2021 (2) TMI 269 - AT - Income Tax

Ad-hoc disallowance @ 7.5% on trading expenses - failure to submit the documents - HELD THAT - CIT(A)/AO decided the case of the assessee on the basis of the material available on record and have not considered the past or subsequent year history of the profit earned by the assessee. Before us the assessee had shown the reasonable cause for non submission of documents before the Commissioner as well as before the assessing officer. Taking into account the facts and circumstances of the matter and in the interest of substantial justice, we concur with this plea of assessee for sending back the matter to the file of CIT(A). As it is highly unlikely that the assessee would intentionally or deliberately not produce the documents before the revenue authorities, as this would cause immense harm to his own interests. Ultimate aim of the assessment by the revenue authorities is to collect correct taxes due from the assessee We set aside the order passed by the Commissioner and remand the matter to CIT (A) - Appeal of the assessee is allowed for statistical purposes.

Issues:
1. Assessment under section 144 of the Act and addition of trading expenses.
2. Disallowance of expenses and income addition under the head Profits and Gains.
3. Denial of interest levy under section 234B of the Act.
4. Arbitrary observations and conclusions made during assessment.
5. Failure to provide complete details of accounts and expenses during assessment.
6. Request for remand of the matter to the file of CIT(A) for fresh order.

Analysis:

Issue 1: Assessment under section 144 and addition of trading expenses
The appellant challenged the assessment under section 144 of the Act, arguing that the authorities unjustly disregarded the past history of the appellant. The CIT(A) confirmed an ad-hoc disallowance of 7.5% on trading expenses, amounting to ?47,88,313, which the appellant contended was exorbitant and not reflective of past assessments. The Tribunal noted that the assessing officer's decision was based on the lack of supporting documents for expenses claimed by the appellant. The Tribunal found merit in the appellant's plea and remanded the matter to CIT(A) for a fresh order, emphasizing the importance of considering past and subsequent year history for a fair assessment.

Issue 2: Disallowance of expenses and income addition
The assessing officer disallowed expenses and added income under the head Profits and Gains due to the appellant's failure to provide complete details of accounts and expenses. The appellant's grounds of appeal included challenging the ad-hoc disallowance without specific defects pointed out by the AO. The Tribunal observed that the appellant did not comply with the directions to provide necessary documents, leading to the decision being based on available records. The Tribunal directed CIT(A) to pass a fresh order, highlighting the need for natural justice and affording the appellant an opportunity to be heard.

Issue 3: Denial of interest levy under section 234B
The appellant denied the levy of interest under section 234B, citing TDS on the income. The Tribunal did not provide a specific ruling on this issue in the summarized judgment.

Issue 4: Arbitrary observations during assessment
The appellant contested the arbitrary observations and conclusions made during the assessment, alleging that submissions and evidence were arbitrarily rejected. The Tribunal did not delve into specific details regarding these arbitrary observations in the summarized judgment.

Issue 5: Failure to provide complete details during assessment
The assessing officer noted the appellant's failure to provide complete details of accounts and expenses, leading to an assessment based on available records. The appellant's non-compliance with providing necessary documents hindered a thorough examination of expenses and income, resulting in the decision being made without full documentation.

Issue 6: Request for remand of the matter
The appellant requested a remand of the matter to CIT(A) for a fresh order, emphasizing the need to consider past and subsequent year history for a fair assessment. The Tribunal granted the appellant's request, setting aside the previous order and directing CIT(A) to pass a fresh speaking order, ensuring natural justice and providing the appellant with an opportunity to present all relevant grounds and evidence.

In conclusion, the Tribunal's decision in this case focused on the appellant's failure to provide complete details during assessment, leading to ad-hoc disallowances and additions. The Tribunal emphasized the importance of considering past and subsequent year history for a fair assessment and remanded the matter to CIT(A) for a fresh order, ensuring natural justice and due process.

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