INCOME TAX OFFICER WARD-5(2)(3), BANGALORE vs. SHRI VINOD KUMAR , BANGALORE

1. This appeal is filed by the revenue and the same is directed against the order of ld. CIT(A)-5, Bangalore dated 27.03.2017 for Assessment Year 2012-13.

The grounds raised

Whether the CIT(A) was right in admitting evidence Under Rule 46A of the Income-tax Rules, the appellant shall not be entitled to produce before [DCIT(Appeals)] the any evidence, whether oral or documentary other than evidence produced by him during the course of proceedings before the AO except in some circumstances.

Whether the CIT(A) was right in accepting the evidence produced during the appellant proceedings with calling remand report from the AO on the documents or such evidences produced.

The CIT(A) was erred in accepting additional evidence i.e., confirmation letter from bank which is not produced before the assessing officer during the course of assessment.

For these and other grounds that may be urged upon, the order of the CIT(A) may be reversed and that assessment order be restored.”

This appeal was earlier fixed for hearing lastly on 07.05.2018. On this date, the ld. AR of assessee Shri K. Vinod Kumar moved an application for adjournment and on his request, the hearing was adjourned to 07.08.2018. On this date i.e. on 07.08.2018, the bench did not function and therefore, the hearing was again adjourned to 15.11.2018 and notice of hearing was sent to the assessee by RPAD which has been duly served on the assessee as per acknowledgement available on record. On 15.11.2018, none appeared on behalf of the assessee and therefore, the appeal of the revenue was heard ex-parte qua the assessee. The ld. DR of revenue submitted that as per ground no. 2 of the appeal raised by the revenue, this is the objection of the revenue that the order of ld. CIT(A) is in violation of Rule 46A of Income Tax Rules, 1962. The bench wanted to know about the additional evidence which has been considered by CIT(A) to decide the issue without confronting the same to the AO. In reply, it was submitted by ld. DR of revenue that as per para no. 7 of the impugned order of ld. CIT(A), he has stated that the AO during the scrutiny assessment proceedings has written to Andhra Bank Manager for confirmation of bank loans and upon the receipt of the reply that the balances are only Rs. 2,95,55,466/- due to the bank from the Page 3 of 5 assessee as against the dues shown at Rs. 5,90,99,428/- in the books of assessee, addition was made by the AO for the balance amount by holding that this much is unexplained credit. She also submitted that ld. CIT(A) has passed his decision on the basis of copies of the confirmation letters from Andhra Bank, Jayanagara Branch submitted before CIT(A) for the first time along with the ledger copies of the assessee’s books for having received various loans. She submitted that the issue was decided by CIT(A) as per Para 7.2 of his order based on such confirmation letters received from the bank without confronting the same to the AO.

We have considered the submissions of the ld. DR of revenue and for the sake of ready reference, we reproduce paras 7 to 7.2 from the impugned order of CIT(A). “7. The grounds taken on the discrepancy in the bank loan balances and bank interest are taken together for adjudication. The Assessing Officer during the scrutiny proceedings has written to Andhra Bank Manager for confirmation of bank loans and upon the receipt of the reply that the balances are only Rs.2,95,55,466/- due to the bank from the appellant as against the dues shown at Rs.5,90,99,428/- in the books of appellant. Therefore, the balance of Rs.2,95,43,962/- was added as unexplained credit. Further, an addition was made on account of excess interest debited to P&L account. During the appellate proceedings the appellant furnished the copies of the confirmation letters from Andhra Bank, Jayanagara Branch along with the ledger copies for having received various loans and packing credit and term loan and the balances as on 31/03/2012, submitting that as per the appellant's books a sum of Rs.5,90,99,428/- was due to the bank and the same is duly explained. As per the appellant's books the loans due to Andhra Bank as on 31.03.2012 were as follows : Secured Loans :

Andra Bank — PC 2,97,20,828-00 2. Andra Bank — PC 001 12,00,000-00 3. Andra Bank — PC 002 25,00,000-00 4. Andra Bank — PC 003 10,00,000-00 5. Andra Bank — PC 004 5,00,000-00 6. Andra Bank — PC 005 25,00,000-00 7. Andra Bank — PC 006 10,00,000-00 8. Andra Bank — PC 007 30,00,000-00 9. Andra Bank — PC 008 30,00,000-00 10. Andra Bank — PC 009 30,00,000-00 11. Andra Bank — PC 010 30,00,000-00 12. Andra Bank — PC 011 30,00,000-00

Andra Bank — PC 012 30,00,000-00 14. Andra Bank — PC 013 30,20,828-00 15. Andra Bank — Term Loan 2,93,78,600-00 -------------------- Rs 5,90,99,420-00 7.1 As regards the addition of Rs.25,08,465/-made on account of excess interest debited to P&L account the appellant submitted that it had debited a sum of Rs.1,01,84,583/- to the Profit and Loss Account as interest to bank. This interest comprised of Interest on term loan of Rs.26,59,429/-, Interest on PC loans of Rs.72,63.047/- and Interest on OD account of Rs.2,62,107/-. The copies of the confirmation letters received from the Bank furnished have been perused. In the order the Assessing Officer has inadvertently mentioned the interest paid on OD account at Rs.53,09,140/- as against Rs.2,62,107/- debited to profit and loss account. Interest paid on PC loans is mentioned at Rs.31,48,169/- as against Rs.72,63,047/- debited to profit and loss account. A copy of Ledger account of Interest paid on OD account and PC loans is furnished. The appellant submitted that the Assessing Officer has observed that the interest on term loan is confirmed by bank at Rs.26,59,429/-, interest on OD account is confirmed at Rs.50,94,561/- and that no interest on PC Account has been reported by bank. So the total interest amount of Rs.77,53,990/- is confirmed by the bank. Therefore the difference of Rs.24,30,593/- being the difference between the interest debited to profit and loss account and the interest supposed to have been confirmed by the bank is disallowed and added to income. 7.2 I have perused the bank statements of various loans and also confirmation letters received from bank and the ledger extracts. In view of the facts of the case that the confirmation received from the bank, it is inferred that the balances shown in the books of account are in accordance with the bank records, therefore, the grounds taken on the discrepancy in the bank loan balances and bank interest are hereby allowed.” 5. From the above paras reproduced from the order of CIT(A), it is seen that the AO made a request to Andhra Bank Manager for confirmation of bank loan and as per the reply received from the bank, there was outstanding of only Rs. 2,95,55,466/- receivable by the bank from the assessee as against the dues shown by the assessee payable to the bank of Rs. 5,90,99,428/- as per the books of the assessee and on this basis, regarding the balance amount of Rs. 2,95,43,962/-, addition was made by the AO as unexplained credit and consequential interest on such excess unexplained credit. The ld. CIT(A) has decided the issue on the basis of subsequent confirmation letters received from the bank as per which the outstanding amount as per bank tallied with the Page 5 of 5 outstanding amount as per assessee’s books being payable to the bank. But CIT(A) has not obtained remand report from the AO in respect of these additional evidences furnished before him for the first time. Hence, we feel it proper to set aside the order of CIT(A) and restore the matter back to his file for fresh decision after obtaining remand report from the AO. We order accordingly. In view of this decision, no adjudication is called for at the present stage regarding the other grounds on merit raised by the revenue.

In the result, the appeal filed by the revenue stands allowed for statistical purposes. Order pronounced in the open court on the date mentioned on the caption page.