2017 (4) TMI 512 - AT - Income Tax

Tax Appeal Partially Allowed for Fresh Adjudication; Emphasis on Fair Process

The assessee's appeal was partly allowed for statistical purposes, with several issues restored to the Commissioner of Income Tax (Appeals) for fresh ... Disallowance of hire charges - Held that:- Since the details called for were not filed, the AO disallowed the assessee’s claim. On appeal, the learned CIT(A) observing that no primary details or explanations were filed to support the assessee’s claim regarding payment to ‘Mahindra’, upheld the disallowance made by the AO. Before us also, except for making the claim that the said expenditure is purely business expenditure allowable under section 37(1) of the Act, no explanations were made or details/evidences filed to support and justify the assessee’s claim. In this view of the matter, we have no reason to interfere with the findings of the authorities below and uphold the same. - Decided against assessee Non-reconciliation of turnover - Held that:- CIT(A) records that the assessee submitted the relevant documents and information in this regard and allowed the assessee relief by deleting the said addition to turnover, evidently without affording the AO adequate opportunity of being heard and to rebut the same. In this factual matrix of the matter, we are of the view that the learned CIT(A) has violated the principles of natural justice as mandated under Rule 46A(3). Thus as CIT(A) having failed to give adequate opportunity to the AO of being heard in the matter, the conditions enumerated in sub-Rule (3) of Rule 46A remained uncomplied with. We, therefore, set aside the order of the learned CIT(A) in deleting the addition on account of unreconciled turnover (i.e. between TDS certificates and turnover shown in the Profit & Loss account) and restore the matter to the file of the learned CIT(A) for fresh consideration and adjudication thereon, only after affording the AO adequate opportunity of being heard and to rebut the details/evidences put forward by the assessee in this regard. - Revenue’s appeal is allowed for statistical purposes Issues Involved:1. Addition on account of scrap sales.2. Depreciation on plant and machinery.3. Disallowance of hire charges.4. Disallowance of provisions.5. Disallowance of depreciation.6. Disallowance of direct expenses.7. Disallowance of staff welfare expenses.8. Non-reconciliation of turnover.Detailed Analysis:1. Addition on Account of Scrap Sales:The assessee challenged the addition of Rs. 10,39,34,238/- made by the Assessing Officer (AO) and confirmed by the Commissioner of Income Tax (Appeals) [CIT(A)]. The Tribunal admitted additional evidence submitted by the assessee, which included contemporaneous accounting records and a letter from Mahindra & Mahindra Limited. The Tribunal restored this issue to the CIT(A) for fresh adjudication after considering the new evidence.2. Depreciation on Plant and Machinery:The assessee contested the denial of depreciation on plant and machinery capitalized during the relevant assessment year. The Tribunal admitted additional evidence related to Cenvat credit and restored the issue to the CIT(A) for reconsideration.3. Disallowance of Hire Charges:The assessee argued against the disallowance of Rs. 31,72,000/- for press hire charges paid to Mahindra Ugine Steel Company Ltd. The Tribunal upheld the disallowance, noting that the assessee failed to provide sufficient details or evidence to justify the expenditure as a business expense under section 37(1) of the Income Tax Act.4. Disallowance of Provisions:The assessee disputed the disallowance of Rs. 74,79,561/- for provisions. The Tribunal admitted additional evidence and restored the issue to the CIT(A) for fresh adjudication after considering the new evidence.5. Disallowance of Depreciation:The assessee challenged the disallowance of Rs. 22,89,974/- for depreciation on a new building and scrap conveyor belt. The Tribunal admitted additional evidence and restored the issue to the CIT(A) for reconsideration.6. Disallowance of Direct Expenses:The Revenue appealed against the deletion of the disallowance of Rs. 1,32,01,934/- for direct expenses by the CIT(A), arguing that the CIT(A) admitted fresh evidence without giving the AO an opportunity to rebut it, violating Rule 46A of the Income Tax Rules. The Tribunal found that the CIT(A) failed to comply with Rule 46A and restored the issue to the CIT(A) for fresh consideration after giving the AO an opportunity to respond.7. Disallowance of Staff Welfare Expenses:The Revenue contested the deletion of the disallowance of Rs. 20,38,552/- for staff welfare expenses by the CIT(A) under similar grounds as the direct expenses. The Tribunal restored the issue to the CIT(A) for fresh adjudication after giving the AO an opportunity to respond, citing a violation of Rule 46A.8. Non-Reconciliation of Turnover:The Revenue appealed against the deletion of the addition of Rs. 13,31,28,883/- for non-reconciliation of turnover between TDS certificates and the Profit & Loss account. The Tribunal found that the CIT(A) had acted on additional evidence without giving the AO an opportunity to rebut it, violating Rule 46A. The issue was restored to the CIT(A) for fresh consideration after giving the AO an opportunity to respond.Conclusion:The assessee's appeal was partly allowed for statistical purposes, with several issues restored to the CIT(A) for fresh adjudication after considering additional evidence. The Revenue's appeal was also allowed for statistical purposes, with issues restored to the CIT(A) for fresh consideration in compliance with Rule 46A. The Tribunal emphasized the importance of giving both parties adequate opportunities to present and rebut evidence to ensure a fair and just adjudication process.