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2016 (9) TMI 1557 - AT - Income TaxDisallowance u/s 40(a)(ia) and 40A - Validity of jurisdiction - non admission of additional evidences filed during the course of appeal proceedings - HELD THAT - Assessee instead of making any such complain to the higher authorities had appeared before the Addl.CIT at Pune who was holding charge of Satara Range. Now that huge additions have been made the assessee cannot say that he was harassed because of his appearance at Pune Income Tax Office instead of appearing at Satara Office. We fail to understand as to what type of other evidences the assessee could have produced at Sarata office before the same AO which he could not furnish at Pune office. This ground raised by the assessee at this juncture according to us is nothing but a frivolous ground having no force in it. We therefore dismiss the additional ground challenging the validity of jurisdiction. Non supply of the various statements recorded at the back of the assessee which were not confronted to him - If the assessee does not appear before the AO he cannot expect the AO to confront the evidences which he had gathered during the course of assessment proceedings. No doubt it is the principle of natural justice that any evidence which has been collected at the back of the assessee and which is utilized against the assessee should be confronted to the assessee before making any such addition. However, in the instant case we find since the assessee did not appear before the AO despite repeated opportunities, there was no occasion on the part of the AO to confront these statements recorded or ledger extracts obtained from various parties. Therefore, the ground raised by the assessee on this issue is also dismissed. Statements of several suppliers were recorded by the AO Shri J.Y. Chauhan, ITO, Ward-2 of Satara office which is impermissible in law - No merit in the above ground raised by the assessee in shape of an additional ground. An officer sitting at a place can always take the help of another officer by issuing necessary commission to record the statements of various persons who are assessed under his charge. Here, in the instant case, the Additional Commissioner sitting at Pune has taken the help of the AO Shri J.Y. Chauhan, ITO, Ward-2, Satara to record the statements of various persons of Satara only. This according to us cannot be held as impermissible in law. Ground raised by the assessee therefore being devoid of any merit is dismissed. Non admission of additional evidences filed during the course of appeal proceedings - Admittedly, the accounts were audited by the auditors and the audit report was filed along with the return of income and such audit report was also duly signed by the assessee himself. Therefore, we fail to understand as to how and why the accounts could be re-audited by another Chartered Accountant or the same Auditor by recasting the accounts. We fail to understand as to how such a thing has happened since there is suppression of huge turnover as well as non recording of huge amount of expenses which have now been shown in the revised financial statements which is not only unbelievable but also unimaginable. Disallowance u/s.40(a)(ia) - various Benches of the Tribunal following the insertion of the second proviso to section 40(a)(ia) by the Finance Act, 2013 w.e.f. 01-04-2013 are holding that disallowance u/s.40(a)(ia) of the Act need not be made if the assessee is not deemed to be an assessee in default under the first proviso to section 201(1) of the I.T. Act. Therefore, if the payees have disclosed the amount received from the assessee and paid the tax thereon, addition cannot be made in the hands of the assessee. However, this aspect has not been verified by the AO since this issue is being raised before us for the first time. Addition u/s 40A - Assessee has demonstrated that the provisions of section 40A(3) is not called for in case of Gatiman Earth Movers since no amount exceeding ₹ 20,000/- has been paid to that party. Similarly certain amounts have been received by crossed cheques with their confirmations -Also the submission of assessee that given an opportunity the assessee can properly reconcile the contract receipts and the sundry creditors. Considering the totality of the facts of the case, we are of the considered opinion that the matter requires a re-visit to the file of the AO for proper adjudication of the issue. We, therefore, restore the issue to the file of the AO with a direction to give one more opportunity to the assessee to substantiate his case. Unaccounted income from land business - submission of the assessee that the lands in question are agricultural lands situated beyond 8 kms from the municipal limits and therefore these are rural agricultural lands and do not form part of the capital asset within the meaning of section 2(14)(iii)(b) - HELD THAT - As perused the orders of the AO and CIT(A) and the paper book filed on behalf of the assessee. We find the AO in the assessment order has made addition to the total income of the assessee on account of unaccounted income from land business. He arrived at this figure by reducing the cost of land from the sale proceeds. We find the assessee before the Ld.CIT(A) in his recasted financial statements had shown the profit on sale of land at ₹ 96,78,970/- after making an adjustment of compensation expenses amounting to ₹ 23,81,325/-. Since the assessee has earned a profit of ₹ 96,78,970/- from such land dealings the Ld.CIT(A) enhanced the income to ₹ 96,78,970/- as against ₹ 11,13,750/- determined by the AO. Nature of land aspect was not properly looked into by the AO or the CIT(A) as the necessary evidences which the assessee has enclosed with the paper book such as 7/12 extracts etc were not properly looked into. Further, the main issues have already been restored to the file of the AO for adjudication of the issues afresh. Considering the totality of the facts of the case, we deem it proper to restore this ground to the file of the AO with a direction to adjudicate the same in the light of our above observations and as per fact and law. Ground of appeal No.5 by the assessee is accordingly allowed for statistical purposes.
Issues Involved:
1. Admission of additional evidence under Rule 46A. 2. Addition of undisclosed contract receipts. 3. Estimation of net profit on unaccounted contract receipts. 4. Disallowance under Section 40(a)(ia) and Section 40A(3) of the Income Tax Act. 5. Addition of sundry creditors and other liabilities. 6. Jurisdictional validity of the assessment order. 7. Treatment of income from land business. Issue-wise Detailed Analysis: 1. Admission of Additional Evidence under Rule 46A: The assessee argued that the additional evidence submitted during the assessment should be admitted as it reveals the correct assessable income. The CIT(A) rejected this request after obtaining the AO's comments, who opposed the admission on the grounds that the assessee failed to substantiate deserving circumstances for the same. The Tribunal upheld the CIT(A)'s decision, emphasizing that the accounts were audited and signed by the assessee, and re-auditing or recasting the accounts was not justified. 2. Addition of Undisclosed Contract Receipts: The AO added ?2,93,11,999/- to the total income as concealed turnover. The CIT(A) upheld this addition. The Tribunal found that the assessee did not adequately reconcile the contract receipts and sundry creditors. The Tribunal restored the issue to the AO to provide the assessee an opportunity to substantiate his case and reconcile the discrepancies. 3. Estimation of Net Profit on Unaccounted Contract Receipts: The CIT(A) estimated the net profit at 12.5% on the undisclosed turnover, resulting in an addition of ?36,64,000/-. The Tribunal noted that the assessee showed net profits of 6.74% and 10.37% in the original and revised profit and loss accounts, respectively. The Tribunal directed the AO to re-examine the estimation of net profit, considering a reasonable percentage, possibly around 8% as per Section 44AD. 4. Disallowance under Section 40(a)(ia) and Section 40A(3): The AO disallowed ?2,12,09,217/- under Section 40(a)(ia) and ?1,00,000/- under Section 40A(3). The CIT(A) upheld these disallowances. The Tribunal directed the AO to verify if the payees disclosed the amounts received and paid taxes thereon, as per the amended provisions of Section 40(a)(ia). Regarding Section 40A(3), the Tribunal found merit in the assessee's claim that no payment exceeding ?20,000/- was made to Gatiman Earth Movers and directed the AO to re-examine the disallowance. 5. Addition of Sundry Creditors and Other Liabilities: The AO added ?2,53,31,075/- as bogus sundry creditors and ?50,26,114/- as non-existing other liabilities. The CIT(A) deleted the additions related to Vestas Wind Tech India Pvt. Ltd. and Vestas RRB Pvt. Ltd. but sustained the balance. The Tribunal directed the AO to provide the assessee an opportunity to reconcile the sundry creditors and other liabilities. 6. Jurisdictional Validity of the Assessment Order: The assessee challenged the validity of the assessment order, arguing that the AO conducted proceedings at Pune instead of Satara, causing undue harassment. The Tribunal dismissed this ground, stating that the AO had valid jurisdiction and the assessee could have approached higher authorities if there were genuine grievances. 7. Treatment of Income from Land Business: The AO added ?11,13,750/- as unaccounted income from land business. The CIT(A) enhanced this to ?96,78,970/-. The Tribunal noted that the assessee claimed the lands were rural agricultural lands and not capital assets under Section 2(14)(iii)(b). The Tribunal restored the issue to the AO to verify the nature of the lands and adjudicate accordingly. Conclusion: The Tribunal partly allowed the appeals for statistical purposes, directing the AO to re-examine several issues, including the reconciliation of contract receipts, sundry creditors, and the applicability of disallowances under Sections 40(a)(ia) and 40A(3). The Tribunal also directed the AO to verify the nature of the lands involved in the land business transactions.
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