2020 (11) TMI 599 - AT - Income Tax

Additions made by the AO while computing book profit u/s 115JB was not raised by the assessee-company in its appeal filed before the Ld. CIT(A) due to inadvertence - addition u/s 68 and disallowance u/s 40(a)(ia) - additional ground - HELD THAT - DR has not raised any material objection for admitting the said additional ground. He however has contended that since this issue was not raised by the assessee before the Ld. CIT(A), an opportunity may be given to the Ld. CIT(A) to consider and decide the same on merit. We find merit in this contention of the Ld. DR. The additional ground is accordingly admitted and the issue raised therein is remitted to the Ld. CIT(A) for deciding the same in accordance with law after giving the assessee a proper and sufficient opportunity of being heard. Addition u/s 68 - addition made by the AO u/s 68 which is not only confirmed but enhanced by the Ld. CIT(A) - HELD THAT - The notice of enhancement was issued by the Ld. CIT(A) on 24.09.2018 and since the impugned order enhancing income of the assessee was passed by the Ld. CIT(A) on 28.09.2018, the assessee did not get proper and sufficient opportunity to submit its reply to the enhancement notice issued by the Ld. CIT(A). He has contended that the Ld. CIT(A) thus has enhanced the income of the assessee without giving proper notice to the assessee and the enhancement made by the Ld. CIT(A) cannot be sustained. DR, on the other hand, has contended that if at all the assessee did not get sufficient opportunity to submit its reply to enhancement notice issued by the Ld. CIT(A) as alleged by the learned counsel for the assessee, the issue relating to enhancement of assessee s income may be sent back to the Ld. CIT(A) for deciding the same afresh after giving proper and sufficient opportunity of being heard to the assessee. We find merit in this contention of the Ld. DR. The impugned order of the Ld. CIT(A) on this entire issue relating to addition made by the AO u/s 68 and further enhanced by the Ld. CIT(A) is accordingly set aside and the matter is remitted back to the Ld. CIT(A) for deciding the same afresh.

Summary

Issues:
1. Addition of unexplained loans under section 68 of the Income Tax Act.
2. Disallowance under section 40(a)(ia) and determination of total income.
3. Enhancement of income by the CIT(A) without proper notice to the assessee.

Issue 1: Addition of unexplained loans under section 68 of the Income Tax Act:
The appellant, a company, received loans during the year under consideration from two creditors. The Assessing Officer (AO) treated the loans as unexplained due to lack of satisfactory verification of the creditors' identity and genuineness of transactions. An addition of the loan amounts was made to the total income of the appellant under section 68. The CIT(A) upheld and enhanced the addition based on bank statements indicating suspicious activities. The appellant contended that the issue was not raised before the CIT(A) due to inadvertence and requested consideration on merit. The Tribunal admitted the additional ground and remitted the issue to the CIT(A) for proper adjudication.

Issue 2: Disallowance under section 40(a)(ia) and determination of total income:
Apart from the loan addition under section 68, the AO also disallowed an amount under section 40(a)(ia) and determined the total income of the appellant. The CIT(A) enhanced the total income based on additional findings from bank statements. The appellant raised grounds challenging the artificial additions beyond the scope of provisions and the legality of enhancement without proper notice. The Tribunal set aside the CIT(A)'s order on this issue and remitted it back for fresh consideration with proper opportunity for the appellant to be heard.

Issue 3: Enhancement of income by the CIT(A) without proper notice to the assessee:
The appellant contested the enhancement of income by the CIT(A) without adequate opportunity to respond to the enhancement notice. The Tribunal found merit in this argument and set aside the CIT(A)'s order, directing a reevaluation of the issue with proper and sufficient opportunity for the appellant to present its case. The appeal of the assessee was treated as allowed for statistical purposes.

This judgment highlights the importance of procedural fairness and the right to be heard in tax assessments. The Tribunal's decision emphasizes the need for proper opportunities for taxpayers to respond to any enhancements or additions to their income, ensuring a just and transparent tax assessment process.