ANJAIAH MUNIGELA,HYDERABAD V. .ITO, WARD-1, NIZAMBAD

ITA 1210/HYD/2024

AI Insights

The case involves Anjaiah Munigela, the appellant, who appealed against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, which confirmed the disallowance of VAT payments and other deductions for the Assessment Year 2012-13. The Assessing Officer had initially made these disallowances due to the non-submission of requisite documents and non-cooperation from the assessee during the assessment proceedings. The tribunal found that despite the non-compliance, in the interest of justice, a fresh opportunity should be given to the assessee to present his case and substantiate his claims with appropriate evidence.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 29109 (ITAT-HYDERABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-12-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SM-A
• Assessment Year: 2012-2013
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: U MINICHANDRAN
• Assessee Lawyers: P. MURALI MOHAN RAO
• Keywords: Opportunity of being heard; Additional evidence; Principle of natural justice
• Section: 147; 148; 144; 142(1); 43B; 37(1)

Judgement Text

" आयकर अपीलीय अधिकरण, हैदराबाद पीठ में IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES “A”, HYDERABAD BEFORE SHRI LALIET KUMAR, JUDICIAL MEMBER AND SHRI MADHUSUDAN SAWDIA, ACCOUNTANT MEMBER ITA No.1210/Hyd/2024 Assessment Year: 2012-13 Anjaiah Munigela, C/o. P. Murali and Co., Chartered Accountants, 6-3-655/2/3, Somajiguda – 500082, Hyderabad. Telangana. PAN : ABTPM9226G. Vs. The Income Tax Officer, Ward – 1, Nizamabad. (Appellant) (Respondent) Assessee by: Shri P. Murali Mohan Rao, C.A. Revenue by: Shri U Mini Chandran, Sr.D.R. Date of hearing: 18.12.2024 Date of pronouncement: 18.12.2024 O R D E R PER LALIET KUMAR, J.M: This appeal is filed by the assessee feeling aggrieved by the order passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi dated 28.09.2024 for the AY 2012-13. 2 ITA 1210/Hyd/2024 2. The grounds raised by the assessee read as under : “1. The order of the CIT(A), NFAC is erroneous both on facts and in law. 2. The Ld. CIT(A) erred in dismissing the appeal. 3. The Ld. CIT(A) erred in confirming the disallowance of VAT payments of Rs. 20,18,385/- 4. The Ld. CIT(A) erred in confirming the disallowance made of Rs. 32,382/-. 5. The Ld. CIT(A) ought to have appreciated that the A.O erred in merely relying on the information furnished by the CTO whose verification on the genuineness of the impugned payments is not over as on date. 6. The Ld. CIT(A) erred in considering the information provided by the Commercial Tax Department, Bodhan Circle, Nizamabad with regard to the impugned challans against the assessee. 7. The Ld. CIT(A) ought to have appreciated that VAT and CST payments have not been disputed by the CST authorities for the year under consideration and that there is no demand from their side. 8. The Ld. CIT(A) ought to have appreciated that the Ld.AO erred in not communicating the contents of the letter of commercial tax officer (CTO) to the appellant to rebut and that no cross examination opportunity was given to the appellant by the AO. The 9. Ld. CIT(A) erred in considering the CTO's letter against the assessee's claim of payment made towards VAT/CST without considering the fact that a case has been filed against the Sales Tax Consultant and that the same is pending before the court for disposal as on date. 10. The Ld. CIT(A) erred in not considering the fact that loss due to embezzlement is an allowable expenditure u/s 37(1) of the Act as it is intrinsically and exclusively connected to the business of the assessee 11. The Ld. CIT(A) ought to have appreciated that there is no debit entry in the books of accounts of the assessee and that it is sine qua non for the purpose of making disallowance u/s 43B of the Act. 12. The Ld. CIT(A) ought to have called for the remand report from the AO on the additional evidence filed before him. 13. The appellant proceedings before the Commissioner of Appeals are in continuation of the assessment procedures and therefore that the CIT(A) ought to have considered the additional evidence raised in exercise of section 250(5). 3 ITA 1210/Hyd/2024 14. The CIT(A) ought to considered the additional evidence, it is upto the Ld CIT(A) either to allow the said additional evidence or to reject them depending on the facts and circumstances of the case.” 3. The brief facts of the case are that assessee is an individual and engaged in the business of milling of paddy and trading in rice and its by-products. The assessee filed its return of income for A.Y. 2012-13 on 01.10.2022 admitting total income of Rs.3,12,230/- after claiming deduction of Rs.32,382/-. On receipt of information by the Department regarding the short payment of sales tax by the assessee, his case was taken up for scrutiny. From the return of income filed by the assessee for A.Y. 2012-13, it was observed that assessee has shown sales of Rs.4,03,67,713/- , however, the assessee was not shown the VAT deduction of Rs.20,18,385/- (5% of 4,03,67,713/-) in profit and loss account and hence, Assessing Officer called for information vide letter dt.23.03.2018, for which assessee has not responded. 3.1. In view of the failure on the part of the assessee in furnishing challans in respect of payment of VAT and CST, Assessing Officer believed that VAT and CST claims made by the assessee were spurious and hence, notice u/s 147 of the Act was initiated and accordingly, notice u/s 148 of the Act was issued to the assessee on 23.03.2019. However, assessee has not filed return of income in response to notice u/s 148 of the Act and therefore, notice u/s 142(1) of the Act was issued on 17.06.2019. As the assessee has neither filed the return of income in response to notice u/s 148 nor furnished any information called for 4 ITA 1210/Hyd/2024 thereafter vide notice u/s 142(1) of the Act dt.16.10.2019, finally, Assessing Officer completed the assessment interalia making additions of Rs.20,18,385/- towards VAT/Sales Tax and Rs.32,382/- (under Chapter VI-A deduction) to the returned income and thereby assessed the total income at Rs.23,62,997/- and thus passed assessment order u/s 144 r.w.s. 147 of the Act. 4. Aggrieved with such assessment order, assessee filed an appeal before the LD.CIT(A), who dismissed the appeal of assessee by observing as under : “5.3. Vide these grounds, the Appellant has submitted that the AO has erred in making an addition of Rs.20,18,385/- u/s 43B without appreciating the fact that this amount was never debited in the books of accounts of the Appellant. As regards, disallowance of Rs.32,382/- claimed under chapter VI-A, the Appellant has submitted that the claim is with respect to the LIC premium and tuition fees for the education of children. The Appellant has maintained all necessary details in this regard. However, reasonable opportunity was not provided by the AO. The Appellant has made the detailed submissions in support of the grounds of appeal. The Appellant has also attached various documents along with submissions. The same have been reproduced at para 4 above. 5.3.1. I have considered the submissions made by the Appellant. I have also perused the assessment order. I find that the Appellant did not respond the queries sent by the AO for the purpose of verifying the information received from the CTO. The Appellant did not respond to notices sent u/s 148 and 142(1) of the Act. The Appellant has not even bothered to respond to the show cause notice sent u/s 144 of the Act. In this background, it is equally important to note that the Appellant has not made any submissions in the present proceedings as to why he has not cooperated before the AO. In view of these facts, I conclude that the Appellant was provided with reasonable opportunity of being heard and, thus, there is no violation of principles of natural justice. I further hold that the non-cooperation on the part of the Appellant during the assessment proceedings was willful. In this background, it is evident that the documents/evidences furnished in the course of present proceedings 5 ITA 1210/Hyd/2024 partake the character of additional evidences since the same were never submitted before the AO. However, the Appellant has not filed any application for the purpose of admission of these additional evidences under Rule 46A.In this regard, it would be imperative to refer to the provisions contained in rule 46A of the Income Tax Rules, 1962 which is being reproduced as under: …. A perusal of the above provisions of Rule 46A would reveal that Rule 46A(1) is negatively worded and precludes an appellant from filing any evidence in the nature of an additional evidence, other than those which have been filed before an AO, except in the circumstances laid out in Rule 46A(1). Thus, it is clear that before the first Appellate Authority an Appellant can rely on the evidence filed before the AO and incase an Appellant so chooses to furnish any evidence other than the ones filed by him before the AO, then in that situation the Appellant must make out a case as falling under any of the four limbs of rule 46A(1). It therefore emerges that without stating a case under Rule 46A(1), an appellant cannot file additional evidence. A natural corollary of the same is that in the absence of any case made out by an Appellant under Rule 46A(1), the first Appellate Authority cannot consider the additional evidence filed before hi ….. Respectfully following the ratio of the above judgments and in view of the fact that the Appellant has furnished the additional evidence without any accompanying petition making out a case under any of the four limbs of the Rule 46A(1) of the Income Tax Rules, 1962, I, being constrained by the procedural rules and law laid out, cannot consider the additional evidence. Thus, in the absence of the requisite documentary evidences, the contention of the Appellant remained unverified and unproved solely due to the conduct and latches on the part of the Appellant and these cannot be accepted. Accordingly, the addition made by the AO is hereby confirmed and the grounds are dismissed, in limine.” 5. Aggrieved with the order of LD.CIT(A), the assessee is now in appeal before us. 6 ITA 1210/Hyd/2024 6. Before us, the ld.AR mainly submitted that the AO has erred in making an addition of Rs.20,18,385/- u/s 43B without appreciating the fact that this amount was never debited in the books of accounts of the Appellant. With respect to disallowance of Rs.32,382/- claimed under chapter VI-A, the ld.AR submitted that the claim is with respect to the LIC premium and tuition fees for the education of children of the assessee. The ld.AR further submitted that the appellant has maintained all necessary details in this regard and that reasonable opportunity was not provided by the Assessing Officer to prove the said claims. The ld.AR also reiterated all the submissions made before the LD.CIT(A) which were reproduced by the LD.CIT(A) at para 4 of his order. The ld.AR further submitted that assessee has all the documentary evidence to prove his case and that the LD.CIT(A) has not properly appreciated the same and hence, requested to give one more opportunity to file all the documents before the Assessing Officer to substantiate his case. 7. On the other hand, Ld.DR supported the orders of lower authorities. 8. We have heard the rival submissions and perused the material on record. In the present case, Assessing Officer observed that assessee has failed to prove the challans in respect of VAT and CST claims made by him by providing all the necessary documents / information / reply, as called for by the Assessing Officer vide notice u/s 142(1) of the Act dt.02.07.2019 and show 7 ITA 1210/Hyd/2024 cause notice dt.28.10.2019 and hence, finally, he completed the assessment u/s 144 r.w.s 147 of the Act. On appeal, the LD.CIT(A) also dismissed the appeal of assessee as the contentions of the assessee had remained unverified and unproved due to the absence of requisite documentary evidence and the same is evident from para 5.3 of the order of LD.CIT(A). 9. In light of the above, though, invariably the appeal of the assessee is required to be dismissed on account of non- compliance, however, considering the totality of the facts and circumstances and in the interests of justice, one more opportunity is granted to the assessee to appear and contest the case before the Assessing Officer. Hence, we remand back the appeal to the file of Assessing Officer for passing fresh order after affording due opportunity of hearing to the assessee in accordance with law. Further, the assessee is directed to appear before the Assessing Officer on the date of hearing fixed by the Assessing Officer and shall file all the documents / evidence in support of its case as called for by the Assessing Officer vide notice u/s 142(1) of the Act dt.02.07.2019 and show cause notice dt.28.10.2019. In case, the assessee failed to file any documents in support of his case, Assessing Officer shall decide the matter in accordance with the law. Accordingly, the appeal of assessee is allowed for statistical purposes. 8 ITA 1210/Hyd/2024 10. In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the Open Court on 18th December, 2024. Sd/- Sd/- Sd/- Sd/-Sd/- Sd/- Sd/- (MADHUSUDAN SAWDIA) ACCOUNTANT MEMBER (LALIET KUMAR) JUDICIAL MEMBER Hyderabad, dated 18.12.2024. TYNM/sps Copy to: S.No Addresses 1 Anjaiah Munigela, C/o. P. Murali and Co., Chartered Accountants, 6-3-655/2/3, Somajiguda – 500082, Hyderabad. Telangana. 2 The Income Tax Officer, Ward – 1, Nizamabad. 3 Pr.CIT, Hyderabad. 4 DR, ITAT Hyderabad Benches 5 Guard File By Order "