BUNTS INDUSTRIES P. LTD,MUMBAI vs. ACIT 10(3), MUMBAI

सुनवाई क" तार"ख /Date of Hearing : 06-04-2017 घोषणा क" तार"ख /Date of Pronouncement : 26-04-2017 आदेश / O R D E R

PER RAMIT KOCHAR, Accountant Member

ITA 3164/Mum/2014 2

“1. On the facts and in the circumstances of the case and in law, the learned C.I.T. (A) erred in dismissing the appeal.

2. On the facts and in the circumstances of the case and in law, the learned C.I.T. (A) erred in dismissing the appeal and that too without giving full and proper opportunity of being heard in the matter.

3. On the facts and in the circumstances of the case and in law, the learned C.I.T. (A) erred dismissing the appeal and that too without appreciating fully and properly the facts of the case.

4. On the facts and in the circumstances of the case and in law, the learned C.I.T. (A) erred in not following the directions of the Appellate Tribunal and dismissing the appeal.

5. On the facts and in the circumstances of the case and in law, the learned C.I.T. (A) erred in not admitting additional evidences and dismissing the appeal.”

“This assessee's appeal challenges Id. CIT (A) order confirming penalty u/s 271 (l)(c) of the Act regarding Assessment Year 2008-09. 2. The main grievance of the assessee is that CIT(A) has dismissed his appeal without adverting to facts and nature of the grounds raised, that too, by a totally non-speaking order.

ITA 3164/Mum/2014 3

3. As we see from Id. CIT (A) order whose operative part reads as under:

"In the grounds of appeal as above it has been simply been requested that the matter may be remanded to the AO and opportunity may be afforded. However, before me the assessee has not brought on record the ''reasonable cause" because of which it failed to furnish the details called for by the AO. Even in the letter dated 28.1.2011 no such submissions have been made. In view of this, I am of the opinion that the assessee is not having any reasonable cause for giving one more opportunity and hence the findings given in the assessment order are upheld Even on merit, the assessee has not given any detailed submissions with regard to the additions made. Hence, I have no reason to deviate with the findings given by the AO in the assessment order."

It nowhere states the points for determination, decision thereon or reasons in support thereof as provided u/s 250(6) of the Act.

4. Although nobody has turned up on assessee's behalf, but we have heard Id DR. The order of CIT (A) is too cryptic. Apart from being non- speaking order, it nowhere states points for determination, decision thereon with reasons in support as required under the provisions of the Act.

5. Therefore, we have no hesitation in setting aside the CIT(A)’s order and restore the matter back to him with a direction to decide the appeal on merits in accordance with law.

Order pronounced in the open court on 15.6.2012.”

Thus as could be seen that the tribunal in first round of litigation set aside the matter back to the file of the ld. CIT(A) with a direction to decide the matter afresh on merits in accordance with law.

In the second round of litigation, the assessee had explained that there was a failure on the part of Chartered Accountant Mr. Vijay Patil to conduct proper audit for the impugned period and the assessee merely signed the documents without reading the same which were sent to the assessee by the CA which were sent only on the last date of filing the return of income It was submitted that hence the ITA 3164/Mum/2014 4 assessee appointed new CA as he was not satisfied with the performance of CA Mr Vijay Patil. The documents for relevant period were with the old CA , Mr Vijay Patil who was not co-operating and refusing to hand over the records of the assessee , hence difficulty was faced by the assessee in producing the evidences in first round of litigation before the AO. The reply of the assessee before learned CIT(A) is as under:-

"We refer to the personal hearing by the undersigned at your office on 07.01.2014 at 11.30 a.m. regarding above, mentioned subject. In this regard, we would like to bring to your notice the fact of our case for your kind consideration:

We had appointed Mr. Vijay Patil as our Auditor for the financial year period 2006-07 & 2007-08. In the financial year 2007-0B our Auditor had not audited our accounts properly and sent us the papers for signing· on the last date of filing returns. With no option left, the Directors of the company signed the papers and filed the Income-tax Return. Being dissatisfied with the auditor, we changed our auditor from the financial year 2008-09 to M/s Arvind Nagda and Associates. Later we received a notice from the department for the scrutiny for the Assessment. Year 2008-09. When we appointed M/s. Arvind Nagda & Associates for the scrutiny they did not have any papers of the previous year in hand as all files were with Mr. Vijay Patil. He was not co-operating to us for the scrutiny matter for which we have filed a complaint at CA Association also.

Since the financial year 2007-08 our company was in loss due to which we have reduced staff and are unable to maintain records at our end. Therefore, all records were kept at CA's office. Later we managed to collect all papers as per the scrutiny; the undersigned and his ex-employee Mr, Murlee KK visited the scrutiny officer. But at that time the officer told that it was too late to consider our papers as order was already passed. On receipt of order we had applied for appeal and then later tribunal for justice. From tribunal once again remand back to your office for the consideration.

ITA 3164/Mum/2014 5 We have got one more scrutiny notice for the Assessment Year 2009-10 which was cleared by us and got the order also (enclosed copy of order).

We request your kindself to consider our case and do the needful.”

The ld. CIT(A) disposed of the appeal in the second round of litigation vide its appellate orders dated 13-02-2014 , by holding as under:-

“2.7 I have carefully considered the direction given by the Hon'ble ITAT and the submissions of the appellant. The appellant was given as many as four opportunities by issue of notice u/s.143(2) as well as 142(1) before levy of penalty u/s.271 (1)(b). After the levy of penalty three more opportunities were specifically given. Adhering to the principles of natural justice the AO had given reasonable opportunities, but still the appellant was not in a position to comply by filing the relevant details called for.

2.8 As mentioned above, during the appellate proceeding, a letter dated 27.01.2011 received in this office on 28.01.2011 containing additional evidences were filed by the appellant but without any request for admitting such additional evidences. It was the submission of the appellant that since F.Y.2007-08 the company was incurring loss and there were retrenchment of the staff and it was not in a position to maintain the records and therefore all the records were kept at C.A.’s office. The contention of the appellant is that one Shri Vijay Patil was the auditor during F.Y. 2006-07 and 2007-08 and not satisfied with his work he was changed in the F.Y. 2008-09 and the new auditor M/s Arvind Nagda & Associates was appointed in his place. Since all the books were kept with Shri Vijay Patil, he did not hand over the records to the new AR. I find all these explanations were not supported by any evidence. Even though business is running in a loss, the appellant has not closed down the business hence, the books of accounts and other documents are supposed to be maintained at the registered office. No evidences were produced before me to show that the registered office is either shifted or it is closed and records were kept in the CA's office for safe custody. No evidence was also furnished before me to show that the books were kept in the custody of Mr. Vijay Patil, the Ex- Chartered Accountant. No such explanation was offered during the assessment proceedings before the AO highlighting this fact.

ITA 3164/Mum/2014 6 Hence, according to me, the entire theory floated is only an after thought and I am inclined to accept the concocted story given by the appellant. Further, I do not accept this as a reasonable cause in entertaining the additional evidences.

2.8.1. I am unable to entertain the fresh evidences filed before me as per the conditions envisaged in Rule 46A of Income Tax Rules. Rule 46A is produced here for the, sake of convenience.

“(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 (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 Deputy Commissioner (Appeals) or, as the case may be, the Commissioner (Appeals) records in writing the reasons for its admission.

(3) The Deputy 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 ITA 3164/Mum/2014 7 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 Deputy 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".

2.8.2 The CIT(A} can entertain any evidence other than the one produced by the appellant before the Assessing Officer provided the exceptional conditions mentioned in Clause (a) to (d) above in Rule 46A are satisfied.

The facts in the present case is as under:

2. Conditions of Clause (b), where the appellant was prevented from sufficient cause from furnishing the evidence which was called for by the Assessing Officer is also not applicable because the AR of the appellant has not brought any evidence before me to ITA 3164/Mum/2014 8 show that the appellant was prevented from sufficient cause in furnishing the evidence in support of his contention.

3. Clause (c} is not satisfied by the appellant since he has not brought out any sufficient reasons to show that the appellant was prevented from filing the evidences.

4. Conditions of clause (d) that where the Assessing Officer has failed to give sufficient opportunity to the appellant to adduce evidence related to the grounds taken in appeal is also not applicable to the present case.

2.8.3 From the assessment order as well as from the detailed submissions made by the AR nowhere it has been pointed out that the Assessing Officer has not given sufficient opportunity to the appellant. In fact, for the specific opportunity given by the Assessing Officer, the appellant has failed to furnish the details called for.

2.8.4 I rely on the decision of Kerala High Court in the case of Unnikrishnan (C.) v. Commissioner of Income-tax reported in 233 ITR 485 KER in this regard.

The head note is as under:

Appeal--Appeal to Commissioner (Appeals) -Production of additional evidence--Requirements to be satisfied -No attempt made by assessee to produce additional evidence either before Assessing Officer or AAC—Failure of assessee to follow requirements of rule 46A--AAC justified in not considering additional evidence--Income-tax Rules, 1962, r. 46A.

Rule 46A of the Income-tax Rules, 1962, relates to appellate proceedings before the Commissioner, in the matter of production of additional evidence before the Deputy Commissioner of Appeals and the Commissioner (Appeals). Such production is conditioned by certain situations. The assessee has to show that the Assessing Officer has refused to admit the evidence. The assessee also has to show alternatively that he was prevented by sufficient cause from producing the evidence before the Assessing Officer. Alternatively, ITA 3164/Mum/2014 9 further, the assessee also has to show its relevancy to the grounds of appeal sought, to be urged. Lastly, the assessee also has to establish that the Assessing Officer did not afford him sufficient opportunity In regard thereto.

The High Court, in a reference, has to act on the basis of the contents of the statement of case. The High Court is not permitted to travel beyond the statement of case.

Held, that the order of the Appellate Assistant Commissioner showed that not even an iota of additional evidence was produced before him in support of the assessee's case that there was improper service of notice on him and that he himself was not running the hotel but someone on his behalf was running it. Even before the Tribunal the point relating to someone running the hotel on behalf of the assessee was withheld. Therefore, no attempt was made by the assessee either before the Income-tax Officer or the Appellate Assistant Commissioner to produce additional evidence. Therefore, the Tribunal was right in holding that the Appellate Assistant Commissioner was justified in not considering the additional evidence.

2.8.5 Reliance is also placed on Commissioner of Income-tax v, Ranjit Kumar Choudhury reported in 288 ITR 179 (Gau).

The head note is reproduced below:

Appeal to Commissioner (Appeals)--Powers of Commissioner (Appeals)-- Power to admit additional evidence-Scope of rule 46A- Documentary evidence not tendered before Assessing Officer-No reason for failure to adduce evidence-Documents not admissible as evidence before Commissioner (Appeals- Income tax Act, 1961, s. 250-lncome tax Rules, 1,962, r.46A.

Rule 46A(1) of the Income-tax Rules; 19'62, enumerates four circumstances allowing the appellant/assessee to produce additional evidence namely,

(i) if the Assessing Officer refuses to admit the evidence which ought to have been admitted ; ITA 3164/Mum/2014 10

(ii) when the appellant was prevented by sufficient. cause from producing such evidence which he was called upon to produce by the Assessing Officer;

(ii) where the appellant was prevented by sufficient cause from producing before the Assessing Officer any evidence which is relevant to any ground of appeal and lastly

(iv) when no sufficient/reasonable opportunity of hearing to the appellant was given to adduce any relevant evidence by the Assessing Officer at the time of passing the order impugned. Therefore, it is clear and unambiguous that only in case of availability of anyone of those four grounds mentioned in sub-rule (1)· of rule 46A, the production of additional evidence is permitted.

2.7.6 Since none of the above 4 exceptional conditions mentioned in Rule 46A are satisfied, the additional evidences filed by the appellant is not admitted and hence the addition made by the AO is sustained. This ground of appeal is dismissed.”

Thus, it could be observed from the appellate order of learned CIT(A) dated 13-02-2014 in second round of litigation that the ld. CIT(A) did not admit additional evidences filed by the assessee holding that the conditions mentioned in Rule 46A of Income-tax Rules, 1962 were not fulfilled by the assessee and hence the addition made by the A.O. were sustained by learned CIT(A) vide appellate orders dated 13-02-2014 passed in second round of litigation.

4. Aggrieved by the appellate order dated 13-02-2014 passed by ld. CIT(A) in second round of litigation, the assessee filed an appeal before the tribunal in second round of litigation.

5. The ld. counsel for the assessee submitted that the tribunal in the first round of litigation, directed the ld. CIT(A) to adjudicate the matter on merits ITA 3164/Mum/2014 11 but it is unfortunate that in the second round of litigation also , the ld. CIT(A) did not admit the additional evidences filed by the assessee in support of its contentions on merits. The ld. counsel drew our attention to the correspondences between the said Chartered Accountant, Mr Vijay Patil and the assessee , whereby a complaint has been lodged by the assessee against the said erring chartered accountant with the Institute of Chartered Accountants of India vide letter dated 05-08-2011 complaining about non handing over of the records of the assessee by the said CA , Mr Vijay Patil to the assessee. He also drew our attention to the letter of ICAI dated 19-10- 2011 about action taken to get records from said erring CA Mr. Vijay Patil. The replies of said CA Mr Vijay Patil are also placed on records. The entire correspondence with ICAI and the erring CA is placed on record at page 2-10. The ld. counsel further drew our attention to the fact that the assessee has sufficient reasons which prevented assessee in presenting his case before the authorities below and submitted that prejudice is caused to the assessee by the appellate order of the ld. CIT(A) in not admitting the additional evidences by invoking Rule 46A of Income-tax Rules, 1962. Thus, the ld. counsel prayed that the matter may be restored to the file of the ld. CIT(A) with a direction to admit the additional evidences and adjudicate the matter on merits in accordance with law. It was submitted that after admitting the additional evidences, the ld. CIT(A) can call for remand report from AO in accordance with Rule 46A of 1962 Rules.

ITA 3164/Mum/2014 12

“This assessee's appeal challenges Id. CIT (A) order confirming penalty u/s 271 (l)(c) of the Act regarding Assessment Year 2008-09. 2. The main grievance of the assessee is that CIT(A) has dismissed his appeal without adverting to facts and nature of the grounds raised, that too, by a totally non-speaking order.

3. As we see from Id. CIT (A) order whose operative part reads as under:

"In the grounds of appeal as above it has been simply been requested that the matter may be remanded to the AO and opportunity may be afforded. However, before me the assessee has not brought on record the ''reasonable cause" because of which it failed to furnish the details called for by the AO. Even in the letter dated 28.1.2011 no such submissions have been made. In view of this, I am of the opinion that the assessee is not having any reasonable cause for giving one more opportunity and hence the findings given in the assessment order are upheld Even on merit, the assessee has not given any detailed submissions with regard to the additions made. Hence, I have no reason to deviate with the findings given by the AO in the assessment order."

It nowhere states the points for determination, decision thereon or reasons in support thereof as provided u/s 250(6) of the Act.

ITA 3164/Mum/2014 13

Order pronounced in the open court on 15.6.2012.”

Thus as could be seen that the tribunal in first round of litigation set aside the matter back to the file of the ld. CIT(A) with a direction to decide the matter afresh on merits in accordance with law. We have observed that the ld. CIT(A) in the second round of litigation refused to admit the additional evidences by invoking Rule 46A of 1962 Rules. On the other hand, the assessee has produced large number of documents with respect to the complaint lodged by the assessee with The Institute of Charted Accountants of India against its erstwhile erring CA Mr Vijay Patil who was not handing over relevant records to the assessee which disabled assessee in filing evidences before the AO. Thus, in our considered view the assessee has established a reasonable cause for not presenting the evidences before the AO at the time of framing of the assessment order dated 25-11-2010 passed by the AO u/s 143(3)(ii) of 1961 Act. The Rule 46A of 1962 Act is an aid to advance justice to compute correct income which can be brought to tax under the provisions of 1961 Act in the hands of tax-payer so as to achieve mandate of 1961 Act which itself derives its powers from Article 265 of Constitution of India which stipulates that taxes are not to be imposed save by authority of law and No tax shall be levied or collected except by authority of law. Rule 46A of 1962 Act cannot be used as sword to stifle bona-fide tax-payers rather it is a shield in the aid of bona-fide tax-payers as well Revenue to advance the cause of justice and to achieve mandate of 1961 Act. Keeping in view the factual matrix of the case as it emerges from the records and to advance justice , we are of the considered view that, in the interest of substantial justice and fair play, this matter needs to be set aside and restored to the file of the ld. CIT(A) with a direction to admit all the additional evidences and ITA 3164/Mum/2014 14 explanations filed by the assessee in remand proceedings before learned CIT(A) and, thereafter, adjudicate the appeal on merits in accordance with law after considering the additional evidences and explanations filed by the assessee in its defense in remand proceedings . The learned CIT(A) shall forward additional evidences and explanations filed by the assessee in set aside proceedings before learned CIT(A) in its defense to the AO for his enquiry, examination and verification as is contemplated u/r 46A of 1962 Rules. Needless to say that proper and adequate opportunity of being heard shall be provided by the ld. CIT(A) to the assessee in accordance with principles of natural justice in accordance with law. We order accordingly.