M/s Sara textiles Ltd., Noida V. DCIT, New Delhi

ITA 3271/DEL/2016

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 7642 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 2 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-08-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 02-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANIMA BARNWAL
• Keywords: Additional evidence; Corroborative evidences; Set aside
• Section: 73

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C NEW DELHI BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER & SHRI VIJAY PAL RAO, JUDICIAL MEMBER I.T.AS. NO.3270/DEL/2016 & 3271/DEL/2016 ASSESSMENT YEARS 2011-12 & 2012-13 M/S. SARA TEXTILES LTD., A-31, SARA HOUSE, HAUZ KHAS, NEW DELHI. V. DY. COMMISSIONER OF INCOME TAX, CIRCLE-7(1), NEW DELHI. TAN/PAN: AAHCS9602C (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI SUMIT LAL CHANDANI, ADV. RESPONDENT BY: MS. ANIMA BARNWAL, SR.D.R. DATE OF HEARING: 23 08 2021 DATE OF PRONOUNCEMENT: 23 08 2021 O R D E R PER VIJAY PAL RAO, J.M. THESE TWO APPEALS BY THE ASSESSEE ARE DIRECTED AGAI NST TWO SEPARATE ORDERS OF COMMISSIONER OF INCOME TAX ( APPEALS)- XXVIII, NEW DELHI BOTH DATED 29 TH MARCH, 2016 FOR THE ASSESSMENT YEARS 2011-12 AND 2012-13, RESPECTIVELY. THE ASSESSEE HAS RAISED COMMON GROUNDS IN THESE APPEALS EXCEPT THE QUANTUM OF DISALLOWANCE. THE GROUNDS RAISED FOR THE ASSESSMENT YEAR 2011-12 ARE REPRODUCED AS UNDER: 1. THE LEARNED COMMISSIONER OF INCOME TAX APPEALS HAS ERRED IN CONFIRMING AN ADDITION OF RS.1607420 ON AC COUNT OF DISALLOWANCE OUT OF COMMISSION EXPENSES CLAIMED BY THE ASSESSEE, WITH TOTAL DISREGARD TO THE FACTS AND CIR CUMSTANCES OF THE CASE. I.T.AS. NO.3270 & 3271/DEL/2016 2 2. THE LEARNED COMMISSIONER OF INCOME TAX APPEALS H AS FURTHER ERRED IN REJECTING THE PRAYER FOR ADMISSION OF ADDITIONAL EVIDENCES UNDER RULE 46A, WITH TOTAL DIS REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. AT THE TIME OF HEARING, THE LD. AUTHORIZED REPRE SENTATIVE OF THE ASSESSEE HAS POINTED OUT THAT THE ASSESSING OFFICER WHILE PASSING THE SCRUTINY ASSESSMENT HAS DISALLOWE D THE COMMISSION PAID BY THE ASSESSEE TO FOREIGN PARTIES FOR WANT OF SUPPORTING EVIDENCE. HE HAS SUBMITTED THAT DUE TO INSUFFICIENT TIME GRANTED BY THE ASSESSING OFFICER TO THE ASSESSEE, THE ASSESSEE COULD NOT PRODUCE THE SUPPOR TING EVIDENCE AND CONSEQUENTLY THE ASSESSEE FILED AN APP LICATION UNDER RULE 46A OF THE INCOME TAX RULES, 1962 BEFORE THE LD. CIT(A) ALONG WITH ADDITIONAL EVIDENCE. THE LD. CIT( A) HAS REJECTED THE PRAYER OF THE ASSESSEE AND DECLINE TO ADMIT THE ADDITIONAL EVIDENCE AND THEREBY CONFIRM THE ADDITION/DISALLOWANCE MADE BY THE ASSESSING OFFICER ON ACCOUNT OF COMMISSION PAID TO THE FOREIGN PARTIES. THUS, THE LD. AR HAS PLEADED THAT THE IMPUGNED ORDER MAY BE S ET ASIDE AS THE LD. CIT(A) HAS REJECTED THE APPLICATION FOR ADMISSION OF ADDITIONAL EVIDENCE ON TECHNICAL GROUND WITHOUT DEC IDING THE ISSUE ON MERITS AFTER CONSIDERING THE ADDITIONAL EV IDENCE PROPOSED TO BE FILED BY THE ASSESSEE. IN SUPPORT OF HIS CONTENTION, HE HAS RELIED UPON THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF DHANNA RAM GARG VS. ITO AS REPORTED IN (2012) 49 SOT 73 (DELHI)/ (2011) 15 TAXMANN.COM 104 (DELHI) . I.T.AS. NO.3270 & 3271/DEL/2016 3 3. ON THE OTHER HAND, LD. DEPARTMENT REPRESENTATIVE HAS SUBMITTED THAT THE ASSESSING OFFICER HAS GRANTED SU FFICIENT OPPORTUNITY TO THE ASSESSEE TO PRODUCE THE SUPPORTI NG EVIDENCE TO THE CLAIM OF COMMISSION PAID TO THE FOR EIGN PARTIES. HOWEVER, THE ASSESSEE FAILED TO PRODUCE AN Y SUPPORTING EVIDENCE IN SUPPORT OF THE COMMISSION EX PENSES. LD. DR HAS FURTHER SUBMITTED THAT THE LD. CIT(A) HA S CONSIDERED THE REQUEST OF THE ASSESSEE BUT IT WAS F OUND THAT THE ASSESSEE HAS FAILED TO EXPLAIN THE SUFFICIENT C AUSE AS TO WHY THE EVIDENCE WAS NOT PRODUCED BEFORE THE ASSESS ING OFFICER. HE HAS RELIED UPON THE ORDER OF THE AUTHOR ITIES BELOW. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS MATERIAL PLACED ON RECORD. THE ASSESSEE-COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF TERRY TOWELS AN D TRADING OF TEXTILE ITEMS. DURING THE SCRUTINY ASSESSMENT, T HE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS PAID COMMISSION TO THE FOREIGN PARTIES. ACCORDINGLY, THE ASSESSING OFFICER ASKED THE ASSESSEE TO PRODUCE THE BILLS, AG REEMENT ENTERED INTO BETWEEN THE PARTIES AND DETAILS OF SAL ES MADE BY THESE PARTIES. THE ASSESSING OFFICER THEREAFTER REC ORDED THAT THE ASSESSEE HAS FAILED TO PRODUCE THE REQUISITE SU PPORTING DOCUMENTS AND CONSEQUENTLY THE CLAIM OF PAYMENT OF COMMISSION TO FOREIGN PARTIES WAS DISALLOWED BY THE ASSESSING OFFICER. THE ASSESSEE CHALLENGED THE ACTION OF THE ASSESSING OFFICER BEFORE THE LD. CIT(A) AND FILED AN APPLICAT ION UNDER RULE 46A OF THE INCOME TAX RULES ALONG WITH ADDITIO NAL EVIDENCE. THE LD. CIT(A) TURNED DOWN THE REQUEST OF THE I.T.AS. NO.3270 & 3271/DEL/2016 4 ASSESSEE ON THE GROUND THAT MORE THAN SUFFICIENT OPPORTUNITIES WERE GIVEN BY THE ASSESSING OFFICER T O THE ASSESSEE TO PRODUCE THE REQUIRED DETAILS IN SUPPORT OF EXPENDITURE CLAIMED IN THE FORM OF COMMISSION TO FO REIGN PARTIES. THE ASSESSEE ALSO FAILED TO PROVE THE NEXU S OF THE EXPENDITURE TO THE INCOME EARNED. IT IS PERTINENT T O NOTE THAT ONCE THE ASSESSEE HAS EXPLAINED THE REASONS FOR NOT PRODUCING THE RELEVANT DOCUMENTARY EVIDENCE IN SUPP ORT OF CLAIM OF PAYMENT OF COMMISSION TO THE FOREIGN PARTI ES, THEN THE ISSUE OF DISALLOWANCE OF COMMISSION PAID BY THE ASSESSEE OUGHT TO HAVE BEEN DECIDED ON MERITS AFTER CONSIDER ING THE ADDITIONAL EVIDENCE FILED BY THE ASSESSEE INSTEAD O F REJECTING THE SAME ON TECHNICAL GROUNDS. THE ASSESSING OFFICE R HAS NOT DISPUTED THE FACT THAT THE ASSESSEE HAS ACTUALLY PA ID THE COMMISSION TO CERTAIN PARTIES. HOWEVER, THE CLAIM O F COMMISSION WAS DISALLOWED FOR WANT OF SUPPORTING EV IDENCE. THUS, IN THE APPELLATE PROCEEDINGS, BEFORE THE LD. CIT(A), THE ASSESSEE WANTED TO MAKE UP THE SAID DEFICIENCY OF T HE PRODUCTION OF THE SUPPORTING EVIDENCE THEN HAVING R EGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS ACCEPTANCE OF THE CLAIM BY THE REVENUE IN THE PRECEDING YEAR, THOUGH U/S.143(1) OF THE INCOME TAX ACT, THE EVIDENCE FILE D BY THE ASSESSEE OUGHT TO HAVE BEEN EXAMINED. THE CO-ORDINA TE BENCH OF THIS TRIBUNAL IN THE CASE OF DHANNA RAM GARG VS. ITO (SUPRA) WHILE CONSIDERING THE IDENTICAL ISSUE AS HELD IN PARAGRAPHS 6 TO 7 AS UNDER: I.T.AS. NO.3270 & 3271/DEL/2016 5 6. A BARE PERUSAL OF THIS RULE WOULD REVEAL THAT A PPELLANT I.E. ASSESSEE SHALL NOT BE ENTITLED TO PRODUCE ANY EVIDENCE WHETHER ORAL OR DOCUMENTARY, OTHER THEN THE EVIDENC E PRODUCED BY HIM DURING THE ASSESSMENT PROCEEDINGS UNLESS CON DITIONS ENUMERATED IN CLAUSE A TO D OF SUB-RULE (1) ARE AVA ILABLE. ACCORDING TO THESE CLAUSES, ADDITIONAL EVIDENCE WOU LD BE PERMITTED, IF IT IS PROVED THAT ASSESSING OFFICER H AS REFUSED TO ADMIT THE ADDITIONAL EVIDENCE OR ASSESSEE WAS CALLE D UPON TO PRODUCE A SPECIFIC EVIDENCE BY THE ASSESSING OFFICE R BUT BY VIRTUE OF SUFFICIENT REASONS HE COULD NOT PRODUCE S UCH EVIDENCE OR ASSESSEE WAS TO PRODUCED ANY EVIDENCE RELEVANT T O THE GROUNDS OF APPEAL BUT HE COULD NOT PRODUCE IT BEFOR E THE ASSESSING OFFICER OR ASSESSING OFFICER HAS PASSED T HE ASSESSMENT ORDER WITHOUT GIVING SUFFICIENT OPPORTUN ITY TO THE ASSESSEE. IF ANYONE CONDITIONS IS AVAILABLE THEN AS SESSEE WOULD BE PERMITTED TO ADDUCE ADDITIONAL EVIDENCE. T HE NEXT STEP SUGGESTED IN THE RULE IS THAT LEARNED CIT(APPE ALS) HAS TO RECORD REASONS FOR PERMITTING AN ASSESSEE TO ADDUCE THE ADDITIONAL EVIDENCE. AFTER THIS EXERCISE, IT HAS BE EN PROVIDED IN SUB-RULE (3) THAT LEARNED FIRST APPELLATE AUTHORITY SHALL NOT TAKE INTO ACCOUNT SUCH EVIDENCE UNLESS AN OPPORTUNI TY TO REBUT THE EVIDENCE WAS GIVEN TO THE ASSESSING OFFICER. AS SESSING OFFICER SHALL BE PROVIDED AN OPPORTUNITY TO EXAMINE THE DOCUMENT SUBMITTED BY THE ASSESSEE AND HE WILL BE P ROVIDED AN OPPORTUNITY TO ADDUCE EVIDENCE FOR REBUTTING THE EVIDENCE PRODUCED BY THE ASSESSEE. SUB-CLAUSE (4) OF RULE 46 A, IS AN EXCEPTION TO THESE CONDITIONS. IT EMPOWERS THE FIRS T APPELLATE AUTHORITY TO DIRECT THE PRODUCTION OF ANY DOCUMENT OR EXAMINATION OF ANY WITNESS WHICH CAN HELP THE LEARN ED FIRST APPELLATE AUTHORITY TO DISPOSE OF THE APPEAL IN ACC ORDANCE WITH LAW AND FOR ANY OTHER SUBSTANTIAL CAUSE. LEARNED CI T(APPEALS) I.T.AS. NO.3270 & 3271/DEL/2016 6 HAS REMITTED THE SUBMISSIONS OF THE ASSESSEE ALONG WITH THE DOCUMENTS TO THE ASSESSING OFFICER FOR HIS COMMENTS . ASSESSING OFFICER HAS SUBMITTED TWO REMAND REPORT. AFTER AN ANALYSIS OF THE REMAND REPORTS AS WELL AS THE SUBMI SSIONS OF THE ASSESSEE, LEARNED CIT(APPEALS) HAS OBSERVED THA T THE DOCUMENTS SUBMITTED BY THE ASSESSEE ARE NOT WORTH A DMITTING. TO OUR MIND THIS IS NOT THE RIGHT COURSE. ONCE HE C ALLED FOR A REMAND REPORT ON THE MERITS OF THE EVIDENCE AND GAV E AN OPPORTUNITY TO THE ASSESSING OFFICER FOR REBUTTING THE EVIDENCE THEN CONDITIONS OF SUB-RULES (1) AND (2) WOULD BE C ONSTRUED AS FULFILLED. LEARNED CIT(APPEALS) MAY NOT RELY UPON T HE EVIDENCE FOR REJECTING THE ARGUMENTS OF THE ASSESSEE ON THE GROUND THAT IT IS NOT SUFFICIENT TO BUTTRESS THE CONTENTIONS OF TH E ASSESSEE, BUT HE CANNOT SAY THAT EVIDENCE IS NOT TO BE TAKEN ON R ECORD. THE ADMISSIBILITY OF THE EVIDENCE IS TO BE DECIDED AT T HE FIRST STAGE UNDER SUB- RULE(1). FOR THAT HE NEED NOT TO CALL FO R A REMAND REPORT ON THE MERIT OF THE EVIDENCE. FIE CAN SIMPLY HEAR THE ASSESSING OFFICER AS IS PROVIDED IN SEC. 250(1) OF THE ACT. IN OTHER WORDS, LEARNED CIT(APPEALS) SUPPOSED TO GIVE JUST AN OPPORTUNITY OF HEARING TO THE A.O. BEFORE ADMISSION OF EVIDENCE. ONCE, IT IS ADMITTED BY RECORDING REASONS AS PROVID ED IN SUB- RULE(2) THEN NEXT STAGE WOULD COME AS ENUMERATED IN SUB- RULE(3), WHERE LEARNED CIT(APPEALS) WOULD CALL UPON A REMAND REPORT OF THE ASSESSING OFFICER ON THE MERIT OF THE EVIDENCE AND ALSO GIVE AN OPPORTUNITY TO THE ASSESSING OFFICER T O LEAD EVIDENCE IN REBUTTAL OF THE EVIDENCE SUBMITTED BY T HE ASSESSEE. 7. WE FIND FROM THE ANALYSIS OF THE RECORD THAT SU FFICIENT OPPORTUNITIES WERE NOT GRANTED TO THE ASSESSEE BY T HE ASSESSING OFFICER. HE HAS COMPLETED THE INQUIRY FOR THE PURPOSE OF THE ASSESSMENT ORDER WITHIN JUST TWO MONTHS. THE REFORE, WE I.T.AS. NO.3270 & 3271/DEL/2016 7 DEEM IT APPROPRIATE TO SET ASIDE BOTH THE IMPUGNED ORDERS AND REMIT ALL THE ISSUES TO THE FILE OF THE ASSESSING O FFICER FOR READJUDICATION. THE OBSERVATIONS MADE BY US WILL NO T IMPAIR OR INJURE THE CASE OF THE ASSESSING OFFICER AND WOULD NOT CAUSE ANY PREJUDICE TO THE DEFENCE/EXPLANATION OF THE ASS ESSEE. THE ASSESSEE WILL BE AT LIBERTY TO SUBMIT ANY EVIDENCE IN HIS DEFENCE BEFORE THE ASSESSING OFFICER. ASSESSING OFF ICER SHALL GRANT DUE OPPORTUNITY OF HEARING TO THE ASSESSEE AN D THE ASSESSEE SHALL CO-OPERATE WITH THE ASSESSING OFFICE R. 5. THUS, IN THE FACTS AND CIRCUMSTANCES OF THE CASE , WE ARE OF THE CONSIDERED VIEW THAT THE ADDITIONAL EVIDENCE PRODUCED BY THE ASSESSEE OUGHT TO HAVE BEEN EXAMINED AND THE ISSUE WAS REQUIRED TO BE DECIDED ON MERITS. ACCORDINGLY, WE SET ASIDE THE IMPUGNED ORDER OF THE LD. CIT(A) AND MATT ER IS REMITTED TO THE RECORD OF THE ASSESSING OFFICER FOR ADJUDICATION OF THE ISSUE OF COMMISSION PAID TO THE FOREIGN PART IES FOR BOTH THE YEARS AFTER VERIFICATION AND EXAMINATION OF THE ADDITIONAL EVIDENCE FILED BY THE ASSESSEE. NEEDLESS TO SAY, TH E ASSESSEE BE GIVEN AN OPPORTUNITY OF HEARING BEFORE PASSING A FRESH ORDER. HENCE, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 6. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD AUGUST, 2021. SD/- SD/- [R.K. PANDA] [VIJAY PAL RAO] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 23 RD AUGUST, 2021 PRABHAT: