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TMI Blog2013 (8) TMI 661X X X X Extracts X X X X X X X X Extracts X X X X ..... s are not properly maintained and in absence of complete ledger, cash book and vouchers, it is not possible to verify trading results or expenses claimed by the assessee - the books of accounts are necessary evidence for the assessment proceedings and the assessee is bound to cooperate with the Assessing Officer by submitting relevant evidence as per requirements of the Assessing Officer. In the present case, the Assessing Officer has specifically mentioned in the remand report that despite several opportunities to the assessee, the complete books of accounts, bills and vouchers related to the claim of expenses were not submitted by the assessee. The Assessing Officer made a disallowance of 20% of expenses on estimated basis on account of non-production of books of accounts, bills and vouchers despite affording adequate opportunity to the assessee for submission of the same. The Assessing Officer also made a contention in the remand report that the Assessing Officer has never refused to admit any evidence nor there was a position that the assessee is prevented by any sufficient cause for producing the evidence in spite of the fact that sufficient opportunities were granted to the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - out of total of Rs. 4,79,05,364/-on adhoc basis at the rate of 5% of the total expenses claimed in profit and loss account merely on the basis that no books of accounts were produced without going into the facts of the case. COMMISSIONER OF INCOME TAX (APPEALS)-XXI rejected the stand of rule 46A for admission of additional evidence and upheld the stand to reject the books of account under section 145(3). COMMISSIONER OF INCOME TAX (APPEALS)-XXI confirmed the part addition out of total addition with total disregard to : i. Explanations provided to the COMMISSIONER OF INCOME TAX (APPEALS)-XXI for the same. ii. Contrary documentary evidence and ledgers provided for the same." 2. Briefly stated the facts giving rise to this appeal are that the assessment proceedings were completed u/s 143(3) of the Income Tax Act (for short the Act). During the assessment proceedings, the Assessing Officer made several disallowances and made the additions thereunder by assessing total income of Rs.3,55,00,587/- as against the total returned income (loss) of Rs.1,69,04,180. The aggrieved assessee filed an appeal before the Commissioner of Income Tax(A) which was partly disallowed p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orporation Pvt. Ltd. (supra) is that a liability which has been incurred but is to be discharged at a future date is deductible in computing the income. It is not in dispute that the assessee has been giving warranty regarding the quality and the life of the cutting saws sold by it to the customers. It is also fact that many a time the warranty conditions are not satisfied and claims are made by the customers in this behalf. In this year also, the AO has allowed a substantial amount in respect of this liability. However, in regard to the claims received after the close of the year but in respect of sales made in the month of March, 2003, it is his case that the liability is contingent in nature because it did not crystalise on or before 31.3.2003. The Ld. CIT(A) did not deal with the merits of the case but allowed the appeal of the assessee on the ground that similar liabilities have been allowed in past. We are of the view that he ought to have considered the merits of the case also. Nonetheless, in view of the aforesaid decision of the jurisdictional High Court, it is clear that the liability of claim and rebate gets fastened on the date of sale and, therefore, the asseseee could ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see that there was a calculation mistake at the end of Assessing Officer and he partly deleted the addition by upholding another part of addition. 6. In the above factual position, we are of the view that the authorities below are expected to follow the principle of consistency in the light of orders passed by ITAT and first appellate authority in assessee s own case in earlier assessment years. As we have already observed that there was a calculation mistake at the end of Assessing Officer which was later corrected by the Commissioner of Income Tax(A), therefore, we find it appropriate to restore this issue to the file of Assessing Officer with a direction that he will decide the issue of assessee s claim pertaining to provision of warranty in the light of earlier orders of the Tribunal and first appellate authority for the earlier assessment years in assessee s case. Accordingly, ground no.1 of the assessee is allowed with the direction as indicated above to the Assessing Officer. Ground no.2 7. Apropos ground no.2, the assessee s representative submitted that the ld. Commissioner of Income Tax(A) was not justified in sustaining a part of disallowance of Rs.1,19,76,341 out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f both the parties and on perusal of record, we observe that admittedly the assessee company filed only journal of April, July, October, 2006 and March 2007 before the Assessing Officer and Assessing Officer rejected the books of accounts u/s 145(3) of the Act with an observation that the books of accounts are not properly maintained and in absence of complete ledger, cash book and vouchers, it is not possible to verify trading results or expenses claimed by the assessee. In the impugned order, the Commissioner of Income Tax(A) decided the issue of rejection of books and admission of additional evidence under Rule 46A of the Rules with following observations:- "From the above facts, it is very much clear that various opportunities were given to the appellant to produce books of accounts, but reasons best known to appellant it has failed to produce the books of accounts. The noting in the order sheet of the assessment record by the AO itself is self-explanatory and describing whole episode in a very clear manner. Furthermore, AO in his remand report also has described the circumstances mentioning the dates, giving opportunities to produce books of accounts which were not produc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The relevant extract of the Hon'ble High Court judgment is reproduced hereunder:- "Held, allowing the appeal, that under rule 46A(3). the evidence produced by the assessee under rule 46A(l) could not be considered on the merits unless the Assessing Officer was given an opportunity to cross-examine the witnesses. Admittedly, the Assessing Officer had not been given an opportunity to cross-examine the witnesses produced by the assessee. A duty is cast upon the assessee to produce all evidence both oral and documentary before the Assessing Officer. When the assessee is not able to produce the evidence or the witnesses before the Assessing Officer, the Commissioner (Appeals) has to satisfy himself about the reasonable cause shown by the assessee for not producing it before the Assessing Officer and for placing if before the appellate authority for the first time. Where the Commissioner (Appeals) was convinced about the reasonable cause, he had to follow the procedure contemplated under Rule 46A(3) by providing sufficient opportunity to the Assessing Officer to examine the evidence or document or to cross-examine the witnesses, as the case may be. In as much as rule 46A(3) ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es were granted to the assessee for submitting the evidence in question i.e. production of books of accounts, bills/vouchers. 12. From the impugned order, we observe that the Commissioner of Income Tax(A) has placed his reliance on the judgment of Hon ble Madras High Court in the case of Commissioner of Income Tax vs Subbu Shashank 327 ITR 577 (Madras) wherein it has been held that it is the duty of the assessee to produce all evidence both oral and documentary before the Assessing Officer. Their Lordships further held that if assessee is not able to produce the evidence or witnesses before the Assessing Officer, the Commissioner of Income Tax(A) has to satisfy himself about the reasonable cause shown by the assessee for non-producing it before the Assessing Officer and the cause which prevented the assessee for placing the additional evidence before the Assessing Officer. The Commissioner of Income Tax(A) has considered the relevant extract of Hon ble Madras High Court. 13. On specific query from the bench, the assessee submitted a copy of its application u/s 46A of the Income Tax Rules, 1962 which shows that the assessee agitated the issue of rejection of books of accounts by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s accounts were incomplete and incorrect without substantiating anything to prove that its accounts were incomplete and incorrect. Therefore, we hold that the Assessing Officer was not justified in rejecting books of accounts of the assessee by invoking section 145(3) of the Act and the same act of the Assessing Officer was erroneously upheld by the Commissioner of Income Tax(A). 15. Coming to the issue of rejection of application of the assessee u/s 46A of the Rules, at the outset, we observe that the books of accounts of the assessee were rejected by the Assessing Officer on baseless reasons which prevented the assessee to produce relevant evidence in support of his claim. Therefore, we hold that the Commissioner of Income Tax(A) also rejected the application of the assessee u/s 46A of the Rules without going to the root of the cause which prevented the assessee to produce relevant evidence before the Assessing Officer. Therefore, we also hold that the Commissioner of Income Tax(A) wrongly rejected the application of the assessee u/s 46A of the Rules without any reasonable and justified basis and these findings of the Commissioner of Income Tax(A) are set aside by holding that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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