2022 (5) TMI 354 - AT - Income Tax

Appellate court remands issues for verification and fresh adjudication, challenges disallowance of debit notes and coal handling expenses.

Ganpat Rai Kewal Ram, Trading Co. Versus Income Tax Officer, Ward-3 (3) Chandauli

The appellate court remanded both issues back to the assessing officer for proper verification and fresh adjudication. The disallowance of debit notes ... Disallowing the debit note issued by the assessee on account of transit loss - HELD THAT:- There is no dispute that the assessee has duly shown the debit notes in the ledger accounts of the purchasers and claimed the same on account of loss in transit. In order to verify the correctness of the claim, the AO issued notices under Section 133(6) of the Income Tax Act. However, except one party namely M/s Heinz India Private Limited Gaziabad, none has responded to the notices issued by the AO under Section 133(6). The AO has mentioned in the assessment order that the assessment is time barring on 31st March, 2015 and accordingly the remaining claim of the loss in transit was added for want of any material in support of the claim. AO has not asked the assessee to furnish confirmation because of time constrain as the impugned order was passed on 30th March, 2015 just one day before the limitation, which is also mentioned by the AO in the assessment order at the bottom of Page No. 2 It is clear that the CIT(A) has not even considered the confirmation filed by the assessee while deciding this issue. Thus, it is apparent from the record that neither the AO has conducted a proper inquiry to verify the correctness of the claim due to time constrain nor the CIT(A) has considered the confirmations filed by the assessee. Accordingly, in the facts and circumstances of the case this issue is set aside to the record of the AO for proper verification and fresh adjudication after giving an opportunity of hearing to the assessee as well as considering the confirmation filed by the Assessee. Disallowance of Coal Handling Expenses - excess claim on the part of the assessee when the net amount of coal is shown by the assessee in the books is considered and the differential amount is rightly added to the income of the assessee - HELD THAT:- As pointed out by the Ld. AR of the assessee, there is a difference in the gross amount of coal purchased by the assessee and coal handling charges are claimed to have been paid on the gross amount and not on the net amount. The AO computed the coal handling charges on the net quantity. However, this point was not raised by the assessee either before the AO or before the CIT(A). Therefore, these facts of gross amount and net amount of coal purchase during the year under consideration were unverified at the level of AO as well as CIT(A) - this issue is set aside to the record of the AO for reconsideration the same after giving an appropriate opportunity of hearing to the assessee. Appeal of the assessee is allowed for statistical purposes. Issues:1. Disallowance of debit notes issued by the assessee on account of transit loss.2. Disallowance of coal handling expenses.Issue 1: Disallowance of debit notes issued by the assessee on account of transit loss:The assessee appealed against the addition made by the AO for disallowing debit notes issued on account of transit loss. The AO added a total of Rs. 9,95,237/- based on lack of response from parties to whom debit notes were issued. The CIT(A) upheld the AO's decision. The assessee contended that the AO's inquiry was rushed, and the confirmation of accounts from purchasers was not considered. The Tribunal noted that while the AO issued notices under Section 133(6) to verify the claim, only one party responded partially. The CIT(A) did not consider the confirmations filed by the assessee. Consequently, the issue was remanded back to the AO for proper verification and fresh adjudication.Issue 2: Disallowance of coal handling expenses:The AO disallowed Rs. 1,69,816/- of coal handling expenses claimed by the assessee, citing discrepancies in the calculation. The assessee argued that the disallowance was ad-hoc and based on the gross amount of purchases, not the net amount. The AO calculated expenses based on net quantity received, leading to the differential. The Tribunal observed that the difference between gross and net amounts was not raised by the assessee earlier. Therefore, the issue was remanded to the AO for reconsideration with proper verification and an opportunity for the assessee to be heard.In conclusion, the appeal of the assessee was allowed for statistical purposes, and both issues were remanded back to the AO for fresh adjudication.