ACIT NON CORPORATE CIRCLE 3, CHENNAI vs. M.G.SEKAR, CHENNAI

This appeal filed by the Revenue is directed against the order of the ld. Commissioner of Income Tax (Appeals) 15, Chennai dated 21.06.2018 relevant to the assessment year 2014-15. The Revenue has challenged the order of the ld. CIT(A) in granting partial relief to the assessee by restricting the disallowance at 20% on the claim of agricultural income and deleting the disallowance of sundry creditors to the tune of ₹.2.27 crores on the basis of the fresh evidences/details produced by the assessee without given an opportunity to the Assessing Officer as per Rule 46A of the Income Tax Rule.

Brief facts of the case are that the assessee filed return of income for the assessment year 2014-15 on 30.03.2016 declaring loss of ₹.2,21,915/-. The return filed by the assessee was selected for scrutiny and notice under section 143(2) of the Income Tax Act, 1961 [“Act” in short] was duly served on the assessee. Thereafter, notice under section 142(1) of the Act dated 16.08.2016 and notice under section 142(1) of the Act dated 01.11.2016 calling for various details were issued. Final show cause notice was also issued to the assessee on 05.12.2016, but there was no reply from the assessee. Since there was continuous non-cooperation from the assessee in furnishing the relevant details, the Assessing Officer proceeded to conclude the assessment under section 144 of the Act after considering the materials available on record and determined the income of the assessee at ₹.2,64,63,568/- by making various additions.

The assessee carried the matter in appeal before the ld. CIT(A) with regard to the disallowance of agricultural income as well as disallowance under section 41(1) of the Act. After considering various documents and submissions of the assessee, the ld. CIT(A) partly allowed the appeal filed by the assessee, against which, the Revenue is in appeal before the Tribunal.

We have heard both the sides, perused the materials available on record and gone through the orders of authorities below. Since the assessee has not responded to any of the notices issued by the Assessing Officer, the best judgement assessment was passed under section 144 of the Act. Against the disallowance of agricultural income, after considering various documents furnished by the assessee, such as, the sale deed for the agricultural lands held by the assessee, patta, chitta, adangal, VAO’s certificate with regard to the agricultural yield and returns of income of various earlier assessment years, the ld. CIT(A) restricted the disallowance to 20% of the agricultural income declared by the assessee, which is in violation of Rule 46A of the Income Tax Rules. Similarly, with regard to the disallowance of sundry creditors, since the assessee failed to provide any substantial proofs/evidences, the sundry creditors of ₹.2,27,55,624/- was disallowed under section 41(1) of the Act and added as business income. After considering the submissions of the assessee, the ld. CIT(A) deleted the disallowance. However, while doing so, we find that the ld. CIT(A) has not obtained any remand report from the Assessing Officer on the fresh materials taken into consideration, which is in violation of Rule 46A of the Income Tax Rules. In view of the above, we set aside the order of the ld. CIT(A) and remit the matters to the file of the Assessing Officer to examine and decide both the issues afresh in accordance with law after allowing an opportunity of being heard to the assessee. The assessee is also directed to furnish all material evidence and explanation for deciding the issues.

In the result, the appeal filed by the Revenue is allowed for statistical purposes. Order pronounced on the 10th September, 2019 at Chennai.