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Income Tax Appellate Tribunal, F Bench, Mumbai
Before: Shri Jason P. Boaz & Shri Sandeep Gosain
This appeal by Revenue is directed against the order of the CIT(A)-5, Mumbai dated 29.01.2015 for A.Y. 2010-11.
The facts of the case, briefly, are as under: - 2.1 The assessee, a company engaged in software development, i.e. developing mobile/wireless applications, did not file its return for A.Y. 2010-11 within the due date specified under section 139(1) or under section 139(4) of the Income Tax Act, 1961 (in short 'the Act'). The case was taken up for scrutiny and notices under section 142(1) of the Act issued to the assessee elicited no response from it. In the course of hearings fixed, the learned A.R. of the assessee vide letter dated 17.08.2012 filed copies of Audit Report under the Companies Act, 1956 and audited financial statements for the year under consideration. It was also submitted that other information called for could not be submitted since the assessee company had sold its business in July, 2009 and M/s. Mobiapps (India) P. Ltd. therefore the same could not be traced. The AO issued a further detailed show cause notice on 22.02.2013 extracted at pages 2 to 4 of the order of assessment and reply thereto is also reproduced at pages 4 and 5 thereof. The AO observed that the submissions made by the learned A.R. of the assessee are general in nature and is without filing any return of income or any supporting evidences and therefore not acceptable. In that view of the matter, the Assessing Officer (AO) proceeded to complete the assessment ex-parte under section 144 of the Act vide order dated 26.03.2013 wherein the assessee’s income was determined at `6,01,32,330/-; making the following disallowances: - (i) Disallowance of expenditure claimed `83,76,955/- `6,54,46,808/- (ii) Advance from customers 2.2 Aggrieved by the order of assessment for A.Y. 2010-11 dated 26.03.2013 the assessee preferred an appeal before the CIT(A)-5, Mumbai. The learned CIT(A) disposed of the appeal vide the impugned order dated 29.01.2015 allowing the assessee partial relief by deleting the addition of `6,54,48,808/- to the assessee’s income made by the AO on account of unexplained advance from customers, as remission or cessation of liability under section 41(1) of the Act. 3.1.1 Revenue, being aggrieved by the order of the CIT(A)-5, Mumbai dated 26.03.2013 for A.Y. 2010-11, has preferred this appeal, raising the following grounds - “On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in correct in deleting the addition of the advances received by the assessee from customers amounting to Rs.6,54,46,808/- by admitting fresh evidence during the appellate proceedings, without allowing the Assessing Officer an opportunity to examine the evidence, submitted, in contravention of Rule 46A of the Income Tax Rules.” 3.1.2 The learned D.R. for Revenue was heard in support of the grounds raised and submitted that a perusal of the impugned order of the learned CIT(A) vis-a-vis the ex-parte order of assessment for A.Y. 2010-11, clearly show that the learned CIT(A) allowed the assessee relief by deleting the addition of advances received by the assessee from customers amounting
M/s. Mobiapps (India) P. Ltd. to `6,54,46,808/- ostensibly by admitting fresh evidence in appellate proceedings. It is contended that when no return of income for the year under consideration nor entire details in this regard called for were not filed before the AO leading to an adverse finding, the learned CIT(A) had grossly erred in not granting the AO adequate opportunity to examine and rebut the additional evidences filed, before adjudicating and allowing the assessee’s claim; which is in gross violation of the provisions of Rule 46A of the Income Tax Rules, 1962 (in short ‘the Rules’). It was prayed that the impugned order of the learned CIT(A) on this issue be set aside and the same be restored to the file of the AO for fresh examination of the additional evidences filed and fresh adjudication thereon. 3.2 The learned A.R. of the assessee was heard in the matter and submitted that there was no objection for this issue to be restored to the file of the AO for fresh examination and adjudication. 3.3.1 We have heard the rival contentions and perused and carefully considered the material on record. Admittedly, the assessee company did not file its return of income for A.Y. 2010-11 within the time limit prescribed under section 139(1) or 139(4) of the Act or in response to notices issued under section 142(1) of the Act. A perusal of the order assessment shows that except for filing copies of Auditors Report under the Companies Act, 1956 and financial statements for the year under consideration, and admittedly except for furnishing of general explanations, no details/evidence to establish its claims expenditure incurred or for establishing or confirming the existence of the balances shown as ‘advances from customers’. In this factual matrix, the AO after affording the assessee a number of opportunities to explain its case was, in our view, constrained to complete the assessment exparte under section 144 of the Act. 3.3.2 On appeal, we find that the learned CIT(A) allowed the assessee relief by deleting the addition of `6,54,46,808/- made under section 41(1) of the Act ostensibly on the basis of certain explanations, evidences/details put forth which were not placed before the AO. In all fairness and in keeping M/s. Mobiapps (India) P. Ltd. with the provisions of Rule 46A(3) of the Rule, it was incumbent on the learned CIT(A), that before taking into account such evidences/details he ought to have afforded the AO reasonable opportunity to examine the same and rebut it if required. In our view, failure to do so by the learned CIT(A), has resulted in violation/contravention of the provisions of Rule 46A(3) of the Rules. In this view of the matter, we set aside the finding/order of the learned CIT(A) in deleting the addition of `6,54,46,808/- under section 41(1) and restore this issue to the file of the AO for fresh examination and adjudication after affording the assessee adequate opportunity of being heard and to file detailed explanation required. We hold and direct accordingly. Consequently, Revenue’s ground is allowed for statistical purposes.