INCOME TAX OFFICER WARD 2.2 KALYAN, KALYAN vs. RAMCHAND HARDASMAL DHANWANI, ULHASNAGAR

The revenue has raised the following grounds of appeal:

When the appeal was called for hearing, no one appeared on behalf of assessee to represent his case. There is no application for seeking adjournment either. On perusal of record, we find that the hearings were scheduled on number of dates. But no response was received from the end of the assessee. In view of the above and considering the nature of dispute, we proceed to dispose the appeal ex-parte qua for the assessee after hearing the Ld. DR and on the basis of material available on the record.

We have heard the Ld. DR and perused the material available on record as well as the orders of the revenue authorities. The Ld. DR contended that the Ld. CIT(A) has failed to comply with the provisions of Rule 46A of the Income- tax Rules, 1962 (in short, the “Rules”), and that the Ld. AO was not afforded a reasonable opportunity to verify the documents submitted at the appellate stage. The Ld. DR argued that in impugned assessment year the assessee’s total credit including interest amount to Rs. 30,35,63,861/-. The verification was conducted by the Ld. AO & the credit amount to Rs. 11,32,61,315/- was allowed. But the rest of the amount to Rs. 19,03,02,546/- is confirmed and added back with total income. The Ld. AO conducted the enquiry by issuing notice u/s 133(6) of the Act. The notice u/s 133(6) was received by the creditors related to amount to Rs. 13,85,03,800/-. But the Ld. AO found that nature of credit, genuinity & creditworthiness of creditors are in doubt. The notice was remained unserved for the creditors related to amount to Rs. 5,51,19,861/- and the creditors in absence of PAN are related amount to Rs. 1,93,00,000/-. Consequently the credit including interest was disallowed amount to Rs. 21,29,23,661/- & expenses was disallowed @20% i.e. 57,99,144/- which comes total amount to Rs. 21,87,22,805/- in impugned assessment. The aggrieved assessee filed an appeal before the Ld. CIT(A). But the Ld. CIT(A) had disposed of the appeal in favour of the assessee without giving the Ld. AO opportunity for verification of evidence & the Ld. CIT(A) had not conducted any separate verification related to the documents submitted by the assessee. Hence, the Ld. DR contended that the impugned appellate order is biased in favour of the assessee. So, aggrieved revenue filed an appeal before us.

The principal grievance of the revenue, as raised in Ground No. 3, is that the Ld. CIT(A), while granting relief to the assessee, relied upon additional evidence/documents furnished during the appellate proceedings without affording an opportunity to the Ld. AO to examine and rebut the same and without calling for a remand report. It is the contention of the revenue that the procedure prescribed under Rule 46A of the Rules, was therefore not duly complied with. On consideration of the material available on record, we find that the additions made by the Ld. AO under section 68 of the Act were primarily based upon his findings regarding the identity and creditworthiness of the creditors and the genuineness of the transactions. The Ld. CIT(A), while adjudicating the appeal and granting relief to the assessee, considered the documents/evidence furnished before him at the appellate stage. However, the Ld. AO was not afforded an effective opportunity to examine such evidence and no remand report was called for. Where additional evidence is admitted and relied upon by the first appellate authority, the procedure contemplated under Rule 46A, including an opportunity to the Ld. AO to examine the evidence and produce evidence in rebuttal, is required to be followed. In the facts of the present case, such opportunity was not afforded to the Ld. AO. In these circumstances, and without expressing any view on the merits of the additions/disallowances, we consider it appropriate to set aside the impugned appellate order and restore the issues to the file of the Ld. CIT(A) for fresh adjudication in accordance with law. The Ld. CIT(A) shall consider the additional evidence, if any, in accordance with Rule 46A of the Rules and shall afford the Ld. AO an adequate opportunity to examine the same and furnish his comments/remand report. The assessee shall also be afforded a reasonable opportunity of being heard and shall extend necessary cooperation in the appellate proceedings.

Accordingly, Ground No. 3 raised by the revenue is allowed for statistical purposes. In view of the restoration of the matter to the file of the Ld. CIT(A), the remaining grounds relating to the merits of the addition under section 68 of the Act and the disallowance of expenses are kept open and are not adjudicated at this stage.

In the result, the appeal filed by the revenue bearing ITA No. 9510/Mum/2025 is allowed for statistical purposes.