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Income Tax Appellate Tribunal, DELHI BENCH ‘D’ NEW DELHI
Before: SHRI I.C. SUDHIR & SHRI L.P. SAHU
ORDER
Per L.P. Sahu, Accountant Member:
This appeal by the assessee is directed against the order of ld. CIT(A)- XVIII, New Delhi dated 30.09.2013 for the assessment year 2009-10.
The assessee has raised as much as seven grounds of appeal, out of which grounds Nos. 1 to 3 are not pressed. The same are, therefore, dismissed as such. By way of remaining four grounds of appeal, the assessee has challenged (i) refusal to admit the additional evidences furnished before the ld. CIT(A); (ii) sustenance addition of Rs.26,91,22,083/- as bogus liability on account of sundry creditors and (iii) disallowance of Rs.63,48,037/- on account of depreciation.
3. The brief facts of the case are that the assessee filed its return of income on 30.09.2009 declaring total income at Nil. However, the assessee had declared income u/s. 115JB of the IT Act at Rs.2,50,088/- as net profit on maintenance fee received of Rs.35,01,12,323/-. The case was selected for scrutiny under CASS. Notice u/s. 142(1) was issued on 25.02.2011 requiring the assessee to furnish certain details/information such as Tax Audit report u/s. 44AB for A.Y. 2009-10; Audited sets of accounts for A.Y. 2009-10 and 2008-09 including balance sheet and profit & Loss Account along with all its schedules & annexures; detailed note on business activity of assessee, computation of income etc. Thereafter, again vide order sheet entry dated 01.10.2011, the assessee was required to furnish following specific details/evidences : (i). Name & Address of shareholders, unsecured loans, debtors, sundry creditors, expenses payable, maintenance fee received, resolution expenses, valuation charges, asset management charges, advisory charges, other legal charges and product/service enhancement, selling and distribution expenses along with amount and ledger account copy; (ii). Confirmation and subsequent payment details of unsecured loans, sundry creditors and expenses payable; (iii). Copy of TDS return along with party details with address;
(iv). Copy of bank statement for verification and (v). Bills for addition to assets.
Plenty of opportunities were extended to the assessee to furnish the aforesaid details/evidences, but the assessee failed to furnish Tax audit report in form 3CD, ledger account of parties in the accounts of assessee, names and addresses of the parties, bills for addition to assets, bank statements, details of subsequent payments, TDS returns etc. The Assessing Officer observed that it was at the fag end of time-barring period of assessment that the assessee furnished confirmations of only four creditors wherein only the closing balances were confirmed and none of the creditors were found filing the return with ROC. The AO also noticed that all these confirmations were signed by the common director of the companies, Ms. Sweta. The AO also noticed that auditors reported in clause 1(a) of annexure to Form 3CA that the assessee has not maintained proper records showing full particulars including quantitative details and situation of fixed assets. It was, therefore, observed that in absence of any details and complete documentary evidences and in view of observations of the auditors, the utilization of assets for the purpose of business could not be verified. The AO, therefore, in view of the aforesaid facts and for want of complete supporting details/documentary evidences, rejected the account books of assessee u/s. 145 of the Act and disallowed the claim of sundry creditors of Rs.26,91,22,083/- and depreciation of Rs.63,48,037/- vide assessment order dated 29.12.2011.
The assessee challenged the assessment order in appeal before the ld. CIT(A) where the assessee furnished written submissions and some additional evidences as mentioned at page 3 of the first appellate order as under : a) Pan card copies of the companies b) Claims of expenses made by (i). X Corporation Ltd. amounting to Rs.888.56 lacs (ii). Juries Ignenium for Rs.292.60 lacs and c) For acquiring software from ETNA Software Private Limited. The learned CIT(A) forwarded the submissions of the assessee and additional evidences to the Assessing Officer for submitting the remand report, on which the Assessing Officer has furnished the remand report dated 08.11.2012, which is reproduced in the impugned order at page 2 to 5 of the first appellate order. In this remand report the Assessing Officer has tried to rebut each and every point raised by assessee. It was explained by AO that more than sufficient opportunities were given to the assessee to furnish the documentary evidences, failing which, it was told, that the order shall be made in the manner as contemplated u/s. 144 of the Act, but since no supporting documents were furnished to establish the genuineness of transactions with sundry creditors etc., the action of the AO cannot be said to be unjustified. The AO on disallowance of depreciation, reiterated the contents of the assessment order. Analyzing the provisions of Rule 46A of the IT Rules, the AO reported that since the Assessee failed to establish that it was prevented by sufficient cause to produce the evidences in assessment proceedings, hence, the additional evidences furnished by the assessee for the CIT(A) are not fit to be admitted. Again, the ld. CIT(A) vide letter dated 05.12.2012, the AO was asked to submit fresh report on merit of the case which he furnished vide letter dated 25.04.2013. The assessee also filed rejoinder of the remand reports as reproduced in the impugned order. After making such a vast exercise, the ld. CIT(A) finally did not admit the additional evidence on record placing reliance on the decision of Hon’ble Delhi High Court in the case of Moser Bear India Ltd vs. Addl. CIT, 17 DTR 98 and after concurring with the views of the AO, confirmed the disallowances/additions made in the assessment order.
Addressing to the first issue regarding refusal to admit the additional evidence, the ld. Counsel for the assessee contended that the ld. CIT(A) had forwarded the submissions of the assessee along with the additional evidences to the AO for his comments. In response the AO had also furnished two remand reports and the assessee has also furnished the rejoinder thereof.
It was submitted that after making such great exercise, i.e., calling of the remand report on merits as contemplated in sub-rule (3) of rule 46A, the ld. CIT(A) has no discretion for refusing to admit the additional evidence on record for consideration. For this proposition, reliance is placed on the following decisions : (i). Dhanna Ram Garg vs. ITO (ITAT Delhi Bench dt. 12.08.11). (ii). M/s. Roop Tikamdas vs. ACIT (ITAT Mumbai dated 13.02.2013) (iii). Advance Agencies Pvt. Ltd. vs. ITO (ITAT Delhi Bench dt. 27.05.11) (iv). Manesh M. Shah vs. DCIT (ITAT Delhi Bench dt. 30.06.2009) (v). Shahrukh Khan vs. DCIT 13 SOT 61 (ITAT Mum.) The ld. DR, on the other hand, relied on the order of the ld. CIT(A) and the remand reports furnished by the AO.
Having considered the rival submissions and gone through the material available on record, we find substance in the contentions of the ld. Counsel for the assessee. It is notable that even though the remand report of the AO was sought by the ld. CIT(A) on the said additional evidences, he finally did not admit such evidences for consideration. Such an action of the ld. CIT(A) is not justified in view of the proposition made in the case of Sahrukh Khan vs. DCIT (supra), where the Tribunal has held as under : “Thus on reading of all these three sub-rules it is implicitly clear that first stage is the assessee sought permission for the admission of additional evidence, the next stage would come that such permission would be granted by recording reasons and thereafter the additional evidence would be sent to the assessing Officer for examination. In the present case though from the record it is not discernible whether permission to adduce additional evidence was granted by recording reasons in writing, but impliedly it is discernible that after filing the additional evidence learned Commissioner took step provided in sub-rule (3) so it gives an inference that the additional evidence sought to be produced by the assessee was a relevant material and the learned Commissioner (appeals) has entertained this additional evidence and only thereafter sent it to the assessing officer under sub-rule (3) for verification. Thus, after calling of the remand report on merit as contemplated in sub-rule (3) of Rule 46A, the learned Commissioner (appeals) is precluded with his discretion for refusing to admit the additional evidence.”
Similar view has been taken by different Benches of ITAT in the other orders relied upon by the ld. Counsel for the assessee (supra), wherein it has been held that once the CIT(A) had called for the remand report on the additional evidences so furnished, he has to admit the same on record for consideration on merits. The ld. CIT(A), however, failed to do so, but refused to admit the same, which is not tenable in view of the aforesaid decisions. We further note that factum of calling of remand report on merits of the additional evidences etc. does not arise in the case of Moser Bear India Ltd. (supra) relied upon by the ld. CIT(A). Therefore, the decision of Hon’ble Delhi High Court, in our opinion, does not help the Revenue, having been rendered in different context. As no decision taking a contrary view in the matter has been cited by the ld. DR, we are of the opinion that the ld. CIT(A) was not justified in refusing to admit the additional evidence. Besides, on perusal of the impugned order it reveals that the ld. CIT(A) has not passed speaking order on merits of the case also by recording his specific findings on the objections of the AO and the submissions of the assessee, but has simply endorsed the views taken by the AO in a very slip shod manner. Therefore, the issues under consideration need fresh adjudication by the Revenue authorities. Since the Assessing Officer has to examine the additional evidences in order to verify the sundry creditors and to examine veracity of depreciation claimed, it will be expedient in the interest of justice to restore the matter to the file of Assessing Officer for deciding both the issues de novo after considering the additional evidences noted above which shall be furnished by the Assessee before him in support of its claims. The Assessing Officer shall pass a speaking order in accordance with law after recording clear findings whether the objections made by AO stand rebutted by the evidences furnished by assessee or not. Needless to say, the assessee shall be given reasonable opportunity of being heard on merits of the case. The assessee is directed to cooperate with the Assessing Officer and will not seek unnecessary time in assessment proceedings. We order accordingly.