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Facts
The assessee, a partnership firm engaged in hospitality and tourism, filed its income tax return for AY 2017-18 declaring a loss. The assessment was completed determining a higher income, with additions made on account of unexplained cash credits, disallowed interest expenses, disallowed depreciation, and suppressed rental receipts. The assessee appealed to the CIT(A), who allowed the appeal. The revenue is in appeal before the ITAT against the CIT(A)'s order.
Held
The ITAT held that the CIT(A) was justified in admitting additional evidence, as the assessee was prevented by sufficient cause. The Tribunal found that the AO did not adequately challenge the additional evidence on merits and failed to conduct proper inquiries. The court also noted that the assessee had provided evidence to prove the genuineness and creditworthiness of the unsecured loans.
Key Issues
Whether the CIT(A) erred in admitting additional evidence without proper reasons and without giving adequate opportunity to the AO, and whether the assessee proved the genuineness and creditworthiness of unsecured loans.
Sections Cited
68, 115BBE, 143(3), 142(1), 154, 46A
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Income Tax Appellate Tribunal, JAIPUR BENCHES,”A” JAIPUR
Before: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, vk;dj vihy la-@ITA No. 324/JP/2024
Aggrieved from the order of Assessing Officer, assessee preferred an appeal before the ld. CIT(A)/NFAC. Apropos to the grounds so raised the relevant finding of the ld. CIT(A)/NFAC is reiterated here in below:
“9. Adjudication and Decision: For the reasons stated that the appellant’s plea is considered on merits. The AO on being forwarded to submit remarks on the evidence admitted u/r 46A, stood on technical grounds and objected to the evidence being admitted.
& CO No. 12/JP/2024 DCIT vs. Paradise Properties The said objections are overruled for the appellant's case falls squarely within the parameters and therefore the additions are considered on merits in the light of the evidence let in, on the footing that the appellate proceedings are continuation of the assessment proceedings and as the first fact finding authority, the additions made are fact intensive, to the extent the resources of this office permit.
A: Vide submission dated 5.10.2023, the appellant submitted as under:
1. "The Learned Assessing Officer in his remand report has virtually not offered any comments factually on the submissions made by the assessee before the Learned CIT(A). He has simply reiterated the facts narrated in the assessment order. The Learned AO has simply harped only that sufficient opportunities were provided before completion of the assessment, In his reply he has avoided offering any comment on the merits and quality of the additional evidence being furnished by the assessee which goes the root of the case. The Learned Assessing Officer has also not offered any comment that due to technical glitches and COVID-19 pandemic the assessee could not access all the notices send to him through ITBA portal or via mail, how could he make compliance during the assessment proceedings.
In these circumstances there was sufficient cause which prevented the assessee in furnishing the relevant evidence. The Learned Assessing Officer has not considered the difficult time of COVID and lockdown period specially the technical glitches with the departmental ITBA portal and wrongly suggested that additional evidence did not require to be admitted. It is purely the prerogative of the Hon'ble CIT to admit the additional evidence. The Learned Assessing Officer was required only to furnish his comments only on the quality of the evidence which he has failed to do. Thus, virtually the additional evidence has its merits and deserves to be considered.
2. Merits of the case go in favour of the assessee -
The Learned AO has mentioned that the additions were made due to non- submission of document related genuineness and creditworthiness of unsecured loan of Rs. 17.25,82,500/-, interest expenses of Rs. 97,12,126/- and evidence regarding additions made in fixed assets for disallowance of depreciation of Rs. 3,66,93,024/-.
The Learned AO has not made any remark/comments on the additional evidences submitted before your honour under rule 46A of the Income Tax Rules 1962 which include complete list of 62 persons along with their complete name, PAN, address, opening balances, new loan accepted during the year, interest credited, TDS, repayment of loan and closing balances along with confirmation of parties, copy of bank statement and copy of ITR acknowledgement. And in case of depreciation claimed the assessee has submitted copy of ledger accounts and bills for addition in fixed assets.
The assessee has submitted all the papers submitted before the learned CIT(A) along with submissions and paper book containing page 1 to 970. In the paper book page no. 34, the depreciation chart was there and from page no. 66 to 901 all the bills of addition of fixed assets were submitted to the learned AO. The details of creditors were submitted from page no. 902 to 970. A copy of acknowledgement of submission made before the learned AO on 29.09.2023 is enclosed for your kind perusal. Therefore, once again you are requested to call the remand report on factual aspect from the AO and oblige."
B: Vide submission dated 28.09.2023, the appellant submitted as under:
1. That during the assessment proceedings the Learned AO has made an addition of Rs. 17,25,82,500/- and interest payment thereon for Rs. 97,12,126/-. Before the Learned CIT(A) the assessee has taken the ground that due to technical glitches and COVID-19 pandemic the assessee could not access all the notices send to him through ITBA portal or via mail. Therefore, there is no reason for not submitting all the evidence in support of unsecured loans taken by the assessee. Therefore, the assessee has filed application under Rule 46A of Income tax Rules, 1962 for admitting the additional evidence. As required by you we are submitting herewith the complete list of 62 persons along with their complete name, PAN, address, opening balances, new loan accepted during the year, interest credited, TDS, repayment of loan and closing balances along with confirmation of parties, copy of bank statement and copy of ITR acknowledgement in few cases. All these documents we have already submitted before the Learned CIT(A) in appellate proceedings. Now for your kind perusal we are also submitting the same.
List of all the unsecured loans amounting to Rs. 17,25,82,500/- available on page no. 902 to 905. Copies confirmations of all the unsecured loans and ITR (provided by some borrowers) are also enclosed herewith at page no. 906 to 970, Interest paid of Rs. 97,12,126/- is also reflected in the list of unsecured loans. Details of PAN, address, opening balances, new loan accepted during the year, interest credited, TDS, repayment of loan and closing balances are also available in the list enclosed herewith. Entries regarding interest payment of Rs. 97,12,126/- is also reflected in the confirmations enclosed at page no. 906 to 970. All the payments were received through proper banking channel and interest and repayment was also through proper banking channel.
The second addition was made by disallowing depreciation of Rs. 3,66,93,024/-. A detailed depreciation chart is available in the audit report enclosed herewith at page no. 34, Ledger account and bills of all the addition made during the year under consideration is available on page no. 66 to 901 for your kind perusal. The deprecation of as Income Tax Act, 1961.33.66.9 is claimed rightly & CO No. 12/JP/2024 DCIT vs. Paradise Properties We are also ready to verify y all the above detain-T with books of accounts and other records maintained by the assessee. Therefore, you are requested to take the same on record and send the remand report in favour of the assessee and oblige." Decision: I have gone through the elaborate documentation filed by the appellant in the form of paper book. Prima facie, the copies of documents constitute the requirements of the AO while framing the assessment. As the appellant was prevented by sufficient cause, the said evidence is admitted. On the basis of the same, all the impugned additions do not deserve to be upheld and therefore all the grounds raised are allowed. The appeal is therefore taken as disposed as 'allowed for statistical purposes. The AO is directed to give effect to this order after due verification of the evidence let in and satisfy himself that the evidence is proof of the claim of allowance/deduction and accord necessary relief in accordance with the provisions of the Act as far as computation of income is concerned, in the interests of justice and avoid protracted litigation. It is also made clear that the above direction would not amount to setting aside the issue to the file of the AO as this authority is aware that such a power is not conferred under the Act. The appeal, in the result, is allowed for statistical purposes.”
The ld. DR is heard who relied on the findings of the assessing officer and vehemently argued that the ld. CIT(A) has considered the additional evidence without proper reasons. The assessment in this case is completed on 26.12.2019 whereas the covid-19 came in India in the effect came in the Mid-March 2020 and therefore, the reasons advanced has no merits and therefore, ld. CIT(A) should have not considered the additional evidence filed by the assessee.
On merits of the case ld. DR also submitted that the order of the ld.
CIT(A) not clear his direction also not clear. The ld. DR in support of the accepted from 143 parties the huge unsecured loans. Vide query letter dated 25.09.2019 ld. AO asked to furnish the confirmation all the cash creditors including name, address and complete postal address, date of receipt of loan mode of payment, total amount repaid during the year under etc., In response the assessee stated that complete address is available in the confirmation enclosed. Thereafter the ld. AO has discussed the details placed on record one by one from page 3 to 20. At page 20 he made a detailed note on the records produced by the assesseeand hold that complete details and confirmation of all creditors were not provided by the assessee. As regards the contention of the assessee that they were not providing sufficient time is wrong the ld. AO has provided ample opportunity to the assessee. The ld. CIT(A) did not appreciate the fact that the assessee has not furnished these details during the assessment proceeding in spite of ample opportunities. The assessee also did not submit the complete details in time in the remand proceedings. Therefore, there are no reasons to admit the additional evidences submitted by the assessee and same is devoid of any merits and assessee failed to prove the identity, credit worthiness and genuineness of the lenders.
CIT(A) on the merits of the case of the assessee. The ld. DR also invited our attention to the comments of the ld. AO after the assessee filed the cross objection wherein the ld. AO submitted that the assessee has filed merely confirmation and assessee has proved the creditworthiness and genuineness of the loan for only four creditors. The addition of depreciation has been allowed based on the verification of details filed. In support of the contentions raised ld. DR also relied upon certain case laws as submitted in the written submission filed, which reads as follows :
“Brief facts of the case:-
In this case the assessee filed return of income for the AY 2017-18 on 02.11.2017 declaring total loss of Rs.4,33,38,051/-, Thereafter, assessment was completed u/s 143(3) on 26.12.2019 assessing total income at Rs. 17,86,33,230/- by making following additions:
1. 1. Addition of Rs. 17,25,82,500/- u/s 68 of the I.T. Act. 2. Addition w.r.t. interest expenses of Rs. 97,12,126/-. 3. Disallowance on account of depreciation amounting to Rs. 3,66,93,024/-.
4. Addition w.r.t. difference amount of rental receipts amounting to Rs. 29,83,628/- 1.1 Aggrieved by the above order passed by AO, the assessee filed an appeal before Ld. CIT(A) on the following grounds: 1. Under the facts and circumstances of the case the Learned Assessing Officer has erred in making the addition of Rs. 17,25,82,500/- u/s 68 of the Income Tax Act 1961 received by the assessee as unsecured loan during the year under consideration and thereby applying the provisions of section & CO No. 12/JP/2024 DCIT vs. Paradise Properties 115BBE of the Income Tax Act, 1961 without providing reasonable opportunity to the assessee.
2. Under the facts and circumstances of the case the Learned Assessing Officer has erred in making the addition of Rs. 97,12,126/-by disallowing interest expenses claimed by the assessee on unsecured loans.
3. Under the facts and circumstances of the case the Learned Assessing Officer has erred in making the addition of Rs. 3,66,93,024/ on account of disallowance of depreciation for the assets purchased during the year under consideration.
4. Under the facts and circumstances of the case the Learned Assessing Officer has erred in making the addition of Rs. 29,83,628/- on account of rental receipts which has already been disclosed by the assessee.
The assessee craves your indulgence to add amend or alter all or any grounds of appeal
before or at the time of hearing." 1.2 Decision of CIT(A): The Ld. CIT(A) vide order dated 19.01.2024 allowed the appeal of the assessee by holding that “I have gone through the elaborate documentation filed by the appellant in the form of paper book. Prima facie, the copies of documents constitute the requirements of the AO while framing the assessment. As the appellant was prevented by sufficient cause, the said evidence is admitted. On the basis of the same, all the impugned additions do not deserve to be upheld and therefore all the grounds raised are allowed. The appeal is therefore taken as disposed as allowed' for statistical purposes. The AO is directed to give effect to this order after due verification of the evidence let in and satisfy himself that the evidence is proof of the claim of allowance/ deduction and accord necessary relief in accordance with the provisions of the Act as far as computation of income is concerned, in the interests of justice and avoid protracted litigation."
2. The decision of ld. CIT(A) is not acceptable on the basis of the following reasons: 2.1 It is submitted that as per Para 3.1 to 3.3 of the assessment order, AO has mentioned that:- “During the course of assessment proceedings, on perusal of balance sheet of the assessee for the year under reference, it is gathered that the assessee has shown unsecured loans of Rs. 6,10,54,266/- as on 31.03.2016 and Rs.
22,09,59,757/- as on 31.03.2017. It is seen from the form no. 3CD filed for the year under reference that the assessee has received unsecured loans from 143 parties. As is evident from perusal of form no. 3CD & Balance sheet of the assessee, the assessee has taken a huge amount as unsecured loans from various parties. Therefore, vide query letter dated 25.09.2019, the assessee was asked to furnish the confirmation of all the cash creditors including their name & complete postal address, date of receipt of loan, mode of payment and total amount repaid during the year under reference. In response, the assesseee vide his submission dated 23.10.2019 has stated that complete details of depositors are available in the confirmations enclosed with reply. The assesseee has also furnished confirmations of some of the cash creditors. The details of the unsecured loans taken by the assessee and documentary evidences submitted by the assessee to prove the genuineness of these loans transactions is being discussed as under.” Thereafter, the AO discussed all these creditors one by one in details in Para 3.4 of AO’s order at page 20 and concluded, as follows:- “The assessee has furnished part confirmations of the cash creditors and in respect of some cash creditors, the assessee has furnished the unsigned confirmations. Accordingly, vide show cause notice dated 08.12.2019, the assessee was asked to show cause as to why the unsecured loans shown by him should not be treated as unexplained cash credit and added to its total income as it has failed to prove the genuineness of the same. Case was fixed for hearing on 11.12.2019 but no compliance was made by the assessee. For sake of natural justice, the assessee was provided one more opportunity to prove the genuineness of unsecured loans vide notice dated 19.12.2019 and the same has been delivered to assessee on mail as well as via speed post. In response, assessee again submitted the same reply which he has submitted in his earlier reply. No additional evidences furnished by the assessee. Even confirmation of parties from whom he has shown to have received unsecured loan were not provided in spite the fact that he was asked to furnish the same vide various notices.” Subsequently after discussing all the creditors in respect of which the assessee could not prove the identity of cash creditors, credit worthiness of lenders and genuineness of cash creditors despite ample opportunities, the AO further discussed them in tabular form in para 3.5 at page 21. After recording detailed reasons, they were added u/s 68 (totaling to Rs. 17,25,82,500/-). Also disallowance of interest expense amounting to Rs. 97,12,126/- was made after detailed discussion in Para 4 of AO’s order. It is clear from the above that sufficient opportunities were provided by the AO during the course of assessment proceedings to the assessee.
In this respect, the reply of the assessee during the course of appellant proceedings in Para 6 of Ld. CIT(A) order at page 82 is also relevant which is quoted below: “With reference to above we would like to submit the following- Admissibility of additional evidence under rule 46A of the Income Tax Act, 1961- With reference to above it is submitted that the assessment order for the year under consideration has been passed 143(3) of the Income Tax Act, 1961. The assessee could not furnish the confirmation of loans because the assessee has not received any communication for submitting the documents like confirmations and other details. The second reason that sufficient time was not provided to the assessee so the assessee could obtain the above confirmation after very hard and long efforts which are submitting herewith as additional evidence. The position being so the assessee could not submit documents and other evidence in support of his defense.” The appellant has submitted to the Ld. CIT(A) that the assessee has not received any communication for submitting the documents and sufficient time was not provided which is proved wronged as the AO was provided with relevant documents/confirmastions in the case of certain parties only (as listed by AO in para 3.3) of his order. Out of total 143 parties, in respect of 61parties, the details were not provided to the AO by appellant. Even after that the AO gave ample opportunities to the assessee to provide these confirmation as per Para 3.4 of his order as explained above. During the remand proceedings, the Ld. CIT(A) adjudicated upon remand report that "the AO on being forwarded to submit remarks on the evidence admitted u/r 46A, stood on technical grounds and objected to the evidence being admitted. The said objections are overruled for the appellant's case falls squarely within the parameters and therefore the additions are considered on merits in the light of the evidence let in, on the footing that the appellate proceedings are continuation of the assessment proceedings and as the first fact finding authority, the additions made are fact intensive, to the extent the resources of this office permit." The ld. CIT(A) called remand report through ITBA. On perusal of record of the attachment of the remand report it was found by the AO that documents related to the claim of depreciation were attached. Therefore, the AO has sent a letter the assessee on 01/09/2023 in which complete details of the unsecured loans and details of the depreciation were called from the assessee on or before 08/09/2023. But the assessee did not submit the details in prescribed time limit. Therefore, the AO has submitted & CO No. 12/JP/2024 DCIT vs. Paradise Properties remand report on 12/09/2023 on technical grounds and objected to the evidence being admitted. The Ld. CIT(A) did not appreciate the fact that the assessee has not furnished these details during the assessment proceedings in spite of giving ample opportunities. Further, the assessee did not furnish the documentary evidences well within time during remand report proceedings also while it was asked by the AO to provide all documentary evidences to substantiate its claim during remand report proceedings. A plain perusal of the 46A rules clearly indicates that none of the four conditions as mentioned in the rules were satisfied in the case of the assessee to warrant admissibility of such additional evidence as ample opportunities were given to the assessee during the course of assessment proceedings. Thereafter, the assessee filed rejoinder on 28.09.2023 and 05.10.2023 on the remand reports before Ld. CIT(A) during appellate proceeding, stating that "COVID-19 pandemic the assessee could not access all the notices send to him through ITBA portal or via mail, how could he make compliance during the assessment proceedings." Therefore, on perusal of the appellate order passed by CIT(A), it is noticed that the assessee has taken the plea that due to COVID-19, he could not access the notices issued by the department. In this regard, kind attention is invited here that the COVID - 19 pandemic lock down started from March 2020, while the assessment order was passed on 26.12.2019. In the light of the above facts, it is observed that the assessee is misleading and taking support of false facts to hide its mistakes and remained non- compliant. The Ld. CIT(A) further asked the comments of the AO on 01/12/2023 on the rejoinder filed by the assessee, wherein it has been mentioned that "the rejoinder filed by the appellant is forwarded herewith to file your report on or before 15.12.2023”, but there was no such document available on ITBA or could not be downloaded due to some technical error, which was well communicated to the Ld. CIT(A) through ITBA Portal. The Ld. CIT(A) was again requested to provide the written submissions filed by the assessee during the appeal proceedings, But the same was not provided to the office of AO. 2.2 Therefore, the decision of the Ld. CIT(A) is not acceptable as - i) No adequate opportunity was provided to the AO to give comments on the remand report, before admission of additional evidence under rule 46A of the Act. It is pertinent to mention here that the documents forming the part of the additional evidence were not provided to the AO during the remand report proceedings, except the documents related to the depreciation issue. Same had been communicated to the Ld. CIT(A) by AO, well before the passing of the order. ii) The Ld. CIT(A) admitted the additional evidence ignoring the fact that the assessee has not complied during the assessment proceeding despite being provided ample opportunities and also remained non-compliant during the remand report proceeding as well. iii) The additional evidence was admitted without giving adequate opportunity to AO ignoring the fact the AO had categorically denied admission of additional evidence and did not comment on merit, since the documents were not with AO. On perusal of the additional evidences. it is clear that the assessee had failed to prove the creditworthiness and genuineness of lenders. The assessee has only submitted the ITR of only 5 lenders from which the creditworthiness and genuineness of the lenders could not be ascertained. The Ld. CIT(A) did not touch the issue of addition of Rs. 29,83,628/- on account of suppression of rental receipts and remained silent on this issue. The Ld. CIT(A) did not give any specific comments upon the merits or facts of this ground. 2.3 In this case, further a detailed report was called from AO to ascertain the facts chronologically of the case which is submitted for your kind perusal as Annexure A. 2.4 Also, the assessee has filed cross objections vide dated 27.06.2024 as follows: 1. “In the facts and circumstances of the cases the Learned Assessing Officer has erred in not following the directions of the Learned CIT(A) who has allowed the appeal of the assessee.
2. In the facts and circumstances of the case the Learned AO has not allowed the specific relief regarding deletion of Rs. 17,25,82,500/- on account of unsecured loans, Rs. 97,12,125/- for interest on unsecured loan and Rs. 29,83,628/- on account.
The assessee craves your indulgence to add amend or alter all or any grounds of appeal
before or at the time of hearing.” In this regard a report was called from AO seeking comments on the cross objection filed by the assessee which is also enclosed as Annexure B for your kind perusal. The comments are also quoted below: Comments on the cross objection filed by the assessee:
1. As per the direction of the Ld. CIT(A) –The AO is directed to give effect to this order after due verification of the evidence let in and satisfy himself that the evidence is proof of the claim of allowance/deduction and accord necessary relief in accordance with provisions of the Act. Accordingly, the undersigned has gone through the paper book submitted by the assessee and it is found that the assessee failed to provide the satisfactory evidence during the verification, assessee only submitted signed copy of confirmation only and no other documentary evidence provided by the assessee to prove the creditworthiness and genuineness of the loan on the ground no.1(Assessee able to prove the creditworthiness and genuineness of the loan in case of four creditors only.)
2. The assessee failed to prove the creditworthiness and genuineness of the unsecured loans so, the Interest on Unsecured Loans on the ground no. 2 is remain sustained as per the assessment order passed on 26.12.2019. Therefore, no relief was granted.
3. Addition on Account of disallowance of Depreciation of Rs. 3,66,93,024/- has allowed to assessee after verification of the Legers and supportive bills & vouchers and invoices as ground no.3.
4. Addition on Account of Suppression of rental receipts of Rs. 29,83,628/- remains same as the assessee failed to provide the any documents relating the Suppression of rental receipts so as ground no.4 remain sustained as per assessment order dated 26.12.2019.
2.5 Also, the relevant case laws are as per table below:
Sl. No Case laws Page No.
1. Kale Khan Mohammad Hanif vs. CIT [1963] 50 ITR 1(Supreme Court of India) 1-5 2. CIT vs. Precision Fianance (P.) Ltd.[1995] 82 Taxman 31 (Calcutta) High Court of 6-8 Calcutta/ 208 ITR 465 3. Nemi Chand Kothari vs. CIT [2004] 136 Taxman 213 [2003]264 ITR 254(High 9-17 Court of Gauhati) 4. CIT Vs. Korley Trading Co. Ltd. (1998) 232 ITR 820 (High Court of Calcutta) 18-19 5. Kamal Motors vs. CIT [2003] 131 Taxman 155(High Court of Rajasthan, Jaipur 20-21 Bench) 6. CIT vs. R.S. Rathore[1996] 86 Taxman 20(High Court of Rajasthan)212 ITR 390 22-24 7. CIT vs. Oasis Hospitalities (P.) Ltd. [2011] 9 taxmann.com 179 (Delhi) (High Court 25-34 of Delhi)[333 ITR 119 (Delhi)] 8. Roshan Di Hatti vs. CIT [1977] 107 ITR 938 (Supreme Court of India) 35-43 9. Shankar Industries vs. CIT[1978] 114 ITR 689(High Court of Calcutta) 44-47 10. Hari Chand Virendra Pal Vs. CIT (High Court of Punjab and Haryana) [1982]11 48-50 Taxman 134 /140 ITR 148 11. CIT vs. Biju Patnaik[1986]26 Taxman 324 (SC)/[1986] 160 ITR 674(SC) 51-59 12. Dhanalaxmi Steel Re-Rolling Mills vs.CIT, 93 Taxman 561/ 228 ITR 780(High 60-63 Court of Andhra Pradesh) 13. Sanil K.M.P vs. CIT [2009] 177 Taxman 481(Kerala)[04.06.2008] 64-65 In view of the above submissions, it is requested that appeal may kindly be decided in favour of the revenue. ”
On the other hand, the ld. AR of the assessee supported the order of the ld. CIT(A). In support of the order of the ld. CIT(A) and to support the cross objections so raised by the assessee, the ld. AR of the assessee has relied upon the following written submission:
“The assessee is a partnership firm engaged in the business of hospitality and tourism sector. The assessee filed its return for income for A.Y. 2017-18 declaring loss of (-) Rs.4,33,38,051/- on 02/11/2017. The return of income was accompanied with audit report u/s 44AB. Copy of acknowledgement of return and computation of income and audit report u/s 44AB of the assessee firm for & CO No. 12/JP/2024 DCIT vs. Paradise Properties AY 2017-18 is available on paper book page no. 1 to 65. The case of the assessee was selected for scrutiny through CASS and notice u/s 143(2) was issued on 09/08/2018. The Learned Assessing Officer completed the assessment on 26/12/2019 determining total income at Rs. 17,86,33,230/-, inter- alia, making the following additions: -
(i) Unexplained cash credits u/s 68 Rs.17,25,82,500/- (ii)Disallowance of interest Rs 97,12,126/- (iii)Disallowance of depreciation Rs. 3,66,93,024/- (iv) On account of suppression in Rental receipts Rs. 29,83,628/-
Subsequently, the assessment was revised u/s 154 on 14/02/2020, reducing the addition made u/s 68 on account of unexplained cash credits to Rs. 12,86,82,500/- from Rs. 17,25,82,500/-. Thus, the total income was determined at Rs. 13,07,33,230/-.
Aggrieved with the order of the Learned Assessing Officer, the assessee went in appeal before the Learned CIT(A). Before the Learned CIT(A), the main plea of the assessee was that there were adequate reasons and grounds on account of which the assessee was prevented in furnishing information before the Learned Assessing Officer. The assessee submitted application under Rule 46A requesting the Learned CIT(A) to admit the additional evidences. Paper Book was submitted containing Papers from Page No. 1-970. This Paper book contained copy of return, computation of income, audit report, details of fixed assets along with ledgers, copy of bills in respect of assets purchased during the year, list of all unsecured loans along with confirmations and other evidences. A copy of the application dated 06/01/2021 for admission of additional evidence before the Learned CIT(A) is available on Paper Book Page No. 134 to 139. Before the Learned CIT(A), the assessee furnished all the supporting documents and evidences, which were required by the Learned Assessing Officer, which included confirmation, copy of bank account and copy of income tax return in respect of all cash-credits. Documents regarding creditworthiness and genuineness of all the unsecured loans creditors which includes their ITR, computation, confirmation, bank statement etc are available on paper book page no. 66 to 133. Complete information was provided in respect of assets pertaining to which the Learned Assessing Officer had disallowed depreciation of Rs. 3,66,93,024/-.
The Learned CIT(A) obtained remand report from the Learned Assessing Officer before admitting additional evidence furnished by the assessee. A Copy of the remand report dated 22/09/2023 submitted by the Learned Assessing Officer in the case is available on Paper Book Page No. 143 to 144. The Learned CIT(A) also sought rejoinder from the assessee on the remand report of the & CO No. 12/JP/2024 DCIT vs. Paradise Properties Learned Assessing Officer. A copy of the rejoinder submitted by the assessee under letter dated 05/10/2023 is available on Paper Book Page No. 148 to 150.
It is submitted that the Learned CIT(A) found that additional evidences furnished by the assessee were crucial for the disposal of the appeal and had a direct bearing on the quantum of additions made by the Learned Assessing Officer. The Learned CIT(A) also noted that in the remand report, the Learned Assessing Officer has failed to specifically make any adverse comments on the quality of additional evidences furnished by the assessee. The remand report only contained submission of the Learned Assessing Officer that it was a case where sufficient opportunity already stood allowed and hence additional evidence should not be admitted. The Learned Assessing Officer even failed to appreciate that when remand report is called for on additional evidences submitted before the Learned CIT(A), it indirectly conveys that it is only after admission of additional evidence that report of the Learned Assessing Officer is called for on such additional evidence. Considering the totality of facts and circumstances, the Learned CIT(A) deleted the entire additions made by the Learned Assessing Officer.
Aggrieved with the order of the Learned CIT(A), the Revenue is in appeal before the Hon'ble ITAT. The grounds of appeal of Revenue are discussed below :-
Ground No.1 On the facts and circumstances and in law, the Learned CIT(A) has erred in admitting the additional evidences under Rule 46 A of the Income Tax Rules, 1962 without giving adequate opportunity to the Assessing Officer in remand proceedings. & Ground No.2 On the facts and circumstances and in law, the Learned CIT(A) has erred in admitting the additional evidences under Rule 46 A of the Income Tax Rules, 1962 in spite of the fact the assessee remained non-compliant during assessment proceedings as well as remand proceedings. & Ground No.3 On the facts and circumstances and in law, the Learned CIT(A) has erred in admitting the assessee's plea that due to COVID 19 he could not access the notice(s) in spite of the fact that assessment order in this case was completed on 26/12/2019 well before the COVID-19 pandemic lock down started from March, 2020.
All the three grounds of the Revenue, No. 1, 2 & 3 are taken together for discussion as the central issue is one and the same, i.e. admissibility of additional evidence. (I) Facts of the case
The assessee is a partnership firm engaged in the business of hospitality and tourism sector. The assessee filed its return for income for A.Y. 2017-18 declaring loss of (-) Rs.4,33,38,051/- on 02/11/2017. A copy of acknowledgement of return along with computation of income is available on Paper Book Page No cited supra. The return of income was accompanied with audit report u/s 44 AB. A copy of audit report with annexures are available on Paper Book Page No. cited supra. The case of the assessee was selected for scrutiny through CASS and notice u/s 143(2) was issued on 09/08/2018. The Learned Assessing Officer completed the assessment on 26/12/2019 determining total income at Rs. 17,86,33,230/-, inter-alia, making the following additions :- (i) Unexplained cash credits u/s 68 Rs.17,25,82,500/- (ii)Disallowance of interest Rs 97,12,126/- (iii)Disallowance of depreciation Rs. 3,66,93,024/- (iv) On account of suppression in Rental receipts Rs. 29,83,628/- Subsequently, the assessment was revised u/s 154 on 14/02/2020, reducing the addition made u/s 68 on account of unexplained cash credits to Rs. 12,86,82,500/- from Rs. 17,25,82,500/-. Thus, the total income was determined at Rs. 13,07,33,230/-.
Aggrieved with the order of the Learned Assessing Officer, the assessee went in appeal before the Learned CIT(A). Before the Learned CIT(A), the main plea of the assessee was that there were adequate reasons and grounds on account of which the assessee was prevented in furnishing information before the Learned Assessing Officer. The assessee submitted application under Rule 46A requesting the Learned CIT(A) to admit the additional evidences. A copy of the application dated 06/01/2021 is available on Paper Book Page No cited supra. In this application, the assessee submitted that during the course of assessment proceedings which lasted from 25/09/2019 to 26/12/2019, it was prevented in furnishing information before the Learned Assessing Officer on the following counts :-
(i) The number of cash-credits were 143, as such, it was impossible to contact each and every cash-creditor. Further, each creditor had his own problem in furnishing copy of bank account and copy of ITR. The cash-creditors normally take advice of their counsels before giving copy of ITR and bank account. Since the counsels of the cash-creditors were busy in assessment proceedings, the required information could not be collected in time.
(ii) It was further submitted that each time when theld Assessing Officer issued notices for hearing, the time granted was hardly of 3-4 days and in such short duration, practically nothing could be done. This could be apparent from the following dates of hearing :-
Date of notice Date of hearing Effective time given excl. date of notice 2/11/2019 7/11/2019 5 days 23/11/2019 27/11/2019 4 days 8/12/2019 11/12/2019 3 days 19/12/2019 23/12/2019 4 days
Thus, it is a case where sufficient time was not granted by the Learned Assessing Officer and this prevented the assessee from furnishing the requisite information. (iii) It is further submitted that even in the time granted, the assessee did his best and furnished confirmations in around 100 cases as is apparent from the assessment order itself, wherein the Learned Assessing Officer has admitted that in many cases, confirmations were filed by the assessee. This fact is verifiable from Page 3 to 20 of the assessment order. The furnishing of confirmations in a large number of cases establishes the fact that the assessee was extending full co-operation to the Learned Assessing Officer even during the course of assessment proceedings. However, the Learned Assessing Officer could not appreciate the fact that more time was required for furnishing all the information in respect of 143 cash credits when the information required was also bulky such as confirmation, PAN, copy of relevant bank account, copy of IT return and also source of deposit in the bank account of the creditors. It was mainly insufficiency of time on account of which the assessee could not furnish the information required by the Learned Assessing Officer regarding genuineness of the cash credits and claim of depreciation etc. (iv) It was further submitted before the Learned CIT(A) that the online submission in 2019 was a new feature and there were technical glitches which also prevented the assessee both in perusing the notices received from the department and also in making compliance of the same.
(v) Simultaneously, while furnishing the aforesaid application u/r 46 A for admission of additional evidence, the assessee also furnished complete information in respect of cash credits and claim of depreciation. In respect of each cash credit, information was furnished, such as, confirmation, copy of bank statement and copy of ITR, details of re-payment and TDS made on payment of interest. In respect of claim of depreciation, copy of bills regarding acquisition of new assets and copy of ledger accounts were furnished. All these details were furnished on Paper Book running 970 pages.
(II) COMPLIANCE OF PROVISIONS OF RULE 46 A BY THE LEARNED CIT(A)
It is further submitted that in admitting the additional evidence furnished by the assessee before the Learned CIT(A), the Learned CIT(A) has acted within the provisions of Rule 46 A, which are quoted below :- Production of additional evidence before the 1[Joint Commissioner] (Appeals) and Commissioner (Appeals). 46A. (1) The appellant shall not be entitled to produce before the 1[Joint 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 (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. (2) No evidence shall be admitted under sub-rule (1) unless the 1[Joint Commissioner] (Appeals) or, as the case may be, the Commissioner (Appeals) records in writing the reasons for its admission. (3) The 1[Joint Commissioner] (Appeals) or, as the case may be, the Commissioner (Appeals) shall not take into account any evidence produced under sub-rule (1) unless the Assessing Officer has been allowed a reasonable opportunity— (a) to examine the evidence or document or to cross-examine the witness produced by the appellant, or (b) to produce any evidence or document or any witness in rebuttal of the additional evidence produced by the appellant. (4) Nothing contained in this rule shall affect the power of the 1[Joint Commissioner] (Appeals) or, as the case may be, the Commissioner (Appeals) to direct the production of any document, or the examination of any witness, to enable him to dispose of the appeal, or for any other substantial cause including the enhancement of the assessment or penalty (whether on his own motion or on the request of the Assessing Officer) under clause (a) of sub-section (1) of section 251 or the imposition of penalty under section 271.
In view of the aforesaid provisions of Rule 46A(3), the Learned CIT(A), before taking into account the additional evidences furnished by the assessee allowed an opportunity to the Learned Assessing Officer by calling a remand report. The Learned Assessing Officer submitted remand report under letter dated & CO No. 12/JP/2024 DCIT vs. Paradise Properties 12/09/2023. However, the Learned Assessing Officer, instead of commenting up on the additional evidences furnished by the assessee before the Learned CIT(A), restricted in furnishing comments that there was no case for admission of additional evidences as the assessee had been provided adequate opportunities during the course of assessment proceedings. A copy of the remand report dated 12/09/2023 is available on Paper Book Page No cited supra. It is submitted that in view of the provisions of Rule 46A(3), (a) & (b), the Learned Assessing Officer was required to examine the additional evidences and documents furnished by the assessee and also to furnish evidence and documents in rebuttal of the same. But nothing of this sort was done. This shows that the Learned Assessing Officer had nothing in possession to controvert the additional evidences furnished by the assessee before the Learned CIT(A). The Learned CIT(A) was, therefore, justified in deleting the additions on the basis of evidences furnished before him.
The Learned CIT(A) has observed on Page 87 of the appellate order that the objections raised by the Learned Assessing Officer regarding admissibility of additional evidences are overruled. The Learned CIT(A) considered that it was a fit case where the assessee was prevented with sufficient cause and on reasonable grounds in furnishing the required information before the Learned Assessing Officer. In view of this, the Learned CIT(A) proceeded to consider the additions on merits and deleted the same. It is submitted that the Learned CIT(A) has acted within the parameters of powers given to him under Rule 46A. The Revenue has no ground to challenge the decision of the Learned CIT(A) in accepting the additional evidences. The following case-laws are quoted in support :-
(I) COMMISSIONER OF INCOME TAX VS. VIRGIN SECURITIES & CREDITS (P) LTD HIGH COURT OF DELHI (2011) 332 ITR 0396
The CIT(A) called for remand report from the AO and thereafter deleted the addition, inter alia, observing that the AO, in his remand report, has not specifically commented upon the additional evidence submitted by the assessee. The additional evidence which was submitted by the assessee was in the form contract note from PNR Ltd., which clearly showed that 20,35,000 shares were sold @ Rs. 2.23 per share and the net price credited to the party works out to Rs. 2.23 per share. The evidence regarding sale price as on 20th March, 2002 was confirmed by the BSE. The bank statement of the assessee in current account was also produced which showed the sale proceeds on 30th March, 2002 confirming the rate claimed by the assessee. The contention that the CIT(A) erred in admitting additional evidence in contravention of r. 46A and no opportunity was given to the Department to make inquiry as to when sale took place appears to be devoid of any merit. It is a matter of record that before admitting the additional evidence, the CIT(A) had obtained remand report from the AO. While submitting his report, the AO had not objected to the admission of the additional evidence, but had merely reiterated the contentions in the assessment orders. It is only after considering the remand report, the CIT(A) had admitted the additional evidence. It cannot be disputed that this additional evidence was crucial to the disposal of the appeal and had a direct bearing on the quantum of claim made by the assessee. It cannot be said nor is it the case of the Revenue that additional evidence is not permissible at all before the first appellate authority. On the contrary, r. 46A permits the CIT(A) to admit additional evidence if he finds that the same is crucial for disposal of the appeal.
(II) COMMISSIONER OF INCOME TAX VS. JIND CO-OPERATIVE SUGAR MILLS LTD. PUNJAB AND HARYANA HIGH COURT (2011) 335 ITR 43
Appeal [CIT(A)]—Additional evidence—Remand to AO vis-a-vis consideration by CIT(A)—It is not necessary that when additional evidence is furnished, the matter must be remanded to the AO—It depends on nature of issue and nature of evidence—In an appropriate case, without any prejudice to either of the parties, the evidence can be looked into by the appellate authority itself—In such a case, it may not be necessary to remand the matter to the AO—In the present case, the material produced by the assessee to the CIT(A) was duly furnished to the AO and his comments were taken by way of written communication which was due compliance of r. 46A—Remand report of the AO was duly considered by the CIT(A) on merits—Contention that the matter should have been remanded to the AO instead of considering the evidence by the appellate authority is not therefore sustainable.
(III) COMMISSIONER OF INCOME TAX VS. CHANDRA KANT CHANU BHAI PATEL.DELHI HIGH COURT (2011) 202 Taxman 262
Held that apart from the fact that the two authorities below had recorded that sufficient opportunity was not accorded to the assessee, even if there was some dispute/doubt about the same, the fresh evidence which was produced in the form of assessment order and the bank statement was without any blemish. Therefore, even in order to advance the cause of justice, the evidence is to be admitted and no prejudice was caused to the revenue.
(IV) DIT Vs. MODERN CHARITABLE FOUNDATIONDELHI HIGH COURT (2011) 335 ITR 105 (Delhi)
The assessee, a charitable trust, had taken donations and unsecured loans. The Assessing Officer asked the assessee to give details in respect thereof. As the assessee failed despite several opportunities, the Assessing Officer treated the donations and unsecured loans as the assessee's undisclosed income. The assessee filed appeal against before the CIT)(A) and produced some documents/evidences for the first time before the CIT(Appeals). On the evidence, the CIT(A) asked for a remand report. The Assessing Officer in his remand report, objected to the admission of the additional evidence on the ground that the requirements of Rule 46 A of the IT Rules were not satisfied as the assessee had failed to produce the same before the Assessing Officer in spite of various opportunities given. However, the documents which were produced were not verified by the Assessing Officer and, therefore, he did not furnish any comments. The CIT(A) admitted the evidence and allowed the appeal of the assessee on the basis of the said additional evidence holding that on the basis of this evidence, the assessee was able to point out the source of donations as well as loans and how the said donations and loans were duly applied for the objective of the assessee/society. The Appellate Tribunal upheld the order of the CIT(A).
Held that the admission of additional evidence admitted by the CIT(A) could not be interfered with. It was more so when the assessee was a charitable organization. The assessee stated that in so far as unsecured loans were concerned, they were paid back in subsequent years, which showed that these were genuine loans taken by the assessee. At the same time, the CIT(A) after admitting the relied upon the same without any verification. Therefore, in order to balance the equities, on the one hand, the assessee was to be permitted to reply upon the additional evidence produced before the CIT(A) and at the same tim,ethe Assessing Officer should also be given an opportunity to verify the documents.. Therefore, the case was remanded back to the Assessing Officer. (V) Keshav Mills Co. Ltd Vs CIT (1965) 56 ITR 365 (SC)
At the appellate stage, additional evidence may be taken and further inquiry may be made at the direction of the AAC. (VI) ITO Vs. Jute Corporation of India Ltd Vs. CIT(1991) 187 ITR 688 (SC)
There appears to be no good reason to justify curtailment of the power of the AAC in entertaining an additional ground raised by the assessee in seeking modification of the assessment order passed by the ITO.
The Learned CIT(A) obtained remand report from the Learned Assessing Officer before admitting additional evidences furnished by the assessee. A Copy of the remand report dated 22/09/2023 submitted by the Learned Assessing Officer in the case is available on Paper Book Page No. cited supra. The Learned CIT(A) also sought rejoinder from the assessee on the remand report of the Learned Assessing Officer. A copy of the rejoinder submitted by the assessee under letter dated 05/10/2023 is available on Paper Book Page No. cited supra.
It is submitted that the Learned CIT(A) found that additional evidences furnished by the assessee were crucial for the disposal of the appeal and had a direct bearing on the quantum of additions made by the Learned Assessing Officer. The Learned CIT(A) also noted that in the remand report, the Learned Assessing Officer has failed to specifically make any adverse comments on the quality of additional evidences furnished by the assessee. The remand report only contained submission of the Learned Assessing Officer that it was a case where sufficient opportunity already stood allowed and hence additional evidence should not be admitted. The Learned Assessing Officer even failed to appreciate that when remand report is called for on additional evidences submitted before the Learned CIT(A), it indirectly conveys that it is only after admission of additional evidence that report of the Learned Assessing Officer is called for on such additional evidence. Considering the totality of facts and circumstances, the Learned CIT(A) deleted the entire additions made by the Learned Assessing Officer.
Ground No.4 & CO No. 12/JP/2024 DCIT vs. Paradise Properties On the facts and circumstances and in law, the Learned CIT(A) has erred in deleting/setting aside the addition made by the Assessing Officer of Rs. 17,25,82,500/- u/s 68 of the Income Tax Act, 1961 received by the assessee as unsecured loan during the year under consideration, applying the provisions of Sec. 115BBE of the Income Tax Act 1961 without giving specific findings on the issue and ignoring the fact that assessee could not establish genuineness and creditworthiness of the parties. & Ground No.5 On the facts and circumstances and in law, the Learned CIT(A) has erred in deleting/setting aside the addition made by the Assessing Officer of Rs. 97,12,126/- by disallowing interest expenses claimed by the assessee on unsecured loans without giving any specific finding on the issue and ignoring the facts that creditworthiness and genuineness of the parties were not established.
It is submitted that during the course of assessment proceedings, the Learned Assessing Officer noticed that there were a number of cash credits wherein money has been accepted during the year under consideration. These cash credits were 143 in number as mentioned on Page 3-20 of the assessment order. Out of these cash credits, the assessee submitted confirmation in respect of 82 cases and in the remaining sixty one cases, complete details could not be furnished due to paucity of time. Therefore, the Learned Assessing Officer treated these 61 cash-credits amounting to Rs. 17,25,82,500/- (reduced to Rs.12,46,82,500/- u/s 154 on 14/2/2020) as unexplained and made addition u/s 68 of the IT Act, 1961. The details of these cash credits are available on Page 21-25 of the assessment order. During the course of appellate proceedings, the assessee submitted following documents for establishing the genuineness of the cash-credits. The evidences furnished by the assessee included the following :
(i) Confirmation (ii) Address and PAN of the creditor (iii) Copy of relevant bank account (iv) Copy of ITR (v) Details of TDS on payment of interest (vi) Details of re-payment of loan
These details were furnished on Paper Book Page No. 902 to 970. Copies of the same are available on the Paper Book now being submitted before the Hon'ble ITAT as mentioned in earlier para. It was submitted before the Learned CIT(A) that every transaction in the case of all the cash-creditors were through banking channels. The assessee, therefore, furnished all the evidences which proved beyond doubt that the credits were genuine and required to be accepted. Since the documents furnished by the assessee were part of additional evidences, these were forwarded by the Learned CIT(A) to the Learned Assessing Officer for his comments in the matter. A copy of the remand report received from the Learned Assessing Officer is available on Paper Book cited supra. The Learned & CO No. 12/JP/2024 DCIT vs. Paradise Properties Assessing Officer, in his remand report, abstained in commenting upon the quality of evidences furnished by the assessee in respect of the cash credits. Rather the Learned Assessing Officer preferred to offer his objection to the admissibility of the additional evidences, which was not his jurisdiction. As already submitted against the earlier grounds that the action of the Learned Assessing Officer in admitting the additional evidences was perfectly within the purview of Rule 46A. As the Learned Assessing Officer did not controvert nor objected to the quality of the evidences furnished by the assessee with respect to the genuineness of the cash credits, the Learned CIT(A) accepted the same and deleted the additions. As a consequence of it, the Learned CIT(A) also deleted the addition of Rs. 97,12,126/- made by the Learned Assessing Officer on account of disallowance of interest paid on these cash credits. Once the cash credit is found as genuine, there was no case for disallowance of interest. The order of the Learned CIT(A) in deleting the addition made on account of unexplained cash credits as well as on account of interest is perfectly in accordance with law and the action of the Learned CIT(A) deserves to be upheld. The ground of the revenue deserves to be dismissed.
Ground No.6
On the facts and circumstances and in law, the Learned CIT(A) has erred in deleting the addition made by the Assessing Officer of Rs. 29,83,628/- on account of rental receipts, which has not been disclosed by the assessee, without giving any finding on the issue.
It is submitted that in the facts and circumstances of the case, the addition made by the Learned Assessing Officer is on account of wrong appreciation of facts on correct perspective. The Learned Assessing Officer has observed that against rental receipts of Rs. 34.13. lacs, the assessee has disclosed rental receipts only of Rs. 4,29,639/-. Therefore, the difference of Rs. 29,83,628/- has been added by the Learned Assessing Officer.
The assessee submitted before the Learned CIT(A) copies of audited accounts which disclose that the entire rental income of Rs. 34,13,267/- was accounted for in the Profit and Loss account. Copy of the relevant part of the audited accounts is available on Paper Book Page No. cited supra. In view of this, the Learned CIT(A) was justified in deleting the additions.
CONCLUSION
In view of the aforesaid submissions, the Hon'ble ITAT is requested to dismiss the appeal of the Revenue and confirm the order of the Learned CIT(A).”
To support the contention so raised in the written submission so filed the ld. AR of the assessee placed reliance on the following evidence / records :
Sr.No. Particulars Page No.
Copy of acknowledgement of return and computation of income of the 1-4 assessee firm for AY 2017-18 2. Copy of audit report u/s 44AB of the assessee firm for assessment year 5-65 2017-18 3. Documents regarding creditworthiness and genuiness of all the 66-133 unsecured loans creditors which includes their ITR, computation, confirmation, bank statement etc.
Copy of application u/r 46 A dated 06/01/2021 submitted before the 134-139 Learned CIT(A) 5. Evidence regarding submission of document before the Learned 140-142 Assessing Officer on 28/09/2023 in response to remand report 6. Copy of remand report dated 22/09/2023 submitted by the DCIT, Circle- 143-144 6, Jaipur 7. Copy of reply dated 29/09/2023 submitted before the Learned 145-147 Assessing Officer 8. Copy of rejoinder dated 05/10/2023 submitted by the assessee before 148-150 the Learned CIT(A).
In addition, the ld. AR of the assessee vehemently argued that though the ld. CIT(A) has allowed the appeal of the assessee and directed to delete the addition vide order dated 19.01.2024, the assessee filed all the information the ld. AO has not given the appeal effect till the appeal filed by the revenue placed before the bench for hearing. In fact the hearing of status from the ld. AO.
In the mean while the ld. AO has allowed only depreciation and the other addition were confirmed therefore, the assessee preferred to file the cross objection as the ld. AO did not follow the direction given by the ld.
CIT(A) for which all the material were placed on record by the assessee.
In this appeal the first ground of the revenue is that the order of the ld.
CIT(A) erred in admitting the additional evidence u/r 46A of the Act without giving adequate opportunity to AO in remand proceedings. This ground has no leg to stand as the ld. CIT(A) based on petition so filed by the assessee he has considered the petition for admitting the additional evidence. In the petition filed by the assessee there is no plea of covid-19 taken by the assessee. But in fact, at the time remand proceeding the same was covid- 19 period. So, the ld. CIT(A) has in the interest of substantial justice admitted the additional evidence and considered. After admitting additional evidence, which was forwarded to the ld. AO for his comments in the remand proceedings but instead of making comments on the evidence he choose to remain silent. Not only that the order of the ld. CIT(A) was passed on 19.01.2024 but till the submission of the status report by the ld. on record by the assessee. Even the ld. AO has not bothered to correct the factual mistake to correct the ground so raised before us as he has already corrected the addition figure on 14.02.2020 by passing an order u/s. 154 of the Act. The mistake as is evident is that in the case of Anushri Gupta the loan amount is 15 lac whereas ld. AO considered it at Rs. 25 lacs. Similarly, in case of Jai Picture Private Limited instead of 10 lac it was considered at Rs. 30 lac by the ld. AO, in case of Mehak Saboo instead of 6,75,000 it was considered at Rs. 5,75,000, in case of Radheyshyam Agarwal instead of 10 lac it was considered at Rs.20 lacs and in case of Yugnak instead of 50 lac it was considered at 5 cr. All these errors resulted in the addition of Rs. 4,89,00,000/- in the case of the assessee which is also not reported by the ld. AO. Thus, as it evident that the ld. AO has even not verified the figures while representing before the ld. CIT(A) and before the bench. This shows the casual approach while dealing with the high pitched assessment.
Ld. AO submitted the remand report on 12.09.2023 wherein instead of commenting upon the additional evidence ld. AO choose to refer to the earlier communication and given his view that this additional evidence may not be admitted. Relying on rule 46A he submitted that none of the condition prescribed is satisfied by the assessee and therefore, instead of his view that the same should not be admitted. Whereas ld. CIT(A) has dealt with all the evidence placed on record consisting of list of all the unsecured loan, copies of confirmation, ITR. Even the acknowledgment at paper book page 140-141suggest the assessee has submitted a 533 pages of evidence and there is no single comments on merits of the case.
As regards the interest disallowed by the ld AO, the assessee submitted that out of the interest so paid to these creditors which amounts to Rs. 88,07,977/- as per the list placed on record at page 66-69 of the paper book filed by the assessee, whereas the ld. AO has disallowed Rs.
97,12,126/-. The assessee has paid interest after deducting TDS of Rs. 8,80,794/-. As is evident from page 66-69 all the creditors are having PAN no details of verification independently was undertaken at the time of remand proceeding and before the bench. Thus, the assessee has discharged the onus for allowability of interest paid by placing the PAN number and the payment of interest paid with name and address of the payee. This information is sufficient to consider the claim of the assessee.
The ld. AO didn’t comment on these evidence. that the entire rental income of Rs. 34,13,267/- was accounted for in the Profit and Loss account. A copy of the relevant part of the audited accounts is available on Paper Book. In view of this, the Learned CIT(A) was justified in deleting the additions.
We have heard the rival contentions and perused the material placed on record. First, we will take up the appeal of the revenue in ITA no. 324/JP/2024.
Before us the revenue has challenged the finding of the ld. CIT(A), while allowing the appeal of the assessee. While doing so the ld. CIT(A) has considered the petition of the assessee for filing the additional evidence which was considered by him considering the merits of the petition and the same was forwarded to the ld. AO also. Ld. AO recommend that the said additional evidence may not be admitted considering the non-compliance by the assessee at the time of assessment proceeding. Considering the evidence and submission of the assessee the ld. CIT(A) has allowed the appeal of the assessee. The revenue has challenged the finding of the ld.
CIT(A) raising six separate grounds of the appeal. evidence admitted by the ld. CIT(A). Though these grounds are separate but relates to the same issue of admission of additional evidence we considered it to be decided one by one.
In Ground no. 1 revenue contended that the ld. CIT(A) has erred in admitting the additional evidence under rule 46A of the Income Tax Rule, 1962 [for short u/r 46A ] without giving adequate opportunity to ld. AO in remand proceeding. On this aspect of the matter the bench noted that at page 85 of the order of the ld. CIT(A) reproduced the remand report of the ld. AO wherein he categorically confirm that she has received the request for remand report based on the written submissions and additional evidence filed by the assessee and based on that ld. AO submitted the remand report dated 12.09.2023. Here the bench noted that the ld. AR merely reiterated the assessee was given as many six opportunities so the additional is not admissible. We note here the ld. AO did not seek the time to peruse the record or was not given opportunity to deal with the submission and the additional evidence. It is the ld. CIT(A) who will in appeal jurisdiction has to decide to consider the additional evidence or not. Based on the petition and finding we do not find any infirmity in the appeal jurisdiction admitting the equal opportunity to the assessee to deal and give the report but here we note that the ld. AO remained silent. Therefore, we do not see any merits in the ground no 1 raised by the revenue and the same is thus dismissed.
Ground no. 2 raised by the revenue challenges the appellate jurisdiction of the ld. CIT(A) in admitting the additional evidence merely on the ground that the assessee remained non-compliant in the assessment proceedings as well as in remand proceedings. So far as the compliance in the remand proceeding, we note that the assessee has filed the acknowledgment of filling as many as 533 pages of evidence on 28.09.2023 [ page 141-141 ] and the ld. AO has submitted the remand report on 12.09.2023 in that report the ld. AO did not contend that the assessee has not submitted the required details and even she did not deal with the merits of the evidence so filed. It is not the case of the ld. AO that ld. CIT(A) has not forwarded the submission and additional evidence to him even the report dated 12.09.2023 confirm that she has received the same in ITBA system of the revenue. As regards the reasons for admissibility the petition itself consists of 970 pages as is evident from the acknowledgement placed before us at page 134-135. The ld. CIT(A) in his appellate jurisdiction after forwarded to the ld. AO. The ld. AO through the ld. DR did not placed on record any illegality in that judicial wisdom and therefore, we see not reasons to deviate in the finding of the ld. CIT(A) in admitting the additional evidence. Based on these observations, ground no. 2 raised by the revenue devoid of merits and thereby dismissed.
Ground no. 3 raised by the revenue deals that the ld. CIT(A) has erred in admitting the plea that due to covid-19 assessee could not access the notice(s) in spite of the fact that assessment order in this case was completed on 26.12.2019 well before the covid-19 pandemic lock down and started in March 2020. On this aspect of the matter, we note that the covid- 19 period was prevailing when the remand proceeding was pending before the ld.AO. This fact is duly recorded at page 88 which deals the proceeding in remand proceeding and not the assessment proceeding. The ld. AO through the ld. DR did not produce any contrary records Even the petition for additional evidence made by the assessee and reproduced in the order of the ld. CIT(A) 82-84 did not deal any of the plea for non-compliance on account of covid-19. Therefore, the facts placed on record and the facts so taken by the revenue and the same is dismissed.
Ground no. 4 raised by the revenue challenges the finding of the ld. CIT(A) while dealing with the addition of Rs. 17,25,82,500/- u/s. 68 of the Act without giving any specific finding on the issue and ignored the fact that the assessee could not establish genuineness and credit worthiness of the parties. As is evident from the ground that the revenue did not challenge that the parties from the assessee has taken the money all are assessed to tax and are having the PAN number allotted by the revenue. So now so far as the genuineness and credit worthiness of the loan accepted by the assessee we note that the ld. AO has from page 3 to 20 discussed the evidence placed on record for the all 143 creditors from the loan is accepted. The gist of the data so available with the assessee is extracted so as to decide the issue;
No of parties where the confirmation duly signed having the name, address, amount received and paid date, amount of interest paid with that of the TDS deducted and details of the PAN number allotted to those creditors by the 83 revenue. No parties were the ld. AO in the assessment order noted that no documents furnished by the assessee. Even the assessee has not furnished PAN no of this party in the form no. 3CD therefore, he did not conduct any enquiry and thus, he hold that the identity and creditworthiness of cash creditors and genuineness of 58 transaction remained unproved.
The bench noted that so far as majority of the cases the assessee has placed on record the confirmation i.e. 83 out of the 143. There is no finding on this what inquiry that has been done so far by the ld. AO in the assessment proceeding, remand proceeding and when the revenue decided to file the appeal before this tribunal. The ld. AO choose to remain silent on the issue. When the ld. CIT(A) on admitting the additional evidence there is no finding or grievance of the ld. AO that the details of the remaining 60 depositor’s details filed are insufficient incorrect or not provided. She remains silent did not undertaken any investigation even in the remand proceedings and there is no finding and she choose to remain silent on these as is done in the assessment proceeding for 83 depositors.
Thus, bench noted at the time when the matter was taken up by the ld. CIT(A) all the confirmations were placed on record and there is no flow on these evidence consisting of confirmations, ITR, Computation, confirmation and bank statement etc. [ page 66-133 ] thus, the revenue did not dispute this factual aspect neither before the ld. CIT(A) nor before us. The bench noted that based on the documents placed on record, the assessee has proved the identity, genuineness and creditworthiness as it is supported by no contrary finding of the ld. AO on this evidence before the ld. CIT(A) and that in the proceeding before us. Thus, we see no infirmity in the records produced by the assessee. The bench noted from the submission chart at page 66-69 that all the depositors are having the PAN and therefore, even the revenue has not challenged the identity of those depositors. Even otherwise we see that once the assessee has placed on record all the records wherein the identity, genuineness and creditworthiness of these depositors is proved by placing on record for all confirmation, ITR, computation and bank statement etc., which is neither disputed to have not been filed nor no contrary finding is recorded on all this evidence. The ld. AO through the ld. DR did not put forward any infirmity so far as relates to these 143 cash creditors placed on record at time of proceeding before ld. CIT(A) we see no reason to deviate from the finding so recorded in the order of the ld. CIT(A). When the assessee was questioned, they have placed on record complete details so as to prove the identity, genuineness and creditworthiness of the transactions. These records so produced remained non-controverted before ld. CIT(A) and even before us. The ld. AO simply objected to the admission of additional evidence and merits of the case even the report of the ld. AO placed before us through the ld. DR considering the dispute revolving around non-compliance we deem it fit to refer to annexure marked as Annexure -A in the submission of the ld. DR reproduced herein above. As is evident that here also ld. AO is finding fault instead of dealing with the merits of the dispute pending before ld. CIT(A) and before us.
Now if the assessing officer wants to dispute the evidence placed before the ld. AO, she should have directed the onus back to the assessee by making inquiry on the records and pin pointing any error , defect orr infirmity in those evidence placed on record by the assessee, which we see is manifestly missing before the ld. CIT(A) and before us when the addition deleted by the ld. CIT(A) is disputed by the revenue before us. The bench also noted that out of 143 creditors the confirmation showing all details were placed on record for 83 creditors the ld. AO not referred to have conducted inquiry for single depositor even at that stage. Not only that when the assessee placed on record complete details of all these 143 depositor no efforts carried out to find out the mistake or incorrectness in the details so placed on record placed by the assessee. Once the ld. CIT(A) upon admitting the additional evidence the ld. AO is merely challenging the appellate jurisdiction of the ld. CIT(A) instead of conducting inquiry as proceeding. The bench also observed that while making the addition u/s. 68 the ld.AO has not considered the correct amount as referred by the ld. AR for five depositors.
For the issue of addition when the ld. CIT(A) is conducting enquiry at the appellate stage instead of assisting him and placing the correct facts on record she preferred to shelter the technicality of mentioning the dates in Annexure-A finding lapse on the part of the ld. CIT(A). Thus, we see the ld.
AO is finding lapses on the faceless appellate jurisdiction instead of dealing with the facts and making inquiry on her part. Whereas ld. AO did not present any lapses on record so made available at the assessment stage, remand proceeding and when the appeal is preferred by the revenue. As is evident that the ld. AO intend to give priority on the lapse and not on the fact on the alleged lapses of ld. CIT(A) still at the second stage of appeal the assessee cannot found fault when the records placed before the authority is not dealt with and priority is given to find fault of the assessee and not on the facts of the assessee.
Based on the discussion recorded herein above we see no infirmity in the finding so recorded by the ld. CIT(A) while directing the ld. AO to delete no. 4 raised by the revenue.
Ground no. 5 raised by the revenue contest the deletion of interest of Rs. 97,12,126/- which was disallowed by ld. AO by observing as under “In respect of interest paid on unsecured loans, loans amounting to Rs. 17,25,82,500/- has been treated as cash creditors therefore, interest paid / payable on these loans is also required to be disallowed.”
Since we have based on the detailed finding recorded in para 17 dismissed the grounds of revenue for an amount of Rs. 17,25,82,500/- considered the unsecured loans as explained there is no reasons to sustained that addition and we have not been given any justifiable reasons by the revenue even on the default of TDS by the assessee the same has rightly been deleted by the ld. CIT(A). In the light of these observations, we see no merits in the ground no. 5 raised by the revenue and therefore, the same is dismissed.
Ground no. 6 raised by the revenue challenges the action of the ld. CIT(A) in directing the ld. AO to delete the addition of Rs.29,83,628/- made on account of rental receipts which has not been disclosed by the assessee without giving any finding on the issue. A brief fact related to the dispute is that the ld. AO observed that against rental receipts of Rs. 34.13. lacs, the the difference of Rs. 29,83,628/- has been added by the Learned Assessing Officer.
On this aspect of the matter the ld. DR submitted that the ld. CIT(A) did not touch upon the issue of suppression of rental receipt and there is no finding on that aspect of the matter and therefore, he strongly supported the finding recorded in the order of the ld. AO. Even the ld. DR submitted that the ld. AR of the assessee has not placed on record anything in the paper book so as to justify the deletion of the addition made by the ld. AO when there is no clear finding of the ld. CIT(A) on this issue.
On this issue before us the ld. AR of the assessee submitted that they have before Learned CIT(A) filed copies of audited accounts which disclose that the entire rental income of Rs. 34,13,267/- was accounted for in the Profit and Loss account. Copy of the relevant part of the audited accounts is available on Paper Book cited supra. In view of this, the Learned CIT(A) was justified in deleting the additions.
On this aspect of the matter, we note that the ld. AR of the assessee failed to demonstrate which are the records they placed on record so as to justify the rental income of Rs. 34,13,267/- and we note from the profit and loss account placed on record that the assessee has accounted Room rent requires verification as to where the receipt of Rs. 34,13,267/- is reflected in the books of the assessee and therefore, we are of the considered view that merely based on the audited accounts the addition made by the ld. AO cannot be considered that the alleged receipt is reflected under which head.
Therefore, based on this aspect of the matter we found merit in the arguments of the ld. DR and considering the arguments of the ld. AR the issue needs to be verified on the claim made by the assessee by the ld. AO. Therefore, based on these observations ground no. 6 raised by the assessee is allowed for statistical purposes.
In the result appeal filed by the revenue is partly allowed.
Now we take up the cross-objection CO/12/JPR/2024 filed by the assessee. In this cross objection the assessee precisely take up the two ground one is that Learned Assessing Officer has erred in not following the directions of the Learned CIT(A) who has allowed the appeal of the assessee and second one on the merits of the case not granting the relief to the regarding deletion of addition of Rs. 17,25,82,500/- on account of unsecured loans, Rs. 97,12,125/- for interest on unsecured loan and Rs. 29,83,628/- on account of rent receipts. allowed the ground raised by the revenue and the cross objection raised are related to that matter only on merits and therefore, we also considered the cross objection filed by the assessee as partly allowed.
In the result cross objection filed by the assessee is partly allowed.
Order pronounced in the open court on 11/09/2024.
Sd/- Sd/- ¼ Mk0 ,l- lhrky{eh ½ ¼ jkBksM deys'k t;UrHkkbZ ½ (Dr. S. Seethalakshmi) (Rathod Kamlesh Jayantbhai) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 11/09/2024 *Ganesh Kumar, Sr. PS आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. The Appellant- DCIT, Circle-06, Jaipur, NCRB, Jaipur izR;FkhZ@ The Respondent- Paradise Properties, Jaipur 2. vk;dj vk;qDr@ The ld CIT 3. vk;dj vk;qDr¼vihy½@The ld CIT(A) 4. 5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 6. xkMZ QkbZy@ Guard File (ITA No. 324/JP/2024 & CO No. 12/JP/2024) vkns'kkuqlkj@ By order,
सहायक पंजीकार@Aेेज. त्महपेजतंत