CRAVATEX LIMITED ,MUMBAI vs. DCIT -6(2)(1), MUMBAI

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ITA 3440/MUM/2024Status: DisposedITAT Mumbai30 August 2024AY 2013-148 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal considered the submissions of both parties and Rule 46A of the Income Tax Act, 1961, which governs the admission of additional evidence by appellate authorities. The Tribunal noted that the impugned order of the NFAC did not mention anything about the additional evidence placed on record by the assessee. The Tribunal found that the non-consideration of additional evidence submitted before the NFAC resulted in a miscarriage of justice, as the assessee has a right to an opportunity to present relevant evidence if sufficient cause is shown for not producing it before the AO. Therefore, the Tribunal restored the matter to the file of the NFAC. The NFAC is directed to adjudicate the prayer for additional evidence as per law and decide the matter afresh. The assessee is given 60 days from the order to submit an application for additional evidence with sufficient cause, if not already filed, or to submit necessary supporting documents. The impugned order of the NFAC is set aside. The Tribunal did not decide on the merits of the disallowances raised in grounds 3.1 to 3.4, as the primary issue was the procedural lapse regarding additional evidence.

What were the facts?

The assessee, Cravatex Limited, filed an appeal against the order dated 28.05.2024 passed by the National Faceless Appeal Centre (NFAC), Delhi. The NFAC had confirmed an addition of Rs. 79,224 made by the Assessing Officer (AO) under Section 14A read with Rule 8D of the Income Tax Act, 1961. The assessee's appeal before the NFAC raised several grounds, including the NFAC's jurisdiction, the non-admission of additional evidence, and the upholding of various disallowances made by the AO. The AO had made additions totaling Rs. 17,62,942 for interest paid, Rs. 77,50,000 for an amount due from F. J. Singh, Rs. 6,55,610 for write-off of bad debts, and Rs. 79,224 under Section 14A. The appeal before the ITAT focused significantly on the NFAC's failure to consider additional evidence submitted by the assessee.

What were the issues?

1. Whether the NFAC (Appeals) had jurisdiction to pass an order dated 28.05.2024, considering the assessment order was passed on 23.03.2016 with a demand of Rs. 16.43 Lakhs, and a CBDT Order dated 16.06.2023 stipulated that orders with demands exceeding Rs. 10 Lakhs were outside NFAC's jurisdiction. - Assessee's contention: The NFAC order is bad in law and lacks jurisdiction as it ignored the CBDT Order and a prior application dated 04.11.2023 regarding jurisdiction. - Revenue's contention: Not recorded. 2. Whether the NFAC (Appeals) erred in not considering the assessee's prayer dated 14.08.2023 for admission of additional evidence filed during appellate proceedings. - Assessee's contention: The NFAC ignored the prayer and uploaded documents, violating principles of natural justice. The additional evidence is crucial for deciding the grounds of appeal. The matter should be restored to the NFAC for deciding the admission of additional evidence. - Revenue's contention: The prayer for additional evidence was made in written arguments, not a separate application, hence it could not be considered by the NFAC. 3. Whether the NFAC (Appeals) erred in upholding the disallowances made by the AO regarding: 3.1 Interest paid (Rs. 17,62,942/-) as capital in nature. 3.2 Amount due from F. J. Singh (Rs. 77,50,000/-) treated as bad debt instead of business loss write-off under Section 37(1) read with Section 28. 3.3 Write-off of bad debts (Rs. 6,55,610/-) treated as provision instead of actual write-off under Section 36(1)(vii) and 36(2). 3.4 Disallowance under Section 14A (Rs. 79,224/-). - Assessee's contention: The NFAC erred in upholding these disallowances. Specific arguments for each sub-ground are detailed in the grounds of appeal but not fully elaborated in the hearing summary. The primary focus of the appeal before the ITAT was on the procedural issue of additional evidence. - Revenue's contention: Defended the order of the NFAC.

Which sections of the Income-tax Act were involved?

Section 250,Section 14A,Section 37(1),Section 28,Section 36(1)(vii),Section 36(2)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCH “C”, MUMBAI

Before: SHRI. OM PRAKASH KANT & SHRI. RAJ KUMAR CHAUHAN

For Appellant: Shri. Mihir Naniwadekar &
For Respondent: Smt. Pradnya R. Gholap
Pronounced: 30.08.2024

O R D E R PER RAJ KUMAR CHAUHAN (J.M.): 1. This appeal is filed by the appellant/assessee against the order dated 28.05.2024 of Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as the “CIT(A)”], passed under section 250 of the Income Tax Act, 1961 Cravatex Limited; A.Y. 2013-14 [hereinafter referred to as “the Act”] for the A.Y. 2013-14, wherein the order of the Ld. AO was confirmed who has made addition of Rs. 79,224/- calculating the disallowance u/s. 14A r.w.r. 8D of the Act.

2.

Assessee has raised following grounds in this appeal:

1. On facts and circumstances of the case and in law the NFAC (Appeals) has erred in not following the CBDT Order dtd.16.06.2023, as per which orders passed before 31.08.2020 having demands in excess of Rs. 10 Lakh were out of the jurisdiction of NFAC (Appeals). The assessment order passed in the appellant's case is dtd.23.03.2016, wherein, a Rs.16.43 Lakh was raised on it. In this regard, a demand of application dtd.04.11.2023 was moved before the NFAC (Appeals) (acknowledgement No.: 502271701041123), which was ignored. The order dtd.28.05.2024 passed u/s.250 of the Income Tax Act by the NFAC (Appeals) is therefore bad in law and lacks jurisdiction and therefore, be cancelled by setting aside the same.

2. On facts and circumstances of the case and in law the NFAC (Appeals) has erred in not considering the assessee's prayer dtd.14.08.2023, (uploaded during the appellate proceeding on 01.09.2023, under acknowledgement No.: 22251301010923), requesting admission in respect of additional evidences filed by the assessee. This being against the principles of natural justice, it is prayed that these additional evidences filed during the course of the appellate proceeding be admitted and considered while deciding this appeal, as they go to the root of grounds taken in appeal.

3. On facts and circumstances of the case and in law, the NFAC (Appeals) has erred in upholding/confirming the following disallowances as made by the Assessing Officer (AO) in respect of the: 3.1 Disallowance made of Rs.17,62,942/ on the grounds that the interest paid is capital in nature and not revenue as claimed by the assessee. The addition made of Rs. 17,62,942/- should be deleted. 3.2 Disallowance made of Rs.77,50,000/- in respect of the amount due from F. J. Singh, by ignoring the fact that the claim for write off made by the assessee was u/s.37(1) r.w.s. 28 of the Income Tax Act as a business loss and not a bad debt, without appreciating the fact Page | 2 Cravatex Limited; A.Y. 2013-14 that the amount of Rs.77,50,000/- was not a provision but a actual write off of business loss. In doing so, the NFAC Appellate Authority further erred in holding that the amount written off was a bad debt u/s.36(1)(vii) and 36(2) of the Income Tax Act. The addition made of Rs.77,50,000/- should be deleted. 3.3 Addition made of Rs.6,55,610/- on account of disallowance of write off bad debts on the grounds that this was a provision and not an actual write off of bad debts claimed u/s.36(1)(vil) and 36(2) of the Income Tax Act. The addition made of Rs.6,55,610/- should be deleted. 3.4 Disallowance made of Rs.79,224/- made u/s.14A of the Income Tax Act. The addition made of Rs. 79,224/- should be deleted.

4.

The appellant reserves its right to add to, alter, amend, modify or delete any of the grounds taken in this appeal.”

3.

We have heard the Ld. AR on behalf of the assessee and Ld. DR on behalf of the revenue. The Ld. AR who at the very outset submitted that this Tribunal may adjudicate the ground no. 2 with respect to the disallowing the additional evidence by the Ld. CIT(A), despite that the necessary documents were placed before him which were not considered/allowed by the Ld. CIT(A). It is further argued that the assessee has uploaded during the appellate proceedings on 01.09.2023 under acknowledgement no. 22251301010923 requesting admission of additional evidence filed by the assessee before making the prayer dated 14.08.2023.

4. The Ld. AR has taken us to the page no. 97 and 98 of the paperbook and referred communication/written submission dated 01.09.2023, Cravatex Limited; A.Y. 2013-14 addressed to National Faceless Appeal Centre (NFAC) stating that in para no. 3 of the said communication, a request was made to the Ld. CIT(A) to consider additional evidence for which application under Rule 46A is separately submitted alongwith the written submissions. The contents of the said para 3 containing reference to additional evidence are reproduced as under: Sr. Particulars Page Annexure No. No. No.

1.

Copy of agreement dtd. 17.02.2003 54 to 57 4 with Mr. F. J. Singh 2. Copy of letter dtd. 01.10.2004 58 5 exchanged with Mr. F. J. Singh 3. Copy of letter dtd. 01.01.2005 59 6 exchanged with Mr. F. J. Singh 4. Copy of letter dtd. 30.12.2006 60 7 exchanged with Mr. F. J. Singh 5. Copy of account provision for doubtful 65 9 advances created in FY 2012 in respect of Rs. 77.50 Lakhs.

6.

Copy of computation of income of the 66 to 68 10 appellant for AY 2012-13.

7. Copy of audited financials of 69 to 82 11 appellant for AY 2012-13.

8.

Copy of ledger account of Image 83 to 86 12 Fitness for the period 2008 to 31.03.2013 9. Copy of the ledger account for 87 13 provision of doubtful debts created in respect of image Fitness in FY 2011-12.

5.

The Ld. AR has further taken us to page no. 113 and 115 of the paperbook which contains the acknowledgement of uploading of these documents Page | 4 Cravatex Limited; A.Y. 2013-14 before the Ld. CIT(A). The Ld. AR therefore argued that the Ld. CIT(A) has not considered the said prayer which was on record for admitting additional evidence and has dismissed the appeal without adjudicating the additional evidence application under Rule 46A. It is therefore prayed that matter may be restored to the file of the Ld. CIT(A) for deciding the issue of admission of additional evidence.

6. The Ld. DR on the other hand defended the order of the Ld. CIT(A) stating that the prayer for additional evidence was made in written arguments and no separate application was made, as a result, the said prayer/additional documents uploaded could not be considered by the Ld. CIT(A).

7.

we have considered the submissions made on behalf of the parties. Rule 46A(1) of the Act is relevant to the present matter and reproduced as under:-

(1) “The appellant shall not be entitled to produce before the Deputy Commissioner (Appeals) or, as the case may be, the Commissioner (Appeals), any evidence, whether oral or documentary, other than the evidence produced by him during the course of proceedings before the Assessing Officer, except in the following circumstances, namely :- (a) where the Assessing Officer has refused to admit evidence which ought to have been admitted ; or Page | 5 Cravatex Limited; A.Y. 2013-14 (b) where the appellant was prevented by sufficient cause from producing the evidence which he was called upon to produce by the Assessing Officer ; or (c) where the appellant was prevented by sufficient cause from producing before the Assessing Officer any evidence which is relevant to any ground of appeal

; or (d) where the Assessing Officer has made the order appealed against without giving sufficient opportunity to the appellant to adduce evidence relevant to any ground of appeal.”

8. Thus, it is evident from the above quoted rule that the Ld. CIT(A) is empowered to admit additional evidence on his satisfaction of sufficient cause which prevented the assessee from producing any evidence before the Ld. AO which is relevant to any grounds of appeal.

9. On perusal of the impugned order of the Ld. CIT(A), it is noticed that there is nothing mentioned about the additional evidence so placed on record vide acknowledgement by the appellant/assessee. It is vehemently argued on behalf of the assessee that the said additional evidence is to be considered which is relevant and necessary for adjudication of the issue/grounds before the Ld. CIT(A).

10.

In this facts and circumstances, we are of the considered opinion that non consideration of additional evidence submitted before the Ld. CIT(A) has resulted into miscarriage of justice, as assessee has a right to be given Cravatex Limited; A.Y. 2013-14 an opportunity in the form of additional evidence by the first appellate authority against the sufficient cause shown for not producing the same before the Ld. AO if the same is found to be relevant to the grounds of appeal.

11. For these reasons, matter is restored to the file of the Ld. CIT(A) who shall adjudicate the prayer of additional evidence of the assessee as per law and shall decide the matter afresh.

12.

The assessee/appellant shall submit the application for additional evidence giving sufficient cause, in case the application is not filed or shall submit the necessary documents in support of his grounds of appeal within the period of 60 days from this order.

13.

The impugned order is accordingly set aside and the appeal is allowed in above terms.

14.

In the result, appeal filed by the assessee is allowed in above terms.

Order pronounced in the open court on 30.08.2024

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