AVANI TEXTILES MILLS,MUMBAI vs. DCIT CIR 1, KALYAN

This appeal has been filed by the assessee against the order dated 30.06.2016 passed by the Ld. Commissioner of Income Tax (Appeals)-2, Thane, for the assessment year 2010-11, whereby the Ld. CIT (A) has dismissed the appeal filed by the assessee against assessment order passed u/s 143 (3) of the Income Tax Act, 1961 (for short ‘the Act’).

Brief facts of the case are that the assessee firm engaged in the business of manufacturing of textiles filed its return of income for the assessment year under consideration declaring the total income of Rs.19,72,973/-. The return was processed under section 143(1) of the Act. Since the case was selected for scrutiny, the AO issued notices u/s 143(2) and 142(1). In response thereof the authorised representative of the assessee attended the proceedings from time to time and submitted the details called for. The assessee had shown gross profit of Rs. 1,61,64,353/-on the turnover of Rs. 7,30,49,832/-. During the 2 Assessment Year: 2010-11 assessment proceedings AO compared the receipts shown as per TDS details with the receipts disclosed by the assessee in its books of account and it was found that the assessee had not shown the receipts as reflected in ITS. The ITS receipts were more as compared to the receipts shown in the books of account. The AO asked the assessee to reconcile the discrepancy. In response thereof the authorised representative reconciled the difference in some, however failed to reconcile the excess receipts to the extent of Rs. 7,07,597/–. The AO treating the same as unaccounted receipts, added the said amount to the income of the assessee and determined the total income at Rs. 26, 80, 570/–.

Comm. of Income Tax (A) erred in confirming addition though AO has not appreciated the materiality of difference & nature of deductions.

The Appellant plead before your Hon’ble Tribunal to direct Assessing Officer to:

There is a delay of three days in filing of the present appeal. The Ld. counsel for the assessee submitted that the assessee could not file the present appeal as the authorized signatory of the assessee firm had gone out of station and was not available in Mumbai on or immediately before the last day of limitation period. Therefore, the appeal was filed when the authorized signatory came back to Mumbai. The Ld. counsel further submitted that since, there is no negligence or inaction on the part of the assessee in not filing the present appeal within the limitation period, the delay may be condoned in the interest of justice. The Ld. departmental representative opposed the request and submitted that the request of the assessee may be turned down as there was no sufficient cause which prevented the appellant/assessee from filing the appeal within the limitation period.

As per the settled principle of law, sufficient cause is the condition precedent for exercising the discretion by the court for condoning the delay. Since the assessee has properly explained the delay of three days, in filing the present appeal, we deem it proper to condone the delay in the interest of justice. We accordingly, condoned the delay and allowed the Ld. counsel to argue the appeal on merit.

The Ld counsel submitted before us that the Ld. CIT(A) has wrongly confirmed the addition made by the AO ignoring the fact that the assessee 4 Assessment Year: 2010-11 has reconciled the discrepancy by explaining that reporting of TDS directories on the basis of gross amount of bill for process charge and income reported by appellant is on net receipt after making directions. The Ld. counsel for the assessee further submitted that the findings of the AO are not based on the evidence on record. The assessee could not present its case before the Ld. CIT(A) as the Ld. CIT(A) proceeded ex parte as the assessee/authorized representative could not appear before the Ld. CIT(A) on the date of hearing due to some unavoidable reasons. The Ld. counsel also submitted statement showing details of turnover, returned income and tax paid for AY 2010-11 to AY 2017-18, statement showing reconciliation of sales recorded in the books of appellants with purchases recorded in the books of the following six debtors, namely Garodia Syntex Pvt. Ltd., Shree Laxmi Synthetics, Symbolic Fabrics Pvt. Ltd., Arrowlene Synthetics, Pilani Overseas and D.M. Silk Mills together with relevant ledger accounts to substantiate its contention.

On the other hand the Ld. departmental representative (DR) relying on the order passed by the Ld. CIT(A) submitted that since the assessee has failed to reconcile the difference during the assessment proceedings as well as during the appellate proceedings, the Ld. CIT(A) has rightly confirmed the addition made by the AO.

We have heard the rival submissions and also carefully perused the material on record. The only grievance of the assessee is that the Ld. CIT(A) has wrongly confirmed the addition made by the AO. We notice that the assessee has failed to reconcile before the Ld. CIT(A) during the appellate proceedings as the Ld.CIT(A) had to pass the impugned order on the basis of material on record due to non-appearance of the assessee on the date of final hearing. We further notice that the assessee has 5 Assessment Year: 2010-11 contended during the assessment proceedings that the difference is on account of discount deducted by the parties. Since the assessee did not submit ledger account of the parties or any other evidence the AO treated the excess receipts as unaccounted receipts. The assessee could not submit the reconciliation statement during the appellate proceedings before the Ld. CIT(A) as the assessee did not appear before the Ld. CIT(A) and the Ld. CIT(A) passed ex parte order on the basis of evidence on record.

Hence, in view of the entire facts and circumstances of the case and the submissions of the Ld. Counsel for the assessee, we are of the considered view that the assessee should be given one more opportunity to substantiate its claim. We therefore restore the matter to the file of the assessee to decide the issue afresh taking into consideration statement showing reconciliation of sales recorded in the books of the appellant with purchases recorded in the books of six debtors along with relevant ledger accounts out of the total ten cases mentioned in the assessment order, submitted by the assessee before us. We further direct the AO to give a reasonable opportunity of being heard to the assessee.