2022 (3) TMI 658 - AT - Income Tax

Disallowance out of job charges - bogus claim of expenses - assessee does not maintain job work register and only summary of job work are available with it and in the absence of any quantitative records maintained item wise it is absolutely impossible to believe the claim of job work expenses from the above said parties - assessee submitted additional evidences under Rule 29 of the Income Tax Appellate Tribunal Rules 1963 - HELD THAT - We note that assessee was prevented by sufficient cause not to file these additional evidences before the lower authorities due to circumstances beyond his control as narrated by the assessee Hon ble Supreme Court in M.S.Gill vs The Chief Election Commission 1977 (12) TMI 138 - SUPREME COURT held The dichotomy between administrative and quasi-judicial function vis- -vis the doctrine of natural justice is presumably obsolescent after Kraipak (A.K. Kraipak - 1969 (4) TMI 103 - SUPREME COURT ) which makes the water-shed in the application of natural justice to administrative proceedings. The rules of natural justice are rooted in all legal systems and are not any new theology. They are manifested in the twin principles of nemo judex in partesua (no person shall be a judge in his own case) and audialterem partem (the right to be heard). It has been pointed out that the aim of natural justice is to secure justice. In respect of the following parties Viz M/s Shri Ganesh Fashion M/s Maruti Nandan Textile M/s Payal Fashion M/s Radha Swami Creation and M/s Deep Creation the payments were made through banking channel and respective bills of job charges are on the record and assessee also submitted contra accounts which were not properly considered by ld CIT(A). In respect of M/s Jahanvi Fashion we note that assessee submitted additional evidences. Therefore we are of the view that the matter should be remitted back to the file of the ld CIT(A) in respect of above noted six parties only to examine the evidences and adjudicate the issue in accordance with law. We are of the view that one more opportunity should be given to the assessee to plead his case before the ld CIT(A) in respect of above noted six parties. The assessee should submit these additional evidences including bank statements and job charges bills before ld CIT(A).We note that it is settled law that principles of natural justice and fair play require that the affected party is granted sufficient opportunity of being heard to contest his case. Therefore we deem it fit and proper to set aside the order of the ld. CIT(A) and remit the matter back to the file of the ld. CIT(A) to adjudicate the issue afresh on merits, in respect of above noted six parties. Assessee appeal allowed for statistical purposes.

Summary

Issues Involved:
1. Rejection of book results under Section 145 of the Income Tax Act, 1961.
2. Disallowance of job charges and addition to the income.

Detailed Analysis:

1. Rejection of Book Results under Section 145 of the Income Tax Act, 1961:

The assessee, engaged in trading cloth and sarees, faced scrutiny during the assessment proceedings for the assessment year 2011-12. The Assessing Officer (AO) issued notices under Section 133(6) of the Act to verify the embroidery job work claimed by the assessee. These notices were returned unserved for several parties, and the assessee failed to provide necessary documents to support the purchases and sales. The AO issued a final show cause notice on 15.03.2014, requesting the assessee to produce the parties and submit various documents. The assessee's response indicated that some parties had closed their businesses, moved out of Surat, or were deceased. Consequently, the AO concluded that the assessee could not substantiate the job work expenses and rejected the book results under Section 145 due to the lack of credible evidence.

2. Disallowance of Job Charges and Addition to the Income:

The AO disallowed a sum of ?1,11,84,297 out of ?1,76,73,760 claimed as job work expenses, deeming them bogus due to the unserved notices and lack of supporting evidence. The assessee appealed to the Commissioner of Income Tax (Appeals) [CIT(A)], who granted partial relief. The CIT(A) admitted additional evidence under Rule 46A of the IT Rules, noting that the assessee was given insufficient time to produce details. The CIT(A) upheld the rejection of books of accounts but allowed claims for some parties where evidence was provided.

Detailed Findings by CIT(A):

- Allowed Claims:
- 4XU Fashion: Confirmation with PAN was provided, and the AO did not find any discrepancy.
- Satyam Creation: The difference in job charges was due to a discount entry, which was explained and accepted.
- Angel Fabric: The confirmation matched the ledger account.
- Darshan Fashion: A small difference of ?611 was considered insignificant.
- Brahmani Creation: The confirmation matched the ledger account.
- Guru Krupa Fashion: The confirmation matched the ledger account.

- Dismissed Claims:
- Shree Ganesh Fashion, Maruti Nandan Textile, Payal Fashion, Radha Swami Creation, and Deep Creation: No sufficient evidence was provided.
- Jahanvi Fashion: Discrepancies in the contra account and lack of supporting documents led to the dismissal.

Tribunal's Decision:

The Tribunal considered additional evidence submitted by the assessee under Rule 29 of the ITAT Rules, 1963, for Jahanvi Fashion, including income-tax acknowledgments, balance sheet, profit and loss account, and capital account. The Tribunal noted that the assessee was prevented by sufficient cause from submitting these documents earlier. The Tribunal emphasized the principles of natural justice and fair play, granting the assessee another opportunity to present the evidence. The matter was remitted back to the CIT(A) to examine the evidence and adjudicate afresh for the parties: Shree Ganesh Fashion, Maruti Nandan Textile, Payal Fashion, Radha Swami Creation, Deep Creation, and Jahanvi Fashion.

Conclusion:

The appeal was allowed for statistical purposes, and the case was remitted back to the CIT(A) for re-examination of the evidence regarding the six parties. The Tribunal underscored the importance of natural justice, ensuring the assessee had a fair chance to present their case. The order was pronounced in open court on 09/03/2022.