Ratnakar Food & Beverages P. Ltd., New ... vs Department Of Income Tax

ITO Vs. M/s Ratnakar Food & Ward 15(3), Beverages. P. Ltd. Room No. 223, C.R. Building, F-2/7 Okhla Industrial I.P. Estate New Delhi. Area-I, New Delhi. 110020 PAN:AAACR1533J (APPELLANT) (RESPONDENT)

Revenue by:-Sh. Vikram Sahay, Sr. DR Assessee by:-Sh. V. K. Jain, CA. Date of hearing: 17/02/2015 Date of pronouncement: 24/02/2015

ORDER

PER C. M. GARG, JM.

This appeal has been has been preferred by the Revenue against the order

of CIT (Appeals) -XVIII, New Delhi, vide dated 20.12.2010 in Appeal

No.231/09-10 for Assessment Year 2007-08.

2. Ground no. 1 and 4 of the Revenue are of general in nature which needs

no adjudication, remaining ground no. 2 and 3 of the Revenue read as under:

"2. That the ld. CIT(A) has erred in law and facts of the case by admitting additional evidences during the appellate proceedings inspite of several opportunities provided by the AO to produce the same at the assessment/remand stage.

3. That the ld. CIT(A) has erred in law and facts of the case by not adjudicating on each issue involved in this case i.e. i) addition of Rs.11,74,314/- out of repair and I.T.A .No.-1311/Del/2011 2

maintenance expenses, ii) disallowance of Rs.39,83,428/- being freight and forwarding expenses,

iii) disallowance of Rs.29,29,334/- being advertisement publicity & sales expenses, iv) addition of Rs.2,66,465/- being unexplained credit in the name of M/s Graphic Concepts and v) disallowance of Rs.6,07,100/- being unexplained expenditure."

3. Apropos these grounds, we have heard both the sides and carefully

perused the relevant material placed on record. The ld. DR submitted that the ld.

CIT(A) has erred in law and on facts of the case by admitting additional

evidences during the appellate proceedings inspite of several opportunities

provided by the AO to the assessee to produce relevant explanation and

evidence during the assessment proceedings and also during the remand

proceedings.

4. The ld. DR further contended that the ld. CIT(A) has erred in law and on

facts of the case by not adjudicating the each issue involved in ground no. 4 to 8

of the first appeal pertaining to additions in regard to repair and maintenance

expenses, disallowance of freight and forwarding expenses, disallowance of

advertisement, publicity & sales expenses, additions being unexplained credit in

the name of M/s Graphic Concepts and disallowance of unexplained

expenditure.

5. The ld. DR submitted that the AO provided due opportunity of hearing to

the assessee but the assessee did not cooperate during the assessment I.T.A .No.-1311/Del/2011 3

proceedings that is why the AO had no option but to complete the proceedings

ex parte on merits on the basis of information and material available on record.

6. The ld. DR further pointed out that the ld. CIT(A) called remand report

from the AO and admitted the additional evidence for consideration but the ld.

CIT(A) granted relief for the assessee on all five counts by merely mentioning

that the AO in his remand report has not given any adverse comments

whatsoever on the voluminous details and documents furnished by the assessee

and the ld. CIT(A) deleted the impugned additions without any reasoning and

adjudication.

7. The ld. DR further pointed out that Rule 46A of IT Rules provides that

the assessee cannot produce additional evidence during first appellate

proceedings except certain circumstances stating therein in the rule.

8. The ld. DR further pointed out that if the ld. CIT(A) was of the view that

the assessee was not given due opportunity of hearing during the assessment

proceedings then also the ld. CIT(A) was duty bound to afford opportunity to

verify/examine and comment on the details, evidence and explanation of the

assessee filed as additional evidence under rule 46A of the IT Rules 1962.

9. Replying to the above the ld. AR vehemently contended that the assessee

was prevented to file relevant explanation, evidence and details before the AO

during the assessment proceedings and therefore, the same was submitted I.T.A .No.-1311/Del/2011 4

before the ld. CIT(A) under rule 46A of the IT Rules, 1962 which was rightly

admitting and considered by the first appellate authority.

10. The ld. AR vehemently contended that the ld. CIT(A) was quite justified

in granting relief for the assessee as the assessee was able to substantiate by

submitting additional evidence that the ad hoc disallowance and additions made

by the AO were not sustainable and therefore, the same were rightly deleted by

the ld. CIT(A).

11. However, the ld. AR fairly accepted that the ld. CIT(A) has granted relief

for the assessee without separately adjudicating upon the core five issues and

without assigning any separate reasons for admitting the impugned additions,

therefore, if it found just and proper the case may be restored to the file of either

CIT(A) or AO for de novo adjudication only on these five issues.

12. On careful consideration of above submissions, we note that the AO

completed assessment proceedings ex parte, and the assessee could not get an

opportunity to support and explained his return of income and to clarify the

doubts in the mind of AO which resulted into impugned ad hoc additions on the

aforesaid five counts. From vigilant reading of the impugned order of the ld.

CIT(A) we also note that the ld. CIT(A) called remand report of the AO on the

additional evidence, detailed explanation submitted by the assessee under rule

46A of the IT Rules 1962 and admit the same by holding that the assessee was

not granted due opportunity of hearing before the AO and this action of the AO I.T.A .No.-1311/Del/2011 5

prevented the assessee to file supportive detailed and explanation during the

assessment proceedings.

13. At the same time, we also observed that the ld. CIT(A) did not allow the

AO to comment on the merits of the additional evidence and explanation and

considered the same for granting relief to the assessee.

14. From operative part of the impugned order, we observed that the ld.

CIT(A) granted relief for the assessee with following observations and

conclusion:

"6.3 I have carefully considered the assessment order, remand report of the AO and the submission made by the ld. AR out of the total repair and maintenance expenditure claimed at Rs.32,38,023/-, the AO has disallowed Rs.11,74,314/- on exparte basis by taking pro rata turnover as compared to the turnover of the last year. The AO has also disallowed the entire expenses of Rs.39,83,428/- and Rs.29,29,334/- claimed by the appellant under the head freight & forwarding expenses; and advertising, publicity and sales expenses due to non availability of details and lack of TDS verification. Similarly, the AO has disallowed the credit in the name of M/s Graphic Concepts at Rs.2,66,465/- due to non-service of notice u/s 133(6). The AO has also disallowed Rs.6,07,100/- paid to M/s Devyani Food Industries Pvt. Ltd. in cash due to non-production of books of accounts. As per the assessment order, all the above additions have been made by the AO in an exparte manner. However, considering the submissions made by the ld. AR as reproduced above, I am I.T.A .No.-1311/Del/2011 6

afraid such ad hoc and arbitrary disallowances cannot be legally sustained. The purpose of assessment is to arrive at the true profits of the assessee for the purpose of taxation which can be done only after affording reasonable opportunity to the assessee and examining the evidences in detail. There cannot be any short cut to doing a fair and proper assessment and the necessary processes have to be undertaken by the AO for this purpose. However, I am afraid the AO has failed to do this and despite time available for completing the assessment from the limitation point of view, he has not afforded proper opportunity to the assessee and has made arbitrary additions in a slipshod manner. The notices were also not sent at the correct address as mentioned earlier in this order. The details submitted at the assessment stage have not been taken into account by the AO while making the above ex parte additions.

Further, the appellant has produced voluminous details during appellate proceeding consisting of the audited statement of accounts, tax audit reports, copy of replies filed before the AO giving details and documents, complete details of expenses including copies of ledger accounts, bills & vouchers, comparative chart of year wise expenses, details of the parties alongwith copies of their accounts, details of TDS deducted and acknowledgement of TDS returns filed, confirmation of accounts from sundry creditors and the party to whom cash payment was made as well as source of the same as per cash book etc. All the above details and documents had been forwarded to the AO for examination during the remand proceeding. However, the AO in his remand report has not given any adverse comments I.T.A .No.-1311/Del/2011 7

whatsoever on the above voluminous details and documents furnished by the appellant. Considering the aforesaid, the above ex parte and ad hoc additions made by the AO cannot be sustained. The AO is directed to verify the details of TDS furnished by the appellant. Subject to the above, the impugned additions are deleted. "

15. In view of above, we are inclined to hold that the ld. CIT(A) granted

relief to the assessee on all five grounds viz., ground no. 4 to 8 before the first

appellate authority, in a cryptic and slip shod manner without separate

adjudication on every issue and without addressing the explanation and

additional and other relevant evidence of the assessee and objections of the AO

on the particular issue. It is expected from judicial and quasi judicial authorities

that they should adjudicate and address all the issues/grounds which have been

raised before them for adjudication and which may be subject to further legal

scrutiny before higher forum or authority. We are unable to appreciate manner

and approach of the ld. CIT(A) in which he granted relief to the assessee deleted

the ex parte and ad hoc additions made by the AO. Under above noted facts and

circumstances of the present case, we have no hesitation to hold that the

Revenue authorities were not justified in making ex parte ad hoc additions and

also deleting the same without detailed and separate adjudication as per

provisions of the Act. In this situation we are of the considered opinion that all

five issues as mentioned and raised by the assessee as ground no. 4 to 8 before

ld. CIT(A) require de novo adjudication at the end of AO. Thus, we restore the I.T.A .No.-1311/Del/2011 8

same to the file of the AO for proper adjudication after affording due

opportunity of hearing for the assessee and without being prejudiced and

influenced by the earlier assessment and impugned order. Since the case is

restored for limited purpose only on five counts as stated above, accordingly,

ground no. 2 & 3 of the Revenue are deemed to be allowed for statistical

purposes.

16. In the result, appeal of the Revenue is allowed for statistical purposes in

the manner as indicated above.

Order pronounced in the open Court on 24 /02/2015.

Sd/- Sd/- (B. C. MEENA) (C. M. GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER

Dated: 24 /02/2015 *AK VERMA*

Copy forwarded to:

1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT

ASSISTANT REGISTRAR