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2019 (6) TMI 1094 - AT - Income TaxAdhoc disallowance of 10% of wages paid to boat staff - Case was selected for scrutiny - CIT(A) dismissed the appeal of the assessee for non prosecution without going into the merits - HELD THAT - CIT(A) has passed the order ex-parte for non prosecution. Therefore, in the interest of justice, we remit the matter back to the file of the CIT(A) with a direction to decide the appeal on merits and the Ld.AR has been directed to comply with the notices issued by the CIT(A). Accordingly, appeal of the assessee is allowed for statistical purpose. Penalty u/s 271B - failure to get the accounts audited u/s 44AB - assessee s gross receipts exceed ₹ 40,00,000/- as per the provisions of section 44AB - HELD THAT - We have heard both the parties and perused the material placed on record. The assessee has assigned reasons for failure to get the accounts audited such as survey u/s 133A was conducted, part time accountant is incapable of summarizing the transactions and the partners ignorance. Survey u/s 133A was conducted in January 2008, whereas, the time limit for filing the appeal was 30.09.2008. It is the mandatory obligation of the assessee to get the accounts audited and submit the Audit report before the due date. The illiteracy or ignorance of the partners is not a sufficient reason. Therefore, we do not see any reason to interfere with the order of the CIT(A) and the same is upheld.
Issues:
1. Disallowance of boat repairs and maintenance expenditure 2. Adhoc disallowance of wages paid to boat staff 3. Penalty levied under section 271B for failure to comply with section 44AB Issue 1: Disallowance of boat repairs and maintenance expenditure The appellant contested the addition of ?16,23,563 towards disallowance of boat repairs and maintenance expenditure. The Assessing Officer (AO) made various disallowances, including payments made to partners for boat repairs. The Commissioner of Income Tax (Appeals) [CIT(A)] dismissed the appeal for non-prosecution without considering the merits, which was found to be in violation of the provisions of the Income Tax Act. The Income Tax Appellate Tribunal (ITAT) remitted the matter back to the CIT(A) to decide the appeal on merits, emphasizing the need for a reasoned order as required by the Act. The appeal of the assessee was allowed for statistical purposes. Issue 2: Adhoc disallowance of wages paid to boat staff Another ground of appeal was related to the adhoc disallowance of 10% of wages paid to boat staff. The AO had made additions to the returned income, leading to the dispute. The ITAT reviewed the contentions and material placed on record, finding that the CIT(A) had passed an ex-parte order for non-prosecution. In the interest of justice, the ITAT directed the CIT(A) to decide the appeal on merits, allowing the appeal of the assessee for statistical purposes. Issue 3: Penalty levied under section 271B for failure to comply with section 44AB The penalty under section 271B was imposed on the assessee for failure to comply with section 44AB regarding the audit of accounts. The AO issued a notice to show cause for the penalty, to which the assessee provided explanations related to survey actions and the incapacity of the accountant. The CIT(A) confirmed the penalty, stating that the reasons provided were not sufficient to justify the failure to get the accounts audited. The ITAT upheld the decision of the CIT(A), noting that the reasons cited, such as survey actions and partner ignorance, did not constitute reasonable cause for non-compliance. The appeal of the assessee in this regard was dismissed. In conclusion, the ITAT addressed the issues of disallowance of boat repairs, adhoc disallowance of wages, and the penalty for non-compliance with audit requirements. The tribunal emphasized adherence to procedural requirements and the need for justifications in tax matters, ultimately allowing one appeal for statistical purposes and dismissing another.
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