MEGA INTERNATIONAL PVT. LTD.,GURGAON vs. DCIT, CIRCLE- 16(2), NEW DELHI

Brief facts of the case necessary for the disposal of this appeal are that the assessee company is engaged in the business of manufacturing of pharmaceutical products like tablets, capsules, syrup, ointment etc. For the assessment year 2013-14 they have filed their return of income on 30/9/2013 declaring an income of Rs. 3, 88, 56, 210/-. Assessment was complete by order dated 31/3/2016 under section 143(3) of the Income Tax Act, 1961 (for short “the Act”) at a sum of Rs. 4, 23, 67, 920/-after making so many additions including the addition of Rs. 12, 76, 381/-on account of sundry creditors, which addition is relevant for this appeal.

Assessee preferred appeal before the Ld. CIT(A) and contended that no opportunity was given to the assessee to put forth their case or to furnish the relevant material before making this addition and therefore, while furnishing all the relevant information and material, assessee prayed to delete. Ld. CIT(A), however, refused to delete the addition on the ground that though the assessee furnished the relevant record in confirmation, the same was not examined by the learned Assessing Officer. Assessee is aggrieved by such an action of the Ld. CIT(A) and preferred this appeal.

When the matter is called, neither the assessee nor any authorised representative entered appearance. It could be seen from the record that the notice was sent to the assessee to the address given in form No. 36 If the assessee is available in such address, such notice should have been served on the assessee. If for any reason, the assessee is not available there, it is for the assessee to make arrangements for service of such notice by furnishing the address where the assessee would be available, or to deliver it to some authorised person, or by making request to the postal department to detain the mail till the assessee claims the same. Since the assessee does not seem to have adopted any of these methods, we are the considered opinion that the reason for nonservice of notice is solely attributable to the conduct of the assessee only. We, therefore, proceed to hear Ld. DR and to decide the issue basing on the material available on record.

Ld. DR submitted that the letter under section 133 (6) of the Act was issued to M/s Ambient Prenters Private Limited, M/s Pharmacare and M/s ABS Mercantile private limited; that the assessee itself furnishing information relating to two parties but failed to furnish any confirmation in respect of M/s Ambient Prenters Private Limited in spite of letter written to them; and that, therefore, learned Assessing Officer had no option but to draw an adverse inference and to make the addition. He further submitted that inasmuch as the confirmation letter produced by the assessee before the Ld. CIT(A) required verification at the end of the learned Assessing Officer, Ld. CIT(A) was also justify in confirming the addition. He accordingly justifies the orders of the authorities below and prayed to dismiss the appeal.

We have gone through the record in the light of the submissions made by the Ld. DR. Insofar as the sundry creditors are concerned, assessment order is clear that in the letter under section 133(6) of the Act was issued to three parties, assessee itself produced confirmation from two parties, but in spite of letter issued to the assessee, assessee failed to file any confirmation in respect of M/s Ambient Prenters Private Limited. It could be seen from the impugned order that the assessee pleaded before the Ld. CIT(A) that the learned Assessing Officer though issued show cause notice on 28/3/2016 informing the assessee in respect of the two parties, there is no such mention in respect of M/s Ambient Prenters Private Limited, and that is the reason why the confirmation in respect of M/s Ambient Prenters Private Limited could not be produced.

On a perusal of impugned order and also the assessment order, we understand that the letter addressed to M/s Ambient Prenters Private Limited was returned with the remark “incomplete address” on 29/3/2016, and, therefore, it is evident that such a fact was not within the knowledge of the learned Assessing Officer when he issued the show cause notice dated 28/3/2016. It makes the things clear that the learned Assessing Officer could not make a mention of the letter addressed to M/s Ambient Prenters Private Limited being returned with endorsement of “incomplete address”. The letter was returned on 29/3/2016 and the assessment order was passed on 31/3/2016 that is leaving only two days at the disposal of the learned Assessing Officer in between. This fact supports the contention of the assessee that no sufficient opportunity was granted to the assessee to clarify the issue or to file the confirmation from M/s Ambient Prenters Private Limited also.

When the assessee itself could produce the confirmation letters in respect of two other parties, and the assessee could have produced such confirmation in respect of the other party also before the Ld. CIT(A), we are of the opinion that there would not have been any difficulty for the assessee to produce such confirmation before the learned Assessing Officer himself. We, therefore, believe that assessee could not produce such a letter before the learned Assessing Officer because he was not put on notice of this fact, with reasonable time at their disposal, before passing of the assessment order. On noting this fact, we hold that sufficient opportunity was not rendered to the assessee before making addition in respect of M/s Ambient Prenters Private Limited.

Valid the confirmation letter in respect of M/s Ambient Prenters Private Limited was produced before the Ld. CIT(A), Ld. CIT(A) had an option of examining it at his end, and if necessary by calling for the remand report from the learned Assessing Officer. Ld. CIT(A), however, observed that proper examination by the learned Assessing Officer was required. No doubt, in such an event, Ld. CIT(A) could have taken steps in such direction. He, however, did not resort to the procedure available to him, but he rejected the letter and dismissed the ground of appeal. According to us, it is not proper exercise of jurisdiction by the Ld. CIT(A). The fact remains that the assessee produced the confirmation letters in respect of two parties out of three before the learned Assessing Officer, and the assessing officer accepted the same, but without affording an opportunity to the assessee, the learned Assessing Officer proceeded to make addition in respect of the 3rd party and the record supports the contention of the assessee that the assessing officer had no sufficient time at his disposal to get the confirmation letter relating to M/s Ambient Prenters Private Limited through the assessee. And when such letter was produced before the Ld. CIT(A), Ld. CIT(A) erroneously rejected the same. Revenue did not avail the opportunity available to them for verification of such a letter.

10. In the circumstances, keeping in view the fact that the business activity of the assessee is not in dispute and the sundry creditors are not generally in disputed, and further in view of the smallness of addition, we do not find any justification to remand issue back to the file of the learned Assessing Officer. Inasmuch as there is no adverse comment by the Ld. CIT(A) on the confirmation letter, we accept the contention of the assessee and direct the assessing officer to delete the addition impugned in this appeal.

In the result, appeal of the assessee is allowed. Order pronounced in the open court on this the 8th day of July, 2021 immediately on conclusion of hearing over virtual mode.