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Before: Shri V. Durga Rao & Shri G. Manjunatha
O R D E R
PER V. DURGA RAO, JUDICIAL MEMBER:
This appeal filed by the Revenue is directed against the order of the ld. Commissioner of Income Tax (Appeals) 8, Chennai, dated 21.02.2020 relevant to the assessment year 2016-17.
The appeal filed by the Revenue is delayed by 155 days in filing the appeal before the Tribunal due to outbreak of COVID-19 pandemic and accordingly, the delay is condoned and admitted the appeal for adjudication.
Brief facts of the case are that the assessee is engaged in the business of processing of Municipal Solid Waste (MSW) and converting charcoal powder, pellets and preparing eco-bricks and other end products. The assessee company filed its return of income for the assessment year 2016-17 on 17.10.2016 admitting NIL income. The case was selected for scrutiny under CASS and notice under section 143(2) of the Income Tax Act, 1961 dated 05.07.2017 was issued. Thereafter Notice under section 142(1) of the Act dated 12.10.2018 was also issued calling for certain details. After verification of details available on record, the Assessing Officer has completed the assessment order under section 143(3) of the Act dated 30.12.2018 assessing income of ₹.14,17,48,606/- after making various additions.
3.1 With regard to the addition towards share premium of ₹.12,29,20,512/-, in the assessment order, the Assessing Officer has noted that the amount has been shown as current year premium while the opening balance was shown as NIL. The assessee company has been incorporated only on 13.05.2015. The Assessing Officer asked the assessee to submit the valuation report along with other supportive documents in respect of the share premium estimated. The assessee company did not submit any details. The onus is on the assessee to prove its claim by furnishing concrete evidences. Since the assessee has failed to do so, in the absence of valuation report and other supporting evidences, the amount of ₹.12,29,20,512/- received as securities premium was added back to the income of the assessee.
3.2 With regard to the claim of expenditure disallowed to the tune of ₹.2,19,18,206/-, on verification of the profit and loss account, the Assessing Officer has noticed that the assessee company has not earned any revenue from its operations during the financial year 2015-16 relevant to the assessment year 2016-17. The assessee company has been incorporated only on 13.05.2015. However, the assessee company has claimed expenditure to the tune of ₹.2,73,97,757/- though there was no income. The Assessing Officer was of the opinion that the assessee ought to have capitalized the said expenditure and should have claimed only 1/5th of the said expenditure. Hence, the Assessing Officer allowed 1/5th of the expenditure claimed to the extent of ₹.54,79,551/- and the balance claim of ₹.2,19,18.206/- was disallowed and brought to tax.
3.3 On appeal, with regard to the addition made under section 68 of the Act, after considering the valuation certificate, the ld. CIT(A) directed the Assessing Officer to delete the addition. Similarly, with regard to the disallowance of expenditure, after considering the submissions of the assessee as well as accepting copy of letter of acceptance from different municipalities and corporations, the ld. CIT(A) directed the Assessing Officer to delete the addition.
Aggrieved, the Revenue is in appeal before the Tribunal. The ld. DR has submitted that since the assessee has not furnished any piece of evidence before the Assessing Officer against the claims of the assessee, both the additions were made in the assessment order. It was further submission that without obtaining any remand report, after considering fresh evidences, the ld. CIT(A) has directed the Assessing Officer to delete both the additions is in violation of Rule 46A of the Income Tax Rules and pleaded that the Assessing Officer should be afforded an opportunity to verify the evidences produced before the ld. CIT(A).
On the other hand, the ld. Counsel for the assessee has strongly supported the order passed by the ld. CIT(A).
We have heard both the sides, perused the materials available on record and gone through the orders of authorities below. Since the assessee could not furnish valuation report and other supporting evidences towards share premium of ₹.12,29,20,152/-, the Assessing Officer made addition under section 68 of the Act. Similarly, the Assessing Officer noticed that the assessee company has not earned any revenue from its operations during the assessment year 2016-17 as the assessee company has been incorporated only on 13.05.2015. Since the assessee company has claimed expenditure to the tune of ₹.2,73,97,757/- though there was no income, the Assessing Officer restricted 1/5th of the expenditure claimed to the extent of ₹.54,79,551/- and the balance claim of ₹.2,19,18.206/- was disallowed.
6.1 On appeal, with regard to the addition made under section 68 of the Act, after considering the valuation certificate, the ld. CIT(A) directed the Assessing Officer to delete the addition. Similarly, with regard to the disallowance of expenditure, after considering the submissions of the assessee as well as accepting copy of letter of acceptance from different municipalities and corporations, the ld. CIT(A) directed the Assessing Officer to delete the addition. However, without obtaining any remand report, after considering fresh evidences, the ld. CIT(A) has directed the Assessing Officer to delete both the additions is in violation of Rule 46A of the Income Tax Rules. Accordingly, we set aside the order of the ld. CIT(A) and remit the matter back to the file of the Assessing Officer to examine and verify the fresh evidences produced before the ld. CIT(A) afresh and decide both the issues in accordance with law after affording sufficient opportunities of being heard to the assessee. The assessee is also directed to produce all the details before the Assessing Officer for verification relating to both the issues.
In the result, the appeal filed by the Revenue is allowed for statistical purposes. Order pronounced on 15th June, 2022 at Chennai.