P V MERCY,THRISSUR V. ITO, W-1, GURUVAYOOR

ITA 824/COCH/2023

AI Insights

The case involves P.V. Mercy, an individual engaged in the business of dealing in cement under the name 'Aiswarya Traders', who appealed against the order of the National Faceless Appeal Centre (NFAC) for the Assessment Year 2013-14. The primary contention was regarding the disallowance of cash expenditures under Section 40A(3) of the Income Tax Act, amounting to Rs. 1,55,12,373, and the addition of unconfirmed sundry creditors amounting to Rs. 11,52,558. The CIT(A) had dismissed the appeal ex parte, leading to the current appeal before the ITAT. The ITAT found procedural irregularities in the handling of the case by the NFAC, particularly the failure to adequately consider the appellant's submissions and the impact of the COVID-19 pandemic on the hearing process.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 474725 (ITAT-COCHIN)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-02-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2013-2014
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: LEENA LAL
• Assessee Lawyers: TESIN MATHEW
• Keywords: Condonation of delay; Set aside; Business income; Recovery proceedings
• Section: 143(3); 40A(3)

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH BEFORE SHRI INTURI RAMA RAO, AM AND SHRI PRAKASH CHAND YADAV, JM ITA No. 824/Coch/2023 Assessment Year: 2013-14 P.V. Mercy .......... Appellant Aiswarya Traders, Nhamangad P.O. Vylathur, Thrissur 680307 [PAN: ACWPV0753D] vs. The Income Tax Officer .......... Respondent Ward - 1, Guruvayur Appellant by: Ms. Tesin Mathew, Advocate Respondent by: Smt. Leena Lal, Sr. D.R. Date of Hearing: 23.01.2025 Date of Pronouncement: 04.02.2025 O R D E R Per: Inturi Rama Rao, AM This appeal filed by the assessee is directed against the order of the National Faceless Appeal Centre, Delhi [CIT(A)], dated 01.03.2024 for Assessment Year (AY) 2013-14. 2. The brief facts of the case are that the appellant is an individual carrying on the business of dealer in cement under the name and style of “Aiswarya Traders”. The return of income for AY 2013-14 was filed on 27.12.2013 disclosing income of Rs. 6,41,080/-. Against the said Return of Income, the assessment was 2 ITA No. 824/Coch/2023 P.V. Mercy completed by the Income Tax Officer, Ward-1, Guruvayur (hereinafter called \"the AO\") vide order dated 27.01.2016 passed u/s. 143(3) of the Income Tax Act, 1961 (the Act) at a total income of Rs.1,73,06,020/-. While doing so, the AO made disallowance of expenditure incurred in cash u/s. 40A(3) of the Act of Rs. 1,55,12,373/- and also made addition of sundry creditors of Rs. 11,52,558/- for alleged failure of the appellant to submit confirmation letters and to reconcile the difference in balance standing to the credit of the sundry creditors. 3. Being aggrieved, an appeal was filed before the CIT(A), raising the following grounds of appeal: - “i] The order of assessment u/s 143(3) dated 27.01.2016 passed by the Income Tax officer, W-1, Guruvayur for the AY 2013-14 is not correct on law and facts and also against the statutory provisions and the spirit of law. ii] The learned Assessing officer legally and materially erred in not considering and appreciating the submissions regarding the unsettled purchases, but simply made addition u/s 40A(3) amounting to Rs 1,55,12,372/-, though in fact no such cash purchases were effected during the said period. iii] The findings of the Assessing Authority that the appellant has paid the full amount against the purchases it made from M/s Vellara Communications is incorrect, against the actual facts and without any materials on record. iv] The Assessing Officer legally and materially erred in disallowing an amount of Rs. 1,55,12,372/- under Section 40A(3) particularly when he admitted and accepted various cash payments and receipts out of business expediency made between the appellant and the sister concern, M/s Vellara Communications. 3 ITA No. 824/Coch/2023 P.V. Mercy v] The learned assessing officer erred in adding back Rs 491877 (166026+325851) to business income as unconfirmed creditors without having any material on hand as evidence against the appellant. vi] Appellant craves leave for additional grounds at the time of hearing. For these and other grounds to be submitted at the time of hearing, it is prayed that the above appeal be allowed and may be pleased (1) to delete the additions made u/s 40A(3) amounting to Rs 1,55, 12,372/-, since there is no cash purchase during the period 2012-13 and (2) to delete the additions amounting to Rs 491877 made against the appellant for non confirmation of creditors.” 4. The CIT(A) dismissed the appeal exparte. 5. Being aggrieved, the appellant is in appeal before us in the present appeal. 6. At the outset, we find that there is delay of 51 days in filing the present appeal. The appellant filed an affidavit seeking condonation of delay stating that the appellant had no knowledge of the impugned order till the recovery proceedings were initiated by the AO on 19.10.2023. It is further submitted that the appellant’s elder son, Mr. Antony Sunny, who was handling the tax matters was in judicial custody. Thus, it is submitted that the delay occurred on account of factors and reasons, which are beyond the control of the assessee and, therefore, prayed for condonation of the delay. 7. On the other hand, the ld. Sr. DR has no serious objection for condonation of delay. 4 ITA No. 824/Coch/2023 P.V. Mercy 8. In the absence of any evidence to the contrary, to disbelieve the averments made in the affidavit, we are of the considered opinion that it is a fit case to condone the delay of 51days. Accordingly we condone the delay in filing the appeal and admit the appeal for adjudication. 9. We have heard rival contentions and perused the material available on record. We carefully perused the impugned order passed by the CIT(A). The CIT(A), while passing the exparte order, although entered into the merits of the addition made in the order, but failed to advert to the grounds of appeal raised by the appellant before him as extracted above. Further, we find that except the last notice of hearing, all the notices of hearing were issued by the NFAC during the Covid-19 pandemic period. In the circumstances we set aside the order of the NFAC and remand to the NFAC with the direction for fresh adjudication in accordance with law after affording opportunity of hearing to the appellant. 10. In the result, appeal filed by the assessee is partly allowed. Order pronounced in the open court on 4th February, 2025. Sd/- Sd/- (PRAKASH CHAND YADAV) JUDICIAL MEMBER (INTURI RAMA RAO) ACCOUNTANT MEMBER Cochin, Dated: 4th February, 2025 n.p. 5 ITA No. 824/Coch/2023 P.V. Mercy Copy to: 1. The Appellant 2. The Respondent 3. The Pr. CIT concerned 4. The Sr. DR, ITAT, Cochin 5. Guard File By Order Assistant Registrar ITAT, Cochin "