M/S A.C.CONSTRUCTION,KOLKATA vs. I.T.O WD - 41(1),KOLKATA., KOLKATA

The Assessee is a partnership firm. It derives income from the business of carrying out construction contracts. The assessee filed return of income for A.Y.2007- 08 on 31.10.2007 declaring a total income of Rs.4,52,355/-. The return was processed u/s 143(1) of the Income Tax Act, 1961 (Act) on 28.03.2009. The assessee however on 27.03.2009 filed a revised return of income declaring total income of Rs.4,52,360/- but claiming an enhanced refund. Since the original return was not filed within the time u/s 139(1) of the Act, the revised return was not taken cognisance by the AO. The AO however on perusal of the original and revised return found that there was discrepancy in the contract receipts shown in the original and revised return. The purchases were shown at a higher figure in the revised return than in the original return. Both the returns were accompanied by the audit reports signed on the very same day. All these discrepancies led the AO to believe that income of the assessee M/s. A.C.Construction A.Y.2007-08 1 chargeable to tax has escaped from income. Accordingly proceedings u/s 148 of the Act was initiated by issuing of notice on 26.03.2010.

The assessee was represented by one Shri S.R.Bhowmick, Tax Consultant in the proceedings before the AO. On 07.10.2010 a notice was issued to the Assessee by the AO requesting to furnish books of accounts etc. On 25.10.2010. Shri S.R.Bhowmick appeared before the AO but did not explain the issues raised by the AO in his show cause notice. The assessee’s AR was asked by the AO to give certain details and the hearing was fixed on 3.11.2010. There was no compliance by the assessee on 03.11.2010. A final show cause notice dated 09.12.2010 was issued and even this remained not complied with by the assessee. Since the time limit for completion of assessment was getting barred by 31.12.2010, the AO proceeded to pass order of assessment on 24.12.2010 wherein the AO determined the total income of the assessee by adding a sum of Rs.11,68.,786/-. The addition so made was nothing but the discrepancy between the figures shown in the audit report filed along with the original return and audit report filed along with the revised return. The addition was made u/s 68/69C of the Act as unexplained credit/expenditure. Another sum of Rs.26,73,067/- was disallowed being labour charges debited in the profit and loss account. The disallowance was made for the reson that the assessee failed to deduct tax at source on these payments u/s 194C of the Act. The AO invoked the provisions of section 40(a)(ia) of the Act and made the aforesaid addition.

Aggrieved by the aforesaid additions the assessee preferred the appeal before CIT(A). It appears that there was again no compliance by the assessee before CIT(A) as the very same AR appointed by the Assessee Shri S.R.Bowmick was handling the appeal of the Assessee before CIT(A). There was almost about seven hearings before CIT(A). On 22.01.2013 there was no compliance on behalf of the assessee nor any prayer for adjournment and in these circumstances the CIT(A) was of the view that the assessee has no material to show that the order of AO was not correct. Accordingly the appeal of the assessee was dismissed by CIT(A) for non compliance.

Aggrieved by the order of CIT(A) the assessee has preferred the present appeal before the Tribunal.

Grounds of appeal

This appeal was fixed for hearing on 29.01.2016. On that date the written submission was filed on behalf of the Assessee, which has been sent by post. The case was adjourned to 30.03.2016, 18.05.2016, 20.07.2016 and 28.09.2016. On these dates there was no compliance on behalf of the assessee. The notice of hearing on all these dates were sent to the assessee but could not be served on the assessee. On 07.12.2016 M/s. A.C.Construction A.Y.2007-08 3 when the case was called for hearing none appeared on behalf of the assessee. It is clear from the written submission filed by the assessee dated 14.01.2016 before the Tribunal that he intends that the written submissions be considered and the appeal be decided on the basis of the contentions raised in the written submissions. In fact a letter dated 03.03.2016 has also been filed before the Tribunal requesting the written submissions be treated as the plea of the Assessee before the Tribunal.

It is seen from the written submissions filed by the assessee that the assessee has relied on the Tax Consultant Shr S.R.Bhowmick, who had not properly represented the assessee’s case before the revenue authorities. It has also been stated in the written submissions that the accounts filed with the original return was on the basis of unapproved books of accounts and that the discrepancies could be properly explained with supporting evidence. It is also submitted the amount disallowed u/s 40(a)(ia) of teh Act were labour charges which are not subjected to TDS u/s 194C of the Act and therefore the said disallowance was also uncalled for. It has been prayed that it is only because of the negligence on the part of the assessee’s Authorised Representative that the case was not properly represented. The assessee has sought for an opportunity to explain his case before AO and prayed for setting aside the order of CIT(A) and restoration of the issue to the file of AO to enable the assessee to produce books of account and explain of the discrepancies. The ld. DR relied on the order of CIT(A).

We have carefully considered the written submissions and the orders of the authorities below. In our view going by the non compliance before AO and CIT(A) the plea of the Assessee that the non compliance was because of negligence on the part of the assessee’s AR, appears to be true. We find that there is a ring to truth in the statements made in the written submission. We therefore accept the plea of the assessee and set aside the order of CIT(A) and remand the issues disputed by the assessee before the Tribunal namely ground nos. 4 to 7 for fresh consideration by the AO after affording due opportunity of being heard to the assessee.

In the result the appeal of the assessee is treated as allowed for statistical purposes. Order pronounced in the Court on 09.12.2016.