EXCEL INFRAPOWER PRIVATE LIMITED,JODHPUR vs. DCIT CENTRAL CIRCLE-1, JODHPUR

We find that the assessment order as well as the appellate order have substantially proceeded on the sole premise that the appellant allegedly failed to furnish explanations and supporting documents and therefore the additions were confirmed without adjudication of the issues on merits of the case. It is noted that the observation and findings throughout the assessment order and appellate order repeatedly state that “no explanation was furnished”, “no documentary evidence was filed” and hence additions were made and sustained.

The Ld. counsel contended that the impugned orders are passed virtually ex parte qua the assessee and suffer from serious violation of principles of natural justice inasmuch as no effective opportunity of being heard was granted and that even the documentary evidences and explanations furnished were not properly considered. The Ld. AR argued that there was no independent enquiry conducted by the AO and the additions were made merely on suspicion based on loose papers.

Admittedly, both the authorities below have failed to adjudicate the matter in accordance with settled principles of law. We find that the assessment order itself records that notices were issued and part reply were partially furnished on 29.02.2024. However, the assessment was ultimately completed by the AO due to limitation constraints and the additions have been made merely because the assessee allegedly failed to furnish explanations before the limitation period expired. It is seen that no independent verification or enquiry was conducted by the AO. The Ld. CIT(A), also instead of adjudicating the issues independently, has merely reproduced the findings of the AO and dismissed the appeal on the ground that no supporting documents were furnished. The Ld. AR contended that the appellate proceedings are quasi-judicial proceedings and the CIT(A) is duty bound to adjudicate issues on merits

The appellant referred to the decision of Hon’ble Supreme Court in the case of Tin Box Company v. CIT reported in (2001) 249 ITR 216 (SC) in which it has been held that where proper opportunity is not granted, the matter deserves to be restored back for fresh adjudication and the appellant stated that the impugned order is therefore liable to be set aside on this ground alone.

On the merits of the additions, the appellant submitted that the addition has been made based on loose papers containing ledger entries in the name of “Punaram Ji Other Cash Book DKG”. It is noted that the impounded papers are merely loose sheets and that the authorities below did bring on record any corroborative evidence to establish the content of these loose sheets and that where statement of concerned person was recorded, there was no enquiry from alleged recipient was conducted. There is no finding exists on record that the entries on alleged loose sheets represented actual unexplained expenditure of the assessee. The appellant referred to the decision in the case of CBI v. V.C. Shukla 3 SCC 410 wherein it was held that loose sheets are not books of

We find that the other common additions are made in the impugned orders without any effort by the AO to identify nature of payments or examining whether same were already recorded in books and the addition has been sustained by Ld. CIT(A) merely because explanation was allegedly not furnished, is not justified in law. Further addition of trade payables as unexplained cash credits under section 68 of the act has also been made merely because confirmations and details were allegedly not furnished. The appellant submits that the impugned addition is ex facie unsustainable because trade payables arise from business transactions and they are not fresh cash credits simpliciter. Section 68 cannot be invoked mechanically in respect of trade creditors without examining purchases/sales. The Assessing Officer has not

Similarly, disallowance of the claim of Depreciation and other ad hoc disallowance 20% of expenses merely for alleged non-production of bills/vouchers, is also not correct as the fixed assets were duly reflected in audited financial statements and depreciation and expenses were claimed in regular course. There is no finding that assets did not exist or that assets were not put to use and that entries in books were false. Mere non-furnishing of bills cannot justify wholesale disallowance without conducting verification and examining the issue and disproving the claim of the appellant either by pointing out specific defect in books of account or bills or vouchers. In the present case, the books of account have not been rejected under section 145 and thus disallowance are

From the record, it is evident that the Ld. CIT(A) did not call for the remand report on the submission of evidence by the appellant although he was duty bound to call for remand report to admit evidences if necessary and adjudicate issues independently and decide appeal on merits. However, the appellate order merely reproduces findings of AO and summarily dismisses the appeal. The order therefore suffers from non-application of mind and failure to exercise appellate jurisdiction vested under section 250.

In the alternative plea, the appellant submitted that substantial justice deserves to prevail over technicalities. The appellant is willing to furnish books of account, confirmations, ledger accounts bills/vouchers

In view of principles of natural justice, the peculiar facts and circumstances of the case, the material available on record, and that the assessment as well as the first appellate order have substantially proceeded on account of alleged non-compliance without proper examination of evidences to adjudicate and issues on merits of the case. We are of the considered opinion that the matter requires fresh adjudication by the AO in the interest of substantial justice. In view of that matter, we direct the AO to grant adequate opportunity to the appellant for proper verification by carrying out independent enquiry and make speaking observation and findings on merits of the case after considering the written submissions filed on record and filed during fresh proceedings.

Thus, the matter in all the four captioned appeals is restored to the file of the AO for passing de novo assessment order in accordance with law.

In the result, the grounds raised by the assessee in all the four appeals are allowed for statistical purposes.