SRI CHAKRA MERCHANDISING (P) LTD.,CHENNAI vs. DCIT, CHENNAI

This appeal of the assessee is directed against the order of the Commissioner of Income Tax (Appeals) – 15, Chennai, dated 17.03.2015 and pertains to assessment year 2008-09.

Shri G. Baskar, the Ld.counsel for the assessee, submitted that three issues arise for consideration in this appeal. The first issue is with regard to loss returned by the assessee to the extent of ₹25,57,57,954/-. The second issue is with regard to addition of ₹7,68,35,802/- on closing stock. The third issue is with regard to addition of ₹13 Crores on account of additional share capital.

The Ld.counsel for the assessee submitted that the CIT(Appeals) has enhanced the assessed income from ₹8,11,24,410/- to ₹12,95,18,768/- without giving any notice for enhancement. On filing additional evidence, the Ld.counsel submitted that these documents could not be produced before the Assessing Officer at the time of assessment. According to the Ld. counsel, proper opportunity was not given to the assessee by the Assessing Officer. Moreover, the CIT(Appeals) without giving any opportunity by way of a statutory notice, enhanced the assessment. Therefore, according to the Ld. counsel, there is a violation of principles of natural justice, hence, the matter may be remitted back to the file of the Assessing Officer for reconsideration.

On the contrary, Shri AR.V. Sreenivasan, the Ld. Departmental Representative, very fairly submitted that since the assessee has filed additional evidence before this Tribunal, the matter needs to be re-examined by the Assessing Officer, therefore, he may not have any objection in case the matter is remitted back to the file of the Assessing Officer.

We have considered the submissions of Ld.counsel for the assessee and the Ld. Departmental Representative and perused the relevant material available on record. Admittedly, the CIT(Appeals) enhanced the assessed income to ₹12,95,18,768/- from ₹8,11,24,410/- without issuing any notice for enhancement. Under the scheme of Income-tax Act, the power of the CIT(Appeals) is coterminous with that of the Assessing Officer. Apart from that, the CIT(Appeals) is also empowered to enhance the assessment. However, the CIT(Appeals) is expected to give notice of enhancement before doing so. In this case, the CIT(Appeals) enhanced the assessment without giving notice, therefore, there is a clear violation of natural justice as contended by the Ld.counsel for the assessee.

Moreover, the assessee has also filed additional evidence before this Tribunal. These documents have to be verified by the lower authorities. This Tribunal is of the considered opinion that the Assessing Officer being the original authority, may be in a better position to appreciate the additional evidence filed by the assessee. Therefore, the matter needs to be re-examined by the Assessing Officer. Accordingly, the orders of both the authorities below are set aside and the entire issue raised by the assessee is remitted back to the file of the Assessing Officer. The Assessing Officer shall re- examine the matter in the light of the additional evidence filed by the assessee and decide the issue afresh in accordance with law, after giving a reasonable opportunity to the assessee.