PARESH NATH SINGHA,NADIA vs. D.C.I.T CIR - NADIA, NADIA

This is an appeal preferred by the assessee against the order of CIT(A)-XXXVI, Kolkata dated 06.12.2012 for A.Y 2009-10.

We note that there is a delay of 122 days which the ld. AR explained that during the assessment proceeding Shri S.K.Modak, Advocate represented the assessee before the AO. Thereafter before the ld. CIT(A), Shri U.Gupta, CA was representing the matter. The order of ld. CIT(A) dated 06.12.2012 was received by the assessee on 31.12.2012. The ld. AR took our attention to para no.2 of the affidavit filed by the assessee wherein it has been stated that the assessee requested Shri S.K.Modak, Advocate to consult some tax consultant in respect to preferring an appeal before the Tribunal. Later on the assessee came to know that Shri Modak’s father was terminally ill because of cancer and that he passed away on 2nd June, 2013. So Shri S.K.Modak could not consult the tax consultant and prepare the appeal for filing before the Tribunal. The ld. AR pleaded that because of this unfortunate incident happening, Shri S.K.Modak was not in a position to file the appeal in time for which the assessee should not be penalized. We take note that from a perusal of the affidavit filed by the assessee Paresh Nath Singha A.Yr.2009-10 which corroborates the aforesaid facts and since the ld. DR does not have any objection as such against the condonation of delay, we are inclined to condone the delay and proceed to hear the appeal on merit.

The grievance of the assessee is that the AO had made an addition of Rs.19,59,066/- which was passed by estimating the disallowance out of transport charges. However the main grievance of the assessee is against the action of ld CIT(A) that during appeal the disallowance has been enhanced by the ld. CIT(A) to Rs.29,13,827/- without giving any reasonable opportunity to the assessee.

The brief facts of the case is that the assessee carries out four kind of businesses. (i) Wholesale distributor of Fertilizer and pesticides, (2) Transport, (3) Clearing and Forwarding of ACC Cement and (4) dealing in ACC cement. During the assessment proceedings the AO notes that the assessee has incurred transport expenses relating to the clearing and forwarding of ACC cements and expenditure were all made with debit vouchers. The AO deputed an inspector to enquire about the genuineness of the transportation expenses of Rs.19,83,840/-. As per the inspector’s report the said expenses were bogus. When confronted with the inspector’s report, according to the AO Shri Modak, AR accepted the disallowance of Rs.19,83,840/- which was therefore added to the net profit of the assessee. Aggrieved the assessee preferred an appeal before the ld. CIT(A), who initially fixed the hearing on 12.11.2012 and since the adjournment was sought the matter was posted on 20.11.2012. The ld. CIT(A) notes that the assessee failed to attend nor produced any books of account, bills and vouchers. Therefore he issued notice u/s 251(1) of the Act on the assessee on 21.11.2012 wherein it was stated that the AO has disallowed 10% of transportation charges of Rs.1.98 crore in the absence of books, bills and vouchers. The ld. CIT(A) asked the assessee to produce bills and vouchers or that he will enhance disallowance from 10% to 25% of the total claim made and fixed the matter on 03.12.2012. Thereafter the ld.CIT(A) notes that on 03.12.2012 though the ld. AR attended but he failed to produce any bills or vouchers. So he enhanced the disallowance form 10% to 25% of Rs.1.98 crores which 2 Paresh Nath Singha A.Yr.2009-10 came to Rs.29,13,827/-. Aggrieved by the said order of the ld. CIT(A) the assessee is before us.

We have heard both the parties and perused the records. We find that the assessee is into four kind of business i.e. (i) Wholesale distributor of Fertilizer and pesticides, (ii) Transport, (iii) Clearing and Forwarding of ACC Cement and (iv) dealing in ACC cement. We take note that the assessee is into clearing and forwarding of ACC cement and has claimed expenditure of Rs.1.98 crore. The AO has made the disallowance based on the report of the Inspector saying that the bills are bogus and the ld. CIT(A) after listing the matter twice issued a letter of enhancement. On 03.12.2012 when the ld. AR appeared for answering the notice for enhancement the ld. CIT(A) passed the impugned order stating that the assessee failed to produce bills or vouchers to substantiate the expenditure and enhanced the disallowance from 10% to 25% of Rs.1.98 crores i.e. at Rs.29,13,827. We take note that the assessee is into various kinds of business and a perusal of page-19 of the paper book reveals that the lorry hire charges paid on behalf of the ACC Cement to the tune of Rs.1,95,90,669/- and the assessee has shown to have received transport charges from ACC Cement of Rs.2,07,47,702/-. When the AO has accepted that an amount of Rs.2.07 crore has been received by the assessee we do not find any reason for disallowing 10% of the expenses claimed by the assessee. If the AO is harping upon the inspectors report that the expenses claimed for clearing and forwarding ACC Cement is bogus, then the entire expenses had to be disallowed. Bogus expenditure cannot be allowed, however in this case AO accepted 90% but disbelieved 10% because it is bogus. When the AO has accepted Rs.2.07 crore which the assessee received from ACC Ltd, the adhoc disallowance of 10% cannot stand in the eyes of law when the fact remains that the books of the assesssee are audited statutorily and has not been rejected by the AO. We note that the ld. CIT(A) has listed the matter twice and has enhanced the disallowance from 10% to 25% for the failure of the AR to produce the books, bill and vouchers. It is true that the ld. CIT(A) has power to enhance the assessment and has co-terminus 3 Paresh Nath Singha A.Yr.2009-10 power as that of AO, but he should discharge the same as a quasi-judicial authority by giving proper oppurtunity to the assesse. It should be remembered that “Justice should not only be done but it should be seen to be done”. The ld. CIT(A) while adjudicating the appeal, had entertained any doubt about the genuineness of any expenditure claimed by the assessee should have specifically asked for item wise expenditure that has been claimed and in case, the assessee failed to produce any item wise bills/vouchers, then the ld. CIT(A) could have disallowed the item wise expenditure and not adhoc disallowance which action smacks of artbitrariness and such action cannot be countenanced. . Therefore we are inclined to allow the appeal of the assessee and direct deletion of the addition made by the authorities below.

In the result the appeal of the assesee is allowed.