2018 (5) TMI 1013 - AT - Income Tax

Unexplained income u/s 68 - advances received from customers - CIT-A deleted the addition accepting additional evidence - no opportunity have been given to the A.O. to rebut the additional evidences produced - denial of natural justice - Held that - A.O. noted in the assessment order that specific query letters were issued to the assessee calling for confirmation and other details to prove both the above grounds. However, on the date fixed, nothing was produced by assessee to the satisfaction of the A.O. The A.O. feeling no alternative, made the addition. Assessee submitted that assessee produced the evidence before Ld. CIT(A) but no application filed for admission of additional evidence. Assessee produced the evidence for the first time before Ld. CIT(A) in respect of both the grounds of appeal. However, no opportunity have been given to the A.O. to rebut the evidences produced by assessee at appellate stage and even no remand report have been called for in the matter. It is, therefore, a case of denial of an opportunity to the A.O. at appellate stage, particularly, when no evidence was filed before A.O. at assessment stage Nothing has been done in the matter. Even the assessee has not made any request to the Ld. CIT(A) for admission of the additional evidence as per submission of the Learned Counsel for the Assessee. We, therefore, do not subscribe the view of the Ld. CIT(A) for deleting both the additions in such a manner. We, accordingly, set aside the order of the Ld. CIT(A) and restore these issues to his file with a direction to redecide the grounds by giving reasonable, sufficient opportunity of being heard to the assessee as well as A.O - Decided in favour of revenue for statistical purposes.

Summary

Issues:
1. Addition made u/s 68 of I.T. Act, 1961.
2. Addition made u/s 37 of I.T. Act, 1961.

Analysis:
1. Addition u/s 68 of I.T. Act, 1961:
The appellant, a company engaged in online marketing, received advances from customers against the sale of goods, which were treated as unexplained income by the Assessing Officer (AO). The appellant claimed these advances as liabilities in the balance sheet. The AO disallowed commission payments made to customers, stating they were not a business expenditure. The CIT(A) deleted both additions after considering the appellant's explanation. The CIT(A) found merit in the appellant's submissions, noting proper documentation of transactions and the business being conducted online. The Revenue contended that no evidence was produced before the AO, and the CIT(A) should have called for a remand report or given the AO an opportunity to rebut the evidence. The Tribunal held that the matter required reconsideration at the CIT(A) level, as the AO was not satisfied with the evidence provided. The Tribunal set aside the CIT(A)'s order, directing a re-decision with reasonable opportunity for both the assessee and the AO.

2. Addition u/s 37 of I.T. Act, 1961:
The AO disallowed commission payments made by the appellant to customers, claiming lack of business expediency. The CIT(A) deleted this addition based on the appellant's submissions and documentation provided. The Revenue argued that no evidence was presented before the AO and the CIT(A) should have called for a remand report. The Tribunal found that the CIT(A) did not provide a proper opportunity for the AO to rebut the evidence presented at the appellate stage. Therefore, the Tribunal set aside the CIT(A)'s order and directed a re-decision with adequate opportunity for both parties. The appeal of the Revenue was allowed for statistical purposes.

In conclusion, the Tribunal directed a re-decision on both additions, emphasizing the importance of providing reasonable opportunities for the assessee and the AO to present their cases. The judgment highlighted the necessity of following principles of natural justice in tax proceedings, ensuring fairness and proper consideration of evidence at all stages of the appeal process.