DCIT CORPORATE CIRCLE 4(1), CHENNAI vs. MIRA ORGANICS AND CHEMICALS PVT. LTD., CHENNAI

This appeal filed by the Revenue is directed against the order of the ld. Commissioner of Income Tax (Appeals) 8, Chennai dated 05.01.2018 relevant to the assessment year 2014-15. The only effective ground raised in the appeal of the Revenue is that the ld. CIT(A) has erred in deleting the addition made under section 41(1) of the Income Tax Act, 1961 [“Act” in short] of ₹.3,53,37,996/- by accepting fresh evidence such as detailed ledger extracts of all the sundry creditors as well as the copies of the civil suits, which is in violation of Rule 46A of the Income Tax Rule.

The assessee company was in the manufacture and distribution of industrial chemicals and agricultural products. The business has subsequently been discontinued on account of losses incurred. The creditors of the assessee have also approached the Debt Recovery Tribunal (DRT) for recovering their receivables from the assessee company. The assessment was completed under section 143(3) of the Act by making an addition of ₹.3,53,37,996/- towards amount claimed under sundry creditors since the assessee could not file complete details of the sundry creditors.

The assessee carried the matter in appeal before the ld. CIT(A). After considering the submissions of the assessee, detailed ledger extracts of all the sundry creditors, etc., the ld. CIT(A) deleted the addition made under section 41(1) of the Act.

Aggrieved, the Revenue is in appeal before the Tribunal. The ld. DR has submitted that by considering fresh material evidences, the ld. CIT(A) deleted the addition without giving an opportunity of being heard to the Assessing Officer is in violation of Rule 46A and pleaded that the issue may be remitted back to the file of the Assessing Officer for verification of the details filed before the ld. CIT(A) and decide the issue afresh.

None appeared on behalf of the assessee despite service of notice through RPAD on record. Hence we proceed to decide the appeal on merits after hearing the ld. DR.

We have heard both sides, perused the materials available on record and gone through the orders of authorities below. During the course of assessment proceedings, when the Assessing Officer called for complete details of sundry creditors, the assessee failed to furnish the same. Therefore, the Assessing Officer treated the sundry creditors as income of the assessee and added to the total income returned. During the course of appellate proceedings, the assessee filed detailed schedules of outstanding sundry creditors as on 31.03.2014 in the books of accounts. The assessee also furnished detailed ledger extracts of all the sundry creditors as well as the copies of the civil suits filed by a large number of creditors for recovery of their dues from the assessee company. By considering the above details furnished by the assessee and without obtaining any remand report from the Assessing Officer, the ld. CIT(A) deleted the addition of ₹.3,53,37,996/-, which is, in violation of Rule 46A. Accordingly, we set aside the order of the ld. CIT(A) and remit the entire issue to the file of Assessing Officer to examine and verify the evidences as was filed before the ld. CIT(A) and decide the issues afresh in accordance with law by allowing an opportunity of being heard to the assessee. Thus, the ground raised by the Revenue is allowed for statistical purposes.

In the result, the appeal filed by the Revenue is partly allowed for statistical purposes. Order pronounced on the 30th November, 2018 at Chennai.