TMI Blog2022 (12) TMI 33X X X X Extracts X X X X X X X X Extracts X X X X ..... substance, we clarify the clear position of law of the same as being not a subject matter of an appeal under the Act, and not liable to be resolved through the appellate procedure under the Act. No notice u/s. 143(2) stands issued by the AO, i.e., Addl. CIT, Chhindwara, after 30/11/2006, i.e., the date of order u/s. 120(4)(b) by the CIT-1, Jabalpur, authorising him to act as an AO - True, there is no issue of notice u/s. 143(2) for AY 2004-05 on or after 30/11/2006. How could, one wonders, that invalidate the notice u/s. 143(2) dated 17/3/2005 by the Asst. CIT, Circle Chhindwara, i.e., the incumbent AO, duly served on the assessee on 18/3/2005; the said notice being also within time and, thus, a valid notice seeking to assume jurisdiction to frame an assessment u/s. 143(3), and which has been by the incumbent AO on 26/12/2006, again noted by the ld. CIT(A) - Though the assessee s Ground speaks of notice u/s. 142(1) as well, the same is not a jurisdictional notice and, therefore, it s relevance in challenge to the validity of the assessment is neither understood nor explained, being also not before the ld. CIT(A), nor covered in the assessee s submissions before him. Notice u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , was finally determined in full at the impugned sum of Rs. 5.04 lacs on 01/4/2003 itself, representing the total amount of debit notes-in-hand as on 31/03/2003. The assessee s claim is, clearly, without any basis on facts, as indeed in law. We therefore uphold the disallowance as confirmed by the ld. CIT(A). Disallowance of expenditure - vast difference in the rate on which hamali charges are claimed as paid (Rs. 5.08 per bag) and that by another party in the trade (rs. 0.30 0.35 per bag) - HELD THAT:- It is pertinent to note that the assessee had in fact reported a net income of Rs. 13,352 under this head for the immediately preceding year. Further, the very fact that the assessee has received compensation at an average of Rs. 3.50 per bag for the year and, further, been allowed expenditure @ 0.85 per bag, implies an acceptance of expenditure at Rs. 4.53 per bag, which is the relevant rate, and not Rs. 0.85 per bag, stated as allowed by the AO. This also explains marginal income under this head for the preceding year, the reimbursement exceeding the expenditure by some paisa per bag. We find no reason for interference. We decide accordingly. Loss on ginned cotton accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 143(3) of the Income Tax Act, 1961 ( the Act hereinafter) dated 26/12/2006 and 24/12/2007 for Assessment Years (AYs.) 2004-05 2005-06 respectively, vide his orders dated 09/03/2016 13/03/2016 respectively. The appeals raising common issues, were heard together, and are being disposed of per a common order for the sake of convenience, even as was by the Tribunal in the first round. 2. The appeals were initially disposed off by the Tribunal vide it s consolidated order dated 10/11/2017, allowing the assessee s appeals on the legal ground of jurisdiction of the Assessing Officer (AO) to act as the assessee s AO. The same was, however, on it being moved by the Revenue u/s. 254(2) of the Act, recalled by the Tribunal vide it s order dated 29/04/2022 upon finding it s earlier adjudication as grossly and gravely mistaken, for being decided afresh in accordance with law after hearing the parties. There has, however, been no representation by or on behalf of the assessee in the ensuing proceedings before the Tribunal on each of the other three occasions on which the matter was posted for hearing, nor even a request for adjournment despite service of notices of hearing, with, rathe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stified in not allowing the refund of Rs. 500/- excess appeal fees inadvertently paid by the assessee, same may please be allowed. AY: 2004-05 4. Ground No.1 disputes the assessment as without jurisdiction. The issue has been discussed in detail by the ld. CIT(A) at pgs. 2-5 of his order, after obtaining the comments both from the AO and the assessee, reproduced in his order. The assessee s challenge is with reference to the Office Memorandum (OM) dated 19/9/2011 issued by Commissioner of Income Tax-1, Jabalpur ( CIT , for short) (PB pgs. 21-25) in pursuance of the Notification dated 31/07/2001 u/s. 120(1)/(2) of the Act, vide which it was clarified that Jt./Adl. CIT heading the Ranges shall have no powers of an Assessing Officer. The same was, however, to no effect inasmuch as the same was passed oblivious of the Notification No. 267, dated 17/09/2001 by the Central Board of Direct Tax (CBDT) vesting the power of the AO with the Jt./Adl. CIT who stood authorised u/s. 120(4)(b) (reproduced in part at para 2D as the assessee s submissions dated 18/04/2012/PB pgs.7-12), which in the instant case was by the CIT-1, Jabalpur vide his order dated 30/11/2006. The same is in confor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in view of the foregoing, without any legal force. We may before parting also clarify, inasmuch the assessee s Ground makes reference to the additional ground before the first appellate authority, that same has been rightly dismissed by him for want of authorisation, which being a part of the appeal memo, could be verified only by the appellant. He has, nevertheless, disposed of the assessee said Gd. on merits, discussed hereinbefore, being in pari materia to it s Gd. 1 before him. Further, though we have upheld his findings, finding the assessee s plea as without substance, we clarify the clear position of law of the same as being not a subject matter of an appeal under the Act, and not liable to be resolved through the appellate procedure under the Act. We decide accordingly. 5. Vide Ground 2, the assessee assails the assessment on the ground that no notice u/s. 143(2) stands issued by the AO, i.e., Addl. CIT, Chhindwara, after 30/11/2006, i.e., the date of order u/s. 120(4)(b) by the CIT-1, Jabalpur, authorising him to act as an AO. True, there is no issue of notice u/s. 143(2) for AY 2004-05 on or after 30/11/2006. How could, one wonders, that invalidate the notice u/s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng for a tolerance, raised. Debit notes were also verified by the AO to find them to have been raised by the buyers (toward shortage, moisture content, damage seeds etc.) on the assessee on a regular basis, i.e., where the parameters exceeded the defined tolerance limits. Occasionally, where the assessee was able to secure a better bargain, so that its purchase rate is below its sale rate, it also benefits, i.e., apart from commission, by way of trading profit. The addition is, thus, well founded with no rebuttal at any stage and, accordingly, confirmed. 7.1 Ground 4 impugns an addition for Rs. 5,03,985/- on account of debit notes raised on the assessee by it s buyers, M/s. Betul Oil and Foods Ltd. and M/s. Itasri Oils Ltd., found debited in the assessee s accounts on 01/4/2003, i.e., the first day of the relevant previous year. The debit notes raised on the assessee (also refer para 6 above), were found by him to be usually followed by debit notes raised in response by the assessee, i.e., where and to the extent it did not fully accept the claim/s made on it, and were accordingly credited to the purchase account (with corresponding debit to the buyer s account). The impugne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is, besides in agreement with the matching principle, has its basis in the accrual concept which, governed by the accounting principles of conservatism and prudence, mandates making an accounting estimate on the basis of the information available, and making a provision in accounts on the basis of such an estimate. In other words, inasmuch as the books for the previous year relating to AY 2003-04 have not been closed on 01/4/2003, information as on 01/4/2003, to the extent it relates to conditions obtaining as on 31/3/2003, would need to be taken into account for the purpose of the estimate as on 31/03/2003. This would also make it incumbent on the assessee to justify, in addition to what had transpired on 01/4/2003, its claim in full, so that an expenditure which, as on 01/4/2003, i.e., the date on which the estimate on the basis of the available information was to be made, was estimated at nil, was finally determined in full at the impugned sum of Rs. 5.04 lacs on 01/4/2003 itself, representing the total amount of debit notes-in-hand as on 31/03/2003. The assessee s claim is, clearly, without any basis on facts, as indeed in law. We therefore uphold the disallowance as confirmed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce toward the goods sold to NIPL being of cheaper quality, as claimed before him, shown, the AO regarded the sale rate (on sale to NIPL) at Rs. 6214 per qtl. On that basis, he reduced the loss claimed by Rs. 3,31,924. The ground is for Rs. 1,29,524 in view of the increased valuation of the opening stock on account of closing stock for the immediately preceding year being increased by Rs. 2,02,400. The ld. CIT(A) has confirmed the addition in view of the facts on record, adverting to s.40A(2)(a). In our clear view, the impugned addition is in fact for Rs. 3,31,924. This is as reduction in the claimed loss by Rs. 2,02,400 is to be in any case given effect to in view of the addition in the value of closing stock for AY 2004-05 and, thus, in income for AY 2004-05, i.e., an independent matter. The assessee has not led any evidence to substantiate it s claim of the quantity sold to NIPL, it s sister concern, being of a cheaper variety. Where so, it s purchase price would also be at a lower rate, i.e., vis-a-vis that sold to third parties. It has also not been shown that the sister concern deals in the business of the cheaper variety/s of ginned cotton. In our view, the sale rate for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... toward it s payment by the due date of filing the return for the year, i.e., 31/10/2005, has been brought on record. The disallowance, since confirmed, is therefore upheld. The basis for disallowance of Rs. 53,720 is of it being penalty under commercial tax, sales tax and entry tax. The law in the matter is well-settled, and the same cannot be an incident of business, to be accordingly allowed as a business deduction u/s. 37(1). The disallowance, confirmed on that basis, is again upheld for the same reason; the assessee not bringing any material to substantiate its claim of the same being not penalty, and compensatory in nature. We decide accordingly. 13. Ground 4 is in pari metria with Gd. 1 for AY 2004-05, decided on the same basis, and to the same effect. Rather, as afore-noted, a Ground (cause of action) not verified by the appellant is not valid. Further, there is no objection lodged with the AO disputing his jurisdiction u/s. 124 for this year. Reference, accordingly, be therefore made to para 4 of this order. The Ground is accordingly dismissed. 14. Ground No.5 does not arise out of the assessment order or the impugned order. It is also not clear as to how the same ..... X X X X Extracts X X X X X X X X Extracts X X X X
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