Income Tax Appellate Tribunal - Agra
Hari Om Agarwal,Kolaras vs Ito Shivpuri, Ashok Nagar on 17 January, 2025
IN THE INCOME TAX APPELLATE TRIBUNAL,
AGRA (SMC) BENCH, AGRA
BEFORE : SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER
ITA No. 91/Agr/2024
Assessment Year: 2017-18
Hari Om Agarwal, v. Income-tax Officer,
M/s. Pooran Chand Hariom, Shivpuri
A.B. Road, Kolaras,
Shivpuri-473770,
Madhya Pradesh
PAN :AEEPA9189E
(Appellant) (Respondent)
Assessee by S/Sh. Rajendra Sharma & Manuj Sharma, Adv.
Revenue by Sh. Shailendra Srivastava, Sr. DR
Date of hearing 31.12.2024
Date of pronouncement 17.01.2025
ORDER
This appeal in ITA No. 91/Agr/2024 for the assessment year 2017- 18 has arisen from the appellate order dated 15.01.2024 [DIN & Order No. ITBA/NFAC/S/250/2023-24/1059711143(1)], passed by learned Commissioner of Income-tax (Appeals), NFAC, Delhi, which in turnhas arisen from the assessment order dated 30.11.2019 passed by Assessing Officer u/s. 143(3) of the Income-tax Act, 1961(Order No. ITBA/AST/S/143(3)/2019-20/1021421636(1)).
2. Grounds of appeal raised by the assessee in Memo of appeal filed with Income-tax Appellate Tribunal , Agra Bench, Agra (grounds number ITA No.91/Agr/2024 1 to 6) , and also the additional grounds of appeal raised by the assessee during proceedings before ITAT(grounds number 7 and 8) , reads as under :
"1 That under the facts and circumstances of the case and in law, the AO has erred in disallowed of Rs. 29,10,240/- and confirmed by Ld. CIT (Appeals) (NFAC) under the head of Discount/claim/shortage/deduction on proportionate basis in compression of last year without applied his mind but only on presumption, surmises and without any basis which is against principle of natural justice and unsustainable in law, Please be deleted.
2 That under the facts and circumstances of the case and in law, the order passed by the Ld. AO for disallowance of expenditure an amounting to Rs. 2910240/- and confirmed by Ld. CIT (Appeals) (NFAC) is arbitrary, capricious and insofar as it is prejudicial to the interest of the appellant, is bad and un-sustainable in the of law as the same is passed without considering the detail filed by the assessee under the head of discount/claim/shortage/deduction made by the purchaser out of sale bill issue by the assessee without pointed out any specific item of expenditure which is not allowable, excessive and not related to business Thus the disallowance is against the principle of natural justice please be deleted 3 That under the facts and circumstances of the case and in law, the order passed by the AO has erred in not pointed out any defect in any expenditure which is not related to the business or excessive or bogus, and Ld CIT (Appeals) (NFAC) confirmed the addition for disallowance of expenditure without taking in to consideration and verifying the assessment record of the assessee which is against the principle of natural justice, is illegal and unsustainable in law, please be deleted 4 That under the facts and circumstances of the case and in law, the Ld. AO has erred in initiating the penalty by issuing notice under section 270A of the Act 1961 without applying his mind at the time of passing the assessment order is bad and unsustainable in law 5 That for these such other grounds that may be urged at the time of hearing, the appellant prays that the appeal may be allowed and entire addition may be deleted or deemed to fit as the case may be. 6 That assessee reserved the right to crave, amend add or delete any grounds of appeal at the time of hearing.
2|Page ITA No.91/Agr/2024
7.That the order passed by the National Faceless Appeal Centre is bad in law being passed not in accordance with the provisions of sub- Section (6) of Section 250 of the Income Tax Act.
8. That the AO has erred on facts and in law while making the addition by disallowing of the expenses(by estimate) out of the expenses claimed under the Head 'general administration and selling expenses' , claimed as per provisions of Section 37 of the Income Tax Act, no disallowance is called for being , books of accounts maintained by the assessee are duly accepted, provisions of Section 145(3) are not invoked. The addition made by the AO , sustained by the National Faceless Appeal Centre is liable to be deleted."
3. Brief facts of the case are that the assessee filed return of income for the impugned assessment year ,declaring income of Rs.7,89,970/-. Case of the assessee was selected by Revenue for framing scrutiny assessment under CASS. Statutory notices u/s. 143(2) and 142(1) were issued from time to time by the Assessing Officer to the assessee during the course of assessment proceedings. Assessing Officer made enquiry from the bank by issuing notice u/s. 133(6) of the Act. The assessee is engaged in the proprietary business of trading in grains, pulses etc..During course of assessment proceedings, the AO observed that there was an abnormal increase in cash deposits in bank account during the demonetization period as compared to cash deposits in the bank account during pre-demonetization period, wherein the assessee explained that the assessee has withdrawn cash of Rs.50 lacs from his Cash Credit(CC) account No. 9160300064325498 with Axis Bank
3|Page ITA No.91/Agr/2024 Shivpuri on 07.11.2016 for making purchase from farmers through Krishi Upaj Mandi. There was cash available of Rs. 37,79,000/- after declaration of demonetization, which was deposited back by the assessee in his bank account on 10.11.2016. The Assessing Officer accepted the aforesaid contention of the assessee, and matter rested there itself as no additions to the income was made by the AO on that count. Further, the Assessing Officer observed that the assessee's turnover during the year under consideration vis-vis in the preceding year was as well General Administration and selling expenses for the corresponding period(s) were as under :
"On examination of the trading cum P&L account of the assessee for F.Y. 2016-17, it is observed that assessee's turnover for these years is as under :
F.Y. 2016-17 F.Y. 2015-16
Turnover/Sales 16,36,45,411/- 6,62,67,208/-
The General Administration and Selling expenses claimed by the assessee for these years are as under :
F.Y. 2016-17 F.Y. 2015-16
General Administration 68,92,241/- 13,74,785/-
and selling expenses
3.2 The Assessing Officer observed that the sales/turnover has increased by about 2.47 times ,while General Administration and Selling expenses have increased by 5.01 times, which as per Assessing Officer were highly unreasonable/disproportionate and does not reflect the actual figure of expenses. Assessee submitted that these expenses are
4|Page ITA No.91/Agr/2024 of essential nature. The assessee also submitted comparative chart of different expenses during financial year(s) 2016-17 and 2015-16. The Assessing Officer observed that the expenses under the head 'Discount/claim/shortage/deduction' are shown in the current financial year to the tune of Rs.59,18,812/- while the same were Rs.12,18,303/- in the immediately preceding year. The assessee explained that the same relate to damage seed, quantity, weight reduction of the sold goods. After considering the same, the deduction was made from the total sale amount. The Assessing Officer observed that these expenses are dependent on the quantum of goods sold and the proportion of these expenses could not vary as compared to preceding year. The AO observed that this sudden increase during the year under consideration vis a vis preceding year is not commensurate, which led to disallowance of excess expenses to the tune of Rs.29,10,240/- under the head "Discount/claim/shortage/deduction" by the AO which stood added by the Assessing Officer to the income of the assessee.
5. Aggrieved, the assessee filed first appeal with ld. CIT(Appeals), which was dismissed by ld. CIT(Appeals). During the appellate proceedings, CIT(Appeals) issued as many as six notices and except on one occasioni.e. on 02.03.2021 when the assessee sought extension for preparing reply, there was no response/reply filed by the assessee and
5|Page ITA No.91/Agr/2024 no submissions were made by the assessee during the course of appellate proceedings before learned CIT(Appeals), which led to dismissal of appeal of the assessee by ld. CIT(A), and the Assessing Officer's assessment order was confirmed by ld. CIT(A).
6. Aggrieved, the assessee has now filed second appeal before ITAT, and learned counsel for the assessee at the outset submitted that the assessee had filed details of these expenses before the Assessing Officer but the Assessing Officer has not made any enquiry with respect to these expenses, but disallowed the expenses to the tune of Rs. 29,10,240/- under the head "Discount/Shortage/claim/deduction' being held to be excessive vis-à-vis preceding year expenses while making comparison with the turnover achieved for the aforesaid period. The ld. Counsel for the assesse has produced before the Bench vide letter dated 31.12.2024, copy of ledger account of the expenses incurred under the head ' discount/shortage/ claim/deduction', which were claimed to have been filed with the Assessing Officer, which is placed on record in . It was further submitted by the ld. Counsel for the assessee that the ld. CIT(Appeals) has dismissed the appeal of the assessee ex parte in limine without deciding the issue on merits mainly on the ground of non- submission of replies/response before the ld. CIT(Appeals). The said order is in contravention of provisions of section 250(6) of the Act.
6|Page ITA No.91/Agr/2024 Prayers were made to set aside the matter back to the file of the Assessing Officer for fresh de novo assessment.
6.2. Learned Sr. DR submitted that there was sudden increase in the expenses under the head 'Discount/Claim/Shortage/deduction'during the year under consideration, but no reasons/justification for abnormal increase in such expenses has been given by the assessee.
7. I have considered rival contentions and perused the material on record. I have observed that the assessee e-filed his return of income declaring total income of Rs.7,89,970/-. Case of the assessee was selected by Revenue for framing scrutiny assessment under CASS. Statutory notices u/s. 143(2) and 142(1) were issued from time to time by the Assessing Officer during the course of assessment proceedings. Assessee participated in the assessment proceedings and submitted replies before the Assessing Officer. So far as abnormal increase in cash depositsin the bank account by the assessee during the demonetization period for which the Assessing Officer asked the assessee to explain the same, the assessee submitted that the assessee has withdrawn cash of Rs.50 lacs from his CC Account with Axis Bank Shivpuri on 07.11.2016 for making purchase from farmers through Krishi Upaj Mandi, and after declaration of demonetization, balance cash of Rs.37,79,000/- was deposited back in his bank account on 10.11.2016. This
7|Page ITA No.91/Agr/2024 contention/explanation of the assessee was accepted by the Assessing Officer wherein no additions were made by the AO on that count, and matter achieved finality. Assessing Officer further observed that General Administration and Selling expenses have increased disproportionately to Rs.68,92,241/- in financial year 2016-17 from Rs.13,74,785/- in the immediately preceding financial year 2015-16 which is an increase of 5.01 times, whileturnover/sales have increased to Rs.16,36,45,411/- in financial year 2016-17 from Rs.6,62,67,208/- during immediately preceding year. Assessing Officer further observed that this abnormal increase in expenses aremainly under the head 'Discount/Claim/Shortage/ Deduction', which was to the tune of Rs.59,18,812/- during the year under consideration vis-a-vis Rs.12,18,303/- in the immediately preceding year. Assessee submitted that it is due to damage seed, quantity, weight reduction of the sold goods etc. .The assessee claimed to have filed the ledger accounts under these heads before the AO(copy is now placed on record by the ld. Counsel for the assessee), in which details of various parties are mentioned in the ledger account along with the amount debited towards expenses under the aforesaid head. The said ledger account is placed on record in file. I have observed that the Assessing Officer has not made any enquiry with respect to these expenses claimed by the
8|Page ITA No.91/Agr/2024 assessee and merely on the ground that expenses have increased 4.85 times in the year under consideration vis-à-vis preceding year, while the sales have increased 2.47 times in the corresponding , the excess expenditure to the tune of Rs.29,10,240/- were disallowed by the Assessing Officer. In my considered view the Assessing Officer ought to have made proper enquiries with the aforesaid parties to unravel truth instead of making the additions based upon the expenses incurred in the preceding year vis-à-vis corresponding turnover during these relevant period. Once the facts are brought on record by the assessee detailing these expenses along with the parties to whom these expenses were paid or pertained and/or incurred, the assessee has discharged its primary onus, and now it is for the AO to have made further enquiries with these parties as well wrt to claim for these expenses by the assessee, to unravel truth . The AO did not made any enquiry in the instant case nor pointed out any defect/deficiencies in these expenses claimed to have been incurred by the assessee. Assessee filed first appeal with ld. CIT(Appeals) and in the statement of facts, the assessee has submitted that the assessee is deriving income from trading of grains, pulses etc. The assessee has submitted that the details were submitted before the Assessing Officer, but without pointing out any defect in the details, the Assessing Officer disallowed expenses on
9|Page ITA No.91/Agr/2024 presumption, assumptions and conjectures without pointing out specific item of expenditure which is not incurred for the business purposes. Ld. CIT(Appeals) while adjudicating first appeal has dismissed appeal of the assessee on the ground of non-submission of replies. Ld. CIT(Appeals), no doubt, has issued as many as six notices, and it is stated that except on one occasion, the assessee did not participated in the appellate proceedings ,and on 02.03.2021 when the assessee entered appearance before ld. CIT(A), the assessee sought extension for preparing the details. I have further observed that the ld. CIT(Appeals) has not adjudicated the issue(s) arising in appeal on merits ,and simply dismissed the appeal for non-prosecutionwherein the assessment order of the AO was upheld. The learned CIT(Appeals) is obligated u/s. 250(6) to specify points for determination, decision thereon and reasoning for such decision. Ld. CIT(Appeals) has not even made any enquiry as to the claim of expenses with respect to shortage/discount/claims/deductions etc.as well no enquiries were made with the parties to whom these expenses were claimed to have been paid or incurred or stood credited , and ld. CIT(A) simply upheld the assessment order passed by the Assessing Officer. CIT(Appeals) even did not call for assessment record nor any directions were issued by ld. CIT(A) to the AO make enquiries and to submit remand report. The 10 | P a g e ITA No.91/Agr/2024 assessee is also equally responsible for its woes, as the assessee did not filed response/replies during appellate proceedings before the ld. CIT(A). In my considered view, appellate order passed by the ld. CIT(Appeals) is not sustainable in the eyes of law, as this is an order passed exparte in limine without deciding the issues arising in appeal on merits, which is in contravention of Section 250(6). Assessing Officer's order is also not sustainable, as the Assessing Officer has made additions based only on the reference to the percentage of expenses vis a vis turnover by comparing the current year with the preceding year of the turnover/sales with these corresponding expenses, without making any enquries to unravel truth. No specific defectsare pointed out by the AO with respect to claim of these expenses by the assessee. Assessing Officer has not made any enquiry with the parties with respect to whom these expenses were claimed to be have been incurred or paid and/or stood credited by the assessee to arrive at the finding that these expenses were not incurred wholly and exclusively for the purpose of business. Thus, in the facts and circumstances of the case, both the orders of the Assessing Officer as well as CIT(Appeals) are set aside and the matter is restored back to the file of Assessing Officer for de novo assessment after giving proper opportunity of hearing to the assessee. Assessee is also directed to cooperate and furnish all the details during 11 | P a g e ITA No.91/Agr/2024 de novo assessment proceedings. I clarify that I have not commented on the merits of the issues arising in appeal. I order accordingly.
8. In the result, appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open court on 17.01.2025.
Sd/-
(RAMIT KOCHAR) ACCOUNTANT MEMBER Dated: 17.01.2025 *aks/-
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(A)
5. DR Asst. Registrar, ITAT, Agra 12 | P a g e