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Facts
The assessee appealed against the CIT(A)'s order for AY 2013-14, which upheld various disallowances made by the AO, including those under section 14A, for capitalization of interest, and write-off of business losses/bad debts. The assessee primarily contended that the CIT(A) failed to admit and consider additional evidence submitted during the appellate proceedings, and also questioned the jurisdiction of NFAC in passing the order.
Held
The Income Tax Appellate Tribunal (ITAT) observed that the CIT(A) did not consider or adjudicate the assessee's prayer for admission of additional evidence, which was critical for the grounds of appeal. Finding that non-consideration of relevant additional evidence leads to a miscarriage of justice, the ITAT set aside the CIT(A)'s order. The matter was remanded back to the CIT(A) for fresh adjudication after properly considering the application for additional evidence under Rule 46A.
Key Issues
1. Whether the CIT(A) erred in not admitting and considering additional evidence submitted by the assessee under Rule 46A. 2. Whether the NFAC had the jurisdiction to pass the impugned order. 3. Validity of disallowances concerning interest capitalization, business loss/bad debt write-off, and Section 14A.
Sections Cited
Section 250 of the Income Tax Act, 1961, Section 14A of the Income Tax Act, 1961, Rule 8D of the Income Tax Rules, Section 37(1) of the Income Tax Act, 1961, Section 28 of the Income Tax Act, 1961, Section 36(1)(vii) of the Income Tax Act, 1961, Section 36(2) of the Income Tax Act, 1961, Rule 46A of the Income Tax Rules
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Income Tax Appellate Tribunal, MUMBAI BENCH “C”, MUMBAI
Before: SHRI. OM PRAKASH KANT & SHRI. RAJ KUMAR CHAUHAN
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.
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.
The appellant reserves its right to add to, alter, amend, modify or delete any of the grounds taken in this appeal.”
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.
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.
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.
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.
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).
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).
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.
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.
The impugned order is accordingly set aside and the appeal is allowed in above terms.
In the result, appeal filed by the assessee is allowed in above terms.
Order pronounced in the open court on 30.08.2024