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Income Tax Appellate Tribunal, LUCKNOW BENCH “B”, LUCKNOW
Before: SHRI KUL BHARAT & SHRI ANADEE NATH MISSHRA
This appeal has been filed by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals)-IV, Kanpur [hereinafter as referred Ld. “CIT(A)”] dated 29.02.2016 for the assessment year 2011-12. The grounds of appeal of the assessee are as under: - “1 That the assessment order is invalid and void ab initio as the assessment being time barred.
2. That Ld. CIT(A) has erred in confirming the rejection of books of account on one hand and confirming various additions/disallowances of expenditure based on the same books of account rejected on the other hand.
3. That the Ld. CIT(A) has erred in confirming disallowance made by AO on account of interest paid to bank of Rs.21,86,041/-.
4. That the Ld. CIT(A) has erred in confirming disallowance made by AO on account of Directors Sitting Fees of Rs.36,000/-.
Page 2 of 33 5. That the Ld. CIT(A) has erred in confirming disallowance made by AO on account of Directors Remuneration of Rs.2,40,000/-.
6. That the Ld. CIT(A) has erred in not adjudicating the disallowance made by AO on account of festival expenses of Rs.2,62,658/-.
7. That the Ld. CIT(A) has erred in confirming disallowance made by AO on account of AO on account of interest on TDS of Rs.21,549/- as not pressed.
8. That the Ld. CIT(A) has erred in confirming disallowance made by AO on account of Preoperative expense of Rs.95,632/-.
9. That the Ld. CIT(A) has erred in confirming disallowance made by AO on account of travelling expenses of Rs.2,91,960/-.
10. That the Ld. CIT(A) has erred in confirming disallowance made by AO on account of payment made to contractor by provision of section 40a(ia) of the Act.
11. That the Ld. CIT(A) has erred in confirming disallowance made by AO on account of battery and mobile of Rs.50,800/-.
12. That the Ld. CIT(A) has erred in confirming disallowance of deduction claimed u/s 80IB(10) of the income tax Act, 1961.
13. That the Ld. CIT(A) has erred in disallowance the deduction worked out by Special Auditors to the extent of Rs.19,46,402/- u/s 80IB(10) of the Act.
14. That the above additions/disallowances are highly excessive, arbitrary and bad in law and on facts.
15. That the assessment order as well as observations of Ld. AO as well as Ld. CIT(A) are arbitrary and bad in law and facts appropriate relief deserves to be allowed.
16. That the appellant’s ground of appeal
in Form 35 may also be considered as part of ground of appeal in the present appeal.
17. That the appellant craves leave to withdraw, introduce or modify any ground of appeal as and when need for doing so arises.”
2. In this case, assessment order dated 26.09.2014 was passed by the Assessing Officer (“AO”) under section 143(3)/142(2A) of the Income Tax Act, 1961 (hereafter as referred as “the Act”) wherein the assessee’s income was calculated as at Rs.1,98,96,420/-. However, the income of the assessee was assessed at Rs.2,01,37,531/-, being book profit, under the provision of Section 115JB of the Act. During the assessment proceedings, this case was referred for special audit under section 142(2A) of the Act vide order dated 21.03.2014. The assessee agitated against the aforesaid order dated 21.03.2014 in Writ Petition filed in Hon'ble High Court of Allahabad, in Writ Tax No.293 of 2014. Vide order dated 13.05.2014, Hon'ble High Court of Allahabad dismissed the aforesaid writ petition of the assessee. Thereafter, time allowed to the auditor for completing audit under section 142(2A) of the Act was extended upto 31.07.2014. The relevant portion of the assessment order is reproduced below: - “3. As per copy of ITR filed, gross receipts were shown at Rs. 23,61,97,601/- from business and profession. Other income of Rs.11,55,268/- was also shown from rent, interest and other sources. After deducting expenses under various heads, net income of Rs.1,45,75,195/- was shown from business of real estate, petrol pump and other sources. Claim of deduction u/s 80IB at Rs.75,61,471/- was also made in the return of income resulting into net income of Rs.67,77,700/-. However, taxes were paid on an income of Rs.1,45,75,195/- u/s 115JB as deemed income suggesting that on the income determined u/s 115JB of the Act was found to higher than the tax worked out on the income determined under the normal provisions of the Act.
4. Vide Para (2) of the notice under section 142(1) dated 26.09.2013, it was specifically required to furnish copy of Audit Report with all schedules and annexures for the year under consideration alongwith preceeding two years. Further, vide Para 41 of the said notice, it was also required to produce books of account, bills and vouchers etc. for verification. However, even after 4 months of lapse of time, the same were not furnished. Since no compliance to the notice under section 142(1) was made, penalty of Rs. 10,000/was also imposed on 06.11.2013. Furthermore, for the continuous noncompliance of notice under section 142(1), penalty u/s 271(1)(b) of Rs. 10,000/was again imposed on 18.12.2014. Considering the above facts as well as past records, prosecution proceedings u/s 276D of I.T. Act, 1961 have also been initiated for willfully withholding copy of Audit Report with all enclosures and annexures for the year under consideration alongwith preceeding two years; books of account and other documents. During the course of assessment proceedings in the case for assessment year 2010-11 too, copy of Audit Report with all enclosures and annexures alongwith Form 3CB were not furnished inspite of repeatedly directed to furnish the same and on account of and on account of such failure on part of the assessee company, the assessment had to be completed on the basis of the material available on record. After making appropriate. disallowance as were considered appropriate including disallowing the claim u/s 801B(10) of the Act.
After careful consideration of the facts, as indicated above, as also the past behavior of the assessee company particularly with regard to its willful withholding of the tax audit report which it was mandatorily required to be obtained in accordance . with the provisions stipulated u/s 44AB of the Act and also its failure to produce the books of accounts inspite of affording repeated opportunities to the assessee company. Vide Para 3 of the notice dated 07.02.2014, was specifically called upon to show cause as to why order directing the audit as contemplated u/s 142(2A) of the Act be not passed. For the sake of brevity, the relevant portion of the notice is extracted here - “You are a builder & colonizer and are engaged in this business for past several years. During a financial year, various house projects at various places run at a time. Purchasing land for future projects, constructing buildings of the existing projects and selling the flats to various parties of the completed projects is a running process in your trade. Besides, you are engaged in trading of petroleum products. Considering past records up to A.Y. 2010-11, it is evident that separate books of account for each unit and each building projects are being kept. No statutory audit report u/s 44AB and Audit Report for claim under section 80/B{10) along with prescribed schedules have since been filed till date. No P & L A/c, Balance Sheet etc. for each unit has been filed. As such, complexity is involved in your books of accounts. Accordingly, considering volumes of accounts, specialized nature of business activities through different "project units as also in the interest of revenue, | propose to get special office through which the inter- alia challenged the powers of the assessing officer audit of your accounts under the provisions of section 142(2A). For the said purpose, this notice is being issued fixing the case for 14.02.2014. If you wish to avail this opportunity, please put forth your written submissions on or before the date fixed.”
In response, the assessee company filed written submission through Dak of the available in the Act relating to issuance of direction u/s 142(2A) of the Act on the following premises “There is complexity in the accounts, and It is in the interest of revenue to direct the Special audit.” In support, it has referred the decision of Allahabad High Court in the case of UP Financial Corporation Vs JCIT-2006, 10(1) ITCL-222. Also, Board Inst. No 10746 dated 12.07.1977 has been referred. It is further relied on the decision of Hon'ble Apex Court in the case of Rajesh Kumar and Others Vs. Dy. CIT(2007) 13(1) ITCL-129 (SC).
The submission made by the assessee company as aforementioned were carefully considered and it has been found that case of Hon’ble Supreme Court and Allahabad High Court, as referred by the assessee, are in respect of old provisions of section 142(2A). With effect from 01.06.2013, besides existing two conditions, following four more conditions have been incorporated in the statute – Volume of the accounts, Doubts about the correctness of the accounts, Multiplicity of transaction in the accounts, and Specialized nature of the business activity In the assessee’s case, all the four newly inserted conditions were found applicable w. e. f. 01.06.2013, were applicable. Accordingly, a proposal was sent to Ld CIT (C), Kanpur, through the Joint Commissioner of Income Tax, Central Range, Kanpur, for special audit u/s 142(2A) of the case for the year under consideration on 14.02.2014.
8. After obtaining approval from Ld. Commissioner of Income Tax (Central), Kanpur vide “Order for Approval u/s 1.42(2A) of the Income Tax Act, 1961"
Page 5 of 33 dated 13.03.2014, an order u/s 142(2A) dated 21.03.2014 was passed in the name of the assessee to get its accounts audited through M/s Dinesh Chandra Shukla & Co., Chartered Accountant_ 24/56, Birnana Road, Kanpur for the year under consideration. Three months time was initially allotted for conducting the audit. A copy of the order was also sent to the Special Auditors. Copies of the orders, note sheet entries etc. were also provided to the assessee as and when required by it. On the same grounds, special audit u/s 142(2A) the Act has also been passed in case of the assessee for A. Y. 2012-13 to get it accounts audited through M/s. D.S. Sinha & Company, Chartered Accountant, 2 ‘Floor, Sky Lark Complex, 14/147, Chunni Ganj, Kanpur.
9. Against the order u/s 142(2A} dated 21.03.2014, assessee filed a writ petition | before the Hon'ble High Court of Allahabad bearing Writ Tax No. 293 of 2014 who vide its order dated 13.05.2014 has dismissed the writ petition of the assessee with the following observations — “13. For these reasons, we find that the impugned orders are in accordance with law. Hence, no case for interference is made out. The writ petition is, accordingly, dismissed.”
10. Since substantial time was Consumed in High Court proceedings, on request of the Chartered Accountants after obtaining necessary approval from Ld. CIT (Central), Kanpur, the Chartered Accounts were allowed to complete the audit work by 31.07.2014 and to submit a copy of the audit report to the assessee as well as to the AO positively by that time. Copy of the Audit Report was received from the Auditors on the due time but a copy of the Audit Report was received on 20.08.2014 from the assessee.”
The assessee filed appeal against the aforesaid assessment order dated 26.09.2014 in the office of the Ld. CIT(A). Vide impugned appellate order dated 29.02.2016, the assessee’s appeal was partly allowed. The present appeal before us has been filed by the assessee against the aforesaid impugned appellate order dated 29.02.2016.
In the course of appellate proceedings in Income Tax Appellate Tribunal (“ITAT”), the following documents were filed from the assessee’s side: - CHART OF REFERENCE BRIEF FACTS OF THE CASE “1. That the approval u/s 142(2A) of the IT Act dated 13.03.2014 has not been signed by Ld. CIT(Central) which is required as per law, thus the present Approval is invalid as per Law and subsequent proceedings on the basis of Audit Report are also invalid.” 5.1 However, at the time of hearing before us, the admission of the aforesaid additional ground was not pressed by the Ld. Authorized Representative (“AR”) for the Assessee. Therefore, the additional ground is not being considered and this appeal has decided in terms of the original grounds of appeal filed with Form no. 36.
6. In the first ground of appeal
, the assessee contended that the assessment order is invalid and void-ab-initio being time barred. In this regard, the following portions from brief facts of the case (referred to in foregoing paragraph no.1 of this order) are reproduced as under: - “1. On Ground No.1, That the Assessment Order is invalid and void ab initio as the Assessment being time barred. (i) That after obtaining the approval from Ld. C.I.T. (Central), the Ld. A. O. passed order u/s 142(2A) dated 21.03.2014 directing Assessee to get its accounts audited from M/s D. C. Shukla & Co., Chartered Accountant, Kanpur within 3 months from the date of service of this order. The Order was served on the assessee and with M/s D. C. Shukla & Co., Chartered Account on very same day. Accordingly, the limitation for Special Audit was expiring on 21.06.2014. (ii) The time for completion of special audit was further extended till 31.07.2014 by the Ld AO and the audit report was obtained by that time by the Ld AO. (iii) In the Order sheet there is no Noting regarding extension of time so moto given by Ld. A. O. to Special Auditor. Ld AO had not even mentioned on which dated he has allowed the extension of Time. (iv) On perusal of the Order sheet it is apparent that there is no noting in the Order sheet regarding request of the Chartered Accountant and getting approval from Ld. C.1.T. (Central) and for extension of time to complete the audit Work by 31.07.2014. Copy of Order sheet entry, the same is at page 21-23 of the Paper book (v) Reliance is placed on Dr. Y.D. Singh B.R.D. Medical College vs. Deputy Commissioner of Jncome-tax, reported in 20. Taxmann.com 174. Copy of Order is at page _65 - 75_ of the paper book vi Thus the extension is invalid and the subsequent assessment made on the basis of invalid extension is liable to be quashed.” 6.1 Further, the relevant portion from written submission (referred to in foregoing paragraph no. 2) is reproduced as under: - “2 Submission on Ground No.1, That the Assessment Order is invalid and void ab initio as the Assessment being time barred. With due respect, it is prayed that Assessment Order passed u/s 143(3)/142(2A) of IT Act dated 29.06.2014 is barred by limitation. In this regard, following facts are being submitted: - (i) That after obtaining the approval from Ld. C.I.T. (Central), the Ld. A. O. passed order w/s 142(2A) dated 21.03.2014 directing Assessee to get its accounts audited from M/s D. C. Shukla & Co., Chartered Accountant, Kanpur within 3 months from the date of service of this order. The Order was served on the assessee and with M/s D. C. Shukla & Co., Chartered Account on very same day. Accordingly, the limitation for Special Audit was expiring on 21.06.2014. (ii) In the Assessment Order at Para-10, Ld. A. O. has observed that on request of Chartered Accountant and after obtaining necessary approval from the Ld. C.I.T. (Central), the Chartered Accountant were allowed to complete the Audit Work up to 31.07.2014. (iii) No information w. r. t. extension of time was given to the appellant. It is further prayed that we have also taken the copy of Order sheet entry on perusal of the same, there is no Noting regarding extension of time so moto given by Ld. A. O. to Special Auditor. We are submitting Copy of Order sheet entry, the same is at page _2123_ of the Paper book. On perusal of the same it is apparent that there is no noting in the Order sheet regarding request of the Chartered Accountant and getting approval from Ld. C.I.T. (Central) and for extension of time to complete the audit Work by 31.07.2014. It is further prayed that at Para-10 of the Assessment Order, the Ld. A. O. had not even mentioned the date when he is allowing extension of Time. In this regard, it is prayed that until and unless, the proper noting is not made in the Order Sheet, no valid extension of time may be allowed. In this regard, the Hon’ble I. T, A. T., Allahabad Bench in the case of Dr. Y.D. Singh B.R.D. Medical College vs. Deputy Commissioner of Income tax, reported in 20. Taxmann.com 174, observed as under: - “Section 158BC of the Income-tax Act, 1961 - Block assessment In search cases - Procedure for - Block period 1-4-1988 to 15-4-1998 - There being no entry in order sheet regarding issuance and service of notice under section 143(2) on assessee, it could be said that no such notice was ever issued and served on assessee and, therefore, block assessment made against assessee under section 168BC, read with section 143(2), was wholly illegal and not maintainable [In favour of assessee]”
Page 10 of 33 Copy of Order is at page - 65 – 76 - of the paper book.” 6.2 On perusal of the impugned appellate order dated 29.02.2016, we find that during the appellate proceedings in the office of the Ld. CIT(A) also, the assessee had taken the plea that the assessment was barred by limitation but the Ld. CIT(A) rejected this contention of the assessee. The relevant portion of the order of the Ld. CIT(A) is reproduced as under: - “5.2 In ground no.2 the appellant has challenged that the assessment order dated 26.09.2014 is barred by limitation. In this regard, the AR has furnished written submission which is reproduced as under: -
1. 1. Brief facts of the case are that during course of proceeding, Ld A.O issued a show cause notice dated 07.02.2014 asking appellant as to why order directing the audit as contemplated under section 142(2A) of the Act be not passed fixing the date for compliance on 14.02.2014.
2. That after receiving above show-cause notice, assessee company has filed its objection. On 20-02-2014, the proposal for special audit was also sent to Ld. Commissioner of Income Tax (Central) by A.O. Approval for special audit was granted by the Ld. Commissioner of Income Tax (Central) on 19.03.2014.
3. That after obtaining approval from Ld. Commissioner of Income Tax (Central), A.O passed an order u/s 142(2A) dated 21.03.2014, directing assessee to get its accounts audited from M/s D.C, Shukla & Co, Chartered Accountant, Kanpur within 3 months from the date of service of order. The order was served on the assessee at local address on the very same day and thus limitation for special order was expiring on 21 June, 2014. In the body of order at para10 A.O has also observed that on request of Chartered Accountant and after obtaining necessary approval from the Ld. CIT(Central), the Chartered Accountant were allowed to complete the audit work i) up to 31.07.2014. No information with regards to extension of time was given to the appellant. The detailed submission in this regards are being given in Para-11 onwards which may please very kindly be considered.
4. That against the order U/s 142(2A) dated 21.03.2014, assessee filed writ petition before the Hon'ble High Court of Allahabad which has been dismissed by the Hon'ble Court vide order dated 13.05.2014. That copy of audit report was furnished and finally assessment has been completed Us 142(2A)/143(3) vide order dated 26.09.2014 which is barred by limitation in view of the provisions of section 142(2A) read with section!53 of the Income Tax Act, 1961.
6. Before going into any explanations, assessee would like to re-produce the provisions of section 142(2A) and section 153 for ready references: The provisions of section 142 2A is as follows: ‘(2A) If, at any stage of the proceedings before him, the Assessing Officer, having regard to the nature and complexity of the accounts of the assessee and the interests of the revertue, is of the opinion that it is necessary so to do, he may, with the previous approval of the Chief Commissioner or Commissioner, direct the assessee to get the accounts audited by an accountant, as defined in the Explanation below sub-section (2) of section 288, nominated by the Chief Commissioner or Commissioner in this behalf and to furnish a report of such audit in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed and such other particulars as the Assessing Officer may require : Provided that the Assessing Officer shall not direct the assessee to get the accounts so audited unless the assessee has been given a reasonable opportunity of being heard." The provisions of section 142(2C) read as follows: ‘(2C) Every report under sub-section (2A) shall be furnished by the assessee to the Assessing Officer within such period as may be specified by the Assessing Officer: Provided that the Assessing Officer may, suo motu, or on un application made in this behalf by the assessee and for any ground and sufficient reason, extend the said period by such further period or periods as he thinks fit; so, however, that the aggregate of the period originally fixed and the period or periods so extended shall not, in any case, exceed one hundred and eighty days from the date on which the direction under sub- section (2A) is received by the assessee.' The Provisions of Explanation (ii) to section 153B read as follows: Explanation. In computing the period of limitation for the purposes of this section, — Section 145 ****** (ii) the period commencing from the day on which the Assessing Officer directs the assessee to his accounts audited under sub-section (2A) of section 142 and ending on the day on which the assessee is required to furnish a report of such audit under that sub-section: or (iii) ****** Shall be excluded: The proviso to Explanation (ii) of section 153B reads as follows: Provided that where immediately after the exclusion of the aforesaid period, the period of limitation referred to in clause (a) or clause (6) of this sub-section available to the Assessing Officer for making an order of assessment or reassessment, as the case may be. Is less than sixty days, such remaining period shall he extended to sixty days and the aforesaid period of limitation shall be deemed to be extended accordingly.’ 7. Further clause (iii) of Explanation to section 153 of the Act deals with the exclusion of period given in the order for getting the accounts audited from the total period available with the Assessing Officer for completing the assessment. The proviso to Explanation-1 speaks that when the time left out with the A.O. after exclusion of the period given in the order for getting the accounts audited is less than 60 days, such remaining period shall be extended to 60 days and the aforesaid period of limitation shall be deemed to be extended.
Your good self may appreciate that in the appellant case, time left out for completing assessment was less than 60 days and thus further it was extended to 60 days available for completion of assessment commencing.
Your good self may please very kindly be appreciate that in view of the proviso to Explanation (ii) of section 153B, A.O was having further time of 60 days for completing assessment and thus assessment should have been completed on or before extended time but in our case, assessment has been completed on 26.09.2014 and thus assessment is barred by limitation.
That in the body of order, at para-10, A.O has observed that on request of Chartered Accountant and after obtaining necessary approval from the Ld. CIT(Central), the Chartered Accountant were allowed to complete the audit work up to 31.07.2014 but no information with regards to extension of time was given to the appellant.
Your good self may appreciate that though in section 142(2C), discretionary power has been given to A.O empowering to extend time suo motu, The proceedings under the Income Tax Act are quasi judicial. In the case appellant no information was passed on by the A.O to assessee. Discretion’ means that something is to be done within the discretion of the authorities that something is to be done according to the rules of reason and justice and not according to private opinion but in according to law and not humour. It should not be arbitrary, vague and fanciful, but legal and regular and it be exercised within the limit to which an honest man competent to discharge his office ought to confine himself. There may be something in the nature of the thing empowered to be done, something in the object for which it is to be done, something in the condition under which it is to be done, something in the title of the person or persons for whose benefit the power is to be exercised, which may couple the power with a duty. The following principles of natural justice have become part of the income-tax law: i) Audi alterampartem (hear the other side) (ii) Give reasons for decision (iii) Act fairly, reasonably and without prejudice, on evidence.
Your good self may please very kindly be appreciate that appellant was one of the affecting party of the decision and therefore before taking into any decision, at least an opportunity of being heard may he allowed. Denial of a right to a appellant on the basis on suspicion/gossip, without cogent materials of support the action would not stand the test of reasonableness and fair play, Discretion should be exercised by the authority in whom the power is vested. There should be no inference of exercise of such power being influenced by any order, instructions or directions of any other authority.
The action of the A.O which has never been brought in the notice of appellant before servicing of order u/s 142(2A)/143(3) dated 26.03.2014, that time has been extended is violation of principle of nature justice. The rule that no man shall be condemned unless he has been given prior notice of the allegations against him and a fair opportunity to be heard is a cardinal principle of justice. Moreover, even in the absence of any charge, the severity of the impact of a discretionary decision on the interests of an individual may suffice in itself to attract an implied duty to comply with this rule.
The relevant principles formulated by the courts, about the exercise of discretionary powers, may be broadly summarized as follows: The authority in which discretion is vested can be compelled to exercise that discretion, but not to exercise it in any particular manner. In general, discretion must be exercised only by the authority to which it is committed. That authority must genuinely address itself to the matter before it, It must not act under the dictation of another body or disable itself from exercising the discretion in each individual case. In the purported exercise of its discretion, it must not do what it has been forbidden to do nor must it do what it has not been authorized to do. It must act in good faith, It must have regard to all relevant considerations. It must not be swayed by irrelevant considerations. It must not seek to promote purposes alien to the letter or to the spirit of the Legisiuture that gives it power to act. It must not act arbitrarily and capriciously. Nor where a judgment must be made that certain facts exist can discretion be validly exercised on the basis of an erroneous statement about these facts.
Natural justice co-exists with, or reflects, a wider principle of fairness in decision making and that all judicial and administrative decision- makers have a duty to act fair . As stated, natural justice requires that persons liable to be directly affected by proposed administrative acts, decisions or proceedings be given adequate notice of what is proposed so that they may be in a position (o) to make representations on their own behalf; (b) or to appear at a hearing or enquiry (if one is held); and (c) effectively to prepare their own case and to answer the case (if any) they have to meet. Natural justice has various faucets and acting fairly is one of them—(See KL Shephard v. Union of India AIR 1988 SC 686).Further LO in Spackman vy. Plumstead District Board of Works 1985 (10) AC 229, observed as follows: “No doubt in the absence of special provisions as to how the person who is to decide is to proceed, law will imply no more than that the substantial requirements of justice shall be violated. He is not a judge in the proper sense o the word but he must give the parties an opportunity of being heard before him and stating their case and their view. He must give notice when he will proceed with the matter and he must act honest] and impartially and not under the dictation of some other person or person to whom the authority is not given by law. There must be no malverisation of any kind. There would be no decision within the meaning of the statute if there were anything of that sort done contrary to the essence of Justice.”
It is legal fair play not to hurt any party without hearing him unless the Act expressly excludes it. The Supreme Court in C/7 v. B.N. Bhattachargee held that the legal position is that where a statutory provision does not exclude natural justice, the requirement of affording an opportunity of being heard can be assumed particularly where the proceedings are quasi- judicial.
The rule of natural justice requires that the authority before making an order should give a notice. Notice embodies rule of fair play and must precede the adverse order. It should be clear and precise so as to apprise the party determinatively of the case he has to meet (Canara Bank y. Debasis Das [2003] 4 SCC 557. Such a notice should contain reasons for the proposed action. He, then affords an opportunity of hearing and, thereafter, passes a speaking order considering the objections raised in the manner known to law [General Exporters v. CIT [1998] 98 Taxman 257 (Mad.)]. It should contain tentative and prima facie conclusions of the authority. the nature of the allegations, materials, copies of statement recorded and documents collected by the authority on which he intends relying, must be supplied to the concerned party Vijay Kumar Sharma v Appropriate Authority [1997] 223 ITR 572 (Bom.).
It is a fundamental principle of natural Justice that that no material should be relied upon against a party without giving him an opportunity of explaining the same. The right to know the materials on which the authority is going to take a decision is a part of the right to defend himself, The authority, therefore, while taking action by virtue of the powers vested in him and before making an adverse order in pursuance of such power, is obliged to provide to the affected party a ‘reasonable opportunity of being heard. Where an order iy likely to prejudicially affect a person, reasons have to be recorded to give meaning and content to his remedy of appeal, review or approach to a writ Court. Reasons would enable the aggrieved party to show its cause in a better way. Article Id of the Constitution provides that the State shall not deny to any person equality before the law or the equal protection of the laws withinthe territory of India Article I4 thus contains an express constitutional injunction against the State as defined in article 12 prohibiting the State from denying to any person (i) equality before the law, or (ii) the equal protection of the laws.
Your good self may further be appreciate that what extension was allowed or not is best known to the A.O or special auditor but before extension of time, assessee should have been allowed once opportunity to hear him and therefore, even if any extension of time was allowed, then too, it was against sprit of nature justice and should be treated as no extension of time was allowed. In view of the above, it can safely be held that assessment was barred by limitation deserves to be held as void and invalid assessment. From the above, it may be seen that Ld. AR is unable to substantiate its claim that order dated 26.09.2014 is barred by limitation. He has not pointed out specifically any provision of the Act under which it is barred by limitation. Therefore, this ground of appeal
is dismissed.”
7. The Ld. CIT(A), in his impugned order, dismissed the assessee’s contentions on this issue, holding that the assessee’s side did not point out any specific provision of law under which the assessment order can be said to be barred by limitation, and also failed to substantiate the claim that the assessment order Page 15 of 33 dated 26.09.2014 was time barred. During the appellate proceedings in Income Tax Appellate Tribunal also, the position remains the same. No specific provisions of law have been brought to our notice by the assessee’s side to support the contention that the assessment order is time-barred. Further, in assessment order (at paragraph no. 20 at page 4), it is categorically stated by the Assessing Officer that the auditor was allowed to complete the audit work by 31.07.2014 and to submit the copy of the audit report. It is also stated by the Assessing Officer that the audit report was received by him from the auditor in due time. Nothing has been brought for our consideration to dispute this factual position as stated by the Assessing Officer. In view of foregoing, first ground of appeal is dismissed.
8. Ground Nos. 2 to 13 of the appeal are regarding various disallowances made by the Assessing Officer. We are taking these disallowances one by one.
9. The Assessing Officer disallowance an amounts of Rs.21,86,041/- being interest paid to bank for credit facility; on the ground that the huge amount of interest fees disallowance/advance/loans made by the assessee to cash source/directors and their relatives, as also towards advance for loan vide impugned appellate order dated 29.02.2016. The Ld. CIT(A) is confirmed this disallowance. As regards, disallowance of Rs.21,46,041/- out of interest expenses paid by the assessee (ground no. 3 of appeal), at the time of hearing before us, the Ld. AR for the Assessee relied on the written submission, the relevant portion of which is reproduced as under: - 9.1 As stated in the aforesaid written submission, the Ld. AR for the Assessee submitted that in similar facts and circumstances of the case. This issue has been decided in assessee’s own favour by the aforesaid order dated 20.02.2023 of ITAT (in of Income Tax Appellate Tribunal (“ITAT”) Lucknow Bench in assessee’s own case for AY. 2012-13. Ld. DR for the Revenue relied on the orders passed by the AO as well as Ld. CIT(A). No facts and circumstances of provision of law have been brought for our consideration from either side to distinguish the present case before us from assessment year 2012-13. In view of the foregoing and respectfully following the aforesaid order dated 20.02.2023 in assessee’s own case in we decide the issue in the present appeal also in assessee favour and direct the Assessing Officer to delete the aforesaid disallowance of Rs.21,46,041/-.
10. Further, the Assessing Officer made disallowances of Rs.36,000/- on account of Director Sitting Fees and of Rs.2,40,000/- paid as Directors Remuneration. At the time of hearing before us, the Ld. AR for the Assessee relied on the written submission, the relevant portion of which is reproduced below: - 10.1 As stated in the aforesaid written submission, the Ld. AR for the assessee submitted that in similar facts and circumstances, The issues have been decided in assessee’s own case by the aforesaid order dated 20.02.2023 (in for AY. 2012-13 of ITAT Lucknow Bench. Ld. Sr. DR for the Revenue relied on the orders passed by the AO as well as Ld. CIT(A) but no facts and circumstances or provisions of law have been brought for our consideration from either side to distinguish the present case before us from assessment year 2012-13. In view of the foregoing, and respectfully following the aforesaid order dated 20.02.2023 in assessee’s own case in ITA.
Page 22 of 33 No.460/LKW/2016, we decide these issues in the present appeal also in assessee favour and direct the Assessing Officer to delete the aforesaid disallowance of Rs.36,000/- and Rs.2,40,000/-.
11. The Assessing Officer disallowed an amount of Rs.2,62,658/- incurred by the assessee towards festival expense. The Ld. CIT(A) confirmed this disallowance. At the time of hearing before us, the Ld. AR for the assessee submitted that this issue was raised by the assessee before the Ld. CIT(A) but the Ld. CIT(A) did not adjudicate on this issue. He submitted that this issue may be restored back to the file of the Ld. CIT(A) with the direction to decide this issue on merits. The Ld. Sr. Departmental Representative (“DR”) for Revenue expressed no objection to this. In view of foregoing, we restore this issue to the file of the Ld. CIT(A) with a direction to adjudicate the issue on merits in accordance with law after providing reasonable opportunity to the assessee.
12. The Assessing Officer disallowed an amount of Rs.21,549/- on account of interest on TDS. The Ld. CIT(A) confirmed this disallowance. At the time of hearing before us, the Ld. AR for the assessee did not press the ground against the aforesaid disallowance. Accordingly, the disallowance of Rs.21,549/- is confirmed. This ground of appeal being not pressed by the assessee is dismissed.
13. The Assessing Officer disallowed an amount of Rs.95,632/- claimed by the assessee as preoperative expense. Vide impugned appellate order dated 29.02.2016 of the Ld. CIT(A) confirmed this addition.
13.1 At the time of hearing before us, the Ld. AR for the assessee relied on the submissions made during the appellate proceedings “6.3 Ground no. 8(7) & 18 pertains to addition/disallowance of pre operative expenses. The relevant portion of assessment order dealing with the addition is reproduced as under: - 13.2 The Ld. Sr. DR for the Revenue relied on the orders by the AO and the Ld. CIT(A). On perusal of the impugned order of the Ld. CIT(A), we find that the decision of the Ld. CIT(A) confirming addition on this issue is in accordance with law. Having regard to the facts and circumstances of the present appeal before us, no material has been brought for our consideration to persuade us to interfere with the order of the Ld. CIT(A). In view of the foregoing, the disallowance of Rs.95,632/- is confirmed and the assessee’s ground of appeal on this issue is dismissed.
14. The Assessing Officer disallowed an amount of Rs.2,91,960/- claimed by the assessee on account of Travelling Expenses. The Ld. CIT(A) is confirmed this disallowance. At the time of hearing before us, the Ld. AR for the Assessee relied on the written submission, the relevant portion of which is reproduced below: - 14.1 As stated in the aforesaid written submission, the Ld. AR for the Assessee submitted that in similar facts and circumstances the issue regarding Travelling Expenses has been Page 26 of 33 decided by the aforesaid order dated 20.02.2023 (in of ITAT Lucknow Bench in assessee’s own case for AY. 2012-13. Ld. Sr. DR for the Revenue relied on the orders passed by the AO as well as Ld. CIT(A). No facts and circumstances or provisions of law have been brought for our consideration from either side to distinguish the case before us from assessment year 2012-13 from the present appeal before us. In view of the foregoing and respectfully following the aforesaid order dated 20.02.2023 in assessee’s own case for AY. 2012-13 in we decide the issue in the present appeal also in assessee favour and direct the Assessing Officer to delete the aforesaid disallowance of Rs.2,91,960/-.
15. The Assessing Officer made disallowance of an amount of Rs.84,375/- under section 40a(ia) of the Act on the ground that the assessee did not deduct tax at source out of payment made to the contractor. Vide impugned appellate order dated 29.02.2016 of the Ld. CIT(A), the Ld. CIT(A) confirmed the aforesaid addition. At the time of hearing before us, the Ld. AR for the Assessee relied on the submissions made in the course of appellate proceedings in the office of the Ld. CIT(A). The relevant portion of the order of Ld. CIT(A) is reproduced below: - 15.1 On perusal of the impugned order of the Ld. CIT(A), it is found that the order of the Ld. CIT(A) on this issue regarding disallowance under section 40a(ia) of the Act is not a speaking order. He has rejected the submissions made by the assessee in a summary manner without any discussion and without stating any reasons. This is a violation of Section 250(6) of the Act whereby the Ld. CIT(A) was duty bound to pass a speaking order. The Ld. Sr. DR for the Revenue relied on the orders by the AO and the Ld. CIT(A). In view of foregoing, and having due regard for Section 250(6) of the act, we restore this issue to the file of the Ld. CIT(A) with a direction to adjudicate the issue on merits in accordance with law after providing reasonable opportunity to the assessee.
Page 30 of 33 16. The Assessing Officer disallowed an amount of Rs.50,800/- claimed by the assessee on account of battery and mobile expenses. The Ld. CIT(A) confirmed this disallowance. At the time of hearing before us, the Ld. AR for the Assessee relied on the written submission, the relevant portion of which is reproduced below: -
17. As stated in the aforesaid written submission, the Ld. AR for the assessee submitted that in similar facts and circumstances, the issue regarding battery and mobile expenses has been decided in assessee’s own favour by the aforesaid order dated 20.02.2023 (in of ITAT Lucknow Bench for AY. 2012-13 in assessee’s own case. Ld. Sr. DR for the Revenue relied on the orders passed by the AO as well as Ld. CIT(A). No facts and circumstances or provisions of law have been brought for our consideration from either side to distinguish the case before us from assessment year 2012-13. In view of the foregoing and respectfully following the aforesaid order dated Page 31 of 33 20.02.2023 for AY. 2012-13 in assessee’s own case in we decide the issue in the present appeal also in assessee favour and direct the Assessing Officer to delete the aforesaid disallowance of Rs.50,800/-.
18. The Assessing Officer disallowed an amount of Rs.19,46,402/- under section 80IB(10) of the Act. The Ld. CIT(A) confirmed this disallowance. At the time of hearing before us, the Ld. AR for the Assessee relied on the written submission, the relevant portion of which is reproduced below: -
19. As stated in the aforesaid written submissions, the Ld. AR for the assessee submitted that in similar facts and circumstances, the issue regarding assessee’s claim u/s 80IB of the Act has been restored back to the file of Ld. CIT(A) in assessee’s own case by the aforesaid order dated 20.02.2023 (in for AY. 2012-13 of ITAT Lucknow Page 32 of 33 Bench. Ld. Sr. DR for the Revenue relied on the orders passed by the AO as well as Ld. CIT(A). No facts and circumstances or provisions of law have been brought for our consideration from either side to distinguish the present case before us from assessment year 2012-13. In view of the foregoing and respectfully following the aforesaid order dated 20.02.2023 in assessee’s own case in we also set aside this issue regarding assessee’s claim u/s 80IB of the Act to the file of the Ld. CIT(A), with the direction to pass fresh order on this issue in accordance with law, after providing reasonable opportunity to the assessee.
Ground Nos. 2 to 17 of appeal of the assessee is hereby treated as disposed of in accordance with the aforesaid direction.
In the result, the appeal of the assessee is partly allowed.
Order is pronounced today in open court on 05/12/2024.