2023 (4) TMI 331 - AT - Income Tax

Addition u/s 41 (1) - remission or cessation of trading liability - admission of additional evidences - assessee submitted that there were some genuine reasons because of which documents and replies could not be submitted to the AO and assessee was suffering from failure of kidney. In this regard, medical prescription has also been attached - HELD THAT - As in the interest of justice, we agree that there was reasonable cause of ailment that prevented the assessee to supply the documents and replies to the AO. Hence, we direct that the additional evidences and submissions made before the ld. CIT (A) be accepted by the ld. CIT (A). After going through the submissions and additional evidences, ld. CIT (A) shall pass an order as per law. Needless to add, assessee should be granted adequate opportunity of being heard. Appeal of the assessee stands allowed for statistical purposes.

Summary

Issues involved:
The judgment deals with the addition of Rs.1,47,10,075/- under section 41(1) of the Income Tax Act, 1961 for the Assessment Year 2014-15.

Addition of Rs.1,47,10,075/- under section 41(1) of the Income Tax Act:
The appellant, engaged in trading of menthol oil, had a disputed amount in the name of a creditor, M/s Suraj Trading Company. The Assessing Officer (AO) sought reconciliation of the difference but the appellant failed to comply despite multiple opportunities. Consequently, the AO treated the difference as representing remission or cessation of trading liability under section 41(1) of the Act.

Submission of additional evidences and documents:
Before the CIT (Appeals), the appellant submitted additional evidences and documents, seeking an opportunity to be heard. However, the CIT (A) found that the appellant did not respond to previous opportunities provided by the AO. The CIT (A) declined to admit the application under Rule 46A of the Income-tax Rules, 1962, and upheld the addition under section 41(1) of the Act based on the material available with the AO.

Appeal and fresh consideration:
The appellant appealed the CIT (A)'s decision, citing genuine reasons for the delay in submitting documents due to the appellant's health issues. Medical prescriptions were attached as evidence. The appellant requested a remittance of the matter to the CIT (A) for fresh consideration in light of the additional evidences and submissions made.

Decision and direction of the Tribunal:
The Tribunal acknowledged the reasonable cause of the appellant's ailment that hindered document submission to the AO. In the interest of justice, the Tribunal directed the CIT (A) to accept the additional evidences and submissions, and to pass an order as per law after due consideration. The appellant was to be granted adequate opportunity of being heard. Consequently, the appeal of the assessee was allowed for statistical purposes.

This judgment highlights the importance of providing reasonable cause for non-compliance, the acceptance of additional evidence in the appellate process, and the need for a fair opportunity to be heard in tax matters.