2013 (7) TMI 13 - AT - Income Tax

Additional grounds during course of proceedings CIT objected Held that - Tribunal has power to permit assessee to raise new ground of appeal, not set forth in memorandum of appeal, even without formal amendment of grounds provided that new ground does not involve further investigation into facts Purpose of assessment proceeding to assess taxable liability of assessee correctly in accordance with law If assessee entitled to certain relief, assessee should not be deprived of it, even if claim first time made before Tribunal during pendency of appeal Issues raised in additional grounds are legal issues which go to root of matter Matter restored to CIT to examine additional grounds Following the decision of Vijay Kumar Jain v. CIT 1974 (3) TMI 18 - PUNJAB AND HARYANA High Court and National Thermal Power Co. Ltd. v. CIT 1996 (12) TMI 7 - SUPREME Court Appeal allowed. Principal of natural justice not followed Appeal disposed of ex-parte Held that - Order of CIT set aside to give adequate opportunity of hearing to assessee, and readjudicate on issues involved Appeal allowed.

Issues Involved:
1. Disallowance of expenditure under various heads due to self-made vouchers.
2. Disallowance of provisions for defective liability period.
3. Addition by treating agricultural income as unexplained cash credit.
4. Disallowance of interest paid on mobilization for not charging interest on advances to sub-contractors.
5. Lump sum disallowance of expenditure over and above previous additions.
6. Consideration of sale proceeds as short-term capital gains.
7. Admission of additional legal grounds by the assessee.
8. Cross-objection by the Revenue regarding expenditure towards eviction and development charges.
9. Protective addition in the hands of another assessee.

Detailed Analysis:

1. Disallowance of Expenditure Under Various Heads:
The assessee filed a return of income admitting Rs. 20,21,95,340, which was later processed under Section 143(1) of the Income Tax Act. During scrutiny, the assessment was completed with a total income of Rs. 20,45,15,769 after disallowing Rs. 20,00,000 under various heads due to self-made vouchers and non-verifiable details.

2. Disallowance of Provisions for Defective Liability Period:
An additional disallowance of Rs. 1,45,409 was made for provisions for defective liability period.

3. Addition by Treating Agricultural Income as Unexplained Cash Credit:
Post a survey operation under Section 133A, a notice was issued under Section 148. In the reassessment, the total income was determined at Rs. 77,21,72,253, which included an addition of Rs. 1,75,000 by treating agricultural income as unexplained cash credit.

4. Disallowance of Interest Paid on Mobilization:
The reassessment also disallowed Rs. 1,88,34,670 from interest paid on mobilization for not charging interest on advances given to sub-contractors.

5. Lump Sum Disallowance of Expenditure Over and Above Previous Additions:
A lump sum disallowance of Rs. 75,00,000 was made over and above the Rs. 20,00,000 already disallowed in the earlier scrutiny assessment.

6. Consideration of Sale Proceeds as Short-Term Capital Gains:
The Assessing Officer considered sale proceeds as short-term capital gains, resulting in an addition of Rs. 54,11,46,794.

7. Admission of Additional Legal Grounds by the Assessee:
The Tribunal allowed the admission of additional grounds raised by the assessee, as they were of a legal nature and went to the root of the matter. These grounds included issues like the legality of the notice under Section 148 and the assessment order, the unjust and excessive nature of the additions, and the lack of opportunity to cross-examine witnesses.

8. Cross-Objection by the Revenue:
The Revenue filed cross-objections contesting the reliefs granted by the CIT(A), particularly regarding the addition of expenditure towards eviction and development charges. However, these cross-objections became infructuous due to the Tribunal's decision to set aside the CIT(A)'s order and restore the matter for fresh adjudication.

9. Protective Addition in the Hands of Another Assessee:
In a related appeal, the CIT(A) had made a protective addition in the hands of another assessee, which was contested. The Tribunal set aside the issue to the CIT(A) for fresh adjudication, emphasizing the need for adequate opportunity for hearing.

Conclusion:
The Tribunal allowed the appeals of the assessees for statistical purposes and dismissed the cross-objections of the Revenue. The matters were set aside to the CIT(A) for fresh adjudication, with directions to consider the additional legal grounds and provide adequate opportunities for hearing. The decision underscores the importance of proper verification, adherence to legal procedures, and the right to a fair hearing in tax assessments.

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