RAJ RANGA TEXTILES PRIVATE LIMITED,COIMBATORE vs. THE ASSISTANT COMMISSIONER, COIMBATORE

Brief facts of the case are that the assessee is a Private Limited Company, engaged in the business of manufacturing of yarn and has filed its return of income on 02.11.2017 for AY 2017-18, declaring total income of Rs.NIL under normal provisions and Rs.1,96,967/- as deemed income u/s.115JB of the Act. The case was selected under CASS under ‘Complete Scrutiny’ category. The AO issued statutory notices to the assessee and by calling for details. In response, the assessee submitted its reply along with supporting documents for verification. On perusal of the documents submitted by the assessee, the AO found that the assessee has made cash transactions exceeding the limit specified u/s.40A(3) of the Act and the assessee has failed to discharge and prove the cash transactions to the tune of Rs.9,30160/-. Subsequently, the AO noticed that the assessee has given advance amounting to Rs.2,67,01,465/- was disclosed as advance for capital goods and advance amounting to Rs.60,54,000/- was disclosed as advance in the financial statement and the assessee has claimed interest expenses with respect to the loans taken from banks, out of which the advances were given. The AO not convinced with the submission of the assessee and made an addition to the tune of Rs.9,30,160/- as unexplained cash credits u/s.68 of the Act and also by making disallowance of proportionate interest expenses to the tune of Rs.39,30,656/- (12% of Rs.2,67,01,465/- and 12% of Rs.60,54,000/-) and completed the assessment by passing an order u/s.143(3) of the Act dated 24.12.2019 and by arriving total income of Rs.14,52,380/-.

Aggrieved by the order of the AO, the assessee preferred an appeal before the ld.CIT(A) on 27.05.2024.

At the outset, we observed that ld.CIT(A) has dismissed the appeal of the assessee due to the assessee has not furnished the any fresh evidence / documentary evidence during the appellate proceedings. Since, the assessee failed to furnish the documentary evidence/proper explanation to substantiate the claims during the assessment as well as appellate proceedings, the

Before us, the ld.AR submitted the paper book of 160 pages consisting of Return of income, Audit report, details filed in form 35 before the ld.CIT(A), details of claim of expenditure of interest and debtors from page No.1 to 73. During the course of the hearing the ld.AR also submitted that the AO has not appreciated the facts and evidence during the assessment proceedings and the same has been confirmed by the ld.CIT(A) and hence prayed that the Tribunal may be pleased to set aside the order of ld.CIT(A) and remit the issues to the file of AO by providing one more opportunity to the assessee. Further, ld.AR assured the bench that the ld.AR will represent on behalf of the assessee before the Authorities to complete the proceedings effectively.

Per contra, the ld.DR submitted the Assessing Officer had provided sufficient opportunity to appear before passing the assessment order and hence, prayed for confirming the order of the ld.CIT(A).

We have heard the rival submissions and perused the materials available on record including the paper book filed by the assessee before this Tribunal. On perusal of the assessment order as well as the impugned order passed by the ld.CIT(A), we observe that the additions/disallowances made by the AO were primarily on account of alleged unexplained cash transactions, advances given by the assessee and consequential disallowance of proportionate interest expenditure. We further observe that the ld.CIT(A) has dismissed the appeal mainly on the ground that the assessee failed to furnish fresh documentary evidences during the appellate proceedings.

Before us, the assessee has filed a paper book running into 160 pages containing return of income, audit report, Form No.35 filed before the

In our considered opinion, the issues involved in the present appeal require proper factual verification with reference to books of accounts, supporting evidences, details of debtors, nature of advances and nexus of borrowed funds with business purposes. Further, the allowability of interest expenditure also requires detailed examination based on evidences to be furnished by the assessee. Since the assessee has now placed additional materials before this Tribunal and has also sought one more opportunity to substantiate its claim, we are of the view that in the interest of substantial justice, one more opportunity deserves to be granted to the assessee.

Accordingly, considering the facts and circumstances of the case, we deem it fit and proper to set aside the impugned order passed by the ld.CIT(A) as well as the assessment order passed by the AO on the issues in dispute and remit the matter back to the file of the Assessing Officer for fresh adjudication. The AO is directed to examine the evidences, books of accounts and all supporting materials to be furnished by the assessee in support of the debtors, advances and claim of interest expenditure and thereafter decide the issues afresh in accordance with law. The assessee is also directed to substantiate the genuineness of the debtors and establish the business expediency/nexus with regard to the interest-bearing borrowed funds and corresponding advances by producing necessary documentary evidences before the AO.

Needless to say, the AO shall provide adequate opportunity of being heard to the assessee and pass a speaking and well-reasoned order dealing with each of the submissions and evidences furnished by the assessee. The assessee is also directed to extend full cooperation and shall not seek unnecessary adjournments during the set aside proceedings.

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