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Income Tax Appellate Tribunal, DELHI BENCH ‘SMC’ NEW DELHI
Before: SHRI R.K.PANDA
PER R.K.PANDA, ACCOUNTANT MEMBER This appeal filed by the Revenue is directed against the order dated 06.05.2016 of the CIT(A)-14, New Delhi relating to assessment year 2012-13.
Facts in brief of the case are that the assessee is an individual and filed his return of income on 25.08.2012 declaring total income of Rs.2,80,631/-. The assessee is engaged in the business of building activities and running his business from 17A/35, West Punjabi Bagh, New Delhi. During the course of assessment proceedings, the Assessing Officer observed that the assessee has claimed construction
Page 2 of 10 expenses of Rs.40 lacs in three properties for which he has not furnished any supporting evidence for the genuineness of the construction expenses. Further, no source of such expenditure was furnished despite opportunities granted. He, therefore, treated the expenses made on such construction as unexplained expenditure made during the year out of undisclosed source. He accordingly made addition of Rs.40 lacs to the total income of the assessee u/s 69C of the Act. Similarly, the Assessing Officer also made an addition of Rs.4,80,000/- which was claimed by the assessee as salary for want of any supporting evidence.
Before Ld.CIT(A), the assessee filed certain additional evidences based on which Ld.CIT(A called for a Remand Report from the Assessing Officer. The assessee had also explained the reasons for which he was prevented from submitting these additional evidences. It was explained that the assessee was filing the requisite details as called for by the Assessing Officer from time to time. When the case was last fixed for hearing on 07.03.2015, the assessee appeared before the Assessing Officer with those details. However, the Assessing Officer issued another notice on 05.03.2015 u/s 142(1) fixing the case for hearing on 10.02.2015. It was submitted that when the assessee had appeared before the Assessing Officer on 07.03.2015 he was Page 3 of 10 informed that the case has been fixed for hearing on 10.03.2015.
However, since the assessee was going abroad on the same day, he was not in a position to appear before the Assessing Officer.
4. Based on the submissions filed by the assessee, Ld.CIT(A) accepted the additional evidences. So far as the deletion of Rs.40 lacs is concerned, he held that the assessee filed before him the requisite details with evidences which reveal that expenses have been incurred for the purpose of the business of the assessee. He further noticed that in the subsequent year i.e. A.Y. 2013-14, such expenses have been accepted by the Assessing Officer while completing the assessment u/s 143(3). He accordingly deleted the addition made by the Assessing Officer on account of investment made in the three properties amounting to Rs.40 lacs and the salary of Rs.4,80,000/-.
Aggrieved with such order of the Ld.CIT(A), the Revenue is in appeal before the Tribunal with the following grounds:-
1. “On the facts and circumstances of the case & in law, the Ld. CIT(A) is not justified in deleting the addition made by the Assessing Officer (AO) on account" of unexplained source of expenditure u/s 69C of the Act amounting to Rs.40,00,000/- without proper verifying the source of expenditure during the appellate proceedings even though the assessee could not prove the nexus of source of expenditure as well as bills furnished in respect of expenditure were unsigned. ITO vs Ishwar Chand Bansal Page 4 of 10 2. On the facts and circumstances of the case & in law, the Ld. CIT(A) is not justified in deleting the addition made by the Assessing Officer (AO) on account of unexplained source of expenditure u/s 69C of the Act amounting to Rs.40,00,000/- by accepting the additional evidence and ignoring the report of the AO which is in contravention of Rule 46A of Income Tax Rules, 1962.
3. On the facts and circumstances of the case & in law, the Ld. CIT(A) is not justified in deleting the addition made by the Assessing Officer (AO) on account of salary expenses amounting to Rs.4,80,000/- being unverifiable by accepting the additional evidences without verifying the cash flow statement as well as ignoring the report of the AO which is in contravention of Rule 46A of Income Tax Rules, 1962.
The appellant craves the right to add, alter or amend any ground of appeal
before or during the course of the hearing of the appeal.”
6. Ld.DR strongly challenged the order of the Ld.CIT(A). Referring to the order of the Ld.CIT(A), he submitted that there is no basis on which Ld.CIT(A) accepted the additional evidences. Referring to the various pages of the Paper Book, he submitted that all these are self made vouchers and Ld.CIT(A) has not gone into details all those vouchers.
Referring to the bank account of the assessee filed in Paper Book, he submitted that there are huge deposits and withdrawals in the bank account. Under these circumstances, Ld.CIT(A) should not have Page 5 of 10 deleted the addition. He accordingly submitted that the order of Ld.CIT(A) be reversed and that of the Assessing Officer to be restored.
The ld. Counsel for the assessee on the other hand strongly supported the order of Ld.CIT(A). Referring to the decision of Hon’ble Delhi High Court in the case of CIT vs Virgin Securities and Credits Pvt.Ltd. reported in 322 ITR 396, he submitted that Hon’ble High Court in the said decision has held that where Ld.CIT(A) before admitting the additional evidences had obtained a Remand Report from the Assessing Officer and the Assessing Officer in the Remand Report had not objected to the additional evidence and when such additional evidence was crucial to the disposal of the appeal and had a direct bearing on the quantum of the claim made by the assessee the Ld.CIT(A) can admit such additional evidence under Rule 46A if he finds that the same is crucial for disposal of the appeal. He submitted that in the instant case, admission of additional evidence was crucial for disposal of the appeal since the assessee was prevented by sufficient causes for non-furnishing of those details before the AO. He accordingly submitted that Ld.CIT(A) was fully justified in admitting the additional evidences.
So far as the merit of the case is concerned, he submitted that the assessee is engaged in the business of purchase of old properties,
Page 6 of 10 renovate them and sale them in the market. He submitted that provisions of section 69C are applicable if the assessee is unable to explain the source of such expense. However, if the same is explained in the P&L A/c and the books of the assessee show sufficient funds then no addition u/s 69C is called for. Referring to various pages of the Paper Book, Ld. Counsel for the assessee drew the attention of the Bench to the audited accounts and various bills and vouchers for the expenses that have been incurred. Further in the subsequent year, the Assessing Officer has accepted similar expenditure and has not made any addition. So far as salary expenditure is concerned, he submitted that the same has been paid by cash and is duly supported by proper vouchers. He accordingly submitted that the order of Ld.CIT(A) being in accordance with law should be upheld and the grounds raised by the Revenue should be dismissed.
I have considered the rival arguments made by both sides, perused the orders of the Assessing Officer and Ld.CIT(A) and the Paper Book filed by the assessee. I have also considered the various decisions cited before me. I find the assessee in the instant case is engaged in the business of purchase of old properties, renovate them and sale them in the market. During the impugned assessment year, the assessee has claimed to have spent an amount of Rs.40 lacs on Page 7 of 10 renovation of three properties which was claimed in the P&L account.
Since the assessee did not furnish the requisite details, the Assessing Officer invoking the provisions of section 69C made addition of the same. Similarly the Assessing Officer also made addition of Rs.4,80,000/- on account of salary for want of evidence. I find before Ld.CIT(A) the assessee furnished certain additional evidences based on which Ld.CIT(A) called for a Remand Report from the Assessing Officer.
Although, the Assessing Officer objected to the admission of the additional evidence, he has not given any comments regarding the merit of the documents. I find the Ld.CIT(A) based on the evidences filed before him, admitted the additional evidences and deleted both the additions. It is the submission of the Ld. DR that admission of such additional evidence by the Ld.CIT(A) is in violation of Rule 46A. It is the submission of the Ld. Counsel for the assessee that the assessee was prevented from sufficient causes for non-submission of such additional evidence. According to him when the assessee appeared before the Assessing Officer on 07.03.2015, the Assessing Officer instead of hearing the matter, had adjourned the matter to 10.03.,2015. The above submission of the assessee before the Ld.CIT(A) remains un-controverted by the Ld.DR. Under these
Page 8 of 10 circumstances, it is to be seen as to whether the Ld. CIT(A) was justified in admitting the additional evidences.
As per the provisions of Rule 46A, the assessee is entitled to produce additional evidence before the Ld.CIT(A) where the Assessing Officer had refused to accept such evidence which ought to have been admitted or where the assessee was prevented by sufficient cause from producing such evidence which he was called upon to produce by the Assessing Officer. As mentioned earlier, the assessee in the instant case had appeared before the Assessing Officer on 07.03.2015 but the case was adjourned to 10.03.2015 without the consent of the assessee as mentioned before the Ld.CIT(A) and not controverted by the Revenue. Further, Ld.CIT(A) had called for a Remand Report from the Assessing Officer giving him full opportunity to go through the documents and submit the report. Although the AO had submitted his report objecting to the additional evidence, however, he has not commented upon the merit of the documents.
I find somewhat similar case had come up before the Hon’ble Delhi High Court in the case of Virgin Securities & Credit Pvt.Ltd.
(supra) where the Hon’ble High Court had observed as under:-
“dismissing the appeal, (i) that before admitting the additional evidence the Commissioner (Appeals) had obtained a remand report from the Assessing officer. In the remand report the ITO vs Ishwar Chand Bansal
Page 9 of 10 Assessing Officer had not objected to the admission of the additional evidence. The additional evidence was crucial to the disposal of the appeal and had a direct bearing on the quantum of the claim made by the assessee. Rule 46A of the Income Tax Rules, 1962, permits the Commissioner (Appeals) to admit additional evidence if he finds that the same is crucial for disposal of the appeal.” 12. Since the additional evidences filed by the assessee before the Ld.CIT(A) go to the root of the matter for deciding the issue on merit and since the Ld.CIT(A) had accepted those additional evidences after giving due opportunity to the Assessing Officer through his Remand Report, therefore, I find no merit in the arguments of the Ld.DR that there is violation of the provisions of Rule 46A.
So far as the merit of the case is concerned, I find the assessee had field the details of expense supported by bills and vouchers. The expenditure is duly recorded in the books of accounts of the assessee which are duly audited. There is also sufficient source to explain the expenses incurred by the assessee as per the audited accounts.
Further, in the subsequent year, the Assessing Officer, in the order passed u/s 143(3), has accepted similar expenses. I, therefore, do not find any infirmity in the order of the Ld.CIT(A) in deleting the addition of Rs.40 lacs on account of investment made on the three properties.
Page 10 of 10 14. So far as the deletion of Rs.4,80,000/- on account of salary is concerned, I find the assessee had produced the requisite bills and vouchers before the Ld.CIT(A) based on which he had deleted the addition. I, therefore, do not find any infirmity in the order of the Ld.CIT(A) deleting the disallowance of salary of Rs.4,80,000/- In this view of the matter, the order of the Ld.CIT(A) is upheld and the grounds raised by the Revenue are dismissed.
In the result, the appeal filed by the Revenue is dismissed.
Pronounced in the open court on 13.06.2017.