ACIT, CENTRAL CIRCLE-2, PATNA vs M/S CONTESSA COMMERCIAL CO. PVT LTD, KOLKATA

Income Tax Appellate Tribunal, KOLKATA-PATNA ‘e-COURT’, KOLKATA

Before: Shri Rajpal Yadav, Vice-(KZ) & Shri Rajesh Kumar

Per Rajpal Yadav, Vice-President (KZ):- The Revenue is in appeal before the Tribunal against the order of ld. Commissioner of Income Tax (Appeals)-3, Patna dated 22.06.2020 passed for A.Y. 2017-18. 1

ITA No. 72/PAT/2020 Assessment Year: 2017-2018 M/s. Contessa Commercial Co. Pvt. Limited

The Revenue has taken four grounds of appeal. In brief, its grievance is that ld. CIT(Appeals) has erred in deleting the addition of Rs.2,19,20,000/- by entertaining additional evidence in violation to Rule 46A of the Income Tax Act. The addition was made by the ld. Assessing Officer with the aid of section 68 on account of unexplained credit.

Brief facts of the case are that the assessee has filed its return of income on 04.11.2017 declaring total income ‘NIL’ and current year loss of Rs.60,00,834/-. The case of the assessee was selected for scrutiny assessment and a notice under section 143(2) was issued on 14.08.2018 fixing the case for hearing on 28.08.2018. The ld. Assessing Officer thereafter issued a questionnaire under section 142(1) on 29.01.2019 and fixed the case for hearing on 11.02.2019. According to the ld. Assessing Officer in response to the notice under section 143(2) of the Income Tax Act, the assessee has submitted that the reasons assigned for selection of the case for scrutiny assessment are being available in audited balance-sheet. The assessee further prayed that kindly issue questionnaire to submit any other information, if required by the ld. Assessing Officer. According to the ld. Assessing Officer, he has issued notice but those were not replied by the assessee. He

ITA No. 72/PAT/2020 Assessment Year: 2017-2018 M/s. Contessa Commercial Co. Pvt. Limited found cash credits amounting to Rs.2,19,20,000/- available against the name of five lenders. According to the ld. Assessing Officer, these amounts were taken by the assessee as a loan during the year and they were paid back. Hence the accounts of these concerns have been squared up. Somehow in an ex-parte assessment order, the ld. Assessing Officer treated these credits as unexplained one and made an addition of Rs.2,19,20,000/-.

On appeal, assessee filed submissions along with certain details and ld. CIT(Appeals) has deleted the addition.

The assessee has filed a paper book running into 229 pages under the certificate that these papers were filed before the ld. CIT(Appeals).

On the other hand, ld. Sr. D.R. has filed a paper book containing written submission, order-sheets before the ld. CIT(Appeals) etc. While impugning the order of ld. CIT(Appeals), ld. Sr. D.R. contented that the assessee did not participate in the proceedings before the ld. Assessing Officer. The ld. Assessing Officer has passed an ex-parte assessment. Thus it will demonstrate that no documents were submitted by the assessee. The assessee in the garb of written submission filed a paper book

ITA No. 72/PAT/2020 Assessment Year: 2017-2018 M/s. Contessa Commercial Co. Pvt. Limited along with evidences, which has been entertained by the ld. CIT(Appeals) without following true procedure contemplated in Rule 46A of the Income Tax Act. The ld. Sr. D.R. thereafter appraised us the true meaning and scope of Rule 46A. For the facility of reference, we take note of the written submission filed by the ld. D.R. as well as copy of Annexure 1 & 2 placed on record by the ld. D.R. It is pertinent to note that ld. D.R. has further placed on record copy of the written submission filed by the assessee before the ld. CIT(Appeals). The ld. Sr. D.R. has also placed on record copy of the judgments relied by him in his written submission. The written submission along with Annexure 1 & 2 read as under:-

ITA No. 72/PAT/2020 Assessment Year: 2017-2018 M/s. Contessa Commercial Co. Pvt. Limited

On the strength of the submissions, ld. Sr. D.R. further contended that ld. CIT(Appeals) did not follow the mandatory procedure contemplated in sub-Rule 1, 2 & 3

ITA No. 72/PAT/2020 Assessment Year: 2017-2018 M/s. Contessa Commercial Co. Pvt. Limited of Rule 46A and, therefore, he should have not deleted the addition by entertaining the additional evidence.

The ld. Counsel for the assessee, on the other hand, drew our attention towards Annexure 2 filed by the ld. D.R. and submitted that it is a copy of the notice issued by the ld. CIT(Appeals) and in this notice, ld. CIT(Appeals) invited the written submission from the assessee and provided a e-mail on which such submission could be filed. In response to this notice, the assessee has filed the submissions. The ld. CIT(Appeals) thereafter decided the appeal of the assessee. Therefore, the assessee has not applied for permission to lead for the evidence under Rule 46A. It is the ld. CIT(Appeals) who has provided an opportunity to the assessee for filing written submission. The ld. CIT(Appals) must have exercised his powers under sub-Rule 4 of Rule 46A and duly deleted the additions. He relied upon the order of the ld. CIT(Appeals).

We have duly considered the rival contentions and gone through the record carefully. Rule 46A, Section 250(1) and Section 261 have direct bearing on the controversy, therefore, we deem it appropriate to take note of all these provisions, which read as under:- “Procedure in appeal:- 250.: The Commissioner (Appeals) shall fix a day and place for the hearing of the appeal

ITA No. 72/PAT/2020 Assessment Year: 2017-2018 M/s. Contessa Commercial Co. Pvt. Limited and shall give notice of the same to the appellant and to the Assessing Officer against whose order the appeal is preferred. x x x x x x x x x x x x x x xx x x Powers of the Commissioner (Appeals); 251.: (1) In disposing off an appeal, the Commissioner (Appeals), shall have the following powers: (a) in an appeal against an order of assessment, he may confirm, reduce, enhance or annul the assessment; or (aa) in an appeal against the order of assessment in respect of which the proceeding before the Settlement Commission abates under section 245HA, he may, after taking into consideration all the material and other information produced by the assessee before, or the results of the inquiry held or evidence recorded by, the Settlement Commission, in the course of the proceeding before it and such other material as may be brought on his record, confirm, reduce, enhance or annul the assessment; or (b) in an appeal against an order imposing a penalty — he may confirm or cancel such order or vary it so as either to enhance or to reduce the penalty; (c) in any other case — he may pass such orders in the appeal as he thinks fit. (2) The Commissioner (Appeals) shall not enhance an assessment or a penalty or reduce the amount of refund unless the appellant has had a reasonable opportunity of showing cause against such enhancement or reduction.

Explanation:-In disposing of an appeal, the Commissioner (Appeals) may consider and decide any matter arising out of the proceedings in which the order appealed against was passed, notwithstanding that such matter was not raised before the Commissioner (Appeals) by the appellant.

Rule – 46A:- Production of additional evidence before the Deputy Commissioner (Appeals)and Commissioner (Appeals) (1) The appellant shall not be entitled to produce before the Deputy Commissioner (Appeals) or, as the case may be, the 16

ITA No. 72/PAT/2020 Assessment Year: 2017-2018 M/s. Contessa Commercial Co. Pvt. Limited 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 97[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 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.

ITA No. 72/PAT/2020 Assessment Year: 2017-2018 M/s. Contessa Commercial Co. Pvt. Limited 10. Before, to construe the meaning of Rule 46A, it is pertinent to note that against an assessment order, the appeal only is available to the assessee and not to the revenue. A bare perusal of Rule 46A would indicate that it prohibits the appellant to produce any evidence before the Appellate Authority either oral or documentary other than the evidence, which were produced by the assessee during the assessment proceeding. However, under sub- Rule 4, certain exceptions have been carried out when the appellant would be entitled to lead evidence. This exception provides namely- Sub-Rule (1) (a) Where ld. Assessing Officer has refused to admit evidence which ought to have been admitted. In other words, an assessee produced some evidence, which was to be taken on record but ld. Assessing Officer refused to take it.

(b) Under sub-clause (b), where assessee prevented by sufficient cause for producing the evidence, which he was called upon to produce. For example, certain documents were not possessed by the assessee. It might have been seized by the authorities i.e. State Government or Central Government, therefore, the

ITA No. 72/PAT/2020 Assessment Year: 2017-2018 M/s. Contessa Commercial Co. Pvt. Limited assessee could not produce that document and after the assessment order if he is able to lay his hand on the documents, then, on fulfilment of the condition of this clause, he will be allowed to produce that document.

(c) Where the appellant was prevented by sufficient cause from producing before the ld. Assessing Officer any evidence, which is relevant to any grounds of appeal. This clause would provide certain types of evidence, which is relevant due to some reason could not be produced before the ld. Assessing Officer. Sometime a situation would come that after the addition, it is felt by an assessee that had that particular evidence was produced, then, this addition would not be there.

The last condition is where ld. Assessing Officer has not given proper opportunity to lead evidence.

11.

Sub-Rule (2) of Rule 46 further contemplates that whenever any evidence is being entertained, then the ld.

ITA No. 72/PAT/2020 Assessment Year: 2017-2018 M/s. Contessa Commercial Co. Pvt. Limited 1st Appellate Authority would record reasons for permitting to adduce the additional evidence.

12.

Sub-Rule (3) would further put a condition upon ld. CIT(Appeals) that such evidence will not be used unless an opportunity is being granted to the assessee.

13.

Sub-Rule (4) is an exception to Rule 1, 2 & 3. This starts with a non-obstante clause, which provides that nothing contained in Rule 46A to effect the power the ld. 1st Appellate Authority to direct the production of any document or examination of any evidence etc. In other words, when ld. Commissioner felt that certain material is required for just decision of the appeal, then he can exercise the powers under sub-Rule (4) and take on record any material, which is relevant for adjudication of the appeal in right perspective.

14.

Adverting to Section 250, sub-Section (1), this clause provides that ld. 1st Appellate Authority would fix a date and place for hearing the appeal and shall give notice of the same to the appellant as well as to the ld. Assessing Officer. At this stage, we would like to draw our attention towards Annexure 2 placed on record by the ld. Sr. D.R., which is extracted by us. A perusal of the Annexure would indicate that ld. 1st Appellate Authority has not only given notice of hearing of the

ITA No. 72/PAT/2020 Assessment Year: 2017-2018 M/s. Contessa Commercial Co. Pvt. Limited appeal to the assessee alone, rather this notice was given to the ld. Assessing Officer also. A copy of the notice was supplied to ld. Assessing Officer. He could join the appellate proceedings.

15.

Section 251 provides the powers with the ld. 1st Appellate Authority while deciding the appeal. By exercising the powers under this section, ld. 1st Appellate Authority may confirm, reduce, enhance or annul the assessment. Explanation appended to this section would further contemplates that any issue if arose before the ld. 1st Appellate Authority from the assessment proceedings, then he may entertain that issue and decide even if no discussion is available in the assessment order on that topic. In other words, any item which was the subject matter of the proceeding in which order against appeal was passed, then all ancilliary issue on that subject matter could be entertained by the ld. 1st Appellate Authority. A bare perusal of the scheme of section 251 would indicate that under this section, ld. 1st Appellate Authority not only exercised the powers of 1st Appellate Authority but co-terminus powers of the ld. Assessing Officer.

16.

In the light of above, let us consider the facts of the present case. There is no doubt that assessment order was passed as an ex-parte order. However, a perusal of

ITA No. 72/PAT/2020 Assessment Year: 2017-2018 M/s. Contessa Commercial Co. Pvt. Limited the assessment order would indicate that in response to the notice under section 143(2), assessee has submitted that the questions narrated in the reasons for issuance of this notice are answered by the assessee in the audited financial statement. But if any other queries required, then a show-cause notice be issued to the assessee. According to the ld. Assessing Officer, he has issued a show-cause notice on 29.01.2019, which was to be replied by 11.02.2019. A perusal of the assessment order would suggest that after February, 2019, the proceedings before the ld. Assessing Officer remained dormant and all of a sudden, they were taken up on 12.10.2019 whereby hearing was fixed for 18.10.2019. The ld. Assessing Officer has passed the assessment order on 27.11.2019. For the sake of giving opportunity of hearing, he has given 2, 3 notices whereby only four days, six days time was given. The ld. Assessing Officer has not ensured whether service of these notices was being affected upon the assessee or not. He issued notice under section 143(2) on August 18, but did not keep the proceeding live for almost 8-10 months and then all of a sudden concluded the proceeding within one month ex- parte. Against this assessment, when assessee carried the matter in appeal, ld. 1st Appellate Authority has given a notice fixing the date of hearing as well as place of hearing. This notice was given not only to the assessee but to the ld. Assessing Officer also, but again ld.

ITA No. 72/PAT/2020 Assessment Year: 2017-2018 M/s. Contessa Commercial Co. Pvt. Limited Assessing Officer did not join the proceedings before the ld. Commissioner. Since it was an ex-parte assessment order and on perusal of that, ld. 1st Appellate Authority would have thought fit for permitting the assessee to file written submission. The assessee has filed the written submission and ld. CIT(Appeals) perused them and decided the issue. If we take the aspect theoretically, then to some extent, stand of the ld. Sr. D.R. is justified, namely demonstrative application of mind at the end of the ld. 1st Appellate Authority for entertaining the written submission including supporting evidence is not discernable on the record, but simultaneously it is to be appreciated that notice was given to the ld. Assessing Officer. He himself not joined the proceeding. Apart from that, ld. Sr. D.R. was unable to make submission on the quality of evidence placed before the ld. CIT(Appeals), which was considered by the ld. 1st Appellate Authority. It is true that it is not discernable as to how ld. 1st Appellate Authority has applied his mind for providing the opportunity of hearing along with entertainment of supporting material, but under clause (4) of Rule 46A, ld. 1st Appellate Authority would himself gone into all these materials and it appears 1st Appellate Authority has gone through those materials.

17.

The paper book filed before the ld. CIT(Appeals) has been filed before us also, though, we were not taken

ITA No. 72/PAT/2020 Assessment Year: 2017-2018 M/s. Contessa Commercial Co. Pvt. Limited through this evidence on merit during the course of hearing, but we ourselves have perused them. The reason for not referring these papers was the emphasis of the Revenue that these are not part of the record and these are not to be considered.

18.

It is pertinent to observe that ld. 1st Appellate Authority has given liberty to the assessee to file written submission in the show-cause notice (extracted supra). Impliedly it would suggest that the assessee could file any supporting material in support of its submission. This opportunity to file written submission contained in the notice for hearing issued by the ld. CIT(Appeals) would suggest that this notice has taken care of all procedural mechanism, which has been alleged to have been violated by the ld. Sr. D.R. The assessee itself has not filed any application for additional evidence under Rule 46A where reasons were required to be recorded. It is the opinion of the ld. CIT(Appeals), which might have been formed on the basis of perusal of the assessment order. Therefore, to this extent, we do not find any merit in Ground No. 2 of the Revenue, where it has been pleaded that ld. CIT(Appeals) has erred in entertaining submissions along with fresh material for deleting the addition. The ld. Sr. D.R. has relied upon a large number of decisions. We do not have any dispute with regard to the proposition propounded therein rather we have

ITA No. 72/PAT/2020 Assessment Year: 2017-2018 M/s. Contessa Commercial Co. Pvt. Limited adopted that very line of reasoning. There are factual deviations. The assessee has submitted the written submission on the basis of opportunity given by the ld. 1st Appellate Authority. In the written submission, it has filed supporting evidence, which is to be construed, as gone through by the ld. CIT(Appeals) while exercising the co-terminus power of the ld. Assessing Officer. Sub-Rule 4 of Rule 46A provides so. A perusal of the paper book would indicate that all the creditors were income-tax assessee. For example, Jiwansagar Times Pvt. Limited, the assessee has taken a loan of Rs.1.62 crores from this concern. The assessee has repaid this loan during this period and squared up this amount. Copy of the return of this creditor is available on page 31 of the paper book, wherein it has disclosed gross income of Rs.20,27,185/-. It has claimed refund of Rs.7,31,100/-. On page 73, the copy of the return of KSL Resources Pvt. Limited is available. The assessee has taken a loan of Rs.2,00,000/-. This concern has shown gross income of Rs.19,89,514/- and claimed refund of Rs.58,980/-. Similar, is the position with regard to other creditors. The ld. CIT(Appeals) has observed that he has gone through the documentary evidence in the shape of income-tax return, balance-sheets, bank statements and thereafter deleted it. Once the ld. 1st Appellate Authority has co-terminus power of the ld. Assessing Officer and if ld. 1st Appellate Authority itself gone into all these

ITA No. 72/PAT/2020 Assessment Year: 2017-2018 M/s. Contessa Commercial Co. Pvt. Limited materials, otherwise, which would have been gone by the ld. Assessing Officer had an opportunity to the assessee was granted properly. Therefore, we do not find any miscarriage of justice in the approach of the ld. CIT(Appeals), which deserves one more round of litigation at the level of ld. Assessing Officer.

19.

In the result, the appeal of the Revenue is dismissed. Order pronounced in the open Court on 18.10.2023.

Sd/- Sd/- (Rajesh Kumar) (Rajpal Yadav) Accountant Member Vice-President Kolkata, the 18th day of October, 2023 Copies to :(1) Assistant Commissioner of Income Tax, Central Circle-2, Patna, C.R. (Annexe) Building, 6th Floor, Bir Chand Patel Marg, Patna-800001, Bihar (2) M/s. Contessa Commercial Co. Pvt. Limited, 12, Syed Salley Lane, Bura Bazar, Kolkata-700073 (3) Commissioner of Income Tax (Appeals)-3, Patna (4) Commissioner of Income Tax- , (5) The Departmental Representative (6) Guard File TRUE COPY By order Assistant Registrar, Income Tax Appellate Tribunal, Kolkata Benches, Kolkata Laha/Sr. P.S. 26

ACIT, CENTRAL CIRCLE-2, PATNA vs. M/S CONTESSA COMMERCIAL CO. PVT LTD, KOLKATA