ACIT NON CORPORATE CIRCLE 7(1), CHENNAI vs. CHINNASAMY MANI, CHENNAI

The Ld. Sr. DR pleaded for violation of Rule 46A and submitted that the documents / explanation which led to adjudication in the impugned order was never confronted to Ld. AO and therefore, the same was in violation of Rule 46A of Income Tax Rules, 1962. These rules empower CIT(A) to accept additional evidence in certain specified circumstances. The rules further provide that in such cases, a copy of such additional evidence will be sent to concerned AO who can examine the evidence or documents or cross examine the witness produced by the appellant. The AO may also produce any evidence or document or any witness in rebuttal of the additional evidence produced by the appellant. After cross-examination of additional evidence by the assessing officer, such assessing officer produce a report before the CIT(A) containing the observations made by them. The CIT(A) after considering both additional evidence application by the appellant and assessing officer report on such additional evidence, decide as to whether to accept or reject the additional evidence.

The Ld. AR, on the other hand, submitted that the sufficient details were supplied by the assessee. The Ld. AR also assailed the additions as sustained in the impugned order. & 3078/Chny/2018 - 4 - 4. Having heard the rival submissions and after due consideration of relevant material on record, our adjudication would be as under. Assessment Proceedings 5.1 The assessee being resident individual is stated to be engaged as distributor of inhaler products. The assessee work for M/s Copley Scientific Ltd., UK and the assessee receives income in foreign currency being GBP (£). The assessee declared income of Rs.39.78 Lacs whichwas subjected to scrutiny assessment. It transpired that the assessee withdrew funds from GBP (£) account and deposited the same in Indian Bank Accounts. Accordingly, there was increase in capital. The assessee was asked to produce all bank account as well cash flow analysis between the banks. 5.2 However, assessee produced only ICICI bank with A/c 602205039723 along with GBP Account A/c 603806000026 which was held by Ld. AO insufficient to substantiate the claim. It was noted that the opening balance in Account No. 602205039723 was Rs.14.98 Lacs only whereas increase in capital was for Rs.527.88 Lacs. The capital introduction should be to the tune of Rs.14.98 Lacs plus current year’s profit of Rs.9.25 Lacs and not Rs.527.88 Lacs as claimed by the assessee. Finally, in the absence of sufficient details, Ld. AO added the amount of Rs.527.88 Lacs to the income of the assessee. Appellate Proceedings 6.1 It was submitted that the income earned from AY 2009-10 onawards was held in EEFC Account No.603806000026 maintained in GBP with ICICI bank. To comply with RBI directions, funds were transferred from GBP account to other accounts and amounts were invested in fixed deposits. The assessee stated to have offered income & 3078/Chny/2018 - 5 - on presumptive basis in earlier years and it was submitted that the bank balance as on 31.03.2015 was out of funds received in GBP Account from AY 2009-10 which was already offered for taxation in earlier years. The assesseealso filed the Bank statements of various bank accounts. Accordingly, the assessee assailed the findings of Ld. AO. 6.2 During appellate proceeding the assessee filed Return of Income from AYs 2009-10 2015-16, bank statements, Balance Sheet As on 31.03.2015 and statement of foreign exchange received. The Ld. CIT(A) held that the claim of the assessee that it was filing returns under presumptive scheme was not in order. 6.3 Proceeding further, Ld. CIT(A) tabulated the cash flow chart as submitted by the assessee during appellate proceedings. The same has been given on Page-6 of the impugned order. The assessee arrived at total Bank Balance as on 31.03.2015 for Rs.518.28 Lacs. However, Ld. CIT(A) after examining the tabulation,upheld the addition of Rs.77.43 Lacs (Rs.6.58 Lacs + Rs.70.85 Lacs) and deleted the balance addition. The said adjudication has given rise to cross-appeals before us. Our findings and Adjudication 7. Upon perusal of assessment order, it could be seen that the assessee’s capital balance has shown increase of Rs.527.88 Lacs. The Ld. AO held that the capital introduction should be to the tune of Rs.14.98 Lacs plus current year’s profit of Rs.9.25 Lacs and not Rs.527.88 Lacs as claimed by the assessee. The assessee could not substantiate the same and could not file the documentary evidences to support the same. & 3078/Chny/2018 - 6 -

During appellate proceedings, the assessee, for the first time, filed copies of return of income of earlier years along with statement of account and cash flow statement. The Ld. CIT(A) also refuted the claim of the assessee that it was offering income in earlier years on presumptive basis. Finally, Ld. CIT(A) upheld the addition of Rs.77.43 Lacs and deleted the balance addition without rendering a finding as to how the remaining amount was substantiated by the assessee. It could also be seen that evidences / documents were considered by Ld. CIT(A) without calling remand report from Ld. AO and without confronting the same to Ld. AO. The same is in violation of Rule 46A.

Considering the facts and circumstances of the case, we set aside the impugned order and restore the matter back to the file of Ld. AO for fresh adjudication with a direction to the assessee to substantiate the credits made in the books of account. Needless to add that adequate opportunity of hearing shall be granted to the assessee. 10. The appeal of the revenue as well as of the assessee stands allowed for statistical purposes.