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Income Tax Appellate Tribunal, “A” BENCH, AHMEDABAD
Before: SHRI PRAMOD M. JAGTAP & SMT.SUCHITRA RAGHUNATH KAMBLE, ACCOUNTANT
O R D E R
PER PRAMOD M. JAGTAP, VICE-PRESIDENT This appeal is preferred by the Revenue against the order dated 31.8.2018 of the Commissioner of Income-tax (Appeals)-6, Ahmedabad passed in appeal no.CIT(A)-6/67/16-17 for the assessment year 2013-14.
The Grounds of Appeal
raised by the Revenue read as under: “1. The Ld.CIT(A)) has erred in law and in facts of the case in admitting the additional evidences under Rule 46A without appreciating the fact that the case of the assessee did not fall under any of the clause of Rule 46A and the AO has also objected to admission of additional evidences?
2. Whether on the facts and in the circumstances of the case, the decision of Id. CIT(A) is justified in allowing relief with regard to the disallowance
2 made of Rs.2,21,65,000/- on account of Unsecured loan and Rs.24,34,461/- on account of interest against the said unsecured loans, overlooking the facts of the case that the assessee had failed to prove the genuineness and credit worthiness of the depositors at the time of assessment, even though assessee was given sufficient opportunity and also while submitting the remand report, the AO has mentioned that the additional evidences given by the assessee must not be admitted?
3. It is therefore, prayed that the order of the Ld.CIT(A) be set aside and that of the assessing officer be restored to the above extent,
The appellant craves leave to add, alter and /or to amend all or any of the ground before the final hearing of the appeal.”
Briefly stated the relevant facts of the case are that the assessee is a registered firm engaged in the business of development and execution of construction projects. For the assessment year 2013-14, the assessee filed its e-return declaring total income at Rs.11,37,88,864/-. The said return was taken up for scrutiny and notice under section 143(2) of the Act was issued and served upon the assessee on 17.9.2014. Thereafter, notices under section 142(1) were served upon the assessee from time to time. In response thereto, the assessee furnished various details as called for. The AO, during the course of assessment proceedings requested the assessee to furnish details of unsecured loans in tabular form to establish, genuineness of each transactions, identity and credit-worthiness of 15 creditors. The assessee produced copies of loan details showing that the impugned transactions were through banking channels and also details of interest payment made to the 15 creditors. However, the AO was not satisfied with the details furnished by the assessee. He held that no income-tax returns, bank statements etc. were furnished in respect of these creditors, and accordingly, the AO made addition under section 68 on account of unsecured loans amounting to Rs.2,23,65,000/- and disallowed the corresponding interest debited/claimed at Rs.24,68,471/-. He, added these two amounts to the 3 returned income of the assessee, and thus assessed income at Rs.13,87,22,335/-.
4. Aggrieved by the order of the AO, the assessee filed an appeal before the ld.CIT(A). During the appellate proceedings before the ld.CIT(A), the assessee filed an application dated 3.11.2017 for admission of additional evidence under Rule 46A of the Income Tax Rules, 1962, comprising of copies of the documents in respect of all the unsecured loans, which could not be submitted before the ld.AO at the time of assessment. This additional evidence was forwarded by the ld.CIT(A) to the AO for his comments and reports. The ld.AO in his remand report dated 30.1.2018 confirmed of having verified PAN with IT return, bank statements, confirmation of amounts, statements of creditors to establish identity and credit-worthiness of the concerned creditors and genuineness of the transactions. Based on the AO’s report, the ld.CIT(A) deleted the addition to the extent of Rs.2,21,65,000/- out of total addition of Rs.2,23,65,000/- made by the AO under section 68, and the balance amount of Rs.2,00,000/- was confirmed. Similarly, out of total interest payment of Rs.24,68,471/-, disallowance of Rs.34,010/- representing part of interest payment made to one Bhavnaben N. Vyas was sustained and the balance interest disallowance was deleted. Accordingly, the ld.CIT(A) partly allowed the appeal of the assessee, and aggrieved by the order of the ld.CIT(A) the Revenue is in appeal before the Tribunal.
The ld.DR submitted that CIT(A) has not given proper opportunity to the AO while entertaining additional evidence produced by the assessee during the appellate proceedings, which is clearly in violation of the Rule, and consequently, the relief given by the ld.CIT(A) to the assessee by relying on the additional evidence is not sustainable.
The ld.counsel for the assessee, on the other hand, invited our attention to the show cause notice dated 17.3.2016 issued by ld.AO under section 142(1) of the Act (copy at page no.38 of paper book) requesting for various details of unsecured loans in tabular form, namely, opening balance, amount received, repaid during the year, interest credited/paid and closing balance along with cogent evidence that prove genuineness of transactions and credit-worthiness of depositors to cumulatively satisfy all the conditions of sections 68 of the Act. He submitted that AO directed the assessee to produce entire details called for in the notice by 22.3.2016. The ld.counsel for the assessee contended that this show cause notice dated 17.3.2016 (day being Thursday) was received by the assessee on 18.3.2016 (Friday) at 5:00pm, and within a short span of three days (including holidays), the assessee was asked to furnish entire details as required by the AO, which was humanly not possible. It is, therefore, during the appellate proceedings, the assessee moved an application dated 3.11.2017 before the ld.CIT(A) for admission of additional evidence, and the ld.CIT(A) after allowing opportunity to verify the same and examining remand report dated 30.1.2018 submitted by the AO, deleted major portion of the additions, and retained only Rs.2,00,000/- paid to one Bhavnaben Vyas, and corresponding interest payment of Rs.34,010/-. The ld.AR thus prayed that order of the ld.CIT(A) does not call for any interference, as there is no violation of Rule 46A as alleged by the ld.DR.
We have considered rival submissions and perused the relevant material available on record. The issue for our consideration is, whether the ld.CIT(A) has contravened Rule 46A of the IT Rules, 1962 or not ? For adjudicating this core issue, it is relevant to reproduce observation of the CIT(A)’s order, which read as under:
5 Page No.18 “…… From a perusal of the above Remand Report of the AO it is seen that, the AO in remand proceedings had issued notices u/s 133(6) of the Act. to the above fifteen (15) persons. It is further seen that all the above fifteen (15) persons responded to the letters issued by the AO and submitted confirmations and other requisite details. The AO has mentioned that all the persons filed confirmations. The AO has also mentioned the details regarding cheques vide which loans were given and detail of bank account from which cheques were given. The AO has also mentioned that copies of ITRs were given. From a perusal of the findings of the AO, confirmations and other documents filed by the appellant, and other details sent; by the above fifteen (15) persons to the AO directly as mentioned by the AO in his Remand Report, the identity and creditworthiness of the above creditors and genuineness of the transactions in respect of unsecured loans given by the above persons to the appellant except in case of Bhavnaben N. Vyas are clearly established. It is further seen that in all cases the unsecured loans had been given by cheque and the transactions are duly reflected in the bank statements of the creditors. These details are discussed as follows”
…. ….. ….
…. ….. ….
In view of above discussion it is clear that out of loans of Rs. 2,23,65,000/-, identity and creditworthiness of the creditors who have given loans of Rs. 2,21,65,000/- is established and also the genuineness of the transactions in respect of these unsecured loans is established. Accordingly, in view of discussion above and relying on the Remand Report of the AO, it is held that the addition of Rs. 2,21,65,000/- was not justified. Accordingly, out of addition of Rs. 2,23,65,000/- addition of Rs. 2,21,65,000/- is deleted while addition of Rs.2,00,000/- is upheld. Further, in view if discussion above, and in view of the fact that unsecured loans of Rs. 2,21,65,000/- have been held to be genuine, addition on account of disallowance of interest paid on the same is also deleted. Accordingly, out of interest disallowance of Rs. 24,68,471/-, disallowance of interest of Rs.34,010/- paid to Bhavnaben N. Vyas is upheld while the balance addition is deleted. These grounds of appeals are partly allowed.”
8. It is pertinent to note here that the AO vide show cause notice dated 17.3.2016 (copy of which annexed at page no.38 of the paper book filed by 6 the assessee) had required the assessee to furnish various details within a very short period of three working days, which was not a reasonable time as per law, and without appreciating the same, the AO went ahead to pass assessment order on 30.3.2016. No doubt, because of shortage of time given to the assessee for production of details, the assessee was prevented by reasonable cause from producing evidences before the AO. During the appellate proceedings before the ld.CIT(A), the assessee made requisite application for admission of additional evidence under Rule 46A vide letter dated 3.1.2017, and the same was forwarded by the ld.CIT(A) to the AO seeking remand report. Further, the AO in the Remand Report confirmed the details furnished by the assessee in respect of all the 15 creditors, wherein identity, credit-worthiness and genuineness of the transactions were stated to be established on evidence. Based on the report of the AO, the ld.CIT(A) substantially deleted addition i.e. to the extent of Rs.2,21,65,000/- and confirmed only addition of Rs.2,00,000/-, and consequently, deleted interest addition of Rs.24,68,471/- and upheld interest amounting to Rs.34,010/- paid to Bhavaben N. Vyas.
9. Having regards to the facts discussed above, we are of the view that there is no violation of Rule 46A of the IT Rules by the ld.CIT(A) while passing impugned order because an application was moved by the assessee vide letter dated 3.11.2017, requesting for admission of additional evidence under Rule 46A and the same was forwarded to the AO, and the AO was given sufficient time to rebut the same. As a matter of fact, the AO in his detailed remand report had confirmed of having verified the additional evidence submitted by the assessee to establish the identity and credit- worthiness of the concerned creditors, and genuineness of the transactions entered into by the assessee with the 15 creditors, based on which the ld.CIT(A) has passed the impugned order giving relief to the assessee. We therefore, do not find any infirmity in the impugned order of the ld.CIT(A) calling for any interference and upholding the same, we dismiss the appeal of the Revenue.
In the result, appeal of the Revenue is dismissed. Order pronounced in the Court on 3rd February, 2022 at Ahmedabad.