SRI RAGHVENDRA AGRO INDUSTRIES,MANTRALAYAM vs. INCOME TAX OFFICER , WARD 1, ADONI

The brief facts of the case are that, the assessee is a partnership firm engaged in the business of procurement of raw cotton from farmers, processing the same into cotton bales after eliminating wastage, and also trading in cotton, yarn and cotton seeds. For the assessment year 2023-24, the assessee filed its return of income on 31.10.2023 declaring a total income of ₹8,51,210/-. The return was accompanied by audit report in Form No. 3CB and 3CD, as the accounts of the assessee were audited under Section 44AB of the Income-tax Act, 1961. The return of income was processed by the Centralized Processing Centre, Bengaluru, and an intimation under Section 143(1) of the Act dated 30.05.2024 was issued. While processing the return, the CPC made an adjustment of ₹1,01,08,010/- comprising disallowance of interest of ₹89,66,194/- and remuneration to partners of ₹11,41,816/-, on the ground of inconsistency between the return of income and the tax audit report with reference to disallowances under Section 40(b) of the Act. Consequently, the total income was determined at ₹1,09,59,220/- and a tax demand of ₹43,92,120/- was raised.

Aggrieved by the intimation issued under Section 143(1) of the Act, the assessee filed an appeal before the Commissioner of Income Tax (Appeals). Before the Ld. CIT(A), the assessee filed an appeal challenging the intimation issued under Section 143(1) of the Act and also sought condonation of delay of 11 days in filing the appeal. During the appellate proceedings, the assessee filed written submissions along with supporting documents, including a revised tax audit report, contending that the additions made by the CPC were on account of misreporting by the tax auditor in Form No. 3CD and that the interest paid to banks and remuneration paid to partners were allowable as per law. After considering the submissions of the assessee and examining the records, the Ld. CIT(A) held that the assessee had failed to show sufficient cause for condonation of delay in filing the appeal and, accordingly, rejected the condonation petition. Since the delay was not condoned, the Ld. CIT(A) did not adjudicate the issues on merits and dismissed the appeal in ‘limine’.

The learned counsel for the assessee, Shri A. Srinivas, C.A. submitted that, the appeal before the Ld. CIT(A) was dismissed in ‘limine’ on the ground of delay in filing the appeal and, therefore, the issues on merits were not adjudicated. The learned counsel further submitted that, the delay in filing the appeal was only 11 days and the same occurred due to ill health of the assessee, which constitutes sufficient cause. He submitted that, the additions made in the intimation issued under Section 143(1) of the Act were on account of incorrect reporting by the Tax Auditor in Form No. 3CD and that, the assessee has since filed a revised Form No. 3CD correcting the said mistakes. Therefore, the matter may be set aside to the file of the A.O. for fresh consideration after verifying the revised audit report and other supporting evidence.

The Ld. Senior A.R. for the Revenue, Shri K. Vinoth Kannan, on the other hand, fairly submitted that, since the Ld. CIT(A) had dismissed the appeal in ‘limine’ without adjudicating the issues on merits, and since the assessee claims that, the additions were made on account of incorrect reporting in Form No. 3CD, the matter may be restored to the file of the A.O. for verification of the revised Form No. 3CD and other evidences filed by the assessee. He accordingly submitted that, the Revenue has no serious objection if the issue is set aside to the file of the A.O. for fresh adjudication in accordance with law.

We have heard both the parties, perused the material available on record and had gone through the orders of the authorities below. We find that the Ld. CIT(A) dismissed the appeal filed by the assessee in ‘limine’ on the ground of delay in filing of the appeal. Admittedly, there is a delay of 11 days in filing of the appeal before the Ld. CIT(A). Although the assessee stated in Form No. 35 that there was a delay of 3 days in filing of the appeal, the actual delay was 11 days. The assessee explained the reasons for the delay in filing of the appeal and stated that, he was suffering from severe cold and body pains, and the Doctor had advised him to take rest due to ill health and, therefore, he could not hand over the signed papers to the auditor for filing of the appeal. The Ld. CIT(A), although accepted the fact that the assessee explained the reasons, rejected the explanation only on the ground that, the reasons given in Form No. 35 for condonation of delay were not supported by any evidence. In our considered view, the delay is very small, and the reason given by the assessee is ill health. Since the delay is very small and the reason given by the assessee constitutes sufficient cause, in our considered view, the Ld. CIT(A) ought to have condoned the delay of 11 days in filing of the appeal. Since the Ld. CIT(A) dismissed the appeal in ‘limine’ without condoning the delay, even though the reasons given by the assessee fall within sufficient cause, in our considered view, the delay of 11 days in filing of the appeal before the Ld. CIT(A) deserves to be condoned. Accordingly, we condone the delay of 11 days in filing of the appeal before the Ld. CIT(A).

Having said so, let us come back to the facts of the case. Admittedly, the dispute involved in the appeal pertains to the adjustment made by the A.O./CPC, in the intimation issued under Section 143(1) of the Act, towards interest/remuneration paid to the partners under Section 40(b) of the Act. The assessee claims that the adjustment made by the A.O./CPC is on the basis of an incorrect Form No. 3CD issued by the Tax Auditor and that the same has been corrected by filing a revised Form No. 3CD, explaining that, the said amount pertains to interest paid to the banks and not to the partners. Since the Ld. CIT(A) has not decided the issue on merits and further, the assessee claims that, the addition made by the A.O. is only on account of incorrect reporting by the Tax Auditor in Form No. 3CD, in our considered view, the matter needs to be remanded to the A.O. for further verification. Accordingly, we set aside the order of the Ld. CIT(A) and remand the issue back to the A.O., with a direction to verify the claim of the assessee in the light of the evidence that may be filed by the assessee, including the relevant Form No. 3CD, and decide the issue in accordance with law.

In the result, the appeal filed by the assessee is allowed for statistical purposes.