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Facts
The assessee filed an appeal against the Ld. CIT(A)'s order for AY 2017-18, which had sustained various additions made by the AO, including unexplained cash credits. The appeal was filed with a 237-day delay due to an inoperative email account. The assessee also sought to admit additional evidence and contended that the AO failed to provide a proper opportunity of hearing by seeking clarifications just nine days before framing the assessment order.
Held
The Tribunal condoned the delay, finding it not deliberate due to technical glitches. It admitted the additional evidence, determining that a failure of justice would occur otherwise. Citing the Supreme Court's decision in TIN Box Co. v. CIT, the Tribunal set aside the Ld. CIT(A)'s order and remanded the assessment to the AO for de novo consideration on all issues, except for the disallowance of advertisement expenses (Rs. 1,84,489/-) and belated EPF payment (Rs. 46,256/-), which were confirmed as unchallenged by the assessee.
Key Issues
Whether the delay in filing the appeal should be condoned; whether additional evidence should be admitted at the appellate stage; whether the assessee was afforded proper opportunity of hearing by the AO; and the validity of various additions/disallowances made by the AO.
Sections Cited
250, 143(3), Rule 29 (ITAT Rules, 1963), 143(2), 40A(3), 68, 194I
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Income Tax Appellate Tribunal, ‘A’ BENCH: CHENNAI
Before: SHRI ABY T. VARKEY & SHRI JAGADISH
आदेश / O R D E R
PER ABY T. VARKEY, JM:
1. This is an appeal preferred by the assessee against the order of the Learned Commissioner of Income Tax (Appeals)/NFAC, (hereinafter in short "the Ld.CIT(A)”), Delhi, dated 18.10.2023 for the Assessment Year (hereinafter in short "AY”) 2017-18.
2. At the outset, it is noted that there is a delay of ‘237’ days in filing of the appeal. The assessee has filed a condonation application along with the affidavit before this Tribunal seeking condonation of delay.
1. According to the Ld.AR, the impugned order dated 18.10.2023 was forwarded to the registered e-mail ID of the assessee which was inoperative due to technical gliches and due to which assessee was not aware of the impugned order of the Ld.CIT(A); and only when the recovery proceedings were initiated by the AO by letter dated 25.07.2024, the assessee came to know that its appeal has been dismissed and thereafter, immediately took steps to file the appeal and in this process, there is a delay of ‘237’ days in filing of this appeal; and since, the assessee was of bona fide belief that the e-mail account of the assessee was operative, the delay caused is not deliberate. Therefore, assessee pleads for condoning the delay. The Ld.DR opposed condoning the delay. However, it has been brought to our notice that the assessee was unaware of the outcome of the impugned order of the Ld.CIT(A) due to technical glitches/e-mail being inoperative. Therefore, it can’t be said that the delay caused was deliberate; and in any event, assessee wouldn’t gain from delaying the filing of this appeal. Therefore, we are inclined to condone the delay and proceed with the adjudication of the appeal.
3. At the outset, the Ld.AR of the assessee has filed petition for admission of the following additional evidences under Rule 29 of the Income Tax Appellate Tribunal Rules, 1963:
1. It is submitted the above appeal is preferred by the appellant against the order u/s 250 of the Act of CIT(A) dated 18.10.2023, wherein the order of assessment passed u/s 143(3) of the Act dated 31.12.2019 was challenged.
2. The AO during the assessment proceedings has made various additions and disallowance same was challenged in the appeal before the CIT(A). In the impugned order the Ld CIT(A) sustained the additions made by the AO. Pertaining to addition towards unexplained cash credits of Rs. 13,53,565/-, the Petitioner submitted detailed written submissions before the Ld CIT (A) explaining that these entries are not from the book of accounts of the assessee. The petitioner now in order to substantiate the claim submits cash book of Shobika Mens for the AY 2017-18 and Bank Statement C.J Riyaz Ahamed for AY 2017-18, where these entries are present
3. It is submitted that the non-filing of the above documents before the AO and the CIT(A) was neither willful nor wanton and only due to the reasons stated above. It is further submitted that if the above documents are not admitted as evidence, the Petitioner / Appellant would be put to great hardship and irreparable loss. It is thus just and necessary that the above documents are admitted as additional evidence and taken on file in this appeal before this Hon'ble Tribunal.
4. In these circumstances, it is humbly prayed that the above mentioned documents may be admitted as additional evidence and thus render justice.
4. It is noted that following documents have been filed by the assessee for the first time before this Tribunal:
1. TMB bank account statement of CJ Riyaz Ahamed (Page Nos.102-105 of the PB).
2. Cash Book ledger of Shobika Mens for AY 2017-18 (Page Nos.106-167 of the PB)
5. However, the Ld.DR opposes admission of the additional evidences.
Regarding admission of evidence at the appellate stage, let us take guidance from the decision of the Hon’ble Supreme Court in the case of State Of Rajasthan vs Asharam @ Ashumal [2023] 6 SCC 314 wherein their Lordship’s had an occasion to answer the question - What is the test for determining if additional evidences can be taken at the appellate stage? Is it the impossibility or inability to pronounce the judgment in the absence of such evidence? Held. ‘No, test is to see if there would be a failure of justice without such additional evidence. And once it is found that there will be failure of justice, any kind of evidence formal or substantial can be received’. Testing on the touch stone of the aforesaid ratio of the Hon’ble Supreme Court and having gone through the documents filed from Page Nos.102-167 of the Paper Book, we are of the opinion that there will be failure of justice if these evidences couldn’t be admitted and considered while adjudicating the issues raised in the appeal. However, since we find that these documents were not before the authorities below especially in the hands of the AO while framing the assessment, for the interest of justice and fair play, we are inclined to admit the evidences.
The next grievance of the assessee is that it didn’t get proper opportunity before the AO. In this regard, it was brought to our notice that the assessee received only one notice dated 16.04.2019, pursuant to which assessee filed reply, P & L A/c, balance sheet, Form No.26AS.
However, the AO didn’t ask for any other clarification till 22.12.2019 and asked for clarification only “9” days before the assessment order was framed i.e. on 31.12.2019 which fact is discernable from Page No.2 of the assessment order; and since, the assessee couldn’t file all the documents on 24.12.2019 while filing its reply to the clarification sought by the AO on 22.12.2019, we are of the view that the AO has made additions without giving proper opportunity to the assessee. The assessee has cited the decision of the Hon’ble Supreme Court in the case of TIN Box Co. v. CIT reported in [2001] 249 ITR 216 (SC) and prayed that since assessee didn’t get proper opportunity before the AO and that the additional evidences has a bearing on the income of the assessee, the assessment be set aside back to the file of the AO for de novo assessment. Per Contra, the Ld DR doesn’t want us to give one more innings to assessee.
Having heard both sides, we find that the assessee had filed Return of Income [RoI] for AY 2017-18 on 24.08.2017 admitting total income at Rs.82,950/- which RoI was selected for complete scrutiny under CASS since there was huge cash deposits during demonetization period and abnormal increase in sale with decrease in profitability as compared to preceding year. It is noted that notice u/s.143(2) was issued on 24.09.2018, and thereafter, a letter was issued to the assessee through e-processing portal on 14.01.2019 calling for certain documents, and in response, assessee filed a letter dated 16.04.2019 which fact the AO acknowledges that the assessee has filed the P&L A/c, balance sheet, Form No.26AS and filed reply/details regarding source of cash deposits.
However, thereafter the AO issued a letter dated 22.12.2019 calling for clarification in respect of i) advertisement expenses (ii) rent paid (iii) interest payment towards unsecured loan 4) unsecured loan 4) difference in creditors balance 6) Cash credit in partner’s capital account 7)
Disallowance u/s.40A(3) on purchase, 8) EPF belated payments.
Pursuant to which, the assessee filed reply on 24.12.2019 but couldn’t file the relevant documents which led to the AO drawing adverse inference against assessee. It is noted that assessee couldn’t file relevant evidence before the Ld.CIT(A) due to technical glitches, because of which, assessee has filed additional evidences before us which we have admitted (supra) and since, the assessee didn’t get proper opportunity because clarification was asked at the fag end of the assessment viz nine days before framing assessment as noted supra, we taking note of the order of the Hon’ble Supreme Court in the case of TIN Box Co. (supra) wherein their Lordships while reversing the order of the Hon’ble High Court, the Tribunal and CIT(A) has restored the assessment back to the file of the AO since the assessee didn’t get proper opportunity before the AO. The Hon’ble Supreme Court has held in the case of TIN Box Co., as under:
It is unnecessary to go into great detail in these matters for there is a statement in the order of the Tribunal, the fact-finding authority, that reads thus :
"We will straightaway agree with the assessee's submission that the Income-tax Officer had not given to the assessee proper opportunity of being heard."
That the assessee could have placed evidence before the first appellate authority or before the Tribunal is really of no consequence for it is the assessment order that counts. That order must be made after the assessee has been given a reasonable opportunity of selling out his case. We, therefore, do not agree with the Tribunal and the High Court that it was not necessary to set aside the order of assessment and remand the matter to the assessing authority for fresh assessment after giving to the assessee a proper opportunity of being heard.
Two questions were placed before the High Court, of which the second question is not pressed.
The first question reads thus:
"1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in not setting aside the assessment order in spite of a finding arrived at by it that the Income-tax Officer had not given a proper opportunity of hearing to the assessee?"
In our opinion, there can only be one answer to this question which is inherent in the question itself: in the negative and in favour of the asses- see.
The appeals are allowed. The order under challenge is set aside. The assessment order, that of the Commissioner (Appeals) and of the Tribunal are also set aside. The matter shall now be remanded to the assessing authority for fresh consideration, as aforestated. No order as to costs.
In the light of the aforesaid discussion, we set aside the impugned order of the Ld.CIT(A) and restore the assessment back to the file of the AO with a direction to assess the income of the assessee, except the disallowance of advertisement expenses of Rs.1,84,489/- and addition made of Rs.46,256/- on EPF payment made belatedly since assessee has not challenged or filed any grounds, against such addition; Therefore, we confirm the disallowance on both counts. And the assessee is noted to have filed written submissions in the form of chart which is reproduced as under:
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Gro Addition by the AO Submission Submissions to be made before the AO und No The Rent was paid to 4 Co-owners who Sale deed Showing Purchases by the 4 owners each held 1/4th share in the property under their name under their names in individual capacity; i. Rafic Ahamed – Pgs 1 to 7 PB Each of them received their 1/4th share of ii. Rashi Ahamed - Pgs 8 to 15 PB the monthly rent and thus the total rent iii. Riyaz Ahamed - Pgs 16 to 22 PB paid during the year to each owner only came to Rs.1,20,000/- which was less iv. Rakeef Ahamed – Pgs 23 – 29 PB Disallowance of Rs. 1,44,000 then the statutory limit to deduct TDS was made u/s 40(a)(ia) u/s.194I of the Act. ROI of the 4 partners offering their ¼th share of Disallowance was made as no the rental income TDS was deducted.The monthly 2 i. Rafic Ahamed – Pgs 30 & 32 PB rent paid was Rs.40,000/- and the same was paid to a single ii. Rashi Ahamed - Pgs 33 to 36 PB person. Total rent paid during the year was Rs.4,80,000/-. iii. Riyaz Ahamed - Pgs 37 to 39 PB iv. Rakeef Ahamed –Pgs 40 to 57 PB
Rental Leger in Appellants Book of Account - Pg 59 of PB Supposed difference in All the credits are either the relatives of unsecured loan of Assessee’s partners or the Assessee’s Rs.80,28,704/- was added to the sister concern or Partners’ Proprietorship income as certain transactions concern.The receipts from the creditors with the creditors appearing in were towards the capital of the partners in the appellant’s bank statement the appellant firm. were not reflected in the books of Shobika.Same were treated as unexplained cash credit u/s 68 of the Act. Mother of the partners in appellant firm Loan ledger of C.J. Umshalma Begum in the books of Appellant - Pg 63 of the PB Rs.3,48,704 to Rafic Ahmed Rs.6,00,000 to Rakeef Ahamed Relevant Transaction in the Bank statement of Rs.6,00,000 to Riyaz Ahamed C.J Umshalma begum -Pgs 64 - 66 of the PB Rs.6,00,000 to Rashi Ahamed Rs.6,00,000 returned back i. Uslama Begum – Rs. 27,48,074 Ledger of the partner’s capital account in the appellant’s books showing credit of these amounts to their capital 3 i. Rafic Ahmed - Pg 79 of PB ii. Rakeef Ahamed – Pg 86 of PB iii. Riyaz Ahamed – Pg 91 of PB iv. Rashi Ahmed – Pg 93 of PB Sister concern Loan ledgers of Ritika in the books of Appellant – Pg 67 of PB Rs 4,50,000 to Rafic Ahmed Ledgers of the Appellant in the Books of Ritika – Rs 4,50,000 to Rakeef Ahamed Pg 68 of PB Rs.4,50,000 to Riyaz Ahamed Ledger of the partner’s capital account in the Rs.4,50,000 to Rashi Ahamed appellant’s books showing credit of these amounts to their capital ii. Rithika – i. Rafic Ahmed - Pg 80 of PB Rs.18,00,000 ii. Rakeef Ahamed – Pg 86 of PB iii. Riyaz Ahamed – Pg 91 of PB iv. Rashi Ahmed – Pg 93& 94 of PB iii. Shobika Dot Com – Proprietorship concern of Riyaz Ahmed Loan ledgers of Shobika dot com in the books of Rs.10,80,000 Appellant – Pg 69 of PB
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Payments of Rs.6,90,000 and Ledgers of the Appellant in the Books of Rs.3,90,000 to Rashi Ahamed’s capital Shobika dot com – Pg 70 of PB Ledger of Rashi Ahamed’s capital account in appellant’s books showing credit of these amounts to his capital - Pg. 93 of PB Proprietorship concern of Rakeef Ahmed Loan ledgers of Shobika Mens in the books of Appellant – Pg 71 of PB Payment of Rs. 6,00,000 + 1,20,000 Ledgers of the Appellant in the Books of iv. Shobika Mens – towards capital ofRakeef Ahamed Shobika Mens – Pg 72 of PB Rs7,20,000 Ledger of Rakeef Ahamed’s capital account in appellant’s books showing credit of these amounts to his capital -Pg. 86 of PB A partnership firm of Rafic Ahamed and Loan ledgers of Rashi Silk Palace in the books Thasneem Banu of Appellant – Pg 73 of PB Ledgers of the Appellant in the Books of Rashi v. Rashi Silk Palace – Silk Palace – Pg 74 of PB Rs 2,40,000 Relevant Transaction in Capital Account of Rafic Ahamed in the appellant’s books - Pg79 of PB
Sister concern Loan ledgers of Maharaja Silks in the books of Appellant – Pg 75 of PB Rs 1,35,000 to Rafic Ahmed Rs 1,35,000 to Rakeef Ahamed Ledgers of the Appellant in the Books of Rs.1,35,000 to Riyaz Ahamed Maharaja Silks – Pg 76 of PB Rs.1,35,000 to Rashi Ahamed Relevant Transaction in Capital Account of vi. Maharaja Silks – Rs. Partners in the appellant’s books 5,40,000 i. Rafic Ahmed - Pg 80 of PB ii. Rakeef Ahamed – Pg 87 of PB iii. Riyaz Ahamed – Pg 91 of PB iv. Rashi Ahmed – Pg 94 of PB
Proprietorship concern of Rakeef Ahmed Loan ledgers of Madurai Blazer in the books of Appellant – Pg 77 of PB Payment of Rs. 3,00,000 + 6,00,000 vii. Madurai Blazer –Rs. Ledgers of the Appellant in the Books of 9,00,000 Madurai Blazer – Pg 78 of PB Relevant Transaction in Capital Account of Pg 86 of PB Ledger Account of “Madurai Tavakkal Traders The Goods were dispatched by the sellers and Surat – Aagam Silks” for the FY 16-17 only on 31.03.2017.They were accounted along with the confirmation letters will for in the Purchases and stock account of besubmitted before the AO Difference of Credit balance of the appellant only in the next year (F.Y Rs. 1,88,391 pertaining to 2017-18) and not under the year under “Madurai Tavakkal Traders appeal. The Appellant will be Producing the Ledgers of and Surat – Aagam Silks” was 4 MaduraiTavakkal Traders and Surat – Aagam added as the goods purchased Silks” for the FY 17-18 before the AO to during the year have to be provide reconciliationthat the purchases were accounted for in the same year accountedduring the next year in mercantile system.
This cash was deposited by Riyaz The Assessee has produced two additional Ahamed in his ownTamilnaduMercantile documents before the Hon’ble ITAT Bank – SB Account out of the payments Cash Credit in Partner Riyaz receivedby him from SHOBIKA MENS, i. TMB Bank Statement of Riyaz Ahmed’s individual bank which is a proprietorship concern of Mr. Ahmed – Pgs 102 – 105 of PB Account of Rs. 13,53,565/- 5 Rakeef Ahmed. ii. Cash book of SHOBIKA MENS- treated as unexplained cash Pgs 106 – 167 of PB credits u/s 68 of the Act. Riyaz Ahmed is maintaining the SB account under his individual capacity and Above two documents will be explained before deposits were made by him. The Action of the AO
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Riyaz Ahamed has no way connected to SHOBIKA
Payments through Agents Bank deposit slips to the respective agents - Pgs 176 to 178 of PB The assesee has directly deposited cash into the bank accounts of the Agents , which was then paid by the agents to procure goods from the following sellers Creative Enterprise, Maher Creation, Aarev Traders, MGM & Sons, Shab AshokumarMethmla. Payments of various bills Three Separate Bills regarding Purchases from Madurai Sri Amman Handlooms -Pgs 180 to 182 The Assessee has paid the same to of PB Madurai Sri Handlooms under 3 separate bills
Disallowance of Purchase of R. 4,92,171 u/s 40A(3) – For reason the assesee has paid the 6 same by exceeding cash Payment through RTGS Relevant bank Statement @ Pg 179 of PB payments of Rs. 20,000 The payment of Rs. 1,25,255 to Elampillai VPS Silk was through RTGS on 04.11.2016 – from TMB Bank account of Shobika
Geniune Payments towards The Assessee will be submitting relevant documents connected to this payments before i. Erode Mahavir Tex – Rs. 25,920 the AO ii. Madurai Bismi – Rs. 20,559 All other documents will be put forth and emphasised before the AO And which may be considered by the AO before framing the assessment.
In the light of the aforesaid discussion, the AO is directed to frame the assessment after considering the written submissions filed by assessee including additional evidences admitted supra and after hearing the assessee frame the assessment in accordance to law except the two issues as noted at para 8.