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Income Tax Appellate Tribunal, DELHI BENCH “C”, NEW DELHI
Before: SHRI P. M. JAGTAP & MS. SUCHITRA KAMBLE
PER P. M. JAGTAP, AM : This appeal is preferred by the Revenue against the order of ld. CIT(A)- XXV, New Delhi dated 03.11.2014 and the grounds raised by the Revenue therein read as under :-
“1. Whether on the facts in the circumstances of the case of Ld. CIT(A) has erred in deleting the addition of Rs.69,53,350/- made by the AO on account of addition u/s 41(1) of the Act, in violation of Rule 46A by admitting fresh evidence and not calling for a remand report in respect of the confirmations submitted by assessee.
2. Whether on the facts and in the circumstances of the case the CIT(A) has erred in deleting the addition of Rs.69,53,350/- without appreciating the facts that in spite of providing ample opportunities to furnish the confirmations of sundry creditors, the assessee had only furnished copies of ledger account and which was not confirmed by the creditors.”
The assessee in the present case is an individual who filed his return of income for the year under consideration on 05.01.2011 declaring a total income of Rs.4,84,236/-. In the Balance Sheet filed along with the said return, certain creditors and loan creditors were shown by the assessee. In order to verify the said creditors, letters u/s 133(6) were issued by the Assessing Officer to some of the creditors. Out of the said letters, letters sent to two creditors namely Shree Ganesh Enterprises and M/s Reema Polychem were returned back unserved by the postal authorities. When this fact was confronted by the Assessing Officer to the assessee seeking the later’s explanation in the matter, the assessee failed to prove that the liability towards the said two creditors as shown in the balance sheet as on 31.03.2010 was actually in existence. The Assessing Officer, therefore, invoked the provisions of section 41(1) of the Act and made an addition of Rs.69,53,350/- to the total income of the assessee in the assessment completed u/s 143(3) vide order dated 28.03.2013.
The addition made by the Assessing Officer u/s 41(1), inter-alia, was challenged by the assessee in the appeal filed by the assessee before the ld. CIT(A). During the course of appellate proceedings before the ld. CIT(A), it was submitted by the assessee that Shree Ganesh Enterprises was one of his two proprietary concerns and since the said concern was not operational, the funds available with the same were transferred to other proprietary concern, namely, M/s Subhash Chand Kathuria. It was contended on behalf of the assessee that the liability appearing in the name of Shree Ganesh Enterprises thus was not the trade liability and since the same was very much in existence, the addition made by the Assessing Officer u/s 41(1) was not justified. It was also brought to the notice of the ld. CIT(A) by the assessee that the letter sent by the Assessing Officer to the said party u/s 133(6) was returned undelivered by the postal authorities with the remark “insufficient address”. It was pointed out that the complete address of the said party was furnished before the Assessing Officer and there was no proper efforts made by the postal authorities to deliver the letter sent by the Assessing Officer. Evidence in the form of copy of account of Shree Ganesh Enterprises, bank statement of the said party giving the complete address as well as confirmation was also filed by the assessee before the ld. CIT(A) to support and substantiate his case that the liability in the name of the said concern was very much in existence. This documentary evidence filed by the assessee for the first time before him was forwarded by the ld. CIT(A) for verification and comment of the Assessing Officer. In the remand report submitted to the ld. CIT(A), the Assessing Officer did not offer any adverse comment on the evidence filed by the assessee. According to the ld. CIT(A), the said evidence was sufficient to establish that the liability appearing in the name of Shree Ganesh Enterprises, assessee’s another concern was very much in existence and the addition made by the Assessing Officer by invoking section 41(1) was not sustainable.
As regards the liability of Rs.35,06,550/- appearing in the name of M/s Reema Polychem, the assessee submitted before the ld. CIT(A) that the said party was a trade creditor having regular transactions with the assessee even during the year under consideration. A confirmation issued by the said party showing such transactions as well as the existence of closing balance of Rs.35,06,550/- was also filed by the assessee before the ld. CIT(A). When the said evidence filed by the assessee for the first time was forwarded by the ld. CIT(A) for verification and comment of the Assessing Officer, the latter did not offer any adverse comment on the same in the remand report submitted to the ld. CIT(A). Ld. CIT(A) accordingly held by relying on the said evidence that the liability in the name of M/s Reema Polychem was very much in existence and the addition made by the Assessing Officer by invoking section 41(1) was not sustainable. He accordingly deleted the entire addition of Rs.69,53,350/- made by the Assessing Officer u/s 41(1) of the Act. Aggrieved by the order of the ld. CIT(A) on this issue, the Revenue has preferred this appeal before the Tribunal.
At the time of hearing fixed before the Tribunal on 10.07.2018, none has appeared on behalf of the assessee. It is noted that there was a similar non- compliance on behalf of the assessee when this appeal was fixed for hearing earlier on 07.02.2018 03.05.2018. This appeal of the Revenue is, therefore, being disposed of ex-parte qua the respondent-assessee after hearing the arguments of the ld. DR and perusing the relevant material available on record.
The main grievance as projected by the Revenue in the grounds raised in this appeal is that the addition made by the Assessing Officer u/s 41(1) has been deleted by the ld. CIT(A) vide his impugned order by relying on the fresh evidence filed by the assessee without giving any opportunity to the Assessing Officer to verify the same, which is in violation of Rule 46A of the Income Tax Rules, 1962. It is, however, observed from the impugned order of the ld. CIT(A) that the entire evidence filed by the assessee to show the genuineness and existence of both the creditors was forwarded by the ld. CIT(A) to the Assessing Officer for verification and comment. As specifically noted by the ld. CIT(A) in his impugned order, no adverse comment whatsoever was offered by the Assessing Officer on the said evidence in the remand report submitted to the ld. CIT(A). It is thus clear that opportunity was specifically given by the ld. CIT(A) to the Assessing Officer to verify the additional evidence filed by the assessee in support of its case on the issue relating to the addition made u/s 41(1) and this position clearly evident from the order of the ld. CIT(A) is not rebutted or controverted even by the ld. DR. Since there was no adverse comment offered by the Assessing Officer on the additional evidence filed by the assessee in support of its case and the said evidence was sufficient to establish that both the concerned creditors were genuine and in existence as on 31.03.2010, we are of the view that the addition made by the Assessing Officer on account of the said creditors by invoking section 41(1) is rightly deleted by the ld. CIT(A) vide his impugned order. We, therefore, uphold the impugned order of the ld. CIT(A) on this issue and dismiss the appeal filed by the Revenue.
In the result, the appeal of the Revenue is dismissed. Order pronounced in the open Court on this 13th day of July, 2018.