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Income Tax Appellate Tribunal, “A” BENCH : BANGALORE
Before: SHRI GEORGE GEORGE K & SHRI LAXMI PRASAD SAHU
Per George George K, Vice President:
These cross appeals are directed against the order of CIT(A) dated 28.12.2022, passed under section 250 of the Income Tax Act, 1961 (hereinafter called ‘the Act’). The relevant Assessment Year is 2018-19.
There is a delay of 31 days in filing the appeal. The assessee has filed the petition for condonation of delay. On perusal of the reasons stated in the petition for condonation of delay, we are satisfied that there is reasonable cause for delay in filing this appeal belatedly and no latches can be attributed to the assessee.
ITA Nos.114, 249/Bang/2023 Page 2 of 7
Hence, we condone the delay of 31 days in filing this appeal by the assessee and proceed to dispose off both the same on merits.
Brief facts of the case are as follows:
Assessee, a trust, filed its return of income for Assessment Year 2018-19 on 27.09.2018 declaring ‘Nil’ income. Assessment was selected for scrutiny and notice under section 143(2) of the Act was issued on 22.09.2019. The assessment under section 143(3) r.w.s. 143(3A) and 143(3B) of the Act was completed vide order dated 15.04.2021. In the Assessment Order, the AO had made the following additions / disallowances :
Sr. No. Addition / Disallowance Amount 1 Disallowance of capital expenditure Rs. 51,62,94,148/- in respect of Application of income 2 Unexplained Cash credits u/s 68 of Rs. 75,34,10,052/- the Act
Aggrieved by the assessment completed, assessee filed appeal before the First Appellate Authority (FAA). The CIT(A) deleted the disallowance made by the AO with reference to capital expenditure in respect of application of income amounting to Rs.51,62,94,148/-. As regards unexplained cash credit under section 68 of the Act. The CIT(A) confirmed the AO’s action since there was no compliance to the notice issued from the Office of the First Appellate Authority.
Aggrieved by the order of the CIT(A), Department and assessee have filed the cross appeals before the Tribunal. We shall first adjudicate the Department’s appeal.
ITA Nos.114, 249/Bang/2023 Page 3 of 7
ITA No.114/Bang/2023 (Department’s appeal)
In the above appeal, following grounds are raised.
The order of the Ld.CIT(A), is opposed to facts and circumstances of the case; 2. The Ld. CIT(A) has erred in allowing the capital expenditure without giving opportunity to the Assessing Officer. When the assessee did not produce any documentary evidence in the form of invoices before the Assessing Officer and the copy of said invoices was produced for the first time during the appellate proceedings, the Ld.CIT(A) ought to have remanded the case back to the Assessing Officer and obtained the view of the assessing officer, as per the procedure laid down in Rule 46A; 3. The Ld. CIT(A) has erred in not following the procedure laid down in Sub-Rule 3 of Rule 46A which prescribes that the CIT(A) shall not take into account fresh evidence produced before him unless the A.O. has been allowed a reasonable opportunity to examine such additional evidence produced by the assessee, or to produce any evidence to rebut such additional evidence; 4. The Ld. CIT(A) has erred in admitting the evidence which was not produced before the Assessing Officer without recording the reasons in writing for admission when Sub-Rule 2 of Rule 46A prescribes so; 5. The appellant craves leave to add, alter or amend all or any of the grounds of Appeal before or at the time of the hearing of the appeal. 6. The order of the learned CIT(A),NFAC may be set-aside and the order of the A.O. may be confirmed.
Brief facts in these above grounds are as follows:
During the course of assessment proceedings, the AO found that assessee had shown a sum of Rs.51,62,94,148/- as capital expenditure incurred during the year towards “acquisition of capital assets”. The AO asked the assessee to furnish the details of the expenditure incurred. In compliance, the assessee furnished only the ledger accounts and no bills / vouchers were submitted in
ITA Nos.114, 249/Bang/2023 Page 4 of 7
support of the expenditure. Therefore, the AO disallowed the capital expenditure of Rs.51,62,94,148/- and excluded the same from the application of the income.
During the course of appellate proceedings, assessee submitted invoice copies of the capital expenditure incurred for “acquisition of capital assets”. The CIT(A), on perusal of the invoice noticed that assessee had purchased medical equipment and held that assessee’s claim of application of income on expenditure incurred on “acquisition of capital asset” was correct. Accordingly, addition amounting to Rs.51,62,94,148/- was deleted.
Aggrieved, the Revenue has filed the appeal before the Tribunal. The learned DR submitted that the CIT(A) has admitted additional evidence in violation of Rule 46A of the Income Tax Rules, 1962 (hereinafter called ‘the Rules”). Therefore, it was submitted that the issue may be restored to the files of the AO to examine / verify the invoices submitted by the assessee before the FAA.
The learned AR supported the order of the CIT(A).
We have heard the rival submission and perused the material on record. As regards the capital expenditure incurred on “acquisition of capital assets”, the assessee had only furnished the ledger accounts before the AO. Consequently, the said capital expenditure was excluded from application of income. Before the FAA, assessee had submitted the invoices for purchase of the medical equipment which is claimed as application of income. The FAA has admitted additional evidence in violation of the mandate contained in Rule 46A of the Rules. Therefore, in the interest of justice and equity, we are of the view that AO ought to be granted an opportunity to verity / examine the invoices that are
ITA Nos.114, 249/Bang/2023 Page 5 of 7
produced before the FAA. Hence, issue raised in the Department appeal is restored to the files of the AO.
In the result, appeal filed by the Revenue is allowed for statistical purposes.
ITA No.249/Bang/2023 (Assessee’s appeal)
The grounds raised in the above appeal reads as follows:
That, on the facts and in the circumstances of the case, the Ld.CIT(A) NFAC erred in upholding the assessment order passed by National Faceless Assessment Centre u/s 143(3) of IT Act 1961 which is void ab initio and liable to be quashed. 2. That, on the facts and in the circumstances of the case, the Ld.CIT(A) NFAC erred in upholding the assessment order passed by National Faceless Assessment Centre u/s 143(3) of IT Act 1961 which is void ab initio and liable to be quashed as the Ld. Assessing officer did not provided proper opportunity before passing the assessment order. 3. That, on the facts and in the circumstance of the case the Ld. CIT(A) NFAC erred in upholding the IA. Assessing officer's assessment order treating the grants received from Government of Karnataka of Rs.75,34,10,052/- as unexplained credit without providing proper opportunity to the assessee to submit the details and documents. 4. That, the appellant craves leave to add to, alter, and amend modify, substitute, delete and or rescind all or any of the grounds of appeal on or before the final hearing, if necessary, so arises.
The brief facts in relation to the above grounds are as follows:
During the course of assessment proceedings, it was noticed that assessee had disclosed grant of Rs.75,34,10,052/- received from Government. The AO directed the assessee to furnish documentary evidence in receipt of the grants.
ITA Nos.114, 249/Bang/2023 Page 6 of 7
The assessee did not furnish any evidence regarding the source of receipt of Rs.75,34,10,052/-. Therefore, the AO treated the same as unexplained cash credit as per provisions of section 68 of the Act and added it to the assessee’s income under the head “Income from Other Sources”.
Aggrieved, assessee raised this issue before the FAA. Before the FAA, three notices were issued to submit the written submissions. Since there was no reply to the notices issued by the Office of the FAA, the CIT(A) confirmed the view taken by the AO in making the addition under section 68 of the Act.
Aggrieved by the order of the CIT(A), assessee has filed the present appeal before the Tribunal. Assessee has filed a Paper Book comprising of 56 pages enclosing therein copy of the return filed along with the computation statement, copy of the audited financial statement for the relevant Assessment year, copy of the state government grant released circular, ledger extract of the government grants received in the relevant Assessment Year, summary of grant released from the relevant Assessment Year, etc. The learned AR submitted that in the interest of justice and equity, one more opportunity may be granted to the assessee to furnish the details of the grant received by the assessee from the Government.
Learned DR supported the order of the AO and the CIT(A).
We have heard the rival submissions and perused the material on record. The assessee has not complied with three notices issued from the Office of the FAA nor has the assessee furnished any details with regard to the grant received from the Government before the AO. Assessee in the Paper Book submitted before us had detailed the total grant that was received by the assessee during the Assessment Year 2018-19. In the interest of justice and equity, we are of the
ITA Nos.114, 249/Bang/2023 Page 7 of 7
view that one more opportunity ought to be granted to the assessee to furnish the necessary evidence in support of its case. Accordingly, the issue is restored to the files of the AO. The assessee is directed to co-operate with the Revenue and shall not seek unnecessary adjournment in the matter. The AO is directed to afford a reasonable opportunity to the assessee to furnish its written submissions. It is ordered accordingly.
In the result, appeal filed by the Department and assessee are allowed for statistical purposes.
Pronounced in the open court on the date mentioned on the caption page.
Sd/- Sd/- (LAXMI PRASAD SAHU) (GEORGE GEORGE K) Accountant Member Vice President
Bangalore. Dated: 12.07.2023. /NS/*
Copy to: 1. Appellants 2. Respondent 3. CIT 4. CIT(A) 5. DR, ITAT, Bangalore. 6. Guard file
By order
Assistant Registrar, ITAT, Bangalore.