M/S. ORIENT ENTERPRISES,KOLKATA vs. ITO, WARD - 40(1), KOLKATA, KOLKATA

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ITA 120/KOL/2018Status: DisposedITAT Kolkata27 June 2018AY 2012-133 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal found that confirmations were received from most parties, and in one case, the notice was sent to an incorrect address. Therefore, an ad hoc disallowance was not justified.

What were the facts?

The Assessing Officer made an ad hoc disallowance of 2% of freight charges paid by the assessee, as notices sent to freight parties for confirmation were returned or not responded to. The assessee contended that some addresses were incorrect and confirmations were sent directly to the CIT(A).

What were the issues?

Whether an ad hoc disallowance of freight charges is justified when confirmations are available or were sent directly to the appellate authority, and whether incorrect addresses for notices invalidate the disallowance.

Which sections of the Income-tax Act were involved?

Section 133(6),Section 250

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “SMC” BENCH : KOLKATA

Before: Hon’ble Shri J.Sudhakar Reddy, AM]

Hearing: 05.06.2018Pronounced: 27.06.2018

This appeal by the Assessee directed against the order of the Learned Commissioner of Income Tax (Appeals)-12, Kolkata [ in short the ld CITA] dated 18.10.2017 passed under section 250 of the Income Tax Act, 1961 (in short “the Act”) for the Assessment Year 2012-13.

2.

The assessee is a partnership firm and is in the business of transport contractor. For verifying the claim of freight charges paid, the AO, during the assessment proceedings issued notice u/s 133(6) of the Act to parties to whom freight charges were paid for confirmation. As most of these notices were allegedly returned back by the postal authorities, for various reasons, an ad hoc disallowance of 2% of the total claim of freight charges was made by the AO . The assessee carried the matter an appeal. The Ld. CIT(A) called for a remand report. During the M/s Orient Enterprises A.Yr.2012-13 course of remand proceedings, the AO issued fresh notices u/s 133(6) to five parties. One party confirmed the transaction. The notice sent to one party got returned. As far as the notices given to the other three parties, no reply was sent to the Assessing Officer. The ld. AO accordingly submitted a remand report.

3.

The ld. Counsel for the assessee submitted that, in the case of party from whom the notice was returned, the address to which the notice was sent was erroneous. In the case of three other parties, the assessing officer alleged that they have not responded to the notices, but the fact was that replies were filed by them confirming the transaction, directly to the Ld. CIT(A) by speed post. He submitted paper book running into 75 pages and took this page through the necessary evidences in support his contentions.

4.

The ld. DR submitted that, the replies were not filed by these third parties before the AO and hence the same should not be considered. He submitted that proper opportunity was not given to the assessee.

5.

After hearing rival submissions, and on a careful consideration of the facts and circumstances of the case, a perusal of papers on record and orders of the lower authorities below as well as case law cited, I hold as follows.

6.

I find that the 4 out of 5 parties have filed confirmations letter in question, before the Ld. CIT(A) passed this impugned order. In the case of the fourth party, the notice was not sent by the AO to the correct address. Three parties have directly sent their confirmations to the Ld. CIT(A).

M/s Orient Enterprises A.Yr.2012-13 7. Under these circumstances, in my view, no ad hoc disallowance can be made. Hence, I delete the ad hoc disallowance and allow this ground of the assessee.

8.

In the result, the appeal of the assessee is allowed.

Order pronounced in the Court on 27.06.2018

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