ACIT, MUMBAI vs. MAHAKALI VINYL FILM PVT LTD, MUMBAI

All the grounds raised by the Revenue, bearing Nos. 1 to 4, are interconnected and interrelated and relates to challenging the order of the Ld. CIT(A) deleting the additions made by the AO. Therefore, we have decided to adjudicate these grounds through the present consolidated order.

We have heard the counsels for both the parties, perused the material placed on record, the judgments cited before us, and the orders passed by the Revenue Authorities. From the records, we noticed that the assessee filed its return for the year under consideration declaring a loss, and the same was processed under Section 143(1) of the Income Tax Act. Whereas, information received by the Assessing Officer revealed that the assessee had made purchases from suspicious/hawala parties to the tune of Rs. 86,34,616, and the source of these transactions remained unexplained. Therefore, after providing an opportunity of hearing, the assessment was completed under Section 147 read with Section 144 of the Income Tax Act, thereby making an addition of Rs. 86,34,616 on account of unexplained investment.

The said order was challenged before the learned CIT(A), who deleted the addition made by the AO.

After having considered the orders passed by the Revenue Authorities and the facts of the present case, we noticed that neither the assessee nor any of his representatives attended the proceedings before the Assessing Officer, and no documentary evidence was filed before the Assessing Officer. Therefore, in the absence of any cooperation from the assessee, the addition was made.

However, the learned CIT(A) deleted the said addition by referring to the documents furnished by the assessee, which included purchase bills, copies of the tax audit report, profit and loss account, balance sheet, bank statements, etc. The learned CIT(A) admitted all these documents as additional evidence in violation of the provisions of Rule 46A of the Income Tax Rules, and no remand report was sought from the Assessing Officer on the additional evidence so relied upon. In our view, the learned CIT(A) was under a statutory obligation and duty to call for a report from the AO and have the documents admitted as additional evidence verified by the AO.

Be that as it may, without going into the merits of the arguments put forth by both parties, the Bench is of the view that since the Ld. CIT(A) has violated the statutory provisions of Rule 46A of the Income Tax Rules by admitting additional evidence without seeking a report from the AO and without getting the documents verified, the matter needs to be restored back to the file of the ld. CIT(A), with a direction to follow the provisions of Rule 46A of the Income Tax Rules and thereafter pass a fresh order in accordance with law.

Consequently, the impugned order passed by the learned CIT(A) is set aside, and the matter is restored back to the file of the Ld. CIT(A), with a direction to pass a fresh order in terms of the directions indicated above. The appeal is allowed for statistical purposes.

Before parting, we make it clear that our decision to restore the matter back to the file of the Ld. CIT(A) shall in no way be construed as having any reflection or expression on the merits of the dispute, which shall be adjudicated by the Ld. CIT(A) independently in accordance with law.

In the result, the appeal filed by the Revenue stands allowed for statistical purposes.