R.A SHAH AND CO,MUMBAI vs. DCIT, CIRCLE 19(3), MUMBAI

The brief facts of the case are that the assessee, a partnership firm engaged in the business of manufacturing, trading and export of diamonds, filed its return of income for impugned assessment year declaring a total income of ₹1,48,03,560/-. During the assessment proceedings, the Assessing Officer asked the assessee to furnish various details relating to its business activities, unsecured loans, sundry creditors, debtors, imports, expenses and other supporting documents. According to the Assessing Officer, despite repeated opportunities, the assessee failed to furnish the complete list of sundry creditors containing their names, addresses and PANs, and therefore the Assessing Officer could not carry out the verification of their identity, creditworthiness and genuineness by way of issuance of notices under section 133(6) of the Act. The Assessing Officer further observed that the ledgers of certain creditors also did not contain PAN details. The Assessing Officer held that the assessee had failed to discharge the burden cast upon it under section 68 of the Act and therefore treated the entire outstanding balance of sundry creditors amounting to ₹26,63,22,450/- as unexplained cash credits under section 68 of the Act read with section 69C of the Act. The Assessing Officer also observed that there was a difference of ₹2,09,785/- between the value of import purchases as reflecting in the books and the import data available from CBIC and for which no reconciliation was furnished by the assessee, and therefore added the said amount to the income of the assessee.

In appeal, the assessee contended that the Assessing Officer had ignored substantial material placed on the e-filing portal viz. as many as 52 files containing creditor-wise details, confirmations, income-tax returns, invoices and other documentary evidence. The assessee further contended that reply dated 05.03.2024, uploaded on 07.03.2024 giving details of outstanding creditors and reconciliation of import purchases with the CBIC data was also not considered by the Assessing Officer. The assessee submitted that out that the total outstanding creditors contained an amount of ₹42,79,593/- which was the year- end foreign exchange revaluation and therefore the Assessing Officer erred in treating the entire balance as unexplained credit. With regard to the addition of ₹2,09,785/- on account of imports, the assessee submitted that the CBIC data gave the value for customs purposes whereas the books recorded invoice value and, therefore, the difference was fully reconcilable.

The CIT(Appeals) observed that despite issuance of several notices during the appellate proceedings, the assessee did not appear nor did the assessee furnish any written submissions. The CIT(Appeals) held that the assessee had failed to produce documentary evidence to establish the identity, creditworthiness and genuineness of the sundry creditors either before the Assessing Officer or before him during the appellate proceedings. The CIT(Appeals) placed reliance on the decisions of the Hon'ble Supreme Court in A. Govindarajulu Mudaliar v. CIT (34 ITR 807), Sumati Dayal v. CIT (214 ITR 801) and CIT v. P. Mohankala (291 ITR 278), and held that since the assessee had failed to discharge the burden under section 68 of the Act, he confirmed the addition of ₹26,63,22,450/-. With respect to the addition of ₹2,09,785/- relating to import purchases, the CIT(Appeals) observed that the assessee had failed to substantiate the reconciliation with supporting evidence and upheld the addition. Accordingly, the CIT(Appeals) dismissed the appeal of the assessee.

The assessee is in appeal before us against the order passed by the CIT(Appeals) dismissing the appeal of the assessee.

We have heard the rival contentions and perused the material on record. We find that the assessment has been completed under section 144 read with section 144B of the Act by treating the entire outstanding sundry creditors as unexplained under section 68 of the Act mainly on the ground that the assessee had failed to furnish details of the creditors viz. their identity, PAN and supporting evidences, and had also failed to reconcile the difference in the value of imports. The assessee has contended that detailed replies along with creditor- wise details, confirmations, invoices, PAN particulars and other supporting documents were uploaded before the Assessing Officer through the e-filing portal, however, the Assessing Officer did not take these documents into consideration while completing the assessment. However, we also note from the order of the CIT(Appeals) that despite several opportunities granted during the appellate proceedings, the assessee neither appeared before the CIT(Appeals) nor furnished any written submissions or supporting documentary evidence. The CIT(Appeals), therefore, decided the appeal ex parte on the basis of the material available on record and confirmed the additions.

At the same time, the grievance of the assessee before us is that substantial documentary evidence had already been furnished before the Assessing Officer but the same was not taken into consideration while making the impugned additions. Since the additions involve substantial amounts and are primarily based on verification of documentary evidence relating to the identity, genuineness and creditworthiness of the sundry creditors as well as reconciliation of the import purchases, we are of the considered view that the assessee may be given one more opportunity of hearing in the interest of justice. The Hon'ble Supreme Court in Tin Box Company v. CIT [(2001) 249 ITR 216 (SC)] has held that where the matter has not been properly examined, it is appropriate to restore the issue for fresh consideration after granting adequate opportunity to the assessee.

Accordingly, in the interest of substantial justice, we restore the matter to the file of the Assessing Officer for de novo adjudication. The Assessing Officer shall examine all the documentary evidence which the assessee claims to have furnished during the assessment proceedings as well as any further evidence that may be produced by the assessee in support of its claim regarding the sundry creditors and reconciliation of the import purchases. We also make it clear that since the assessee did not avail the opportunities granted by the CIT(Appeals), it shall fully cooperate in the remand proceedings and shall furnish all supporting documents and explanations called for by the Assessing Officer without seeking unnecessary adjournments. We have not expressed any opinion on the merits of the additions and all the issues are left open for fresh adjudication.

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