Case Law Details
Rotodyne Engineering Services (P) Ltd Vs ITO (ITAT Hyderabad)
Introduction: The Income Tax Appellate Tribunal (ITAT) in Hyderabad addressed an appeal filed by Rotodyne Engineering Services (P) Ltd. against an order from the Commissioner of Income Tax (Appeals)-12, Hyderabad. Central to the dispute was the ability of the assessee to provide supporting documents due to the constraints of the COVID-19 pandemic.
Analysis: Rotodyne Engineering Services, engaged in the metals business, was aggrieved by additional tax liabilities imposed for the assessment year 2013-14. The assessment included unexplained expenses and credits under section 68 of the Income Tax Act. Upon appeal, the Commissioner upheld these additions, noting the company’s failure to provide supporting documentation despite several opportunities.
The key argument presented by Rotodyne was that the COVID-19 pandemic hindered their ability to furnish the necessary documents. Their contention was that many employees could not attend work, while others left the company, making it challenging to procure the required paperwork. This argument was further bolstered by the mention of the Supreme Court’s ruling that excluded time limitations generally from March 2020 to February 2022, due to the pandemic.
ITAT, after careful consideration, decided in favor of granting Rotodyne another opportunity to produce the necessary documents. The Tribunal, recognizing the unprecedented circumstances posed by the pandemic, believed this decision would meet the ends of justice. However, to emphasize the seriousness of the issue, ITAT also imposed a cost of Rs. 5,000/- on Rotodyne, to be remitted to the Prime Minister’s Relief Fund.
Conclusion: This ruling underscores the legal system’s flexibility and empathy in the face of unprecedented global challenges like the COVID-19 pandemic. While it upholds the importance of adhering to legal obligations, it also recognizes the genuine difficulties businesses faced during such tumultuous times.
FULL TEXT OF THE ORDER OF ITAT HYDERABAD
Aggrieved by the order dated 21/03/2023 passed by the learned Commissioner of Income Tax (Appeals)-12, Hyderabad (“Ld. CIT(A)”), in the case of M/s. Rotodyne Engineering Services (P) Ltd., (“the assessee”) for the assessment year 2013-14, assessee preferred this appeal.
2. Brief facts of the case are that assessee is a company, engaged in the business of metals, filed its return of income for the assessment year 2013-14 on 18/10/2013, declaring a total income of Rs. 76,44,000/-. After examining the material on record, learned Assessing Officer completed the assessment under section 144 of the Income Tax Act, 1961 (for short “the Act”), by making addition under section 68 of the Act at Rs. 1,03,72,593/-and Rs. 79,94,090/- towards un-explained expenses.
3. Aggrieved by the said order of the learned Assessing Officer, assessee preferred appeal before the CIT(A). Order of the learned CIT(A) reads that in spite of several opportunities granted during the appellate proceedings, to file the submissions and documents in support of grounds of appeal, assessee failed to avail the same. Learned CIT(A), therefore, found no infirmity in the assessment order and accordingly confirmed the addition made by the learned Assessing Officer and also relying on the decisions of various Hon’ble High Courts, dismissed the appeal of assessee both on account of non-prosecution and on merits.
4. Learned AR submitted that learned CIT(A) erred in confirming the order of assessment in disallowing the expenses on the ground that they represent un-explained expenses. It was also contended by the learned AR that the learned CIT(A) erred in confirming the addition made by the learned Assessing Officer under section 68 of the Act, without considering the fact that all the credits represent business transactions. Finally, learned AR prayed that in view of the pandemic interference, the employees of the company could not attend the office and hence they could not arrange the necessary documents with regard to this appeal. Hence, he requested the Bench to restore the appeal to the file of learned Assessing Officer to provide an opportunity to the assessee to prove its case, by submitting the relevant particulars, since the assessment order was passed under section 144 of the Act.
5. Learned DR submitted that in spite of grant of several opportunities, the assessee failed to avail the same and, therefore, it is not open for the assessee to complain that sufficient opportunity was not granted. Hence, he vehemently opposed the request of the assessee.
6. We have gone through the record in the light of the submissions made on either side. It could be seen from the orders of the authorities below that the assessment order is an order passed under section 144 of the Act and the assessee did not enter appearance. It could be seen from the record that appeal was filed before the learned CIT(A) on 11/06/2016. It is also fact that during the appellate proceedings also, the assessee failed to submit any substantive evidence to prove the identity, creditworthiness and genuineness of the current liabilities/unsecured loans and trade creditors and genuineness of the expenses incurred by it for business purposes. Therefore, learned Assessing Officer treated such current liabilities/unsecured loans as un-explained cash credits under section 68 of the Act and made an addition and in the absence of any evidence, disallowed 5% of the expenses debited in profit and loss account. Sustaining the same, learned CIT(A) dismissed the appeal of assessee. It is pertinent to mention here that Covid Pandemic ensued in India in March, 2020. There is nothing to disbelieve the contention of the assessee that due to that the employees of the company could not attend the office and hence they could not arrange the necessary documents/papers with regard to this appeal. So also, there is nothing to disbelieve the contention of the assessee that during the pandemic period, many of the employees left the organization and, therefore, the assessee had become handicapped. It is also undeniable fact that the Hon’ble Supreme Court has excluded time limitation in general pertaining to Covid-19 from 15/03/2020 till 28/02/2022.
7. Having regard to the facts and circumstances of the case, we are of the considered opinion that giving an opportunity to the assessee to produce all the relevant documents before the learned Assessing Officer for fact verification would meet the ends of justice. At the same time, however, we want to indicate our mind to the assessee that this sort of non co-operation will not be without any consequences and for that purpose, we direct the assessees to pay costs of Rs. 5,000/- to the appeal to the credit of the Prime Minister’s Relief Fund, within one month from the date of service of this order on the assessee. Learned Assessing Officer will entertain the appeal of the assessee, producing the proof of remitting costs. Hence, we quash the orders of the authorities below and restore the issue to the file of the learned Assessing Officer to decide it, after hearing the assessee. It is made clear that it is the last opportunity to the assessee and no further lenience will be taken.
8. In the result, appeal of assessee is treated as allowed for statistical purposes.
Order pronounced in the open court on this the 24th day of July, 2023.
