TMI Blog2019 (9) TMI 825X X X X Extracts X X X X X X X X Extracts X X X X ..... Thus, the grounds raised by the assessee as well as the Revenue are allowed for statistical purposes. Disallowance of depreciation at 80% in respect of certain items of plant and machinery and instead allowing depreciation @ 25% - HELD THAT:- It is found as an admitted position that similar issue has been decided in favour of the assessee by the Tribunal in the assessee s own case for the immediately preceding assessment year 2005-06 vide order. Both the sides are in agreement that the facts and circumstances of this ground are mutatis mutandis similar to those of the preceding year. Respectfully following the precedent, we decide this issue in the assessee s favour. This ground is allowed. Disallowance under the head Repairs to machinery - HELD THAT:- CIT(A) sustained the above additions on the ground that the assessee could not produce any document to substantiate such claim. AR fairly conceded that no such document was still available with the assessee. In the absence of any substantiation of the claim of deduction for such expenses, we uphold the impugned order. Thus, the two grounds stand dismissed. Deduction on account of bad debts - HELD THAT:- It is found as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have restored to the AO for a fresh consideration and decision after examining the books of account and relevant documents. Adopting the same reasoning, we set aside the impugned order and send the matter to the AO for deciding it afresh. Needless to say, the assessee will produce the books of account and the relevant details, as called for by the AO. - ITA No.509/PUN/2014, ITA No.714/PUN/2014 - - - Dated:- 13-9-2019 - Shri R.S. Syal, Vice President And Shri S.S. Viswanethra Ravi, Judicial Member For the Assessee : Shri H.P. Mahajani For the Revenue : Mrs. Nandita Kanchan ORDER PER R.S. SYAL, V.P.: These two cross appeals one by the assessee and the other by the Revenue arise out of the order passed by the ld. CIT(A) on 13.01.2014 in relation to the assessment year 2006-07. 2. The first ground raised in the assessee s appeal is against the confirmation of addition of ₹ 45,18,200/- on account of commission paid to Nischal Corporate Services Pvt. Ltd. (NCS) and ₹ 31,62,142/-, being 10% of the remaining domestic commission. The Dep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndeep Sitlani admitted on oath that he had floated all these companies on paper and was issuing accommodation entries to various companies including M/s. Thermax Ltd. During the course of search action, it transpired that NCS was not having any staff or other infrastructure and hence it was not in a position to render any service to the assessee. The Directorate of Investigation issued summons u/s.131(1) to M/s. Thermax Ltd. calling the details of payment made by it as commission to NCS. The assessee produced only hand-written statement. During the course of the assessment proceedings, the AO requested the assessee to submit confirmation letter from NCS, which it failed to do. Instead, the assessee adopted a hostile attitude and did not extend co-operation to the AO. The assessee was again called upon to give the name and designation of the officials who had signed the cheques for making payment to NCS and the details of cheque nos. etc. In reply, the assessee simply stated that it had used the expert services of NCS but no concrete evidence was furnished. The Assessing Officer (AO) disallowed commission of ₹ 45,18,200/- (₹ 27,55,000 + ₹ 11,63,200) which was alleg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the appellant . He, therefore, did not approve the approach adopted by the AO. 5. In our considered opinion, the view canvassed by the ld. CIT(A) is totally out of place. It is the AO who has to make the assessment. He only knows what is required and what is not required for his examination. Once the AO makes a request for production of books of account and the details for enabling him to complete the assessment, it becomes obligatory on the part of the assessee to produce such books of account and the details as called for. The assessee cannot dictate the AO of the manner in which the assessment should be made. It is the sole prerogative of the AO to go ahead with the assessment in the way he wants so long as his action is within the statutory mandate. Even otherwise, examination of books of account is elementary for making an assessment. The ld. CIT(A), in our considered opinion, went completely off the mark in accepting the assessee s contention that the AO should have restricted himself to the limited details as furnished by it or not insisted on examination of the full set of books of account. We, therefore, vacate such finding recorded in the impugned or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Tribunal. The assessee also questioned the correctness of the two witnesses and demanded right to cross-examine them. The adjudicating authority passed the order confirming the demand in the show cause notice. The Tribunal rejected the assessee s ground of not allowing cross-examination. When the matter finally came up before the Hon ble Supreme Court, it observed that not allowing cross-examination of the witnesses, whose statements were the basis of the order, was a serious flaw, which made the order nullity. In reaching this conclusion, the Hon ble Court observed that on an earlier occasion also when the matter came before this Court, the matter was sent back to the Tribunal. From the above factual panorama of Andaman Timber Industries (supra), it is clear that it was a second round of proceedings in which the assessee was repeatedly denied opportunity of cross-examination. Further, the assessee specifically requested the adjudicating authority to allow cross-examination, which was denied. It was under such circumstances that the Hon ble Supreme Court held that the order passed by the Central Excise Adjudicating authority was null and void. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Revenue by holding that the Tribunal was not right in deleting additions made in the block assessment on the ground that no opportunity to cross-examine was granted, when no such opportunity was ever sought at any time. 13. In the case of G. Mahesh Babu, the Tribunal deleted the addition for not allowing cross-examination. The Hon ble Supreme Court in G. Mahesh Babu Vs. Pr. CIT (2018) 407 ITR 14 (St.) dismissed the assessee s SLP against the judgment dated 6.1.2017 of the Hon ble Telangana and Andhra Pradesh High Court in I.T.T.A. Nos. 226 and 208 of 2016 whereby the Hon ble High Court held that an order of assessment passed on the basis of material gathered behind the assessee s back and not supplied to the assessee with an opportunity to rebut, would not be void ab initio, and could be rectified through an order of remand. 14. In Udit Kalra Vs. ITO, Delhi (ITA No.220/2019 and C.M.No.10774/2019, the assessee specifically raised before the Hon ble Delhi High Court the issue of denial of opportunity of cross examination. The Hon ble Delhi High Court vide judgment dated 08-03-2019 held that the addition was valid. 15. In Virbh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... portunity to cross examine, if desired, before deciding the issue on merits. 18. In sofaras the second component of disallowance of commission is concerned, it is seen that the AO disallowed 30% of the remaining commission of ₹ 8.81 crore. The ld. CIT(A) reduced such disallowance to 10%. Against the said finding, both the sides have come up in appeal before the Tribunal. 19. Having heard both the sides and gone through the relevant material on record, it is observed from the factual narration made above that the assessee adopted a non co-operative attitude and did not produce books of account and other relevant bills before the AO. Since the AO was debarred from examining the details of commission along with necessary details, he could not have made a specific disallowance for want of evidence or genuineness etc. It is in such backdrop of the facts that he made disallowance on ad hoc basis. The ld. CIT(A), too, reduced the disallowance to 10% without giving any reasons. We have already vacated the finding of the ld. CIT(A) in holding that the AO should have acceded to the assessee s request for going ahead with partial books and truncated det ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6(b) of the Revenue s appeal are against the deletion of addition on account of fees paid to Mckinsey Company. Here again, both the sides agree that similar issue has been decided in the assessee s favour by the Tribunal in its order for A.Y. 2005-06. We, therefore, decide this issue in favour of the assessee. The ground of the assessee is allowed and those of the Revenue are dismissed. 25. Ground No. 6 of the assessee s appeal is against the confirmation of addition amounting to R.2,21,000/- towards Freight on the method of revenue recognition. Ground No.7 of the Revenue s appeal is against the deletion of addition on account of income recognition from the contract activity. Here again, both the sides agree that similar issue has been decided by the Tribunal in the assessee s favour in its own case for the A.Y. 2005-06. Relevant discussion has been made in para 8.1 pages 9-12 of the order. Respectfully following the precedent, we decide this issue in assessee s favour. The ground of the assessee is allowed and that of the Revenue is dismissed. 26. Ground No.7 of the assessee s appeal and Ground No. 9 of the Revenue s appeal are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 31. Ground No.3 of the Revenue s appeal is against the deletion of disallowance on account of unpaid amount of provision of Short term incentive plan. 32. Both the sides agree that the facts and circumstances of this issue are similar to Ground No.4 of the Revenue s appeal for the A.Y. 2005-06, in which this issue has been decided by the Tribunal in favour of the assessee vide its order dated 24-05-2019 in ITA No.1765 1803/PUN/2012. Respectfully following the precedent, we uphold the impugned order on this score. 33. Ground No. 6(c) of the Revenue s appeal is against the deletion of addition of ₹ 1,18,69,699/- which was made by the AO by disallowing 5% of balance Legal and Professional charges to the tune of ₹ 23.73 crore. The ld. CIT(A) deleted the addition. 34. It is observed that ad hoc disallowances from expenses made in the preceding years have been deleted by the Tribunal for want of the AO not specifically pointing out any defect in the detail of expenses. The factual position in the year under consideration is different inasmuch as the assessee turned hostile and went to the extent of not producing t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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