2024 (1) TMI 1196 - HC - Income Tax

Bogus sundry creditors - difference between the outstanding balance of the sundry creditors as on 31.03.2015 and 31.03.2014, which was the net increase in creditors by treating the same as bogus creditors - CIT(A) deleted addition admitting additional evidences - whether CIT(A) had clearly violated the provisions of Rule 46A of the Income-tax Rules, 1962, while admitting additional evidence? - as per revenue assessee has not furnished any sufficient cause for not submitting the evidence and had remained absent in the assessment proceedings though sufficient opportunity was given HELD THAT - CIT after considering the explanation of the assessee that the assessee was illiterate person and has studied upto fourth standard and he was not able to read English Language, we are of the opinion that the provision of Rule 46A(1) more particularly Sub-clause(b) thereof which reads as under is complied with as the assessee was prevented by sufficient cause from producing the evidence which he was called upon to produce by the Assessing Officer. In view of the above provisions of Rule 46A of the Rules, the assessee being an illiterate person could not appear before the Assessing Officer and the appellate proceedings being the continuation of the assessment proceedings, the CIT(A) has rightly permitted the assessee to produce the additional evidence in consonance with the Rule 46A of the Rules. Decided against revenue.

Summary

Issues Involved:
1. Admission of additional evidence by CIT(A) in violation of Rule 46A of the Income-tax Rules, 1962.
2. Genuineness of sundry creditors and failure to produce supporting bills and evidence.

Summary:

Issue 1: Admission of Additional Evidence by CIT(A)
The Revenue contended that the CIT(A) violated Rule 46A of the Income-tax Rules, 1962 by admitting additional evidence without sufficient cause. The assessee, an illiterate individual, failed to respond to multiple notices during the assessment proceedings, leading to an ex-parte assessment. The CIT(A) admitted documents such as copies of accounts, addresses, and PAN numbers of creditors, which were crucial to the controversy. The CIT(A) justified the admission of these documents, stating they were essential for resolving the issue and called for a remand report from the Assessing Officer. The High Court upheld the CIT(A)'s decision, noting that the assessee was prevented by sufficient cause from producing the evidence earlier and complied with Rule 46A(1)(b).

Issue 2: Genuineness of Sundry Creditors
The Assessing Officer added Rs. 5,30,94,465/- to the assessee's income, treating the increase in sundry creditors as bogus due to the assessee's failure to produce supporting bills and evidence. The CIT(A) deleted this addition after considering the evidence provided during the appellate proceedings, including audited accounts, sample purchase bills, and bank statements. The Tribunal upheld the CIT(A)'s decision, emphasizing that the purchases were supported by bills, entries in books of account, and payments made by cheque. The Tribunal found no merit in the Revenue's appeal, citing the Gujarat High Court's judgment in Nangalia Fabrics (P.) Ltd., which supported the deletion of additions when purchases were verified through bills and payments by cheque.

Conclusion:
The High Court dismissed the Revenue's appeal, affirming that no substantial question of law arose from the Tribunal's order. The CIT(A) was justified in admitting additional evidence under Rule 46A, and the genuineness of the sundry creditors was adequately established through corroborative evidence. The appeal was dismissed with no order as to costs.