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Income Tax Appellate Tribunal, AHMEDABAD “SMC” BENCH
Before: Shri Ramit Kochar
आदेश/ORDER
This appeal in ITA No. 68/Ahd/2024 for assessment year 2017-18 filed by the assessee for assessment year 2017-18 has arisen from the appellate order dated 19-12-2023 ( DIN & Order No. ITBA/APL/S/250/2023-24/1058872891(1)) passed by the office of Commissioner of Income-tax (Appeals) Addl./JCIT(A)-1, Coimbatore, which in turn has arisen from
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the assessment order passed by the Assessing Officer dated 28-12-2019 u/s. 143(3) of the Income-tax Act, 1961(DIN & Order No. ITBA/AST/S/143(3)/2019-20/10233339731(1).
The brief facts of the case are that the assessee filed return of income declaring income of Rs. 12,79,110/- during the year under consideration. Notice u/s. 143(2) was issued on 28-09-2018 by the Assessing Officer to the assessee. Thereafter statutory notice u/s 142(1) was issued by the AO. The case of the assessee was selected for framing scrutiny assessment under CASS under category of complete scrutiny assessment for the reason of excess contribution to provident fund or superannuation fund by the employer. During the course of assessment proceedings, the assessee has furnished details and profit and loss account, computation of income and ledger account of the unsecured loan etc. The Assessing Officer made three additions firstly one lakh on account of unsecured loan to the tune of Rs. 1,00,000/-, secondly addition of Rs. 3,39,973/- was made on account of excess contribution to PF and the third addition was made on account of unexplained creditor of Rs. 10,53,120/-. Thus as against returned income of Rs. 12,79,110/-, the assessed income was Rs. 27,72,200/-. The Assessee being aggrieved filed first appeal with ld. CIT(A) who granted part relief to the assessee by deleting the additions of Rs. 1,00,000/- on
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account of unsecured loan , addition on account of excess contribution to PF of Rs. 3,39,973/- and part relief was given by ld. CIT(A) w.r.t. third addition wherein addition of Rs. 3,51,040/- was sustained by ld. CIT(A) as against additions of Rs. 10,53,120/- as was made by the Assessing Officer . The assessee has claimed to have filed confirmation of the party M/s Shiv Shakti EarthMovers before the AO, and the said party confirmed the transaction. However, the Assessing Officer observed that no identity proof, copy of return of income and PAN was furnished. Since the Shiv Shakti Earthmovers has not given return of income, identity proof and PAN, the Assessing Officer made addition of Rs.10,53,120/- being unexplained creditor shown in the balance sheet and added to the total income of the assessee. Aggrieved by assessment framed by the AO , the assessee filed first appeal with CIT(A). The assessee submitted with respect to the aforesaid addition that the assessee has taken services of Shiv Shakti Earthmovers for transportation of goods , hiring services and purchase of yellow soil , and said the party has given bill of 10,53,120/- during the year under consideration, and during the year only payment of Rs. 43,280/- was made , while in subsequent years 2017-18 and 2018-19, the remaining payments were made through banking channel to the said party. The assessee has enclosed copy of accounts of Shiv Shakti Earthmovers and submitted that Assessing Officer
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has wrongly made addition u/s. 68. The said party has a trade creditor and not cash credit and hence the expenses of Rs. 10,53,120/- are an expense allowable u/s. 37(1). The assessee further submitted that the Assessing Officer has not treated the said expenses as unexplained expenses , but disallowed as unexplained creditor shown in Balance Sheet. The assessee further submitted that Assessing Officer had claimed to have issued summons to the said party and it is established by letter dated 22nd May, 2023 wherein the Assessing Officer stated that no summons were issued to the said party. The assessee further enclosed copy of proceeding of the file of the Assessing Officer, and it was submitted that the details were duly submitted before the Assessing Officer. The assessee also filed copy of ledger account Shiv Shakti Earthmovers for financial year 2017-18 and 2018-19. The assessee also filed copy of VAT return along with purchase account.The ld CIT(A) made adhoc disallowances estimated to the tune of 1/3 by invoking the provisions of section 37(1) and disallowed the expenses to the tune of 1/3 aggregating to Rs. 3,51,040/- as against disallowance of Rs. 10,53,120/- made by the AO which stood added by the AO to the income of the assessee as an unexplained creditors u/s 68.
Aggrieved , the assessee has filed second appeal with Tribunal. The assessee has filed written submissions and
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prayers are made to decide the appeal based on written submission. The assessee has claimed in written submission that the ld CIT(A) erred in disallowing the expenses on adhoc and estimated basis. The assessee claimed to have submitted that purchase account and VAT return wherein the purchases made from said party Shiv Shakti Earthmovers of Yellow Soil is reflected. It is submitted that adhoc disallowance cannot be made. The assessee has also submitted that the impugned account submission/confirmation from the said party Shiv Shakti Earthmovers and the invoices raised by Shiv Shakti Earthmovers , are placed in paper book. It is also claimed that the payment of Rs. 43,280/- has been made to the said party during the year under consideration as against purchases of yellow soil , hiring charges and freight charges to the tune of Rs. 10,53,120/- , while remaining payments were made in subsequent financial year 2017-18 and 2018-19. The ld. Departmental Representative on the other hand submitted that the ld. CIT(A) admitted the additional evidences without calling the remand report from the AO . It was submitted that the PAN and ITR copy of the said party was never submitted. It was submitted that the ld. AO made additions on account of unexplained creditor while ld. CIT(A) converted the additions u/s 37(1) by disallowing expenses to the tune of 1/3 of the total expenses. The ld. Sr. DR prayed that the matter may be set aside to the file of ld. CIT(A) for de-novo determination.
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I have considered written submissions filed by the assessee and have heard the contentions of the ld. Departmental Representative as well as pursued the material available on record. I have observed that the assessee has claimed to have made purchases of yellow soil , freight service and hiring services from Shiv Shakti Earthmovers, aggregating to Rs. 10,53,120/- during the year under consideration, but the payment of only Rs. 43,280/- was made to the said party during the year under consideration. The payment of Rs. 43,280/- was made for invoice dated 20.02.2017 while earlier invoices beginning from November 2016 remained unpaid. The assessee has filed confirmation of the said party before the AO but the PAN , identity proof and copy of ITR was not filed. The Assessing Officer invoked provisions of section 68 and made the addition of the entire credit amount. The assessee filed additional evidences before ld. CIT(A) but the ld. CIT(A) did not call for the remand report from the AO. The ld CIT(A) has given the part relief to the tune of Rs. 7,02,080/- and confirmed the additions to the tune of Rs. 3,51,040/- u/s 37(1).Thus, the ld. CIT(A) confirmed the additions u/s 37(1) while AO invoked Section 68 while making the additions . The ld. CIT(A) did not gave opportunity of hearing to the AO. There are two parties before ld. CIT(A) , and principles of natural justice demand that both the parties be heard. Reference is
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drawn to Section 250(2)(a) and (b).It is observed that the assessee has filed additional evidences before the ld. CIT(A). The ld. CIT(A) has not called for remand report from the Assessing Officer. Rule 46A of Income-tax Rules, 1962 requires that in case additional evidences are submitted before ld. CIT(A) , then ld. CIT(A) is obligated to call for the remand report from the Assessing Officer but no remand report was called for by the CIT(A). Reference is drawn to Rule 46A(3). It is quite un-usual that the assessee has made purchases/services from this party Shiv Shakti Earthmovers to the tune of Rs. 10,53,120/- during the year , but the payment of Rs. 43,280/- has been made during the year under consideration and that too of the invoice of 20.02.2017 while earlier invoices from November, 2016 remained unpaid, and the remaining payments were made in next two financial years. Purchase of soil, freight services and hiring services availed by the assessee requires verification , while CIT(A) has simply accepted the contentions of the assessee without calling for remand report from the Assessing Officer. Under these facts and circumstances, I am setting aside the order of ld. CIT(A) for fresh adjudication of the issues on merits in accordance with law. Needless to say, the CIT(A) shall give proper opportunity to the assessee as well AO. I clarify that I have not commented on the merits of the issue’s in this
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appeal. Thus, the appeal of the assessee is allowed for statistical purposes. I order accordingly.
In the result, the appeal of the assessee is allowed for statistical purposes
Order pronounced in the open court on 24-06-2024 at the conclusion of hearing and reduced to writing and signed on 25.06.2024
Sd/- (RAMIT KOCHAR) ACCOUNTANT MEMBER Ahmedabad : Dated 25/06/2024 आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से,
उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद