A M S LIQUOR MERCHANTS,KARAIKAL vs. ACIT, CRICLE 2(1), TRICHY, TRICHY

Brief facts of the case are that the assessee is a firm, engaged in the business of wholesale and retail trade in food, beverage and tobacco and has filed its return of income for AY 2022-23, declaring total income of Rs.93,61,850/-. The case was selected for scrutiny through CASS, to examine the issue of low income from TCS

Aggrieved by the order of the AO, the assessee preferred an appeal before the ld.CIT(A) on 16.08.2024.

At the outset, we observed that ld.CIT(A) has dismissed the appeal of the assessee without considering the additional evidence filed during the appellate proceedings stating that the assessee has not explained the reasons for not filing the details and documents during the assessment proceedings. Further, the ld.CIT(A) has observed that the assessee has not stated no additional evidence has been provided in terms of Rule 46A in para 12 of Form 35 filed. In view of the above, the ld.CIT(A), NFAC dismissed the appeal filed by the assessee by confirming the order of the AO by passing an order dated 27.11.2025. Aggrieved by the order of the ld.CIT(A), the assessee preferred an appeal before us.

Before us, the ld.AR submitted the paper book of 208 pages consisting of Return of income, written submissions filed before the ld.CIT(A), GST and VAT returns from April 2021 to March 2022, Bank statement of City Union bank Account No.10312000121052, Payment challans for Excise duty and also circular issued by the DC (excise), Puducherry. During the course of the hearing the ld.AR also submitted the reconciliation statement of the Turnover declared in ITR along with the Bank credits. The ld.AR argued that the ld.CIT(A) has dismissed the appeal without considering the

Per contra, the ld.DR submitted the Assessing Officer had provided sufficient opportunity to appear before passing the assessment order. However, the assessee has been negligent in responding to the statutory notices and hence, prayed for confirming the order of the ld.CIT(A).

We have heard the rival parties and perused the material available on record and gone through the orders of the lower authorities. We note that the AO has passed an order by considering the information available with the department as the assessee had not responded to any of the statutory notices issued. Furtner, the same has been confirmed by the ld.CIT(A), NFAC, though the assessee furnished complete details and documents during the appellate proceedings, stating that the assessee had not explained the reasons for not furnishing the details before the Assessing Officer and not mentioning the additional evidence enclosed as ‘Yes’ in Form 35.

In this regard, we find that the approach adopted by the ld.CIT(A) is overly technical and not in consonance with the settled principles of natural justice. It is a well-established proposition that the powers of the first appellate authority are co- terminus with that of the AO, and the ld.CIT(A) is duty-bound to adjudicate the issues on merits, especially when substantial evidences having a direct bearing on the determination of taxable income are placed on record. Further, Rule 46A cannot be applied in a rigid and mechanical manner so as to defeat the cause of substantial justice. When the assessee has placed prima facie relevant material explaining the nature and source of the bank credits and reconciliation of turnover, the same ought to have been examined, either by admitting the additional evidence or by calling for a remand report from the AO.

At the same time, we also note that the assessee had failed to comply with the statutory notices issued by the AO during the assessment proceedings. Therefore, the assessee cannot be said to be entirely free from fault. However, the procedural lapse on the part of the assessee should not result in sustaining an addition without proper verification of facts and evidence. In the present facts and circumstances of the case, and in the interest of justice, we are of the considered opinion that the matter requires fresh adjudication at the level of the ld. CIT(A). Accordingly, we set aside the impugned order passed by the ld. CIT(A) and remit the entire issue back to the file of the ld. CIT(A) with a direction to admit the additional evidences filed by the assessee in accordance with law, call for a remand report from the Assessing Officer, if deemed necessary, examine the reconciliation of turnover vis-à-vis bank credits and other supporting documents and adjudicate the issue afresh on merits, in accordance with law. The assessee is also directed to cooperate fully and furnish all necessary details and explanations before the ld. CIT(A) without seeking unnecessary adjournments.

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