ACIT, ANAND CIRCLE, ANAND vs. NARENDRAKUMAR HANSRAJBHAI PATEL, KHEDA

Aggrieved by the addition, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals). Before the CIT(A), the assessee submitted written arguments along with documentary evidence, including the purchase register, purchase and sale bills, stock statements, e-way bills, GST returns (GSTR-1, GSTR-3B, and GSTR-2B), confirmations from suppliers, and bank statements evidencing payments made through banking channels. The assessee also submitted that all the sales declared had been accepted by the AO, and the sales could not have taken place without corresponding genuine purchases. The assessee contended that the AO made the addition merely on presumptions without any evidence to show that the purchases were bogus or that money had been received back in cash. Reliance was placed on several judicial precedents, including PCIT v. Tejula Rohitkumar Kapadia [2018] 94 taxmann.com 324 (Guj), CIT v. Bholanath Poly Fab (P.) Ltd. [2013] 40 taxmann.com 494 (Guj), and PCIT v. Odeon Builders (P.) Ltd. [2019] 110 taxmann.com 64 (SC), to argue that once purchases and corresponding sales are recorded in the books and supported by documentary evidence, no disallowance can be made merely because the supplier could not be traced or had not filed returns. After carefully examining the assessment order, the submissions, and evidences on record, the Ld. CIT(A) observed that the assessee had maintained regular books of account duly audited under section 44AB of the Act, had made all payments Asst.CIT vs. Narendrakumar Hansrajbhai Patel Asst. Year : 2021-22 through account payee cheques, and had furnished confirmations and GST details of the suppliers. The CIT(A) noted that the AO had accepted the sales but had disallowed corresponding purchases without pointing out any discrepancies in the books of account or evidence of bogus transactions. It was also found that the GST registration numbers of suppliers were mentioned in the confirmations and reflected in the assessee’s GSTR-2A, which proved that purchases were recorded on the GST portal after suppliers filed their returns. The CIT(A) therefore held that the purchases could not be treated as bogus merely because certain suppliers did not respond to the AO’s notices or had filed low returns. In view of the detailed evidence produced by the assessee demonstrating the genuineness of purchases and sales, the CIT(A) held that the addition of ₹10,64,04,151/- made by the AO under section 69C of the Act. was unsustainable. The CIT(A) accordingly deleted the entire addition and allowed the appeal on this ground.

The Department is in appeal before us against the order passed by CIT(Appeals) allowing the appeal of the assessee.

Before us, Ld. DR submitted that the assessee had placed on record substantial evidence before CIT(Appeals) and the assessee was given complete relief without calling for a Remand Report and without seeking comments of the Assessing Officer with respect to the additional evidence placed on record by the assessee during appellate proceedings. Ld. DR drew our attention to paragraph 5.5 of CIT(Appeals) order wherein substantial additional evidence was placed on record by the assessee. Asst.CIT vs. Narendrakumar Hansrajbhai Patel Asst. Year : 2021-22

We have carefully considered the rival submissions and perused the material available on record. The brief facts of the case, as borne out from the record, are that the Assessing Officer made an addition of ₹10,64,04,151/- under section 69C of the Act, on account of alleged non-genuine purchases. In appeal, the learned Commissioner of Income Tax (Appeals) deleted the entire addition after admitting and relying upon voluminous documentary evidences filed by the assessee such as confirmations, e-way bills, GST returns, stock registers, purchase invoices, and bank statements. It is an admitted position that these evidences were either not filed before the Assessing Officer during assessment proceedings or were filed for the first time before the CIT(A). However, the CIT(A) proceeded to allow full relief to the assessee without calling for a remand report from the Assessing Officer as required under Rule 46A(3) of the Income-tax Rules, 1962.

In our considered view, once the CIT(A) admits additional evidences during appellate proceedings, he is mandatorily required to afford an opportunity to the Assessing Officer to examine and rebut such evidences before passing an order. The failure to do so constitutes a violation of the procedure prescribed under Rule 46A(3) and renders the appellate order unsustainable in law. The Hon’ble Bangalore Bench of the Tribunal in Enzen Global Solutions (P.) Ltd. v. Income-tax Officer [2022] 144 taxmann.com 2 (Bang. - Trib.) held that where the Commissioner (Appeals) admitted additional evidences submitted by the assessee to prove genuineness of trade payables and allowed relief without calling for a remand report, it amounted to a clear violation of Rule 46A(3) and the matter had to be remanded to the Asst.CIT vs. Narendrakumar Hansrajbhai Patel Asst. Year : 2021-22 Assessing Officer for fresh consideration. Similarly, in Sai Prasad Properties Ltd. v. Joint Commissioner of Income-tax [2014] 51 taxmann.com 507 (Panaji - Trib.), it was held that when the CIT(A) admitted additional evidences but failed to seek a remand report or examine them, the order could not be sustained and required to be restored to the lower authority. The same principle was reiterated by the Mumbai Bench of the Tribunal in Assistant Commissioner of Income-tax v. R & B Infra Projects (P.) Ltd. [2018] 98 taxmann.com 456 (Mumbai - Trib.), where it was held that the CIT(A) cannot rely upon additional evidences furnished for the first time before him to delete additions without obtaining the Assessing Officer’s comments.

Applying the ratio of the above judicial pronouncements to the facts of the present case, we find that the learned CIT(A) has allowed complete relief to the assessee solely on the basis of evidences that were not before the Assessing Officer and without complying with the procedural requirement of calling for a remand report. This omission has deprived the Assessing Officer of an opportunity to examine the veracity of the evidences and to offer his comments thereon. In such circumstances, the appellate order suffers from a serious procedural infirmity and cannot be sustained.

Accordingly, in the interest of justice, we set aside the impugned order of the learned CIT(A) and restore the matter to his file with the direction to admit and examine the additional evidences in accordance with Rule 46A, after obtaining a remand report from the Assessing Officer and affording due opportunity of hearing to both parties. The CIT(A) shall thereafter pass a speaking order in accordance with law. Asst.CIT vs. Narendrakumar Hansrajbhai Patel Asst. Year : 2021-22

In the result, the appeal of the Revenue is allowed for statistical purposes.