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TMI Blog2017 (4) TMI 512X X X X Extracts X X X X X X X X Extracts X X X X ..... me. In this factual matrix of the matter, we are of the view that the learned CIT(A) has violated the principles of natural justice as mandated under Rule 46A(3). Thus as CIT(A) having failed to give adequate opportunity to the AO of being heard in the matter, the conditions enumerated in sub-Rule (3) of Rule 46A remained uncomplied with. We, therefore, set aside the order of the learned CIT(A) in deleting the addition on account of unreconciled turnover (i.e. between TDS certificates and turnover shown in the Profit & Loss account) and restore the matter to the file of the learned CIT(A) for fresh consideration and adjudication thereon, only after affording the AO adequate opportunity of being heard and to rebut the details/evidences put forward by the assessee in this regard. - Revenue’s appeal is allowed for statistical purposes - ITA No. 4558/Mum/2013 - - - Dated:- 7-4-2017 - Shri D.T. Garasia, Judicial Member and Shri Jason P. Boaz, Accountant Member For The Assessee : Shri H.P. Mahajani For The Revenue : Ms. Vidisha Kalra ORDER Per Jason P. Boaz, A.M. These are cross appeals, by the assessee and Revenue, directed against the order of the CIT(A)-1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 3. Aggrieved by the order of assessment dated 21.11.2007 for A.Y. 2005-06, the assessee preferred an appeal before the CIT(A)-12, Mumbai. The learned CIT(A) disposed off the appeal vide the impugned order dated 19.03.2013, allowing the assessee partial relief. 4. Both Revenue and the assessee, being aggrieved by the order of the CIT(A)-12, Mumbai dated 19.03.2013 for A.Y. 2005-06, have filed cross appeals which we will dispose off in seriatum. B. Assessee s appeal in ITA No. 4558/Mum/2013 for A.Y. 2005-06 5. In its appeal, the assessee has raised the following grounds: - 1. On the facts and in the circumstances of the case and in law, the learned CIT (Appeal) erred in confirming addition/disallowance of ₹ 10,39,34,238/- made by the learned Assessing Officer. The reasons adduced by the learned Assessing Officer for making the addition and by the learned CIT (A) for confirming the same are factually and legally incorrect, unwarranted and untenable. The learned CIT (A) also erred in upholding the view of the learned Assessing Officer that, for like reasons, the amount in question was a provision for a liability other than an ascertained liability for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... signated as Manager Accounts, attended the assessment proceedings from time to time. It will also be noticed that the said Sunil Shetty also appeared before the CIT (Appeals). The assessee merged with Mahindra Ugine Steel Co. Ltd. (MUSCO), a listed public company, with effect from 1st April 2005, though, however, the scheme of merger was approved by the Bombay High Court in February 2006. The assessment proceedings for the impugned assessment year commenced during the time that the assessee had merged with MUSCO. We are informed that initially, one Mr. Siju George, Sr. Manager - Accounts, working with in Pranay appeared before the Assessing Officer. However, Mr. George left the organisation sometime in late 2007. In the last few days of Mr. Georges, Mr. Sunil Shetty, who was Manager Accounts in M(JSCO, appeared before the AO and facilitated conclusion of the assessment proceedings on the basis of the material on record submitted by Mr George. It may please be appreciated that Mr Sunil Shetty was not working with Pranay and therefore had no factual background about the matter. Having participated in the assessment proceedings as stated above, Mr Sunil Shetty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h explanation and/or complete details/documents or evidence to prove its claims. In the light of the explanation and reasons put forth in its application for admission of additional evidence, for not filing these evidences before the authorities below being due to inadvertent mistakes of its employees and taking into consideration the fact that the basis on which the additions/disallowances have been made and sustained in their orders by the authorities below was for non production of details/ documents or evidence to support its claims, we are of the considered view that the interest of equity and justice would be served if the additional evidence put forth by the assessee is admitted for consideration in its appeal. In our view no loss would be caused to Revenue by admission of the additional evidence for consideration, as only the legitimate taxes due on correct income will be recovered. We hold and direct accordingly. 7. Grounds where additional evidence is filed by assessee are as under: - 7.1 Ground No. 1 Addition on account of scrap credit - ₹ 10,39,34,238/- Additional evidence filed in respect of this ground is placed at pages 1 to 28 of the paper book. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee to furnish the cost, date of purchase and year-wise depreciation claimed, hire charges received by Mahindra and place of first use of asset. Since the details called for were not filed, the AO disallowed the assessee s claim. On appeal, the learned CIT(A) observing that no primary details or explanations were filed to support the assessee s claim regarding payment to Mahindra , upheld the disallowance made by the AO. Before us also, except for making the claim that the said expenditure is purely business expenditure allowable under section 37(1) of the Act, no explanations were made or details/evidences filed to support and justify the assessee s claim. In this view of the matter, we have no reason to interfere with the findings of the authorities below and uphold the same. Finding the ground No. 3 raised by the assessee devoid of merit, the same is dismissed. 9. In the result, the assessee s appeal for A.Y. 2005-06 is partly allowed for statistical purposes. Revenue s appeal in ITA No. 4597/Mum/2013 for A.Y. 2005-06 10. In this appeal Revenue has raised the following grounds: - 1. On the facts and circumstances of case and in law the Ld. CIT(A) err ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant craves leave to amend or alter any ground or add a new ground which may be necessary. 11. Grounds 1 2 Disallowance of Direct Expenses ₹ 1,32,01,934/- Grounds 4 5 Disallowance of Staff Welfare Expenses ₹ 20,38,552/- 11.1.1 In these grounds, Revenue assails the order of the learned CIT(A) in deleting the above referred disallowances of direct expenses of ₹ 1,32,01,934/- and staff welfare expenses of ₹ 20,38,552/- by admitting fresh evidence during appellate proceedings and acting on them to give the assessee relief, without affording the AO adequate opportunity of being heard in the matter for rebuttal of the same which is in violation of Rule 46A of the I.T. Rules, 1962 (in short the Rules ). It is further contended that the learned CIT(A) erred in holding that the aforesaid disallowances were made on suspicion and surmises, without appreciating the fact that the assessee had failed to furnish books of account and other details to substantiate its claim for being allowed the aforesaid expenditure and that the disallowances made by the AO were reasonable, in the given circumstances where the assessee failed to furnish the details called f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the assessee failed to file the required details called for in order to substantiate its claim for having incurred the said expenditure. We find, that on appeal, the learned CIT(A) after observing that complete details called for were not filed before the AO, took submissions constituting additional evidence from the assessee and acted thereon to allow the assessee relief; stating that books of accounts, etc. were produced before the AO who could not point out any specific defect and deleted the disallowances stating they were made by the AO on suspicions and surmises. This averment by the learned CIT(A), in our view, is not borne out by the material on record. At the same time, we observe that the assessee has filed additional evidence in its appeal in all those issues which were held against it. Be that as it may, it is amply clear that the learned CIT(A) deleted the additions after taking submissions/ additional evidence on these issues from the assessee and acting on them without affording the AO adequate opportunity of being heard and to rebut the claims of the assessee, which is in violation of the principles of natural justice as laid out in Rule 46A(3) of the Rules. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d suggest that Sub Rule (1) puts an embargo upon the assessee to seek permission for producing additional evidence either oral or documentary. Such evidence can only be permitted to be produced, if conditions enumerated in sub clause (a) to (d) are available. The CIT(A) has to record in writing as to why he had admitted the additional evidence. Sub Rule (3) contemplates that if additional evidence is taken on record, then it cannot be considered on merit, unless an opportunity to the AO is given to comment on the evidence or documents or to cross examine the witness produced by the assessee. Apart from that the AO would be given an opportunity to produce any evidence or documents or any evidence in rebuttal of the additional evidence produced by the assessee. Sub Rule (4) is an exception to all other sub rules. This rule authorizes the CIT(A) to direct any part for production of any documents or examination of any witness to enable her to dispose of the appeal or for arriving at a just conclusion. In the light of the above, we find that the learned CIT(A) failed to give adequate opportunity to the AO of being heard in the matter and the conditions enumerated in Sub Rule (3) remaine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at no reconciliation of the difference in turnover as per TDS certificates and receipts recorded in the Profit Loss account was filed by the assessee before the AO leading to the said addition. In para 7.2 of the impugned order, the learned CIT(A) records that the assessee submitted the relevant documents and information in this regard and allowed the assessee relief by deleting the said addition to turnover, evidently without affording the AO adequate opportunity of being heard and to rebut the same. In this factual matrix of the matter, we are of the view that the learned CIT(A) has violated the principles of natural justice as mandated under Rule 46A(3) of the Rules. For the reasoning rendered by us in paras 11.3.2 and 11.3.3 of this order (supra), we find that the learned CIT(A) having failed to give adequate opportunity to the AO of being heard in the matter, the conditions enumerated in sub-Rule (3) of Rule 46A remained uncomplied with. We, therefore, set aside the order of the learned CIT(A) in deleting the addition on account of unreconciled turnover (i.e. between TDS certificates and turnover shown in the Profit Loss account) and restore the matter to the file of the l ..... X X X X Extracts X X X X X X X X Extracts X X X X
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