TROPICAL STONES PRIVATE LIMITED,CHENNAI vs. ACIT, CHENNAI

आदेश / O R D E R

PER S.S.GODARA, JUDICIAL MEMBER

I.T.A.No.1214/14 :- 2 -: upholding disallowances/additions u/s 43B and section 68 of ` 58,420/-, ` 22,53,443/-, ` 48.70 lakhs, ` 96.25 lakhs and ` 6,96,952/-, in proceedings under section 143(3) of the Income-tax Act, 1961 (in short the ‘Act’).

The assessee-company manufactures/sells marble and 3. granite. It had filed its return admitting loss of ` 70,72,760/-. The Assessing Officer took up ‘scrutiny’. He appears to have issued various notices u/s 142(1) r.w.s 143(2) dated 31.5.2010, 23.8.2010 and 31.8.2010 and also section 271(1)(b) dated 23.11.2010 and fixed various dates of hearing. The assessee appeared only on 30.11.2010.

The Assessing Officer fixed the next date to 8.12.2010. Again the assessee did not appear. The Assessing Officer framed a ‘regular’ assessment on 30.12.2010 inter alia disallowing deduction u/s 43B VAT payable of ` 58,420/-, manufacturing/pooja/ advertisement expenses of ` 22,53,443/-, unsecured loans of ` 48.70 lakhs, secured loan of ` 96.25 lakhs and interest expenditure of ` 6,96,952/- for want

I.T.A.No.1214/14 :- 3 -: of necessary details by invoking section 68 of the Act. The assessee’s total taxable income stood assessed at ` 1,04,31,055/- as against the loss declared of ` 70,72,760/- (supra).

“6.1 The remand report of the AO is reproduced below:

The facts of the case leading to passing of the order u/s 143(3) of the Act are as under: Notice under section 143(2) of the Income Tax Act, 1961 was issued (i) by the then A.O. on 3110812009 asking the assessee to submit the details to substantiate its claim in the return of income. The assessee was requested to attend on 18/09/2009 at 02.00 p.m. The records indicate that the assessee did not respond to this notice. The assessee compliance, as per records is only on 30/11/2010 i.e 14 months after receipt of the notice issued. (ii) Notice U/S 142(1) calling for information along with a Questionnaire was issued on 31-05-2010 posting the case for hearing on 15-06-2010 at 02.30 PM for which there was no response from the assessee. (iii) Again another notice u/s. 143(2) r. w.s 129 was issued to the assessee on 20-08- 2010 posting the case for hearing on 15-09-2010 at 11.30 AM and assessee failed to respond to the said notice also. (iv) Again another notice usl 142(1) r.w.s. 129 was issued on 31-08-2010 along with a Questionnaire posting the case for hearing on 15-09-2010 at 11.30 AM for which too there is no response from the assessee. Copies

I.T.A.No.1214/14 :- 4 -: of the said notices were sent to all the directors also. (v) Final opportunity was given to the assessee vide a letter dt. 08-11-2010 to appear on 19-11-2010 at 03.30 PM for which too assessee failed to respond. (vi) Finally the AO, on 23-11-2010 has issued a notice U/S 274 r.w.s 271 requiring the assessee to appear on 30-11-2010 at 11.00 AM and to show cause why an order imposing penalty should not be made U/S 271 (1) (b) for failure to comply with the notices served U/S 142(1) and 143(2) earlier. (vii) Mr. A. Sekar, CA, Authorised Representative of the assessee appeared on 30-11- 2010 and he was asked to furnish details listed by the AO on 08- 12-2010. The assessee has neither furnished any details nor offered any explanation for non submission. (viii) The Assessment order was passed on 3011212010, which was after giving the assessee opportunities of being heard and submit details. 7.3 As already reproduced above from the remand report of the AO, the AO has posted the case on various dates, for which there was no compliance.

7.4 During the appeal proceedings, the AR of the appellant, vide letter dated 18.02.2004, has made submissions in reply to the Remand Report of the AO, wherein he has stated as under:

“a. Para 2:

Rule 46AA(1) is reproduced by Assessing Officer. As the appellant has already filed Managing Director's affidavit and documentary evidences explaining the failure of the Chartered Accountant aged about 74 years to furnish the details called for due to his old age, Diabetics, Liver cancer, loss of memory (Alzheimer) and subsequent demise, which the assessee came to know after receipt of assessment order. Further, we enclose letter dated 17.02.2014 from Audit Firm confirming the illness of the Senior Partner during the relevant time corroborating the affidavit filed"

7.5 The gist of the A.R’s submission, the reason for non compliance before the AO was that auditor had suffered loss of memory and at the same period in time the Managing Director of the company was also ill.

7.6 Under Rule 46A of the Income-tax Rules, 1962, an Appellant shall not be entitled to produce any evidence other than the evidence produced before him during the course of proceedings before the Assessing Officer except in the circumstances (a) where the Assessing Officer has refused to admit evidence which ought to have been admitted by him; or (b) where the Appellant was prevented by sufficient cause from producing evidence which he was called upon to produce by the Assessing Officer; or (c) where the Appellant was I.T.A.No.1214/14 :- 5 -: 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 an order appealed against without giving sufficient opportunity to the Appellant to adduce evidence relevant to any ground of appeal.

7.7 Where an Appellant produces evidence that was not produced before the Assessing Officer during the course of assessment proceedings, the Assessing Officer has to be allowed a reasonable opportunity to examine the evidence and to produce any evidence in rebuttal to the additional evidence produced by the Appellant.

7.8 The additional evidence produced by the Appellant along with the reasons for not producing it before the Assessing Officer during the assessment proceedings was forwarded to· the Assessing Officer for his examination and report. In the report submitted, the Assessing Officer has stated that the Appellant was given adequate opportunities to furnish evidence during the assessment proceedings. It was submitted that in spite of many opportunities during the assessment proceedings. the Appellant did not produce the evidence which he is producing now in the appellate proceedings. The Assessing Officer submitted that the case of the Appellant is not convered by any of the exceptions given in Rule 46A and requested that the additional evidence furnished by the Appellant should not be admitted.

7.9 I have considered the submissions of the Appellant and the report of the Assessing Officer on the additional evidence produced and also perused the record.

7.10 I find that the reasons for producing additional evidence during the appellate proceedings are not covered in the exceptions provided under Rule 46A, as submitted by the AO. Further, reasons furnished for such non-compliance is not accepted. Accordingly the additional evidence produced by the Appellant is not admitted and the additions made by the Assessing officer is upheld. The grounds are dismissed.”

Therefore, the assessee is aggrieved.

We have heard both parties and gone through the case file. 5.

The present is a case where all the disallowances/additions have been I.T.A.No.1214/14 :- 6 -: made on account of non-furnishing of the relevant details. The assessee’s additional evidence/plea stands rejected in the lower appellate proceedings. The assessee attributes reason of its non- cooperation with the Assessing Officer to the fact that its auditor Shri B. Surender suffered from loss of memory/illness. We find that the said auditor has expired on 4.3.2012 after framing of the assessment on 30.12.2010 and during the pendency of the lower appellate proceedings. Necessaary certificate is at page 95 of the case file.

Neither the remand report nor the lower appellate order have specifically controverted this plea. It is also to be seen that the hon'ble jurisdictional high court in the case of Venture Metal Products P. Ltd vs Dy. CIT [2014] 362 ITR 122(Mad) has allowed additional evidence under rule 46A in case of a bereavement in counsel’s family.

We take cue therefrom and feel that the assessee deserves another innings as its auditor suffered from ill health in the course of assessment and died during the pendency of lower appellate proceedings. We order accordingly and set aside the assessee’s grounds back to the file of Assessing Officer for decision afresh as per law. The assessee would be at liberty to place on record all its evidence/additional evidence in support of the claims raised.

I.T.A.No.1214/14 :- 7 -:

Order pronounced on Wednesday, 4th of February, 2015, at Chennai.