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ACIT, CIRCLE-4(1), PATNA vs MUNNI RAI, PATNA | BharatTax

ACIT, CIRCLE-4(1), PATNA vs. MUNNI RAI, PATNA

ITA 269/PAT/2018Status: DisposedITAT Patna16 January 2025AY 2008-09Bench: SHRI SOJOY SARMA, JUDICIAL MEMBER SHRI SANJAY AWASTHI (Accountant Member)1 pages

AI SummaryAllowed

Facts

The Revenue's appeal concerns an addition of Rs. 3,44,45,828/- made by the Assessing Officer (AO) on account of unexplained sundry creditors. The assessee had appealed against the AO's order, and the CIT(A) deleted this addition. The Revenue is aggrieved by this deletion and has filed the present appeal.

Held

The Tribunal noted that the addition of Rs. 3,44,45,828/- regarding unexplained sundry creditors did not directly arise from the AO's order dated 25.02.2016. The Tribunal found that this issue was neither discussed in the AO's order nor was an opportunity given to the assessee to respond. Therefore, the Tribunal decided to remand the issue back to the AO for fresh adjudication.

Key Issues

Whether the CIT(A) was justified in deleting the addition of unexplained sundry creditors, and whether the issue was properly before the CIT(A) based on the AO's order.

Sections Cited

250 of the Income Tax Act, 1961, 143(3) of the Income Tax Act, 1961, 263 of the Income Tax Act, 1961, 143(3) r.w.s 254 of the Act, 143(3) r.w.s. 263 of the Act, 68 of the Act

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Income Tax Appellate Tribunal, “PATNA BENCH” PATNA

For Appellant: Shri Sudipta Sannigrahi, CA

For Respondent: Shri Ashok Kumar, CIT

Assistant Commissioner of Income Tax, Circle-4(1), Patna, 4th Floor, Lok Nayak Jai Prakash Bhawan, Dak Bunglow Road, Patna .....................…...…………….... Appellant vs. Munni Rai, 68, Chanakya Puri, Raja Bazar, Bailey Road, B.V. College, Patna -14 [PAN: AANPR7968R] ...............…..….................... Respondent Appearances by: Assessee represented by : Shri Sudipta Sannigrahi, CA Department represented by : Shri Ashok Kumar, CIT Date of concluding the hearing : 09.01.2025 Date of pronouncing the order : 16.01.2025 O R D E R

PER SANJAY AWASTHI, ACCOUNTANT MEMBER:

1.

The present appeal emanates from order u/s 250 of the Income Tax Act, 1961 (hereafter ‘the Act’), passed by the Ld. Commissioner of Income Tax (Appeals) -2, Patna [hereafter ‘the Ld. CIT(A)]. The impugned order dated 06.08.2018 has been passed in respect of Ld. AO’s order dated 25.02.2016 (u/s 143(3) r.w.s 254 of the Act.

1.1 This particular case has a unique set of facts which deserve to be enumerated briefly as under:

(a) Order u/s 143(3) of the Act dated 30.07.2010 was passed after estimating business income at 7% of gross receipts. The assessee preferred an appeal against this order.

(c) Through order dated 03.07.2014, the ITAT upheld the action of the Ld. CIT(A), dismissing the Revenue’s appeal.

(d) The Ld. CIT(A) passed an order dated 26.11.2011 u/s 263 of the Act and held the order of AO dated 30.07.2010 as being erroneous and prejudicial to the interests of revenue as the loan creditors had not been allegedly verified. The assessee went in appeal before the ITAT against this order.

(e) Vide order dated 28.05.2015, the ITAT dismissed the assesee’s appeal, even though it was directed to consider the benefit of telescoping regarding the loan creditors and overall turnover.

(f) In the meantime, the Ld. AO passed an order u/s 143(3) r.w.s. 263 of the Act dated 06.03.2013 and after verification, etc. added Rs. 3,44,45,808/- u/s 68 of the Act.

Munni Rai “Under section 254, the Tribunal may after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit. The power of the Tribunal in dealing with appeals is, thus, expressed in the widest possible terms. The purpose of the assessment proceedings before the taxing authorities is to assess correctly the tax liability of an assessee in accordance with law. If, for example, as a result of a judicial decision given while the appeal is pending before the Tribunal, it is found that a non-taxable item is taxed or a permissible deduction is denied, there is no reason why the assessee should be prevented from raising that question before the Tribunal for the first time, so long as the relevant facts are on record in respect of that item. There is no reason to restrict the power of the Tribunal under section 254 only to decide the grounds which arise from the order of the Commissioner (Appeals). Both the assessee as well as the Department have a right to file an appeal/cross-objections before the Tribunal. There is no reason why the Tribunal should be prevented from considering questions of law arising in assessment proceedings although not raised earlier. In the case of Jute Corpn. of India Ltd. v. CIT [1991] 187 ITR 688, the Court, while dealing with the powers of the AAC observed that an appellate authority has all the powers which the original authority may have in deciding the question before it subject to the restrictions or limitations, if any, prescribed by the statutory provisions. In the absence of any statutory provision, the appellate authority is vested with all the plenary powers which the subordinate authority may have in the matter. There is no good reason to justify curtailment of the power of the AAC in entertaining an additional ground raised by the assessee in seeking modification of the order of assessment passed by the ITO. The Court further observed that there may be several factors justifying the raising of a new plea in an appeal and each case has to be considered on its own facts. The AAC must be satisfied that the ground raised was bona fide and that the same could not have been raised earlier for good reasons. The AAC should exercise his discretion in permitting or not permitting the assessee to raise an additional ground in accordance with law and reason. The same observations would apply to appeals before the Tribunal also. The view that the Tribunal is confined only to issues arising out of the appeal before the Commissioner (Appeals) takes too narrow a view of the powers of the Tribunal. Undoubtedly, the Tribunal will have the discretion to allow or not allow a new ground to be raised. But where the Tribunal is only required to consider a question of law arising from the facts which are on record in the assessment proceedings there is no reason why such a question should not be allowed to be raised when it is necessary to consider that question in order to correctly assess the tax liability of an assessee. The Tribunal has, therefore, jurisdiction to examine a question of law which arises from the facts as found by the authorities below and having a bearing on the tax liability of the assessee. Proceedings remanded back to the Tribunal for consideration of the new grounds raised by the assessee on the merits.” Since, the additional ground of appeal does not require any new fact to be brought on record for adjudication, it deserves to be held that the additional ground filed by the Revenue is admitted for adjudication.

“The Assessee is a contractor and derives income from contract receipt and filed its return of income on 30.09.2009. The assessee has shown total taxable income of Rs. 17,60,784/. The case of the assessee was selected for scrutiny on compulsory basis under section 143(3) of the Income-tax, Act, 1961 and statutory notice u/s 143(2) & 142(1) of the Income-tax Act, 1961 have been issued accordingly. In this case, assessment was passed u/s 143(3) of the I.T. Act, 1961 on 30/09/2011 determining of the total income of Rs.23,50,588/ at the rate of 7.0% after invocation of proviso under section 145(3) of the Income-tax Act, 1961 as rejection of books of account of the assessee. On perusal of the assessment order passed under section 143(3) of the Income-tax Act, 1961 for A.Y. 2008-09, it is found that the order u/s 143(3) was prejudicial to the interest of revenue and henceforth the said order was re-opened u/s 263 of the Income-tax Act, 1961 by the Hon'ble CIT-2, Patna and subsequently an order under section 143(3)/263 of the Income-tax Act, 1961 was passed by the erstwhile A.O. on 06/03/2013 ascertaining the total income of the assessee at Rs.3,89,67,770/- after adding back unexplained sundry creditors of Rs.3,44,45,828/. Being aggrieved with the order passed under section 143(3)/263 of the A.O. dated 06/03/2013 the assessee preferred an appeal before the Hon’ble Munni Rai ITAT, Patna. The Hon'ble ITAT, Patna has passed an order vide I.T.A.Nos.29 & 30/Pat/2012 dated 28/05/2015 wherein it has upheld the invocation of section 263 and passed direction to the A.O. On the direction of the Hon'ble ITAT, Patna benefit of telescoping in respect of bogus sundry creditors has to be considered but since there is no evidence on the case record of the assessee nor produced by the assessee till date, the effect to the order is being given accordingly by this draft order. Any objection to this may be submitted before the undersigned on or before 10/01/2016. Accordingly, the assessment order of the A.O. u/s 143(3)/263 dated 06/03/2013 is proposed to be modified u/s 143(3)/254 of the 1.T. Act, 1961 as per order of the ITAT, Patna dated 28/05/2015. Calculation of tax on the modified income is proposed as under: ………………” 4.1 It is clear that the Ld. AO has not discussed the merit, or otherwise, of the addition of Rs. 3,44,45,828/-. Presumably this was not done because he was merely consolidating the computation of income arising from orders/directions by various Appellate Authorities in one place. Thus, effectively, the issue of unexplained creditors does not arise from this order of AO. It is also felt that the Ld. CIT(A) should have confined himself to the substantive issue in the impugned order before him. A plain reading of the AO’s order reveals that the issue of unexplained cash credit was neither discussed nor any opportunity given to the assessee for responding to the same. Technically, the Revenue’s contention that the issue of unexplained cash credit became final with the withdrawal of appeal by the assessee has merit. However, at this stage, in the interest of substantive justice it is felt that the assessee should not be left without an alternative remedy to agitate his grievance in a legally correct manner. Hence, we deem it fit to remand the issue of addition of Rs. 3,44,45,828/- to the file of Ld. AO for fresh adjudication, after giving an opportunity of being heard to the assessee.