DCIT CENT. CIR. -5(3) (ERSTWHILE DCIT CENT. CIR. -36), MUMBAI vs. KRISHNA KNITWEAR TECHNOLOGY LTD., MUMBAI

Krishna Knitwear DCIT Cen Cir -5 (3) Technology Ltd. (Erstwhile DCIT Cent Cir- बिधम/ 11/12, Raghuvanshi Mill 36) Room No. 1906, 19th Compound, SenapatiBapat Vs. Floor, Air India Building, Marg, Near Mahalaxmi Nariman Point, Mumbai- Station, Mumbai-400013. 400021 स्थायीलेखासं./जीआइआरसं./ PAN No. AAACK4721H (अपीलाथी/Appellant) (प्रत्यथी / Respondent) : अपीलाथीकीओरसे/ Appellant by : Shri M. C. Omi Ningshen प्रत्यथीकीओरसे/Respondentby : ShriSanat Kapoor सुनवाईकीतारीख/ : 06.02.18 Date of Hearing घोषणाकीतारीख / : 21/02/2018 Date of Pronouncement आदेश / O R D E R

Per Sandeep Gosain, Judicial Member:

1. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT (A) is justifiedin not deciding the issue and giving the directions for verification of vouchers and evidences maintained by the assessee of Rs. 2,36,75,192/- for Rent, Ratesand taxes claimed by the assessee instead of disallowing the same without taking into consideration the fact that principal of natural justice was followed by giving sufficient opportunity to the assessee at the time of assessment proceedings to furnish the vouchers, other evidences etc?"

2. Without prejudice to the above ground, whether on the facts and in the circumstances of the case and in law, the Ld. CIT (A) is justified in giving the directions for verification of vouchers and evidences maintained by the assessee of Rs. 2,36,75,192/- for Rent, Rates and taxes claimed by the assessee instead of remanding back the issue under consideration to Assessing Officer for verification during the appellate proceeding?"

Aggrieved by the order of AO, assessee preferred appeal before Ld. CIT(A) and Ld. CIT(A) after considering the case of both the parties allowed the appeal of the assessee. Now before us, the revenue has preferred the present appeal by raising the above grounds.

Ground No. 1& 2. 3. This ground raised by the revenue are inter connected and inter related and relates to challenging the order of Ld. CIT(A) in not deciding the issue and giving the directions for verification of vouchers and evidences maintained by the assessee for rent, rates Krishna Knitwear Technology Ltd. and taxes claimed by the assessee, therefore we thought it fit to dispose of the same by this common order.

4.3 I have considered the submissions of' the appellant and perused the materials • _ available on record. The point for adjudication is whether the A.O. was justified ill making disallowance of Rs.2,36,75,192/- out of Rent, Rates and Taxes. It is noticed that the A.O. made the aforesaid disallowance in view of the appellant's failure to furnish the details of nature of payments and of deduction of tax at source on rent paid to workers/ others. A perusal of the Krishna Knitwear Technology Ltd. assessment order reveals that the appellant has three manufacturing divisions at Silvassa and a processing division at Navi Mumbai. The appellant hag a total turnover of Rs.2,307 crores during the relevant period. It is claimed that dae appellant has more than 500 workers who are reimbursed monthly rent as per their entitlements on account of accommodationhired by them. It is also claimed that depending on the entitlement of workers/employees, the rent payment in each case is ranging between Rs.1,000 to Rs.5,000 per month which is far below the threshold limit On which TDS is required to be deducted. However, the appellant has not produced the relevant documentary evidence to substantiate the above claims, though it is stated that the payment of rent to workers/ others is .backeil by vouchers and supporting evidence. In these circumstances, it is considered fair and reasonable to direct the A.O. to carry out necessary verification of the vouchers and evidences maintained by the appellant in this regard and act accordingly. Needless to say, the appellant will be afforded reasonable. opportunity of being heard and presenting the relevant evidences and materials in this regard. If the claim of the appellant is found to be correct upon verification, the disallowance of Rs.2,36,75,192/- made by the A.O. out of Rent, Rates & Taxes will stand deleted. With this Krishna Knitwear Technology Ltd. direction, Ground raised by the appellant is treated as allowed.

After having gone through the facts of the present case as well as considering the orders passed by revenue authorities and submissions made by both the parties, we find that the point for adjudication before the Ld. CIT(A) was as to whether the AO was justified in making disallowance of Rs. 2,36,75,192 out of rent, rates and taxes. As per factual position, since the assessee has failed to furnish the details of nature of payments and deduction of taxes at source on rent paid to workers /others, therefore in order to carry out necessary verifications of the vouchers and evidences maintained by the assessee, necessary direction were given to the AO. Against that directions, the revenue has filed the present appeal before us. After considering the facts of the present case, we find that Ld. CIT(A) has directed the AO to carry out necessary verifications of the vouchers and evidences maintained by the assessee. However, we have also noticed that the AO while Krishna Knitwear Technology Ltd. passing the order of assessment has categorically held that the assessee has failed to furnish the details of nature of payment and of deduction of tax at source on rent paid to the workers /others. Therefore, in such circumstances, instead of using the word vouchers and evidences „maintained‟ by the assessee, Ld. CIT (A) ought to have directed the AO to carry out necessary verifications of the documents or evidences so produced by the assessee by following the provisions of the Act. In our considered view, the purpose of investigation by the AO is to find the truth and though in this case, the matter has been remanded back by the Ld. CIT(A) to the AO for carrying out necessary verifications. To our mind, this order has not caused any prejudice to the rights of the revenue. Hence, we uphold the orders passed by Ld. CIT(A) with a modification to the effect that AO would carry out necessary verifications of vouchers and evidences so produced by the assessee after following the provisions of the I.T. Act. With these observations and modifications, we dismiss these grounds of appeal raised by the revenue.

Krishna Knitwear Technology Ltd.