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Income Tax Appellate Tribunal, KOLKATA BENCH “B” KOLKATA
Before: Shri Aby.T Varkey & Shri Waseem Ahmed
आदेश /O R D E R
PER Waseem Ahmed, Accountant Member:-
This appeal by the Revenue is directed against the order of Commissioner of Income Tax (Appeals)-VIII, Kolkata dated 18.12.2012. Assessment was framed by ITO Ward-9(4), Kolkata u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) vide his order dated 30.12.2011 for assessment year 2009-10.
At the time of hearing none appeared on behalf of assessee though notice of hearing was sent to assessee. However we decided to hear the present appeal as we find that the hearing is possible without appearance of assessee or by Ld. AR for the assessee. Shri Debasish Banerjee, Ld. Senior Departmental Representative represented on behalf of Revenue.
ITO Wd-9(4), Kol. Vs. M/s K.N. Wire Pvt. Ltd. Page 2 3. Brief facts in this appeal are that assessee in the present case is a Private Limited Company and engaged in iron ore business. The assessee, for the year under consideration filed its return of income dated 15.09.2009 declaring total income of ₹1,43,370/- which is comprising of income from business and house property. Subsequently case was selected under scrutiny and accordingly notice u/s 143(2)/142(1) of the Act was issued upon assessee. Assessment was framed u/s 143(3) of the Act at a total income of ₹34,88,490/- after making certain additions / disallowances which have been discussed in subsequent paragraph.
First issue raised by Revenue in this appeal is that Ld. CIT(A) erred in deleting the addition made by Assessing Officer for ₹14.38 lacs on the basis of additional evidences which were accepted in violation of the provision of Rule 46A of the Income Tax Rules, 1962 (hereinafter referred to as ‘the Rule’).
4.1 The assessee in the year under consideration has deposited cash of Rs.24,12,090/- and simultaneously withdrawn the same for Rs.9,74,090/-. As a corollary there was net cash deposit of ₹14.38 lacs by assessee in its bank account in the year under consideration. On question by AO about the source of such cash deposit in its bank account, the assessee failed to furnish necessary details in spite of several opportunities provided to him. Therefore, AO has treated the same as unexplained cash credit u/s. 68 of the Act and added to the total income of assessee.
Aggrieved, assessee preferred an appeal before Ld. CIT(A) whereas assessee submitted that there was cash withdrawal from bank for ₹24,12,090/- which needs to be adjusted with the total cash deposit during the year. Accordingly, Ld. CIT(A) deleted the addition made by AO.
Aggrieved by this, Revenue has come up in appeal before us.
Before us Ld. DR submitted that relief was granted by the Ld. CIT(A) on the basis of additional evidence submitted by assessee which were admitted ITO Wd-9(4), Kol. Vs. M/s K.N. Wire Pvt. Ltd. Page 3 without giving opportunity to AO as required under Rule-46A of the Income tax Rule. He accordingly prayed before Bench to restore this issue to the file of AO for fresh adjudication.
We have heard Ld. DR and perused the materials available on record. The issue in the instant case relates to disallowance made by AO on account of cash deposited by assessee in its bank account which was not explained at the time of assessment proceedings. However, Ld. CIT(A) has granted relief to assessee by observing that there was cash deposit and cash withdrawal simultaneously which was not looked by AO at the time of assessment proceedings. However, on perusal of appellate order, we find that additional evidence were submitted by assessee before Ld. CIT(A) and no remand report was called for on such additional evidence. The same fact can be pointed from the relevant extract of the order of Ld. CIT(A) which is reproduced below for the sake of better understanding : “The A/R of the appellant further submitted an additional written statement towards cash summary for the period 01.04.2008 to 31.03.2009 mentioning the details of date wise cash deposit, cash withdrawal, opening balance and closing cash balance and also showing the relevant date wise cash book entries for the period. On going through the details of statement furnished by the appellant, I find that each and every entry of the deposit in the bank A/Cs is either out of the withdrawal amount of the bank A/Cs or out of cash balance available in the cash book on the date of deposit.”
From the above, we find that some additional written statement explaining the entries of cash deposited and withdrawn was submitted and accordingly the ld. CIT-A granted relief to assessee. We also find that such additional written statement was not provided to AO for cross-examination. Therefore, in our view the provision of Rule 46A has been contravened by Ld. CIT(A). At this juncture, we find important to reproduce same:- “[Production of additional evidence before the [Deputy Commissioner (Appeals) [and Commissioner (Appeals)]. 46A.(1) ………. (2) … … (3) The [Deputy Commissioner (Appeals)] [or, as the case may be, the Commissioner (Appeals)] shall not take into account any evidence produced ITO Wd-9(4), Kol. Vs. M/s K.N. Wire Pvt. Ltd. Page 4 under sub-rule (1) unless the [Assessing Officer] has been allowed a reasonable opportunity- From a plain reading of the above provision, we find that Assessing Officer was to be given a reasonable opportunity to examine the additional documents which was produced before Ld. CIT(A) first time. Hence, in view of above, we find that the provision of Rule 46A of the IT Rules, has been contravened. Therefore, we are of the view that this issue needs to be re- examined at the level of Assessing Officer. Hence, this ground of Revenue’s appeal is allowed for statistical purpose.
Next issue raised by Revenue in ground No. 3 and 4 is that Ld. CIT(A) erred in deleting the interest expense claimed by assessee for ₹9.87 lakh on the basis of additional evidence which were accepted in violation of the provision of Rule 46A of the Income Tax Rules, 1962.
The assessee has shown in its balance-sheet loan from M/s Reliance Capital Ltd. (MRCL for short) and from ICICI Bank for ₹75 lakh and ₹ 10 lakh respectively. The assessee on such loan has incurred interest expense for a sum of ₹9.87 lakh which was claimed as deduction in the books of account. On question by AO about the utilization of such loan, assessee failed to furnish necessary details at the time of assessment proceedings. Therefore the AO has disallowed the interest expenses of ₹ 9.87 lakh and added to the total income of assessee.
Aggrieved, assessee preferred an appeal before Ld. CIT(A) who deleted the addition made by AO. Aggrieved by this, Revenue has come up in appeal before us.
Before us Ld. DR submitted that relief was granted by Ld CIT(A) on the basis of additional evidence which were admitted in contravention to the provision of Rule 46A of the IT Rules. He prayed before Bench to restore this issue to the file of AO for fresh adjudication.
We have heard Ld. DR and perused the materials available on record. At the outset we find that Ld. CIT(A) has considered the additional evidence for giving relief to assessee. The additional evidences are the sanction letters ITO Wd-9(4), Kol. Vs. M/s K.N. Wire Pvt. Ltd. Page 5 of loan from MRCL and ICICI Bank along with their repayment schedule. On the basis of repayment schedule, the payment of interest was confirmed. On perusal of the order of Authorities Below, we find that no remand report has been called for from AO by Ld. CIT(A) in pursuance to the provision of Rule 46A of the IT Rules. Therefore, we are inclined to restore this issue back to the file of AO for fresh adjudication as per law. Hence, this ground of Revenue is allowed for statistical purpose.
Last issue raised by Revenue in this appeal is that Ld. CIT(A) erred in deleting the addition made by AO for ₹ 8.59 lakh on the basis of additional evidence which were accepted in violation of the provision of Rule 46A of the Income Tax Rules, 1962.
The assessee in the year under consideration has claimed bank charges and commission expense of ₹8.59 lakh in its profit and loss account. On question by AO for details for such expense, assessee failed to furnish the supporting details. Therefore, AO disallowed the same and added to the total income of assessee.
Aggrieved, assessee preferred an appeal before Ld. CIT(A) who deleted the addition made by AO. Aggrieved by this, Revenue has come up in appeal before us.
Ld. DR before us submitted that relief was granted by Ld. CIT(A) on the basis of additional evidence which were admitted in contravention to the provision of Rule 46A of the IT Rules. He prayed before Bench to restore this issue to the file of AO for fresh adjudication.
We have heard rival contentions and perused the materials available on record. At the outset, we find that additional evidence was submitted by assessee as recorded in the appellate order. The relevant extract from the order of Ld CIT(A) is reproduced below for the sake of better understanding of the case:- “.. With regard to Bank charge & commission of Rs.8,58,551/, the A/R submitted that the appellant’s total turnover in the Iron Ore business in this year was more than Rs.225.44 lacs and the appellant being totally new in this line of trading business has to pay commission to different parties for ITO Wd-9(4), Kol. Vs. M/s K.N. Wire Pvt. Ltd. Page 6 procuring the order and for making payment through Demand Draft, TRGS, NEFT and therefore it had to incur huge amount of bank charges. It is further submitted that all such amount paid through Bank and in support of this contention, the appellant furnished the ledger copy of Bank charges and commission marked as Annexure ’E’ and urged to allow the same as business expenses as these expenses were wholly and exclusively incurred from the business purposes.”