Income Tax Officer , Surat V. Annapurna Cottex Private Limted, Surat

ITA 60/SRT/2024

• Counselvise Citation: [2024] 101 COUNSELVISE.COM (IT) 5573 (ITAT-SURAT)
• Duration Of Justice: 6 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-07-2024
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 23-06-2024
• Assessment Year: 2017-2018
• Appeal Filed On: 17-01-2024
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RAVIKANT GUPTA
• Keywords: Principle of natural justice; Additional evidence; Reasonable cause; Set aside; Bogus
• Section: 68; 144; 142(1); 250; 143(2); 145(3); 272A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JIDICIAL MEMBER & SHRI BIJAYANANDA PRUSETH, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.60/SRT/2024 Assessment Year: (2017-18) (Physical Court Hearing) Income Tax Officer, Ward-1(1)(1), Surat, Room No. 111, Aaykar Bhavan, Majura Gate, Surat-3950001 Vs. Annapurna Cottex Pvt. Ltd. Shop No.185 Jash Textile Market, Ring Road, Surat-395001 èथायीलेखासं./जीआइआरसं./PAN/GIR No.: AANCA 5030 G (अपीलाथŎ/Appellant) (ŮȑथŎ /Respondent) िनधाŊįरती की ओर से /Assessee by None िनधाŊįरती की ओर से /Revenue by Shri Ravi Kant Gupta,CIT-DR अपील पंजीकरण/Appeal instituted on 18.01.2024 सुनवाई की तारीख /Date of Hearing 24.06.2024 घोषणा की तारीख /Date of Pronouncement 26.07.2024 आदेश / O R D E R PER BIJAYANANDA PRUSETH, AM: This appeal by the Revenue emanates from the order of the Learned Commissioner of Income Tax(Appeals) / National Faceless Appeal Centre, Delhi (NFAC) [in short, “CIT(A)”] u/s 250 of the Income- tax Act, 1961 (in short, “the Act”) dated 23.11.2023 for assessment year (AY) 2017-18. The grounds of appeal raised by the Revenue are as under:- 2 ITA No.60/SRT/2024 AY.17-18 Annapurna Cotttex Pvt. Ltd. “1. On facts and circumstances of the case and in law, the Ld. CIT(A) has erred in admitting the additional evidences, which were not produced before the AO during the course of the assessment proceedings, without satisfying the basic conditions laid down under Rule 46A of the Income-tax Rules, 1962. 2. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of rs.16,72,805/- made on account of unsecured loan u/s 68 of the Income tax Act, 1961 when assessee has failed to comply with the provisions of section 68 of the Act. 3. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition made by AO ignoring the fact that merely submission of PAN and address of the lenders are not sufficient to discharge his onus casted by Section 68 of the Act, in this case the assessee has failed to prove to the satisfaction of the AO that these lenders have sufficient creditworthiness too. 4. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition made by AO on account of estimating of gross profit when AO has justified in rejecting the books of accounts of the assessee within the meaning of Section 145(3) of the Act and completing the assessment in the manner provided as per provisions of Section 144 of the Act. 5. On the facts and circumstances of the case and in law, the Ld.CIT(A) has erred in deleting the addition made by AO when he has issued several statutory notices to the assessee and in response to the same the assessee failed to file any submissions in support of the grounds raised by him nor did appellant seek any adjournment. 6. It is therefore prayed that order passed of the Ld. CIT(A) may kindly be set aside and that of the Assessing Officer be restored. 7. The appellant craves leave to alter, amend and/or withdraw any grounds of appeal either before or during the course of hearing of the appeal.” 2. Notices for hearing were issued and hearing was posted on 21.03.2024, 15.05.2024 and 24.06.2024. None appeared on behalf of the assessee nor any application was filed for adjournment. It is also seen that no written submission has been filed in the ITAT e-filing portal. It is, therefore, clear that no useful purpose will be served by keeping the appeal pending. Accordingly, we have heard the Ld.CIT-DR 3 ITA No.60/SRT/2024 AY.17-18 Annapurna Cotttex Pvt. Ltd. for the Revenue, perused the materials available on record and decide the appeal as below: 3. The facts of the case are that the assessee company is engaged in export business of raw cotton. The assessee company filed its return of income on 02.08.2017, declaring total income of Rs.15,28,900/-. The return was processed u/s 143{1) of the Act. The case was selected for scrutiny through CASS with reason "High revenue from operation (including other income) and no scrutiny in preceding five years". Statutory notices u/s 143(2) and 142(1) along with questionnaire were issued on various dates. In response to the notices, the assessee has not made any compliance. Thereafter, the AO has deputed the Ward Inspector to serve summons upon the assessee and in absence of assessee and closed premises, the summons was affixed. In view of the non-cooperative attitude of the assessee, the AO passed assessment order u/s 144 of the Act with the materials available on record by making the following additions: (i) bogus unsecured loan u/s 68 of Rs.16,72,805/-, (ii) estimation of GP @ 5% of turnover by rejection of book result u/s 145(3) of Rs.2,61,43,510/- and (iii) other income of Rs.1,08,00,334/- (i.e., total of Rs.3,86,16,649/-). The reasons for making the above additions are discussed in detailed by the AO in the assessment order. The AO also initiated penalty proceedings u/s 4 ITA No.60/SRT/2024 AY.17-18 Annapurna Cotttex Pvt. Ltd. 271AAC and 272A (1)(d) of the Act. Aggrieved by the order of AO, the assessee has filed appeal before CIT(A). 4. During the appellate proceedings, the appellant submitted that due to heath reasons, Shri Chandrakant Himmatlal Trivedi, who managed the affairs of the assessee-company, could not respond to the various notices issued by the AO during assessment proceedings. The appellant produced medical certificate in support of above claim. The appellant also uploaded the following documents and additional evidences. i.e., (i) details of purchase of cotton of Rs.1,04,10,96,621/- along with ledger copies and invoices of the suppliers, (ii) details of sale of cotton of Rs.1,06,72,55,906/- along with copies of sales invoices of the suppliers and (iii) bank statement of for relevant AY maintained with Central Bank of India and Indusland bank. The submission of the assessee and the additional evidence were forwarded to the AO on 02.08.2023 calling for remand report. Subsequently, reminder was issued by CIT(A) on 05.10.2023. Since the report was not received, the CIT(A) passed the order u/s 250 of the Act on 23.11.2023 without waiting for the remand report. He has deleted all additions made by AO in a perfunctory manner without elaborating as to why the additions are not proper. Aggrieved by the order of CIT(A) the Revenue has filed present appeal before the Tribunal. 5 ITA No.60/SRT/2024 AY.17-18 Annapurna Cotttex Pvt. Ltd. 5. Before us, Ld.CIT-DR has strongly assailed the order of CIT(A) and has supported the order of AO. He stated that the reasons given by the CIT(A) in admitting the additional evidence is not proper and not in accordance with Rule 46A of the Income-tax Rules, 1962. He also stated that the principles of natural justice was not followed by giving proper and adequate opportunity of hearing to the AO. 6. We have heard Ld.CIT-DR for the Revenue and perused the assessment order and appellate order. We find that the appeal was instituted on 17.12.2019 and was decided by CIT(A) on 23.11.2023. As discussed earlier, the AO passed an ex parte order u/s 144 of the Act due to non-compliance of the assessee to various statutory notices and show cause notice. He has rejected the books of account and estimated gross profit @ 5% of total sale. He has also added unsecured loan of Rs.16,72,805/- u/s 68 of the Act and further added Rs.1,08,00,334/- as income from other sources. The CIT(A) has accepted the explanation of the assessee that the MD of the company was seriously ill during assessment proceedings due to which he could not attend the assessment proceedings. Thereafter, the CIT(A) forwarded the submission and additional evidences to the AO on 02.08.2023 and issued reminder on 05.10.2023. He has thereafter passed the order on 23.11.2023. We find that the CIT(A) has not given 6 ITA No.60/SRT/2024 AY.17-18 Annapurna Cotttex Pvt. Ltd. adequate opportunity of hearing to the Revenue. It may be stated that the appeal was instituted on 17.12.2019 and order u/s 250 of the Act was passed after nearly 4 years on 23.11.2023. When the CIT(A) took such a long period to dispose of the appeal, it is not clear as to why he could not wait even for a couple of months for the Department to submit the remand report. The Hon’ble Madras High Court in case of CIT vs. Subbu Shashank 327 ITR 577 (Mad) held that Rule 46A(3) clearly shows that the CIT(A) cannot take into account any evidence produced under sub-Rule(1), unless the AO has been allowed a reasonable opportunity to cross-examine the witness produced by assessee. When the assesses is unable to produce the said evidence before AO, the CIT(A) has to convince himself about the reasonable cause shown by the assessee for not producing them before the AO and for placing them before appellate authority for the first time. If the CIT(A) is convinced about the reasonable cause, then he has to follow the procedure contemplated under Rule-46A(3) by providing sufficient opportunity to the AO to examine the evidence or documents or to cross-examine the witness, as the case may be. 6.1 The Hon’ble jurisdictional High Court in the case of CIT vs. Valimohmed Ahmedbhai 134 ITR 214 (Guj) held that since something adverse to the ITO was sought to be done in course of appeal by 7 ITA No.60/SRT/2024 AY.17-18 Annapurna Cotttex Pvt. Ltd. augmenting the record (additional evidence), the ITO ought to have been heard and given an opportunity to meet with the additional material by way of cross-examination, counter-evidence and urging submissions in the context of the augmented record. Because, when a prayer for additional evidence was made, it was an independent and substantive application seeking a new right, notice of such application was necessary to the ITO and he ought to have been afforded both and opportunity to oppose it and to test the additional evidence or counter the effect thereof or produce evidence in rebuttal. Not granting such opportunity is violation of principles of natural justice. 6.2 It is clear from the decisions discussed above that the AO should have been granted adequate and proper opportunity of hearing because no details or evidence were produced by the assessee before him during assessment proceedings resulting in passing order u/s 144 of the Act. The additional evidence and details were produced for the first time before CIT(A) during appellate stage. Therefore, the CIT(A) was clearly in error in not following the principles of natural justice because he passed the order without obtaining the remand report. In view of these facts and circumstances of the case and the decision cited supra, we are of the considered view that the additional evidence produced before the AO could have been admitted by CIT(A) only after 8 ITA No.60/SRT/2024 AY.17-18 Annapurna Cotttex Pvt. Ltd. obtaining and considering remand report of AO. We also find that the CIT(A) has not adhered to the principles of natural justice by passing his order without the remand report of AO. Accordingly, considering all the facts, in the interest of justice, we set aside the order of Ld. CIT(A) and remit the matter back to the file of AO with a direction to pass de novo assessment order in accordance with law after granting adequate opportunity of hearing to assessee. The assessee is directed to be more vigilant and to furnish all details and explanation as needed by AO by not seeking adjournment without valid reason. With this direction, the grounds of appeal raised by the Revenue is treated as allowed for statistical purposes. 7. In the result, the appeal of the Revenue is allowed for statistical purposes in above terms. Order is pronounced on 26/07/2024 in the open court. Sd/- Sd/- (PAWAN SINGH) (BIJAYANANDA PRUSETH) JUDICIAL MEMBER ACCOUNTANT MEMBER स ू रत/Surat Ǒदनांक/ Date: 26/07/2024 DKP Outsourcing Sr.P.S 9 ITA No.60/SRT/2024 AY.17-18 Annapurna Cotttex Pvt. Ltd. Copy of the Order forwarded to 1. The Assessee 2. The Respondent 3. The CIT(A) 4. CIT 5. DR/AR, ITAT, Surat 6. Guard File By Order // True Copy // Assistant Registrar/Sr. PS/PS ITAT, Surat