ACIT Vs Ascend Telcom Infrastructure (P) Ltd (ITAT Hyderabad)
ITAT Hyderabad held that deciding any ground based on any additional evidence before CIT(A), without calling for a remand report from the Assessing Officer, is untenable in law. CIT(A) needs to mandatorily given an opportunity to AO to examine the additional evidence.
Facts-
Revenue has raised ground regarding disallowance of Rs. 8,79,00,000/- towards provisions for ‘site restoration costs’. It was the submission of the learned DR that the term of the lease deed was for sufficient long time and therefore, site restoration charges cannot be allowed on provisional basis for making the provisions based on the actuarial as no site restoration expenditure was incurred by the assessee during the A.Y. under consideration.
Conclusion-
From the bare perusal of Rules 46A of the Income Tax Rules, it is abundantly clear that the CIT(A) in case chooses to admit any additional evidence in that eventuality, he/she is under mandatory obligation to provide a reasonable opportunity to the Assessing Officer with a view to examine the evidence or document or permit to cross-examine the evidence produced by the assessee. Further, the law contemplates the Assessing Officer to produce any witness or document or evidence in rebuttal to the evidence produced by the assessee in the appellate proceedings.
In the present case, the ld. CIT(A) had decided the ground without calling for a remand report from the Assessing Officer.
Considering the totality of the facts of the case and in the interest of justice, we deem it proper to restore the issue to the file of the Assessing Officer with a direction to grant one more opportunity to the assessee to substantiate its case by leading evidence to his satisfaction. The Assessing Officer shall decide the issue as per fact and law after giving due opportunity of being heard to the assessee. We hold and direct accordingly. In the result, the appeal filed by the Revenue is allowed for statistical purposes
FULL TEXT OF THE ORDER OF ITAT HYDERABAD
These appeals filed by the Revenue are directed against the common orders dated 31.07.2020 of the learned CIT (A)-1 1, Hyderabad relating to A.Ys.2011-12 to 2017- 18, respectively. The assessee also filed cross objections for the A.Ys 2011-12 to 2015-16. Both the Revenue and assessee raised identical grounds in the above appeals, therefore, the grounds raised by the Revenue for the A.Y 2012-13 in ITA No.553/Hyd/2020 is taken as a lead case and the grounds raised therein is reproduced below:
“1. The ld.CIT(A) erred both in law and on facts of the case in allowing relief to the assessee.
2. The Id CIT(A) erred in deleting the disallowance of 12,40,36,185/- towards Operating & Maintenance expenses, when the Assessing Officer has clearly mentioned in the assessment order that during the search and post-search enquiries the appellant failed to furnish all the bills/vouchers, hence a detailed show cause notice was issued to the assessee company wherein all the facts relating to the bogus/accommodation entries of purchase bills/unexplained & unverifiable expenses with various vendors have been pointed.
3. The ld CIT(A) erred in deleting the addition of Rs. 4,54,98,600/- towards unexplained work-in-progress capitalized in books without appreciating the fact that a detailed show cause notice was issued covering the issues of search involving claim of non-genuine/bogus purchases/ unexplained & unverifiable expenses, as applicable to various vendors as noticed during the search and survey proceedings conducted in the group cases.
4. The Id CIT(A) erred in not following the principle laid down by the jurisdictional High Court of Andhra Pradesh in the case of Gopal Lal Bhadruka vs DCIT 346 ITR 106, wherein it has held that for the purpose of section 153A/153C of the IT Act the AO can take into consideration material other than what was available during search and se1zure operation for making an assessment.
5. The Id CIT(A) is not justified on facts and in law in deleting the addition . ignoring the decision in the case of EN Gopa Kumar Vs CIT(2016) wherein it was held that the presence of incriminating material is not a requirement and the assessment u/s i53A can be made without there being any incriminating material.
6. The Ld.CIT{A) erred in deleting the addition of Rs.8, 79,00,000/- towards provision for “site restoration costs” without appreciating the facts brought on record by the Assessing Officer that the assessee failed to justify the provision made.
7. The Ld. CIT(A) erred n deciding the issue in favour of the assessee without actually verifying the reasonable certainty of the “site restoration costs” and without referring the natter for remand proceedings for verification.
8. The appellant craves leave to amend or alter any ground or add any other grounds which may be necessary which may be necessary.”
2. With regard to the cross objections raised by the assessee, the assessee did not press cross objections and requested for withdrawal of the C.Os. Accordingly, all the cross objections filed by the assessee are treated as withdrawn and dismissed. Ld. AR for the assessee had made endorsement to that effect in the files of CO.
3. In ground of appeal No.1, the Revenue is aggrieved with the issue of disallowance of Rs. 12,40,36,185/- towards operational and maintenance expenses. In this regard, the learned DR drew the attention of the Bench to the assessment order wherein the Assessing Officer adjudicated the issue in Para 4 to the following effect:
“4.0 (i) Site maintenance charges and repair and maintenance expenses involving labor works, earth works etc., claimed under head operating expenses in P&L account Search and post search enquiries revealed that assessee has involved in claiming site maintenance expenses for site security charges and manpower costs etc. along with repairs and maintenance charges claimed under head operating/maintenance expenses and were perused during search for necessary reconciliation of such claim of expenses in P&L a/c with etc. Accordingly supporting bills/vouchers during the search, assessee company was asked to submit bills/vouchers and other relevant supporting ledger extracts etc as applicable in support of the assessee’s clam of huge expenses under civil work/ labour wok expenses for maintenance, repair and manpower related payment proofs as applicable for F.Ys 2009-10 to 2014-15. With reference to this assessee could not submit all bills and vouchers for necessary verification/ reconciliation with relevant vouchers and ledger extracts explaining the various sites involved in incurring such expenses of repair and maintenance involving unskilled labor with earth works, security supervision etc. As assessee could not submit all the details as sought in search and post search proceedings, a detailed show cause letter was issued to the assessee to submit the same in full as applicable a per 1.T.Act as claimed in the Return of Income applicable for Asst. Year 2010-11 to 2016-17.
With reference to this, assessee could not submit all details as required to reconci1le with the P&«L account and relevant ledger extracts, sites/project wise with supporting groupings of relevant expenses falling under these heads. On this assessee stated that each Site-wise/Project Wise ledger extracts and each minor and major head wise civil works bills/vouchers are not readily reconcilable to submit in the desired fashion/reconciliation to verify all civil works and related labor expenses involving various security, repair and maintenance payments etc., as incurred in security, erection, supervision and maintenance of structures involving these works. However, assessee strongly contended all these as indeed expenses incurred in full at various sites involving labor charges, erection and site repair charges and related earth works and could and submit/made available few bills vouchers for perusal and verification as pertains to part of few months. Further, assessee contended these involve huge expenses covering huge data involving various bills and vouchers of minor expenses grouped under each site/project expenses so as to arrive at total expenses as claimed. On perusal of certain bills/vouchers as made available, it is noticeable that some of them are improperly vouched without full details such as address, recipient name, payee signature and name, full description oi maintenance/ security work involved, repairs undertaken and so on and so forth making it not amenable for complete verification with proper reconciliation of such expenses under different sites/projects undertaken by assessee during the year. Accordingly considering all these discrepancies of improper vouching coupled with non-reconciliation of each item of bills vis-à-vis each claim of expenses under these heads, it would be difficult to consider entire expenditure as claimed as supported with proper bills and vouchers as debited in P&L account. Considering these discrepancies to meet the ends of justice, keeping in view of assessee’s facts of case, nature of business of telecommunications having substantial erection sites involving labor expenses partly expenses of Rs.62,01,80,926/- as claimed for the Asst. Year 2012- 13 under the incurred in cash etc, it is just and reasonable to disallow 20% of total head Site maintenance and repair charges/expenses and same comes to Rs.12,40,36,185/- is disallowed as expenses attributable to inflation of expenditure under various expenditures involving civil works bills, earth works, transportation and installation works etc. Addition: Rs. 12,40,36,185 /-.
Penalty proceedings u/s. 271(1)(c) are initiated separately for submission of inaccurate particulars of income”.
4. The learned CIT (A) while dealing with the issue had deleted the addition of 20% of the total amount confirmed by the Assessing Officer by holding as under:
“5. I have considered the assessment order and submissions of the appellant. It is seen that the addition made by the Assessing Officer is not based on any material seized during the course of search. Apparently there is no finding as to inflation of expenses or debiting bogus expenditure by the appellant company. Further, it is seen that the appellant maintains vouches etc at various placed and on sample basis evidences were produced before the Assessing Officer. There is no specific adverse finding of the Assessing Officer. The observations are general without pointing out any specific deficiencies The appellant is a corporate which is owned/run under professional management. The estimated disallowance @20% has no basis. Considering the above, it is held that no addition is warranted and the addition is deleted”.
5. Before us, the learned DR submitted that the assessee has not produced supporting bills and vouchers for verification and reconciliation before the Assessing Officer and further the bills etc., which were produced before AO were not in the manner of disclosing all the details of the expenses carried out by the assessee. He relied upon the order of AO.
6. Per contra, the learned AR submitted that all the necessary vouchers and bills were duly examined by the Assessing Officer in the original assessment proceedings and subsequently, the same was also examined by the Assessing Officer in the 153A proceeding. It was further submitted that once the books of account have not been rejected by the Assessing Officer, therefore, it will not be in accordance with law to disallow 20% of the expenditure claimed by the assessee. The Assessing Officer failed to point out which vouchers/bills were not available with the assessee and what is the basis of disallowing 20% of the total expenditure. He relied upon the written submissions filled in this regard.
6.1 It was submitted by the assessee in the written submissions as under :
“2.1.1 The following expense forms part of operating and maintenance expense debited to profit and loss account for FY 2013-14;
