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DCIT Versus M/s Nirula Handicraft Bazar

2015 (5) TMI 477 - ITAT DELHI

Addition on Sundry Creditors - CIT(A) deleted the addition - whether CIT(A) has erred in accepting the additional evidence during the course of appellate proceedings without giving any opportunity to the AO to cross examine the additional evidence submitted by AOI? - Held that:- The Tribunal in the assessment Year 2008-09 in assessee;s own case held that sub-rule (3) of Rule 46A interdicts the CIT (A) from taking into account any evidence produced for the first time before him unless the AO has .....

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ts and without verification. Since in the case under consideration, the ld. CIT(A) did not follow the procedure laid down in Rule 46A of the IT Rules,1962 , we find merit in the contentions of the ld. DR and therefore, in the interest of justice and fair play, vacate the findings of the Ld. CIT(A) and restore the issues raised in various grounds of appeal before us to his file, with the directions to follow the mandate in terms of Rule 46A of the IT Rules, 1962 as also principles of natural just .....

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ssments of the assessee company for the assessment years 2005-06 and 2007-08 were completed u/s. 143(3) and no such disallowance was made by the Assessing Officer. Since the properties have been taken on rent by the company for its business purposes and the rent agreements provide for payment of the house tax by the assessee company, it was held that this payment was for business considerations and was therefore an allowable expenditure in the case of the assessee. It has also been submitted tha .....

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i And Shri A. T. Varkey JJ. For the Appellant: P.Dam Kanunjna, Sr. DR. For the Respondent: Sh. V. K. Gupta, CA. ORDER Per A. T. Varkey, JUDICIAL MEMBER This appeal filed by the Revenue arises out of the order passed by the Ld. CIT(A)-XVI, New Delhi dated 08.6.2012 pertaining to assessment year 2009-10. 2. The grounds raised in the Revenue s appeal read as under:- 1. Whether on the facts and in the circumstances of the case the Ld. CIT(A) has erred in deleting the addition of ₹ 37,02,418/- .....

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parties out of 53 parties. 4. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of ₹ 35,680/- made on house tax paid for the directions premises without appreciating that house tax paid is indirect benefit to the director. 5. The appellant craves to be allowed to add any fresh grounds of appeal and / or delete or amend any of the grounds of appeal. 3. Facts, in brief, as per the AO and ld CIT (A) are that assessee filed e-return d .....

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to 40.35% in the immediately preceding year. During the course of assessment proceedings, the Assessing Officer asked the assessee to produce details with addresses of sundry creditors declared in the balance sheet alongwith confirmation. The assessee produced name, address and amount due to creditors outstanding as on 31.3.2009; And was further asked by the AO, to furnish confirmation in respect of sundry creditors exceeding balance of ₹ 80000/- outstanding in the books of the assessee. F .....

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st of such parties where notices u/s. 133(6) were received back, (b) a list of parties whose transactions have been shown during the year whereas the assessee has suo motu surrendered the same in the previous year due to non filing of confirmation in respect of such parties; and (c) a list of sundry creditors where neither the assessee could file confirmation nor could be obtained directly from such persons due to non availability of complete addresses. The assessee s response thereto was not fo .....

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etc. Assessing Officer by referring various judgments has stated that it has been held in the case of Sushilkumar Jaiswal vs. ITO (ITAT, Delhi) 59 TTJ 18, by the Tribunal that summons sent to 4 creditors returned unserved - one creditor denied transaction, then the assessee has not discharged his onus of proving the creditors. The Hon ble MP High Court in the case of VISP(P) Ltd. vs. CIT (MP) 265 ITR 202, have held that Section 68 of the I.T. Act, 1961 does not confine to cash entries in books .....

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itors but none were produced for examination - neither was the AO requested to issue notice u/s. 131. According to AO no evidence was placed on record to show that any effort was made by these parties ( sundry creditors) for recovery of their dues from the assessee. And neither was any evidence furnished by the assessee of any business transaction with any of the parties during the year under consideration. And only a few self drawn vouchers were produced which appeared to have been made in a si .....

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brought on record, it was held that the creditors and balances thereof are not open to verification and accordingly, the AO made the disallowance of ₹ 37,02,418/- on account of sundry creditors. 3.1 With regard to disallowance out of House tax of ₹ 35,680/-. the assessee has paid house tax on rental properties amounting to ₹ 1,68,138/-. Out of ₹ 1,66,138/- the assessee has disallowed a sum of ₹ 1,18,686/- in the computation of income towards House Tax for self owned .....

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greement. The reply of the assessee was not acceptable to the AO as the house tax paid pertains to Rental properties which are owned by the Directors of the assessee. According to the AO it is on indirect benefit derived by the Director from the assessee company which is excessive and unreasonable. Therefore, the house tax paid, not owned by the assessee was disallowed amounting to ₹ 35,680/-. 4. Against the aforesaid order of the Assessing Officer, assessee appealed before the Ld. CIT(A), .....

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e (herein after the rule) in accordance with Delhi High Court decision in the case of CIT vs. Manish Buildwell 16 Taxmann.com 27(Del) because in this case also the ld CIT (A) did not follow the procedure prescribed U/Rule 46 (A) before admitting additional evidence before passing the appellate order. Hence, he requested that the issue in dispute may also be sent back to the file of the CIT(A) with the same directions as given in the assessment year 2008-09 by the Co-ordinate Bench in assessee s .....

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under consideration. Only a few self vouchers were produced before him that too appeared to have been made in a single sitting. And in the previous assessment year i.e. AY 2008-09, the assessee had itself surrendered a sum of ₹ 45.76 lacs in view of non filing of confirmation from some of these creditors only. So according to the AO, the assessee has not been able to prove the genuineness of the transaction as also the identity and creditworthiness of the persons coupled with the fact tha .....

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r and identical issue and remanded back the issue to the file of the Ld. CIT(A) to follow Rule 46A, in accordance with Delhi High Court decision in the case of CIT vs. Manish Buildwell (Supra). The Tribunal in the assessment ear 2008-09 has adjudicated the issue as under:- 6. We have heard both the parties and gone through the facts of the case. Indisputably, the assessee surrendered an amount of ₹ 45,76,244/- in relation to 23 creditors ,when the AO asked the assessee to furnish the confi .....

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ved that an admission is an extremely important piece of evidence but it cannot be said that it is conclusive and that It is open to the person who made the admission to show that it is incorrect, there is no such dispute with this proposition of law. In the instant case, neither before the ld. CIT(A) nor even before us, the ld. AR attempted to show as to how the surrender was incorrect and what prompted the assessee to file appeal without even retracting the surrender. Even after surrender of t .....

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expressed its inability to furnish further confirmations and produce the persons for cross-examination and offered the amount of ₹ 45,76,244/- to tax. 9 I.T.A .no.-3886/Del./2012 There is nothing on record to suggest that the AO did not allow sufficient opportunity to the assessee to submit confirmations. When the assessee expressed its inability to furnish further confirmations or to produce the persons, it offered the amount to tax; and the AO accepted the said offer and completed the a .....

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submitted by the assessee in its application under rule 46A of the IT Rules,1962,without following the procedure prescribed therein. As is apparent from the findings in the assessment order, the assessee was given sufficient opportunity by the AO to submit the confirmations. The ld. CIT(A) without taking cognizance of the fact that the assessee itself surrendered the amount to tax, proceeded to admit additional evidence, without allowing any opportunity to the AO.. In this situation, how the ass .....

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CIT(A) deleted the addition without following the procedure laid down under Rule 46A of the IT Rules,1962 . The ld. CIT(A) arrived at his conclusions without ascertaining as to whether or not the assessee was prevented by sufficient cause from submitting the aforesaid additional documents/information before the AO as per provisions of Rule 46A of the IT Rules, 1962 . Here we may have a look at the relevant provisions of Rule 46A of the IT Rules 1962, which read as under: (1) The appellant shall .....

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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 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 .....

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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 secti .....

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e authority is not permitted to act whimsically while exercising the jurisdiction under it .In the case under consideration, the assessee placed before the ld. CIT(A),certain additional evidence and admittedly, the said documents were not submitted before the AO. The powers of the CIT(A) in terms of rule 46A to admit fresh evidence, entail an element of discretion which is required to be exercised in a judicious manner. The powers of the CIT(A) to admit additional evidence are not only in situat .....

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le 46A must be shown to exist before additional evidence is admitted and every procedural requirement mentioned in the Rule has to be strictly complied with so that the Rule is meaningfully exercised. Once the assessee invokes Rule 46A and prays for admission of additional evidence before the CIT (A), then the procedure prescribed in the said rule has to be scrupulously followed. A distinction should be recognized and maintained between a case where the assessee invokes Rule 46A to adduce additi .....

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umbent upon the CIT (A) to comply with the requirements of the Rule strictly so that the Rule is meaningfully exercised and not exercised in a routine or cursory manner. The Hon ble High Court held that sub-rule (3) of Rule 46A interdicts the CIT (A) from taking into account any evidence produced for the first time before him unless the AO has had a reasonable opportunity of examining the evidence and rebut the same. In the instant case, there is nothing in the impugned order of the ld. CIT (A) .....

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, we find merit in the contentions of the ld. DR and therefore, in the interest of justice and fair play, vacate the findings of the Ld. CIT(A) and restore the issues raised in various grounds of appeal before us to his file, with the directions to follow the mandate in terms of Rule 46A of the IT Rules, 1962 as also principles of natural justice and thereafter, dispose of the matter in accordance with law after allowing sufficient opportunity to both the parties, bringing out clearly as to how .....

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e the findings of the Ld. CIT(A) and restore the issues raised in ground no 1 before us to the file of the Ld. CIT(A), with the direction to follow the mandate in terms of Rule 46A of the I.T. Rules, 1962 as also keep in mind the principles of natural justice and thereafter, dispose of the matter afresh in accordance with law after allowing sufficient opportunity to both the parties, and how the conditions stipulated in Rule 46 A of the I.T. Rules, 1962 are fulfilled. With these directions, grou .....

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sum of ₹ 1,18,686/- in the computation of income towards House Tax for self owned properties. As regards to balance ₹ 47,452/- (Rs. 1,66,138 - ₹ 1,18,686/) the assessee has submitted that some portion of the house tax pertains to properties owned and used by the assessee and the balance house tax paid pertains to properties taken on rent from Director of the company. On a show cause as to why the house tax paid on rental properties should not be disallowed, it has been submitte .....

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