2016 (2) TMI 156 - AT - Income Tax

Addition on non confirmation of advances by the parties - CIT(A) deleted the addition - Held that - The assessee did not furnish the confirmation letters from the concerned parties. It appears that assessee did not cooperate with the Assessing officer and the Ld. CIT(A) has admitted the alleged additional evidence in violation of provisions of Rule 46A of the I.T. Rules, 1962. Sub Rule (2) provides that the CIT(A) while admitting such evidence must record its reasoning in writing. Sub Rule (3) of Rule 46A provides that Commissioner of Income Tax (Appeals) could not accept such evidence unless the Assessing officer has been given reasonable opportunity of examining the evidence so produced. In the instant case, the Ld. CIT(A) has not recorded the reasons for admitting the additional evidence. Similarly, no opportunity has been given to the Assessing officer to examine the additional evidence, if any, submitted by the assessee because no confirmation was submitted with respect to the amount for ₹ 20,36,703/-. Thus remand the matter to the Assessing officer with a direction to decide the issues afresh - Decided in favour of revenue for statistical purposes Addition on non confirmation of cash credits - CIT(A) deleted the addition - Held that -Assessing officer noted that the assessee had furnished the confirmation of two parties without PAN from whom advances were shown by the assessee. It is stated that assessee submitted only copy of the account given by the parteis but no PAN was mentioned on the letter head of the parties. Therefore, in the absence of proper confirmations, the Assessing officer treated the amount of ₹ 3,63,750/- as unexplained cash credit and added the same to the total income off the assessee. It is true that in the absence of proper confirmations, the Assessing officer was justified in treating the amount in question as unexplained cash credits. The onus was on the assessee to prove the genuineness of the transactions. Without PAN., it was not possible to verify the transactions particularly when one of the parties is stated to be from State of Gujarat. The Ld. CIT(A) himself has observed that the Assessing officer has reported that in case of M/s Vishvnagar CT Scan Centre, Gujarat, the letters have been received back un-served. Thus, the very existence of the party is doubtful.Thus remand the matter to the Assessing officer with a direction to decide the issues afresh - Decided in favour of revenue for statistical purposes

Summary

Issues:
1. Addition of Rs. 15,30,700 on account of non-confirmation of advances by parties.
2. Addition of Rs. 3,63,750 on account of non-confirmation of cash credits.

Analysis:

Issue 1: Addition of Rs. 15,30,700 on account of non-confirmation of advances by parties:

The Assessing Officer (AO) added Rs. 15,30,700 to the income of the assessee due to non-confirmation of advances by parties. The CIT(A) allowed a relief of Rs. 15,30,703 to the assessee but confirmed the addition of Rs. 5,06,003. The assessee failed to produce confirmations from parties for the advances claimed. The CIT(A) admitted additional evidence submitted by the assessee without recording reasons or giving the AO a chance to examine the evidence. The ITAT Chandigarh set aside the CIT(A)'s order, remanding the matter to the AO for fresh examination, directing to afford a reasonable opportunity to the assessee and consider the additional evidence.

Issue 2: Addition of Rs. 3,63,750 on account of non-confirmation of cash credits:

The AO added Rs. 3,63,750 to the income of the assessee due to non-confirmation of cash credits. The assessee furnished confirmations without PAN from parties for whom advances were shown. The absence of proper confirmations led the AO to treat the amount as unexplained cash credit. The ITAT Chandigarh noted that the existence of one party was doubtful as letters were received back un-served. The ITAT Chandigarh set aside the CIT(A)'s order on this issue as well, remanding it to the AO for a fresh decision after providing a reasonable opportunity to the assessee and considering the additional evidence submitted.

In conclusion, the ITAT Chandigarh allowed the appeal for statistical purposes, setting aside the CIT(A)'s order on both issues and remanding the matters to the AO for fresh examination in accordance with the law, ensuring due process and consideration of additional evidence submitted by the assessee.