CIT(A) Must Offer Credible Justifications for Removing an Addition: ITAT
Fact and issue of the case
This appeal is filed by the Revenue feeling aggrieved by the order of Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi dt.22.03.2023 invoking proceedings under section 144 r.w.s. 142(1) of the Income Tax Act, 1961 (in short, “the Act”).
The appeal filed by the Revenue is barred by limitation by 40 days. It has moved a condonation petition explaining reasons thereof. We have heard both the parties on this preliminary issue. Having regard to the reasons given in the petition, we condone the delay and admit the appeal for hearing.
The grounds raised by the Revenue read as under :
The Ld. CIT(A) erred in restricting the addition to Rs.6,34,54,590/-, when the assessee company failed to explain the source and purpose of credits in bank accounts during the assessment proceedings.
The Ld. CIT(A) in restricting the addition to Rs.6,34,54,590/-particularly when the assessee company declared a turnover of Rs. 17,62,60,218/- only whereas the total credits in bank accounts as per assesseee submissions during the course of appeal proceedings for the F.Y. 2017-18 was Rs.26,84,68,274/-
The brief facts of the case are that assessee company filed its return of income for A.Y.2018-19 on 14/10/2018 declaring total income of Rs.16,77,160/-. The return was processed u/s 143(1) and the case was selected for scrutiny under CASS. Notice u/s 143(2) was issued on 22/09/2019 and the same was served on the assessee. In this case, Assessing Officer noticed that assessee company has made cash deposits with various banks at Rs.14,35,22,960/-. Hence, Assessing Officer issued various notices/letters to the assessee. Thereafter issued penalty proceeding for failure to comply with notices issued u/s 142(1) dated 24/12/2021 u/s 274 rws 272A(1)(d) dated 04/02/2021 by the assessee. Assessing Officer also issued notice u/s 133(6) to Axis Bank Ltd and HDFC Bank Ltd on 09/02/2021 however, got no reply from the said banks. As no reply was received from the assessee, show cause notice u/s 144 of the Act dated 05/04/2021 was issued.
Finally, as the assessee has not substantiate substantiated the source of credits of Rs. 39,05,06,143/- in his bank account with documentary evidence, Assessing Officer opined that assessee has no explanation to offer regarding nature and source of credits of Rs.39,05,06,143/- in his bank accounts. Therefore, he treated the said amount as undisclosed and unexplained income of the assessee and added it to the total income under Section 68, r.w.s. 115BBE of the Income Tax Act,1961, for the year under consideration. Thus, Assessing Officer completed the assessment u/s 144 r.w. 144B of the Act and passed assessment order on 13.05.2021.
Feeling aggrieved with the order of Assessing Officer, assessee filed appeal and thereafter, it was migrated to the ld. CIT(A), NFAC, Delhi, who granted partial relief to the assessee.
Aggrieved with the order of ld. CIT(A), Revenue is now in appeal before us.
Before us, Ld. D.R. submitted that Tribunal in the case of assessee in ITA No.213/Hyd/2023 for A.Y.2018-19 has remanded back the matter to the file of ld. CIT(A) with a direction to decide the issue afresh pertaining to cash deposits of Rs.6,34,54,590/-. Ld. DR contended that Assessing Officer had made an addition of Rs.39,21,83,300/- and as against the above said amount, the ld. CIT(A) has restricted the addition to Rs.6,34,54,590/-. The above said issue of Rs.6,34,54,590/- has been sent back to the ld. CIT(A) for fresh adjudication for the remaining amount.
It was submitted by the ld. DR that the order passed by the ld. CIT(A) was cryptic, non-speaking and perfunctory order as the ld. CIT(A) was conspicuously not discussed the remand report and he has not made any comments either agree or disagree with the remand report in his order. It was submitted that the ld. CIT(A) has vaguely and unscrupulously granted the partial relief to the assessee and without any reason has deleted the major additions. It was submitted that the order passed by the ld. CIT(A) is without any basis and is therefore required to be set aside.
Per contra, the ld.AR firstly submitted that the appeal filed by the Revenue is barred by limitation and during the course of appellate proceedings in ITA No.213/Hyd/2023, the Tribunal has pointed that whether the revenue has preferred the appeal against the deletion made by the ld. CIT(A) or not. To the pointed query, the ld. DR had mentioned that no such appeal has been filed by the Revenue. However, quite contrary to the above, the Revenue has preferred appeal after a delay which was condoned. On merit, it was submitted that the ld. CIT(A) before deleting the major addition in para 6.4 of his order had given background for the same, however, the remand report of the Assessing Officer is self-speaking. Ld. A.R. further submitted that based on remand report, the ld. CIT(A) has deleted the addition. It was submitted that the assessee had filed detailed elaborate evidence in support of deletion of addition before the ld. CIT(A) and based on that, the remand report was called for, which forms the basis of deletion of the addition by the ld. CIT(A).
Observation of the court
We have heard the rival submissions and perused the material on record. In the present case, impugned order was received in the office of PCIT-4, Hyderabad on 06.06.2023. Thereafter, the PCIT has mentioned the last date for filing of appeal was 05.08.2023. However, the letter was communicated on 23.08.2023. Based on the above said application, another application for condonation was filed wherein it was mentioned that due to technical glitches and procedural lapses, there was a delay in filing the appeal and the delay in filing the appeal may be condoned. We have heard the rival submissions and perused the material on record on this issue. We are of the opinion that the delay is well explained and therefore, we deem it appropriate to remand back the matter to the file of Assessing Officer.
Coming back to the merits of the case, admittedly, the ld. CIT(A) in Para 6.5 has merely given a vague and unsubstantiate and cryptic finding on the issue. No reasons were provided by the ld. CIT(A) for deleting the additions which are the subject matter of the appeal. In our view, it is the duty of the ld. CIT(A) to adjudicate the grounds raised by the assessee in appeal and further, it is also the duty of the ld. CIT(A) to dispose of the appeal while passing the order and in the order of the ld. CIT(A), as per the mandate provisions u/s 250(6) of the Act, he has to state the points for determination and the decision thereon and the reasons for the said decision. In the present case, ld. CIT(A) has failed to follow the procedure as contemplated under section 250(6) of the Act and has not given reasons much less the plausible reasons for deleting the addition. In view of the above, we are of the opinion that the matter should be remanded back to the file of ld. CIT(A) for fresh adjudication. Hence, we remand back the matter to the file of Ld. CIT(A) with a direction for passing a detailed speaking order after affording due opportunity of hearing to the assessee in accordance with law. Further, the assessee is directed to appear before the Ld. CIT(A) on the date of hearing fixed by the Ld. CIT(A) and shall file all the documents / evidence in support of its case. In case, the assessee failed to file any documents in support of its case, Ld .CIT(A) shall decide the matter in accordance with the law. Accordingly, the appeal of assessee is allowed for statistical purposes.
In the result, the appeal of the Revenue is allowed for statistical purposes.
Order pronounced in the Open Court on 17th October, 2023.