INCOME TAX OFFICER, NON-CORPORATE WARD 19(4), CHENNAI vs. PARVATHY AYYAVU, CHENNAI

We find that this appeal is filed with a delay of 36 days. The Appellant-Revenue filed an affidavit for condonation of delay stating the reasons. Upon hearing the ld. DR and on examination of the said affidavit, we find the reasons stated by the Revenue are bonafide, which really prevented in filing the appeal in time. Thus, the delay is condoned and admitted the appeal for adjudication.

The Appellant-Revenue raised 4 grounds, amongst which, the only issue emanates for our consideration as to whether the ld. CIT(A) is justified in deleting the addition made in the assessment order passed under section 143(3) of the Income Tax Act, 1961 [“Act” in short].

At the outset, we note that the assessee is an individual and engaged in the business of flat promoter. The assessee filed her return of income declaring a total income of ₹.5,84,860/-, which was accepted vide intimation under section 143(1) of the Act. Thereafter, under scrutiny, notices under section 143(2) and 142(1) of the Act were issued. According to the Assessing officer, the assessee was represented by Chartered Accountant, but, could not furnish sufficient proof/evidence towards sundry creditors, loans & advances, inspite of many opportunities given, thereby, the Assessing Officer determined the total income of the assessee at ₹.8,76,17,173/-, inter alia, making addition on account of advances, unsecured loans, sundry creditors, advertisement charges, rent and legal expenses vide his order dated 31.03.2016 passed under section 143(3) of the Act. Aggrieved by the order of the Assessing Officer, the assessee preferred an appeal before the ld. CIT(A).

We note that the ld. CIT(A) recorded that notices issued and served through ITBA portal on nine occasions, but, no compliance was made by the assessee, which is clear from para 5 of the impugned order. In the absence of any written submissions/documentary evidences, the ld. CIT(A) proceeded to dispose of the appeal basing on the material available on record. The ld. CIT(A) observed that the Assessing Officer has got nothing on record to show the entire advance of ₹.8,11,60,146/- is the advances made/received by the assessee during the relevant previous year. Further, since the assessee could not explain the source of said entire advances with documentary evidences, held it is not known as to whether the entire amount is taxable as income in the hands of the assessee in the year under consideration. While making such observation vide para 7.2.1 of the impugned order, he proceeded to delete the entire addition consisting of advances, unsecured loans and sundry creditors of ₹.8,53,22,791/- in the absence of any evidence, which is clear from para 7.2.3 of the impugned order. With regard to the disallowances of ₹.8,36,978/- under section 40(a)(ia) of the Act as well as ₹.8,72,544/-, the ld. CIT(A) confirmed the addition since no evidence is brought on record by the assessee as per para 7.2.4 & 7.2.5 of the impugned order respectively.

The ld. DR Shri P. Krishna Kumar, JCIT submits that the ld. CIT(A) is a fact finding authority, without discussing anything in detail regarding the advances except making an observation that as to whether the said advances are taxable in the year under consideration, deleted the same, is not justified. He submits that there was no evidence brought on record by the assessee before the ld. CIT(A), however, observing as it was an high pitch addition of huge amount without assigning any reason and drew our attention to para 7.2.3 of the impugned order. Further, he argued that the burden is on the assessee to prove the genuineness of the unsecured loans taken before the Assessing Officer and the ld. CIT(A), but, no steps were taken by the assessee inspite of many opportunities given by the Assessing Officer and the ld. CIT(A). He submits that the ld. CIT(A), without having anything on record in support of the details of unsecured loans, deleted by holding that the Assessing Officer brought nothing on record to show the entire advance is the advance made/received by the assessee during the year under consideration is not justified. The ld. CIT(A), being a first appellate authority should have asked or summoned assessment records for his examination, but no effort was taken by the ld. CIT(A) in examining the same. The ld. CIT(A) ought not to have given relief in the absence of any evidence. Further, the ld. DR argued that the ld. CIT(A) ought to have appreciated that the onus of proving the claim made in the return of income is on the assessee only and that even at the appeal stage too, the assessee has not discharged her duty to prove with evidence. Further, he argued that the ld. CIT(A) having power co-existent and co- terminus as that of the Assessing Officer, ought to have asked the assessee to furnish the details and information involving the addition made by the Assessing Officer. He submits that the ld. CIT(A) failed to appreciate the case in right perspective and proceeding to delete the addition without there being any evidence is not justified and thus prayed to set aside the order of the ld. CIT(A) and that of the Assessing Officer be restored.

Heard the ld. DR and perused the material available on record. On perusal of the assessment order, we note that the assessee appointed her authorized representative after receipt of notices under section 143(2) and 142(1) of the Act. The Assessing Officer clearly recorded that the assessee could not furnish any details regarding the points raised in the above said 2 statutory notices vide para 3 of the assessment order. Since the authorized representative could not furnish sufficient proof/evidence towards sundry creditors, loans and advances, having no option, the Assessing Officer proceeded to add the entire advances etc. to the total income of the assessee. Before the ld. CIT(A), it is noted that the assessee could not represent her case by filing compliance in response to the 9 notices issued by the ld. CIT(A). Having observed so, the ld. CIT(A) proceeded to fix the burden on the Assessing Officer by stating that nothing was brought on record that the advance is made/received by the assessee. In this regard, we find force in the argument of the ld. DR that the ld. CIT(A) ought not to have made such observation having co-terminus power as that of the Assessing Officer. Further, we find force in the argument of the ld. DR that the burden is on the assessee to furnish every details regarding advances, unsecured loans and sundry creditors, but, however, the ld. CIT(A) fixed the burden on the Assessing Officer to say whether such advances are taxable in the year under consideration. Therefore, we find that the order of the ld. CIT(A) is not justified in giving relief to the assessee without having supporting evidence or explanation and it is set aside and restore the addition made by the Assessing Officer. Thus, the grounds raised by the Revenue are allowed.

In the result, the appeal filed by the Revenue is allowed. Order pronounced on 14th May, 2025 at Chennai.