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Income Tax Appellate Tribunal, DELHI BENCH : D : NEW DELHI
Before: SHRI R.K. PANDA & SHRI K. NARASIMHA CHARY
ORDER PER R.K. PANDA, AM: These are cross appeals - the first one is filed by the Revenue and the second one is filed by the assessee and are directed against the order dated 5th September, 2014 of the CIT(A)-8, New Delhi relating to assessment year 2010-11.
The facts, in brief, are that the assessee is a company and is engaged in the business of transportation of costal goods through waterways and cargo handling services, etc. It filed its return of income on 28th September, 2010 declaring a loss of Rs.120,53,13,352/-. The case was selected for scrutiny and statutory notices u/s 143(2) and 142(1) were issued and duly served upon the assessee asking for clarification on various issues. A perusal of para 3 of the assessment order shows that despite repeated opportunities granted by the AO, the assessee either sought adjournment or filed negligible details for which the AO was constrained to pass an order u/s 144 of the IT Act, wherein he made addition of Rs.193,06,80,553/- by making disallowance u/s 68 of the IT Act of Rs.91,26,00,000/- and Rs.43,15,00,000/- respectively and disallowance on account of expenses at Rs.58,65,80,553/-. Thus, he determined the total income at Rs.72,53,67,201/- as against the returned loss of Rs.120,53,13,352/-. After adjusting the brought forward loss of Rs.80,79,68,419/-, he determined the total income at Rs.nil.
The assessee preferred an appeal before the CIT(A) and filed certain additional evidences during the course of appellate proceedings before the CIT(A) under Rule 46A of the IT Rules. The ld.CIT(A) forwarded those additional evidences to the AO for his comments. The AO strongly objected to the admission of the additional evidences. However, the ld.CIT(A) gave substantial relief by deleting the addition of Rs.91,26,00,000/- made by the AO on account of unexplained increase in share capital including share premium and Rs.43,15,00,000/- made by the AO on account of unexplained increase in share application money and restricting the disallowance on account of expenses to Rs.7,76,39,843/- out of the addition of Rs.58,68,80,553/- made by the AO.
3.1. Aggrieved with such order of the CIT(A), the Revenue as well as the assessee are in appeal before the Tribunal by raising the following grounds:-
“1. Whether on the facts and circumstances of the case & in law, the Ld. CIT(A) has erred in admitting the additional evidences filed during appellate proceedings and in holding that AO’s contentions against acceptance of additional evidences are not valid? 2. Whether on the facts and circumstances of the case & in law, the Ld. CIT(A) has erred in deleting the addition of Rs. 91,26,00,000/- made by the A.O. on account of unexplained increase in share capital including share premium? 3. Whether on the facts and circumstances of the case & in law, the Ld. CIT(A) has erred in deleting the addition of Rs. 43,15,00,000/- made by the A.O. on account of unexplained increase in share application money? 4. Whether on the facts and circumstances of the case & in law, the Ld. CIT(A) has erred in restricting the addition of Rs. 58,65,80,553/- on account of partial disallowance of expenditure made by the A.O. for unsubstantial expenses, to Rs. 7,76,39,843/- without any cogent basis despite himself coming to the conclusion in the appellate proceedings that (i) “the GP ratio and NP ratio show erratic ratio of ratio analysis” (ii) possibility of excessive claim cannot be ruled out in Operational Expenses and Administrative & Other Expenses (iii) the question of self made vouchers and inflated expenses cannot be ruled out in the way the books are maintained?
Whether on the facts and circumstances of the case & in law, the Ld. CIT(A) has erred in not rejecting the books of accounts of the assessee despite finding aforementioned defects in the books of accounts of the assessee produced for the first time during the appellate proceedings? 6. That the order of the Ld. CIT (A) is erroneous and is not tenable on facts and inlaw. 7. That the grounds of appeal
are without prejudice to each other.
8. That the appellant carves leave to add, alter, amend or forego any ground(s) of appeal raised above at the time of hearing.”
Ld. CIT (A) is not justified in sustaining Ad Hoc disallowance of Rs 7,76,39,843/- being 10% of Operational and Administrative & Other Expenses as against Ad Hoc 50% disallowance by the AO, despite submitting complete details / desired evidences. The appellant craves leave to add, avoid, forgo or alter the aforesaid Ground of Appeal if it becomes necessary to do so in the interest of justice, at or before the time of hearing of the aforesaid appeal.”
The ld. DR strongly objected to the order of the CIT(A). He submitted that the AO passed the order u/s 144 of the IT Act due to non-compliance of the assessee during the course of assessment proceedings which is evident from para 3 of the assessment order. The assessee filed an application u/r 46A before the CIT(A) by filing certain additional evidences. The ld.CIT(A) called for a remand report from the Assessing Officer and the Assessing Officer had categorically submitted that the case of the assessee was not covered under the exceptions provided in clause (a) to (d) of Rule 46A(1). However, the Assessing Officer had not recorded his findings in respect of the merit of the additional evidence furnished. He submitted that the ld.CIT(A) did not accept the objection raised by the Assessing Officer in respect of admissibility of 4 additional evidence and has not provided any further opportunity to the Assessing Officer for submission of his remand report in respect of additional evidences filed by the assessee during the course of appellate proceedings and in the process has violated the provisions of Rule 46A(3) of the Rules. He submitted that the ld.CIT(A) was not exercising the powers u/s 250(4) of the Act and, therefore, the Assessing Officer ought to have been allowed reasonable opportunity to examine the additional evidences or documents furnished in terms of Rule 46A(3). Further, the ld.CIT(A) has passed a cryptic order in respect of admission of additional evidences without disposing of the application of the assessee by way of a reasoned order in terms of Rule 46A(2) read with clause (a) to (d) of Rule 46A(1). Referring to the following decisions, he submitted that the order of the ld.CIT(A) is not in consonance with the judicial precedents:-
i) CIT vs. Manish Build Well (P) Ltd., 16 taxmann.com 27, 204 Taxman
106 (Del); ii) CIT vs. Jansampark Advertising & Marketing (P) Ltd., 56 taxmann.com
286, 231 Taxman 384 (Del); iii) ACIT vs. Mohar Singh, 16 taxmann.com 37, 49 SOT 129 (Raj.); iv) E-4 Entertainment Pvt. Ltd., A.Y. 2007-08; v) CIT vs. Ranjit Kumar Choudhary, 288 ITR 179 (Gau.); vi) Haji Lal Mohd Biri Works vs. CIT (2005) 275 ITR 496 (All); vii) ACIT vs. Nirula Handicraft Bazar (P) Ltd., (Delhi), Order dated 12.10.2012; 5 viii) ITO 24(2) vs. Kuber Chand Sharma, (ITAT, Delhi); & ix) ITO 31(1), New Delhi vs. Bhai Manjit Singh (ITA No.1807/Del/2010). He accordingly submitted that the order of the ld.CIT(A) be reversed and that of the Assessing Officer be restored.
5. The ld. counsel for the assessee, on the other hand, strongly supported the order of the CIT(A). He submitted that because of the non-appearance of the counsel of the assessee, the case remained unrepresented before the Assessing Officer. Referring to page 2 of the assessment order, he submitted that the final show cause notice was issued on 01.01.2013 fixing the case for hearing on 8th January, 2012 and the Assessing Officer passed the order on 9th January, 2013. Thus, adequate opportunity was not granted to the assessee and the assessment was not getting time barred on 9th January, 2013. Therefore, the Assessing Officer should have given further opportunity to the assessee. He submitted that the ld.CIT(A) appreciated the above facts and admitted the additional evidences after giving due opportunity of being heard to the Assessing Officer. Since the Assessing Officer did not give his comments on the merit of the case and also objected to the admission of the additional evidences, the ld.CIT(A), after proper appreciation of the facts of the case not only admitted the additional evidences, but also gave relief to the assessee which, on the facts and circumstances of the case, is fully justified. He, accordingly, submitted that the order of the CIT(A) be upheld to the extent of relief granted by him. So far as the addition sustained by the CIT(A) is concerned, he submitted that the same is not justified under the facts and circumstances of the case.
The ld. counsel also relied on the following decisions:-
i) CIT vs. Bhagat Steel & Forging (P) ltd. 52, taxmann.com 28 (Del); ii) CIT vs. Virgin Securities and Credits (P) Ltd., 20 taxmann.com 681 (Del); iii) CIT vs. Hewlett Packard India, 314 ITR 55 (Del); iv) CIT vs. Chandra Kant Chanu Bhai Patel, 202 Taxman 262 (Del); v) CIT vs. Betterways Finance, of 2009 (Delhi HC); and vi) CIT vs. Text Hundred India Pvt. Ltd., 2061 and 2065/2010
(Del).
We have considered the rival submissions made by both the sides and perused the material available on record. We find the Assessing Officer at para 3 of the assessment order, has mentioned as under:-
“3. Notice u/s 143(2) of the Act, was issued on 27.04.2012 fixing the case for hearing on 08.05.2012. On 08.05.2012 simply a adjournment letter was filed and the case was adjourned for 22.05.2012. On 22.05.2002 again an adjournment letter was filed. Again on 23.05.2012 a questionnaire was issued fixing the case for hearing on 08.06.2012. On 08.06.2012 some details were filed and case was adjourned for 22.06.2012. On 22.06.2012 again an adjournment letter filed and case was adjourned for 25.07.2012. On 25.07.2012 again an adjournment letter was filed and case adjourned for 21.08.2012. On 21.08.2012 again an adjournment letter was filed and case adjourned 10.09.2012. On 10.09.2012 none attended nor any adjournment was sought. Again notice u/s 143(2) of the Act, was issued on 05.09.2012 fixing the case for hearing on 14.09.2012. On 14.09.2012 none attended nor any adjournment was sought. After that AR of the assessee company was contacted telephonically many times but he failed to appear before the undersigned. Finally AR of the assessee company Shri Rajnsh Aggarwal appeared before the undersigned on 05.12.2012. On this date various queries were given to him and the case was adjourned for 10.12.2012. But on this date also nobody appeared. After that telephonically many times efforts were made to contact to AR of the company but no response was received. Finally a show cause notice was issued on 01.01.2013 fixing the case for hearing on 08.01.2013. But till now nobody attended nor any adjournment is sought till date in response to the notices so issued. In view of the facts and in the circumstances of the case I am left with no alternative but to complete the assessment ex-parte u/s 144 of the Income Tax Act, on the basis of material available on record.” 8. The ld. counsel for the assessee also fairly conceded that there was no compliance before the Assessing Officer due to non-appearance of the counsel for the assessee. We find the assessee filed certain additional evidences before the CIT(A) under Rule 46A of the IT Rules. Before adjudicating the admissibility of the additional evidences filed before the CIT(A) under Rule 46A of the IT Rules, we would like to extract the provisions of Rule 46A which read as under:- “46A. (1) The appellant shall not be entitled to produce before the [Deputy Commissioner (Appeals)] [or, as the case may be, the Commissioner (Appeals)], any evidence, whether oral or documentary, other than the evidence produced by him during the course of proceedings before the [Assessing Officer], except in the following circumstances, namely :— (a) where the [Assessing Officer] has refused to admit evidence which ought to have been admitted ; or (b) where the appellant was prevented by sufficient cause from producing the evidence which he was called upon to produce by the [Assessing Officer] ; or (c) where the appellant was prevented by sufficient cause from producing before the [Assessing Officer] any evidence which is relevant to any ground of appeal ; or (d) where the [Assessing Officer] has made the order appealed against without giving sufficient opportunity to the appellant to adduce evidence relevant to any ground of appeal.
(2) No evidence shall be admitted under sub-rule (1) unless the [Deputy Commissioner (Appeals)] [or, as the case may be, the Commissioner (Appeals)] records in writing the reasons for its admission. (3) The [Deputy Commissioner (Appeals)] [or, as the case may be, the Commissioner (Appeals)] shall not take into account any evidence produced under sub-rule (1) unless the [Assessing Officer] has been allowed a reasonable opportunity—
(a) to examine the evidence or document or to cross-examine the witness produced by the appellant, or (b) to produce any evidence or document or any witness in rebuttal of the additional evidence produced by the appellant. (4) Nothing contained in this rule shall affect the power of the [Deputy Commissioner (Appeals)] [or, as the case may be, the Commissioner (Appeals)] to direct the production of any document, or the examination of any witness, to enable him to dispose of the appeal, or for any other substantial cause including the enhancement of the assessment or penalty (whether on his own motion or on the request of the [Assessing Officer]) under clause (a) of sub-section (1) of section 251 or the imposition of penalty under section 271.]
A perusal of the above provision shows that the assessee does not fulfill any of the conditions laid down in the said provision. Further, a perusal of the order of the CIT(A) also shows that he has not categorically dealt with the objections raised by the Assessing Officer. The various decisions relied on by the ld. counsel for the assessee are distinguishable and not applicable to the facts of the present case. Every case depends on its own set of facts and the ratio in one decision cannot be applied blindly that in each and every case where the Assessing Officer has passed an order u/s 144 due to deliberate non-compliance by the assessee, the CIT(A) can admit additional evidence despite objections by the Assessing Officer and grant substantial relief running into crores. In the present case, the assessee has filed a paper book containing more than 1900 pages and it is also an admitted fact that the Assessing Officer has not examined a single page out of the paper book so filed before us which was filed before the CIT(A). Since the order of the CIT(A) in the instant case is a cryptic one, without deliberating upon the provisions of the Act regarding the admissibility of the additional evidences where an assessee deliberately defied the statutory notices and considering the fact that non-submission of these details before the Assessing Officer due to failure on the part of the counsel is a general one without any corroborative evidence we are of the considered opinion that the matter needs a thorough relook at the level of the Assessing Officer. We, therefore, deem it proper to restore the matter to the file of the Assessing Officer with a direction to go through all the details and decide the issue as per fact and law, after giving due opportunity of being heard to the assessee. We hold and direct accordingly. The grounds raised by the Revenue and the assessee are, accordingly, allowed for statistical purposes.
In the result, the cross appeals are allowed for statistical purposes. The decision was pronounced in the open court on 20.11.2018.