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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 ..... itions/disallowances: - (i) Scrap sales Rs. 10,39,34,238/- (ii) Modvat on capital goods Rs. 10,34,675/- (iii) Octroi Rs. 21,23,387/- (iv) Out of direct expenses Rs. 1,32,01,934/- (v) On account of receipts as per TDS certificates Rs. 13,31,28,883/- (vi) Under section 43B Rs. 41,94,161/- (vii) Under section 68 Rs. 6,50,00,000/- (viii) Under section 69C Rs. 15,22,929/- (ix) Interest under section 36(1)(iii) Rs. 3,95,121/- (x) Press hire charges Rs. 31,72,000/- (xi) Provisions Rs. 74,79,561/- (xii) Miscellaneous expenses Rs. 14,00,000/- (xiii) Staff Welfare expenses Rs. 20,38,552/- (xiv) Interest on differential duty Rs. 19,27,273/- (xv) Depreciation Rs. 22,89,974/- (xvi) Depreciation on Scrap Conveyor Belt Rs. 25,60,682/- Book profits were computed at Rs. 31,44,49,142/- under section 115JB of the Act. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tter dated 23.05.2016, has made an application for admission of additional evidence in paper book pages 1 to 42, it seeks to put forward in support of various claims made in the grounds raised in this appeal. In this application praying for admission of additional evidence, the reasons/explanation put forward as to the circumstances why the same could not be filed before the authorities below is as under: - "At the outset Your Honors may note that the additional evidence basically comprises of contemporaneous accounting records and supporting documents. There is also a current dated letter from Mahindra & Mahindra Limited confirming the state of affairs in respect of Ground No. 1 in the said appeal. From the assessment order, Your Honours will notice that one Mr. Sunil Shetty, designated 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 assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame. 6.3 We have heard both the parties and carefully considered the assessee's application dated 23.04.2016 for admission of additional evidence in paper book (pages 1 to 42); which is admittedly not produced before the authorities below, and the other material on record. We find that the additional evidence sought to be filed is in respect of ground No. 1 (pages 1 to 28), Ground No. 2 (pages 29 to 35), ground No. 4 (pages 36 to 41) and ground No. 5 (page 42) which were raised by the assessee in its appeal. From a perusal of the orders of the Assessing Officer (AO) and learned CIT(A), it appears to us that the additions/disallowances made, in respect of these grounds raised, were made primarily because the assessee either failed to furnish 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 auth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Revenue strongly supported the orders of the authorities below, since no details in this regard were filed before them to establish and justify that the assessee's claim was in order. It is submitted that in this appeal also, except for reiterating its contention that the same is purely a business expenditure under section 37(1) of the Act, no details have been filed to establish the claim. 8.3 We have heard the rival contentions and perused and carefully considered the material on record. In the course of assessment proceedings, the AO noticed that the assessee had claimed expenditure of Rs. 31,72,000/- as press hire charges to M/s. Mahindra Ugine Steel Co. Ltd., a connected concern and required 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 sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ooks of account in support of claim, after given sufficient opportunity by the Assessing Officer. 5. On the facts and circumstances of case and in law the Ld. CIT(A) erred in holding that the above disallowance is based on suspicion and surmises without appreciating the fact that if the details are not provided by the assessee, the A.O. made reasonable disallowance on best judgement on proportionate basis which the best course to be resorted to in such circumstances as upheld by number of decisions. 6. The appellant prays that the order of Ld. CIT(A) on the above grounds be set aside and that of the Assessing Officer be restored. 7. The appellant 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 - Rs. 1,32,01,934/- Grounds 4&5 - Disallowance of Staff Welfare Expenses - Rs. 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 Rs. 1,32,01,934/- and staff welfare expenses of Rs. 20,38,552/- by admitting fresh evidence during appellate proceedings and acting on them to give the assessee relief, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e learned CIT(A) deleting the disallowances of direct expenses and staff welfare expenses be set aside for fresh consideration after giving adequate opportunity to the AO. 11.2 Per contra, the learned A.R. supported the orders of the learned CIT(A) in deleting the aforesaid disallowances of direct expenses and staff welfare expenses. 11.3.1 We have heard the rival contentions and perused and carefully considered the material on record. It is clear to us from a perusal of the order of assessment that the AO was constrained to make the said disallowances of direct expenses and staff welfare expenses for the recorded reason 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 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duced by the appellant. (4) Nothing contained in this rule shall affect the power of the [Deputy Commissioner (Appeals)] [or, as the case may be, the Commissioner (Appeals)] to direct the production of any document, or the examination of any witness, to enable him to dispose of the appeal, or for any other substantial cause including the enhancement of the assessment or penalty (whether on his own motion or on the request of the [Assessing Officer]) under clause (a) of sub-section (1) of section 251 or the imposition of penalty under section 271.] 11.3.3 A perusal of this Rule would 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 fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of the mandate of Rule 46A of the Rules. It is submitted that in view of the above, the order of the learned CIT(A) on this issue be set aside and this issue be taken up for de novo consideration after affording the assessee adequate opportunity of being heard in the matter. 12.2 Per contra, the learned A.R. of the assessee supported the order of the learned CIT(A) on this issue. 12.3.1 We have heard the rival contentions and perused and carefully considered the material on record. On an appreciation/perusal of the orders of the authorities below, it is seen that 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 natur ..... X X X X Extracts X X X X X X X X Extracts X X X X
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