INCOME TAX OFFICER,, NASHIK vs. M/S. MANU RE-ROLLING MILL PVT.LTD,, MUMBAI

This appeal by the Revenue against the order dated 06-12-2016 passed by the Commissioner of Income Tax (Appeals)-2, Nashik [„CIT(A)‟] for assessment year 2012-13.

Ground Nos. 1 to 3 raised by the Revenue challenging the action of CIT(A) in deleting the addition made on account of Revaluation Reserve, Sundry Creditors and Provision of Income Tax in the facts and circumstances of the case.

We find no representation on behalf of the assessee nor any application filed seeking adjournment. On perusal of the docket we note that this appeal listed for the first time on 09-09-2019. Thereafter, the appeal has been adjourned from time to time for non-appearance of assessee. We also note that the notices sent intimating the date of hearing to the assessee by RPAD were all returned unserved with an endorsement of “Not Known”. Today also, the assessee called absent and set ex-parte. We proceed to hear appellant-revenue and dispose of the appeal basing on the material available on record.

Heard Shri S.P. Walimbe, the ld. DR and perused the material available on record. The assessee is a company engaged in the business of re-rolling mill and conducts its business under the name and style of “M/s. Manu Re-Rolling Mills Pvt. Ltd.” The assessee filed return of income declaring total income at Nil on 14-12-2012. Under scrutiny notices u/s. 143(2) and 142(1) of the Act were issued and served on the assessee. According to the AO all the notices were served to the assessee through Postal Department and acknowledgements showing receipt of said notices were on record. Further, the assessee did not present inspite of receipt of notices which made the AO to proceed to complete the assessment u/s. 144 of the Act.

We note that the assessee has shown no business in the profit and loss account but however liabilities were noticed in the Balance sheet under the head Revaluation Reserve, Sundry Creditors and Provision of Income Tax to an extent of Rs.4,72,58,041/-. Admittedly, there was no evidence in support of above said liabilities were furnished in the assessment proceedings. Therefore, the AO proceeded to treat above said liabilities as income of the assessee and added the same to the total income of the assessee vide this order dated 27-03-2015 passed u/s. 144 of the Act.

Having aggrieved, the assessee filed an appeal before the CIT(A). Regarding the addition made on account of Revaluation Reserve of Rs.4,35,44,383/- it was submitted that the assessee had revalued its assets by crediting Revaluation Reserve and debiting assets such as land etc. Rs.4,35,44,383/-. It was contention of the assessee which is evident from Page No. 5 of the order of CIT(A) that the assessee had not earned any income and the addition made by the AO is not justified. Supporting the same the assessee filed copy of audited financial statement of accounts along with audit report. Considering the same the CIT(A) without seeking any remand report from the AO deleted the said addition.

The contention of the ld. DR, Shri S.P. Walimbe is that the CIT(A) accepted the contention of assessee and admitted the evidences without giving an opportunity to the AO. The AO has no occasion to examine the facts along with the evidences on the issue on hand and it is clear the CIT(A) violated the Rule 46A of the Income Tax Rules. As discussed above regarding audited financial statements of accounts and audit report were not before the AO and it was filed before the CIT(A) for the first time. As rightly pointed by the ld. DR there was no opportunity for the AO to examine the same in support of the claim of assessee. Therefore, we find force in the arguments of ld. DR that without giving an opportunity to the AO the CIT(A) decided the issue in favour of the assessee by accepting the assessee‟s contention without giving opportunity to the AO. Therefore, in our opinion, the CIT(A) shall afford an opportunity to the AO for verification of facts under remand report. Since, there was no remand report, the addition made on account of Revaluation Reserve which was deleted by the CIT(A) is liable to be set aside and accordingly, the issue is remand back to the file of AO for its fresh verification. The assessee is liberty to file evidences, if any, in support of its claim and the AO shall give an opportunity to the assessee.

Regarding the other issues in respect of Sundry Creditors and Provision of Income Tax, we note that the CIT(A) decided the issue in favour of the assessee by accepting assessee‟s contention without giving an opportunity to the AO. Therefore, the view expressed by us in the above mentioned paragraph is applicable to the these issues also, therefore, the issues in question regarding the Sundry Creditors and Provision of Income Tax requires to be examined by the AO and assessee shall produce evidences, if any, before the AO. Thus, the issues regarding the Sundry Creditors and Provision of Income Tax are remanded to the file of AO for its fresh verification. The assessee shall produce evidence, if any, in support of its claim. Thus, in all grounds on three issues covering Revaluation Reserve, Sundry Creditors and Provision for Income Tax are allowed for statistical purposes.

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