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2015 (6) TMI 424 - ITAT AGRA

2015 (6) TMI 424 - ITAT AGRA - [2015] 40 ITR (Trib) 158 (ITAT [Agra]) - Admission of additional evidence by the CIT(A) - whether in violation of rule 46A - Held that:- Powers of the Board, which have been vested in them for carrying out for the purposes of the Act, have to be exercised in such a judicious manner so as not to make any statutory provision redundant and nugatory. The rules made in exercise of these powers should also not be interpreted in such a manner as to narrow down, dilute or .....

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s case, in my view, the CIT (A) ought to have admitted the additional evidence which could not be, for genuine reasons, produced before the Assessing Officer. In view of these discussions uphold the well reasoned and well considered action of the CIT(A) and decline to interfere in the matter. - Decided against revenue.

Addition of commission expenses - CIT(A) deleted the addition - Held that:- The elaborate reasoning for the relief so granted by the CIT(A) is quite valid and judicious .....

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me, none of these payments is in excess of the threshold limit resulting in TDS obligations. In view of these discussions, as also bearing in mind entirety of the case, approve the conclusions arrived at by the CIT(A) and decline to interfere in the matter.- Decided against revenue.

Addition of office expenses - CIT(A) deleted the addition - Held that:- The disallowance was made by the AO, on purely estimated basis, as the evidences in support of the expenses were not produced during .....

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hat:- After verification of these details and looking to the fact that the assessee (appellant) was maintaining regular books of account including the books for these two branches and all the details of purchase and sales are available, loss shown by the assessee (appellant) from these two branches cannot be denied and the same cannot be disallowed in absence of any evidence to shown the losses incurred by the assessee (appellant) from these two branches were not genuine or the documents/books m .....

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lowances were ad hoc disallowances for want of evidence but the all the requisite details were furnished at the assessment stage and no defects were pointed out in respect of the same. Also noted that all the evidences admitted as additional evidences under rule 46A were duly confronted to the AO and his remand report was called in respect of the same. In view of these discussions, as also bearing in mind entirety of the case, approve the conclusions arrived at on this issue as well and decline .....

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disallowance to l/10th of these expenses. - IT Appeal Nos. 2 & 60 of 2015 & Co Nos. 3 & 4 (Agra) of 2015 - Dated:- 31-3-2015 - Pramod Kumar, J. Surendra Kumar for the Appellant P.K. Sehgal and Utsav Sehgal for the Respondent ORDER 1. These two appeals, and the two cross objections arising from the appeals, pertain to the same assessee, involve interconnected issues and were heard together. As a matter of convenience, therefore, I am disposing of both the appeal as also both the cross objections .....

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rd business loss, assessed by the Assessing Officer is ₹ 31,41,645 as against gross total income/business income disclosed by the assessee of ₹ 8,55,068. It was in this backdrop that I requested the parties to address me on whether this matter can be heard by this single member bench or should it be referred to a division bench. The matter was thus adjourned on the first day of hearing. On the next date of hearing, learned representatives made specific submissions on this issue. 3. S .....

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and, therefore, quantum of dispute seems to be irrelevant. It was thus submitted that he has no objection to the hearing of these appeals by this single member bench. He, however, hastened to add that as for the question of propriety of whether this matter should be heard by a single member bench or not, this is not a call to be taken by the Departmental Representative, and that, in any event, his submissions should not be construed as a policy stand by the income tax department. He also stated .....

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ited to a decision of Allahabad Division Bench 'A' of this Tribunal, in the case of Cawnpore Textile Ltd. v. IAC [1990] 34 1TD 495, wherein it was held that criterion adopted for determining the jurisdiction of a single member bench is not quantum of addition but quantum of income assessed by the Assessing Officer. Learned counsel also invited my attention to a judgment of Hon'ble Karnataka High Court, in the case of C1T v. Mahakuteshwar Oil Industries [2008] 298 ITR 390, wherein it .....

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nvolved in the appeal. When the provisions of law are unambiguous, according to Shri Sehgal, there is no scope of resorting to any creative process of interpretation and referring to the call of propriety. He submits that in the normal circumstances, it is immaterial whether an appeal is heard by the SMC bench or by the division bench, but, since the division bench is non-functional in Agra, referring these appeals to division bench will result in wholly avoidable delay in disposal of appeals. S .....

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000 with effect from 1st June 2015 and the stated object of this enhancement in the limit is that "(t)his will help in quicker disposal of appeals before the Tribunal". I am thus urged to act in harmony with the purpose of the creation of the SMC bench by taking up the appeal which this SMC bench is allowed to dispose of on the basis of the assessed income of the assessee being less than ₹ 5,00,000. Learned counsel urges me to hear the appeals and the COs and dispose of the same .....

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e his power if the income computed by the AO is less than ₹ 5,00,000 even though the same has been enhanced by the CIT(A) in excess of ₹ 5,00,000". Their Lordships, in this regard, observed as follows: '9. Considering the rival contentions, what is required to be considered by us in this appeal is whether ₹ 5,00,000 to be computed in order to decide the jurisdiction of a Single Member of the Tribunal was the income computed by the AO or on the findings of the CIT(A). I .....

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one JM and one AM. (3) The President or any other Member of the Tribunal authorised in this behalf by the Central Government may, sitting singly, dispose of any case which has been allotted to the Bench of which he is a Member and which pertains to an assessee whose total income as computed by AO in the case does not exceed five hundred thousand rupees and the President may, for the disposal of any particular case constitute a Special Bench consisting of three or more Members, one of whom shall .....

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irector or the ITO who is vested with the relevant jurisdiction by virtue of the directions or orders issued under sub-s. (1) or sub-s. (2) of s. 120 or any other provision of this Act, and the Addl. CIT or Addl. Director or Jt. CIT or Jt. Director who is directed under cl. (b) of sub-s. (4) of that section to exercise or perform all or any of the powers and functions conferred on or assigned to an AO under this Act.' 12. From the definition of AO, we cannot come to the conclusion that if th .....

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n the legislature in their wisdom have used the word "AO", we cannot take a different view than that of the plain reading of the section. When the word, "AO" is used in s. 255, we cannot hold the orders of the appellate authority as an order of the AO. In the circumstances, point No. 1 has to be held against the Revenue. Accordingly, we answer the question No. 1 against the Revenue and we hold that a Single Member of the Tribunal can exercise his power if the income computed .....

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y the SMC bench was a mistake apparent on record and the order passed by the SMC bench should be recalled. It was contended that 'income' includes 'loss' as well. While as on now I am not really concerned with that aspect of the matter inasmuch I am not dealing with a situation in which the income is assessed as loss in excess of ₹ 5,00,000 and I see no need to deal with other judicial precedents on that aspect, suffice to note that what was considered to be material was th .....

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risdiction in such a case will not be of the Division Bench because the addition of ₹ 50,01,000 has been made but of the SMC because the total income assessed is ₹ 1,000.... If the addition had been ₹ 92,46,300 the resultant figure will be total income of ₹ 10. jurisdiction in such case will definitely be of SMC. It is, therefore, futile, in the existing state of law, to look at the quantum of addition. What has to be looked at is the quantum of total income.' 7. I ha .....

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MC bench, is concerned is only with respect to the assessed income, i.e., total income as computed by the Assessing Officer. In my considered view, this bench has the powers to hear any case, which is otherwise in the jurisdiction of this bench, pertaining to an assessee whose total income as computed by the Assessing Officer does/not exceed ₹ 5,00,000- irrespective of the quantum of the additions or disallowances impugned in that appeal. Once I come to the conclusion that this bench has t .....

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rs when circumstances so warrant or justify. Having held that a SMC bench has the power, as indeed the corresponding duty, to decide appeals arising out of an assessment in which income assessed by the Assessing Officer does not exceed ₹ 5,00,000, I may add that ideally the decision to decide as to which matter should be heard by a single member bench and which matter should be heard by a division bench should be determined on the basis of, if it is to be based on a monetary limit, the amo .....

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l, there may be bigger icebergs lurking in the dark representing high value tax disputes adjudication on which may benefit from the collective wisdom and checks and balances inherent in a division bench. However, as the law stands its assessed income which matters and not the tax effect or the quantum of disallowances or additions impugned in appeal. All that is relevant to decide the jurisdiction of the SMC bench is thus the assessed income and nothing other than that. 8. It is in this backdrop .....

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sment year 2003-04. 11. In the first ground of appeal, the Assessing Officer has raised a grievance against admission of additional evidence by the CIT(A) in violation of rule 46A, "without appreciating the fact that ample opportunity was provided to the assessee to produce the books of account and supporting bills and vouchers, which he failed to avail". 12. So far as this grievance of the assessee is concerned, the relevant material facts are like this. During the course of the asses .....

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ot;With reference to the hearing of above captioned appeal fixed for 30th May, 2013, the assessee firm is filing herewith a paper compilation comprising of 127 pages to defend its case properly & judiciously. From the perusal of the assessment order dated 20th March, 2006 passed u/s 413(3) of I.T. Act, 1961, it is quite evident that on account of severe ailment of Senior Partner (Late) Mr. M.P. Jain, who was well conversant with the accounting & taxation matters and in the absence of the .....

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cient opportunity to the assessee firm to defend its case and for producing audited books of account and other relevant records and by completely brushing aside the past established history of the assessee's case. The assessee had subsequently duly filed Written Submission dated 21st March, 2006 along with the requisite details/evidences, in compliance to the remaining queries, at the Dak Counter on 22nd March, 2006, but the same was not considered by the learned AO because according to him .....

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which are relevant to the grounds of appeal before your Honour' and (c) The assessee was not allowed sufficient opportunity to adduce Income Tax Rules, 1962, your Honour kindly admit the documents, material, evidences filed at pages 110-127 in the paper compilation (which as stated above were filed on 22nd March, 2006 through Dak Counter before the learned AO), so as to enable the assessee firm to defend its case properly & judiciously." 13. This petition under rule 46A was opposed .....

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course of the assessment proceedings. It was also pointed out that requisite details and evidences submitted by the assessee on 22nd March 2006 were not at all considered by the Assessing Officer even though the assessment order was served on the assessee on 24th March 2006. It was in this backdrop that the C1T(A) held that the additional evidence should be admitted and the AO should also be given reasonable opportunity of being heard in respect of the same. Learned CIT(A), in coming to this con .....

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h details/documents were not filed before the AO during the hearing of the assessment proceeding but in a Dak Counter. For such delay in filing of details/documents, the Ld. AR has explained quite fairly in his written submission as reproduced above that the assessee (appellant) was prevented by sufficient cause in filing these details/documents because of severe illness of the senior partner (Late) Mr. M.P. Jain. Therefore, it would be unjustified if the Grounds of appeal are decided without co .....

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these details/documents and supporting evidences, the AO should be given sufficient opportunity to examine them and offer comments on the reasonability of disallowances/additions made in the assessment order." 14. The Assessing Officer is aggrieved of the additional evidence so admitted by the CIT(A) and is in appeal before me. 15. Having heard the rival contentions and having perused the material on record, I am not persuaded to uphold the grievance of the Assessing Officer. I have noted .....

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der was served on the assessee on 24th March 2006. 1 have also noticed that the remand report on all these additional evidences and submissions was duly called from the Assessing Officer and taken into account in deciding the matter on merits. A view may indeed be taken, as taken by Hon'ble Gujarat High Court in the case of CIT v. Volimohemed Ahmedbhai [1982] 134 ITR 214, that the CIT(A) cannot admit any additional evidence placed under r. 46A(1) unless the ITO has been allowed a reasonable .....

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n made conferring jurisdiction on the first appellate authority to make such inquiry as he deem fit and that CIT(A) does not exceed his jurisdiction if he asks or allows the appellant to file additional evidence in the matter he thinks fit. Hon'ble Bombay High Court, in the case of Smt. Prabhavati S. Shah v. CIT [1998] 231 ITR 1, have observed that r. 46A does fetter the right of the assessee to produce evidence but it does not restrain ClT(A)'s powers under s. 250(4) or 250(5) of the IT .....

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to the provisions in the statute will be ultra vires and void. Rule 46A was introduced w.e.f. 1st April, 1973 and as a result of insertion of s. 295(2)(mm) in the IT Act which empowered Board to provide for the circumstances in which, the condition subject to which and the manner in which C1T(A) may permit an appellant to produce an evidence which the appellant did not produce or was not allowed to produce before the AO. However, these powers of the Board, which have been vested in them for carr .....

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that, before disposal of any appeal, CIT(A) is required to make further inquiries, either on his own or through the AO, he is not denuded of the powers to do so because of the provisions of r.46A. On a consideration of facts of this case, and in the peculiar facts of this case, in my view, the CIT (A) ought to have admitted the additional evidence which could not be, for genuine reasons, produced before the Assessing Officer. In view of these discussions and bearing in mind entirety of the case .....

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tax at source in respect of the same. Yet, the CIT(A) has deleted the disallowance aggrieved by which the AO is appeal before me. 18. So far as this disallowance is concerned, the relevant material facts are as follows. During the course of the scrutiny assessment proceedings, the Assessing Officer disallowed 75% of the expenditure of ₹ 11,10,688, i.e. ₹ 8,33,016, from sales commission, on the ground that the assessee has not furnished any evidence to justify the same. In appeal, how .....

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ch commission expenses were examined by the department in earlier assessment years also and ad-hoc disallowances were made in view of non-verifiability from the persons to whom such commission was paid. The Ld. AR explained that the nature of business carried on by the assessee (appellant) is such that it is not possible to produce the persons to whom such commission has been paid because they only come along with the tourist and thereafter, it is not possible to trace them out to produce them f .....

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d after examining the modus operandi of the business of the assessee and the market practice of the payment of commission in this type of business, the Hon'ble ITAT, Agra deleted the additions made in earlier years except in A.Y. 1996-97 in which, addition up to ₹ 25,000/- has been confirmed and in A.Y. 2001-02 in which, addition up to ₹ 1,34,994/- has been confirmed. He also pointed out that in case of the same assessee, the disallowance of commission of ₹ 25,000/- out of .....

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ment of commission as claimed by the assessee (appellant) cannot be totally ruled out, however, it is also correct that the verification of the entire amount of commission claimed by the assessee is not possible. However, despite such commission not being completely verifiable, the Hon'ble ITAT Agra while deciding the appeal in assessee's own case for earlier assessment years allowed the payment of commission for most of the years except for AY 1996-97 and AY 2001-02 as discussed above. .....

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e making payment of commission to many persons for a single sale, the total amount of commission paid remained in the range of 25%, however, in absence of non-verifiability of payment of such commission to a large number of persons for a single sale, it is difficult to accept that for one sale, commission would have been paid to many drivers because the tourist would have come in one or two buses and hence, there cannot be a more than two drivers but in same cases, payments are shown to more tha .....

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/-. Accordingly, out of the total disallowance of ₹ 8,33,016/- made by the AO out of commission expenses, the disallowance is sustained up to ₹ 55,534/- and hence, the assessee gets a relief of ₹ 7,77,482/- and therefore. Ground No. 7 & 8 are partly allowed." 19. The Assessing Officer is aggrieved of the relief so given by the CIT(A) and is in appeal before me. 20. I have heard the rival contentions, perused the material on record and duly considered facts of the case .....

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eceding assessment years. As regards the question of non deduction of tax at source from these payments, I have noticed, from the details of payments furnished before me, none of these payments is in excess of the threshold limit resulting in TDS obligations. In view of these discussions, as also bearing in mind entirety of the case, I approve the conclusions arrived at by the CIT(A) and decline to interfere in the matter. 22. Ground no. 2 is thus dismissed. 23. In ground no. 3, the Assessing Of .....

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rt of the expenses were not produced during the course of the assessment proceedings. However, as we have noted earlier in this order, subsequently assessee submitted all the necessary evidences by way of additional evidence under rule 46 A, on which remand report was also called from the AO. It was in this backdrop and satisfied with the material on record that the CIT(A) has granted the impugned relief. The AO is not satisfied by the relief so granted by the CIT(A) and is in appeal before me. .....

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on of the AO and decline to interfere in the matter. 26. Ground no. 3 is also dismissed. 27. In ground no. 4, the Assessing Officer is aggrieved that the CIT(A) has erred in deleting the addition of ₹ 2,31,368 and ₹ 1,90,173 made by the AO in respect of losses of Jaipur and Delhi branches respectively. 28. In the course of the assessment proceedings, the Assessing Officer disallowed these losses with his brief observations to the effect "the assessee has shown loss of ₹ 2, .....

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377; 2,31,368/- & ₹ 1,90,173/- have been disputed. These two additions have been made because of disallowance of loss claimed by the assessee as incurred by its branches running in Hotel Ram Bagh Palace, Jaipur (loss of ₹ 2,31,368/-) & Hotel Maurya Sheraton, Delhi (Rs.1,90,173/). The AO disallowed these two losses stating in the assessment order that supporting evidence of these two losses shown in respect of above mentioned two branches was not produced. In this regard, the .....

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nnot be denied. He also showed to me that the details of sales and purchases of these two branches were also filed along with the letter date 20.03.2006 and the same were also produced before me. After verification of these details and looking to the fact that the assessee (appellant) was maintaining regular books of account including the books for these two branches and all the details of purchase and sales are available, loss shown by the assessee (appellant) from these two branches cannot be .....

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two branches are available. Therefore, I delete the addition of ₹ 2,31,368/- and ₹ 1,90,173/- and accordingly, both the Grounds No.10 & 11 are allowed." 29. The Assessing Officer is not satisfied by the relief so granted by the CIT(A) and is in appeal before me. 30. Having heard the rival contentions and having perused the material on record, I am not inclined to disturb the very well reasoned findings and conclusions of the CIT(A) on this aspect either. I have also noted t .....

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CIT(A) has erred in deleting the additions of ₹ 29,961 and ₹ 1,15,220 made by the AO in respect of expenses of Pleasure Tours Varanasi branch and Agra branch. 33. The facts with respect to these disallowances also are more or less similar. During the course of the assessment proceedings, these ad hoc disallowances were made for want of supporting evidence but, at the first appellate stage, all the necessary evidences were submitted as additional evidence, AO was duly confronted with .....

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have also noted that all the evidences admitted as additional evidences under rule 46A were duly confronted to the AO and his remand report was called in respect of the same. In view of these discussions, as also bearing in mind entirety of the case, I approve the conclusions arrived at on this issue as well and decline to interfere in the matter. 34.1 Ground no. 5 is also dismissed. 34.2 In the result, ITA No. 2/Agra/2015 is dismissed. 34.3 In ITA No. 60/Agra/2015, the Assessing Officer has ch .....

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