Ia No:ga/1/2022 , Ga/2/2022 Nirman Construction v. Additional Commissioner Of Income Tax, Range – 1, Durgapur & Ors

IN THE HIGH COURT AT CALCUTTASPECIAL JURISDICTION (INCOME TAX)ORIGINAL SIDE ITAT/111/2022 IA NO:GA/1/2022 , GA/2/2022NIRMAN CONSTRUCTIONVS. ADDITIONAL COMMISSIONER OF INCOME TAX, RANGE – 1,DURGAPUR & ORS. BEFORE : THE HON’BLE JUSTICE T.S. SIVAGNANAMAnd THE HON’BLE JUSTICE BIVAS PATTANAYAKDate : 21[st] July, 2022. The Court : We have heard Mr. Sumit Ghosh, learned Advocateappearing for the appellant and Mr. Tilak Mitra, learned standingCounsel appearing for the respondent. There is a delay of 737 days in filing the appeal. On perusal ofthe relevant dates we find that the appellant would be entitled to thebenefit of the order passed by the Hon’ble Supreme Court by whichthe period of limitation in filing the appeal under various statutes wasextended by the Hon’ble Supreme Court. For such reason the delay infiling the appeal is condoned. The application for condonation of delayis allowed. ITAT/111/2022 : This appeal filed by the assessee under Section 260A of theIncome Tax Act, 1961 (the ‘Act’ for brevity) is directed against the order dated 21[st] February, 2020 passed by the Income Tax AppellateTribunal, Kolkata, “B” Bench, Kolkata in ITA No.2067/Kol/2017 forthe assessment years 2007-08. The appellant/assessee has raised the following substantialquestion of law for consideration: i)Whether the Learned Tribunal was justified in treating theoutstanding liabilities of sundry creditors as unexplainedcash credit when no sum was found credited in the booksof the appellant during the relevant previous year, assuch offering of explanation or satisfaction to the samedoes not arise ? ii) Whether verification, at any point of time much after thetransactions made for Assessment Year 2007-08, so as tofind out the existence of sundry creditors, can have anyeffect to decide the genuineness of the transactions ?Whether it is not incumbent on the part of the concernedauthority to grant a copy of the report of verification (ifany) conducted by the Assessing Officer to the petitioner,to which the petitioner is prejudiced ? iii) iv) Whether the Learned Tribunal was justified in blindlysupporting the order passed by the CIT(Appeals) whereinthe order of addition made by the AO was upheld eventhough finding that the sundry creditors were paid to theextent of Rs.20,000/- which is within the limit asprescribed in Section 40A(3) of the Income Tax Act, 1961 ?Whether the Learned Tribunal was justified that duringthe Financial Year 2006-07 (A.Y 2007-08) the authoritiesbelow never doubted and/or disallowed thepurchases/expenditures and the payments made inrespect of the same but once this outstanding balanceswere paid by cash but within the statutory limit, the samewas doubted ? v) We have heard Mr. Sumit Ghosh, learned Advocateappearing for the appellant/assessee and Mr. Tilak Mitra, learnedstanding counsel appearing for the respondent/revenue. The assessment for the year under consideration, A.Y.2007-08 was completed under Section 143(3) of the Act by order dated31[st] December, 2009. The first issue which was taken up forconsideration by the assessing officer was with regard to the sundrycreditors. Explanation was called for from the assessee which wasfurnished and the assessing officer partially accepted the explanationand in respect of certain other parties, he came to the conclusion thatthe explanation offered by the assessee was not satisfactory as therewas no evidence and, accordingly, the transaction was held to bebogus and treated as unexplained cash-credit and, accordingly, thesame was taxed. The second issue was with regard to excess cash paymentmade by the assessee in the sundry creditor to the tune ofRs.6,82,658/-. Once again, the assessing officer was not satisfied withthe explanation offered and, accordingly treated the balance asunexplained and taxed the same. However, in respect of two of thecases namely, that of Neha Enterprises and Purnima TradingCompany relief was granted to the assessee. The second issue was with regard to excess cash paymentmade by the assessee in the sundry creditor to the tune ofRs.6,82,658/-. Once again, the assessing officer was not satisfied withthe explanation offered and, accordingly treated the balance asunexplained and taxed the same. However, in respect of two of thecases namely, that of Neha Enterprises and Purnima TradingCompany relief was granted to the assessee. The next issue which was taken up was with regard to cashpayment exceeding Rs.20,000/-. Once again, the explanation offeredby the assessee was found to be not convincing and a sum of Rs.7,61,511/- being 20% of such payment of Rs.38,07,557/- wasdisallowed under Section 40A(3) of the Act. The next issue which was taken up by the assessing officerwas with regard to the employees’ contribution to the Provident Fundand the assessing officer found that the amount was not depositedwithin the statutory due date and held it to be includible in theassessee’s income in terms of Section 2(24)(x) read with Section36(1)(va) of the Act. The next issue was with regard to hire charges. Theassessing officer held that the assessee has violated the provision ofSection 40A(ia) of the Act and the entire amount of Rs.3,31,222/- wasadded back to the total income of the assessee. Aggrieved by suchorder the assessee preferred appeal before the Commissioner ofIncome Tax (Appeals), Durgapur (CIT(A). Only two issues were canvassed by the assessee before thefirst appellate authority namely, with regard to sundry creditors andalleged inflated sundry liabilities. The CIT(A) considered thesubmission and partly allowed the appeal. The assessee beingaggrieved by such order, had preferred an appeal before the tribunaland the revenue also preferred appeal before the tribunal as againstthat portion of the order passed by CIT(A) which went in favour of theassessee. From the order passed by the tribunal, we find that theassessee was not represented. Mr. Ghosh, learned Advocateappearing for the appellant/assessee would submit that notice of hearing of the appeal was not served on the assessee. However, wefind there is nothing to substantiate the said submission nor such aspecific plea has been raised before us in this appeal. Be that as itmay, the learned advocate appearing for the appellant would contendthat the learned tribunal rejected the assessee’s case by referring totwo pages of the order passed by the CIT(A). However, the explanationoffered by the assessee which has been recorded by the CIT(A) inrespect of sundry creditors was not noted and since the assessee wasnot represented, they were in a disadvantageous position and factscould be placed before the tribunal which were already on record.Further, the learned Advocate appearing for the appellant wouldsubmit that the appellant is a works contractor and in the course oftheir activities, they are compelled to make cash payment and thosecash payments have been less than Rs.20,000/-. To substantiate thegenuineness of the same, ledgers were produced before the CIT(A) and,if one more opportunity is granted to the assessee, they will be able tosubstantiate before the tribunal with the records which were placed bythe assessee before the CIT(A). It is further submitted that thetribunal, being the last fact finding authority, the assessee may begranted an opportunity to go before the learned tribunal. We have heard Mr. Tilak Mitra, learned sanding counsel forthe respondent in reply to the above submission. We find from the order passed by the CIT(A) that each ofthe sundry creditors have been specifically dealt with by the CIT(A).Though there were total 20 sundry creditors, the addition was only in We have heard Mr. Tilak Mitra, learned sanding counsel forthe respondent in reply to the above submission. We find from the order passed by the CIT(A) that each ofthe sundry creditors have been specifically dealt with by the CIT(A).Though there were total 20 sundry creditors, the addition was only in respect of 17 of them. Thus, the issue before the tribunal would bewhether the explanation offered by the assessee before the CIT(A) wasjustified and was the CIT(A) right in rejecting the explanation. Suchan exercise appears to have not been done in the instant case largelydue to the fact that the assessee did not appear before the tribunal.Therefore, we are of the view, that one more opportunity can begranted to the assessee to go before the tribunal. In the result, the appeal filed by the assessee(ITAT/111/2022) is allowed and the order passed by the tribunal isset aside and the matter is remanded to the tribunal for freshconsideration. The assessee is directed to appear before the tribunalon the date fixed without seeking for unnecessary adjournment and,they will also be entitled to file paper book containing documentswhich were placed before the CIT(A). After affording an opportunity tothe assessee, the learned tribunal shall consider and decide thematter afresh on merits and in accordance with law. Consequently,the substantial questions of law are left open. Consequently, the connected application for stay (GA/2/2022) also stands closed. (T.S. SIVAGNANAM, J.) (BIVAS PATTANAYAK, J.)