ACIT CENTRAL CIRCLE-3(1), Chennai v. PALEPU PHARMA P.LTD, CHENNAI

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"...On careful consideration of rival submissions, first of all, we note that from para 5 of the assessment order, we clearly observe that the A0 has noted that the assessee has submitted the copies of invoices to show that goods were sold on 29.02.20l6 against the advance money received. From the relevant para 6.1 of the first appellate order, we also found that the ld. CIT(A) had called information from M/s National Pharma, Delhi u/s. 133(6) of the Act and in reply Ms informed the AO that M/s National Pharma, Delhi has neither made any purchases nor any transaction during the period under consideration i.e. 01.04.2015 to 30.06.2016. Ld. Assessee's Representative has placed vehemently reliance on the request letter of the assessee vide dated 21.05.2019, which has been reproduced by the ld. CIT(A) in para 6.4 of the first appellate order, wherein the assessee has contested the letter received by the ld. CIT(A) from M/s. National Pharma on 26.04.2019 and the assessee requested ld. CIT(A) to allow opportunity to cross-examine the competent person/partner/director of M/s. National Pharma, Delhi on the strength of decision of the Hon'ble Supreme Court in the case of Andaman Timber Industries in Civil Appeal No.4228/2006, dated 02.09.2015. But this request and contention of the assessee was dismissed by the ld. CIT(A) by observing that it was bounden duty of the assessee to explain the cash found and it did not do so and did not itself submit the confirmation of the cash from whom it claimed the cash was received and there was no direct evidence of having received cash from National Pharma. Ld. AR strenuously contended that from para 5.6 of the assessment order, it is clear that the assessee has produced the VAT payment, ledger entries, copies of the invoices which shows that goods were sold by the assessee to M/s National Pharma on 29.02.2016 against the amount advance money which was received in cash and found and seized during the search and seizure operation and the AO without doubting, pointing any discrepancy or defect or diminishing such self speaking evidence proceeded to confirm the addition only on the strength of reply letter of M/s National Pharma (received by the ld. CIT(A) on 26.04.2019). Ld. AR also pointed out that despite specific and categorically request of assessee through letter dated 21.05.2019, the CIT(A) dismissed the prayer of assessee for allowing cross examination on the authorized person/partner/director of M/s National Pharma, Delhi, proceeded to confirm the addition on the ground based on his own surmises and conjectures and even the ld. CIT(A) has also not doubted or dismissed the documentary evidence filed by the assessee in the form of sale invoices, VAT payment, ledger entries of M/s National Pharma, which was also filed before the AO as well as before the CIT(4). Therefore, in view of the above factual position, we are inclined to hold that despite a specific request by the assessee to allow cross examination, ld. CITA) denied the same without any cogent justification and valid reason which is a clear violation of proposition

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rendered by the Hon'ble Supreme Court in the case of Andaman Timber Industries (supra). Therefore, we hold that the ld. CIT(A) was not correct in confirming the addition made by the AO keeping aside the evidence submitted by the assessee in the form of sales vouchers, VAT payment evidence, ledger entries, etc. only on the strength of reply letter received by him on 26.05.2019 from M/s National Pharma, Delhi without allowing cross examination to the assessee on the said letter/reply of M/s National Pharma. Therefore, respectfully following the proposition laid down by the Hon'ble Supreme Court, we are compelled to hold that the addition confirmed by the ld. CIT(A) is not sustainable and the observations and findings recorded by the CIT(A) are hit by the proposition rendered by the Hon'ble Supreme Court in the case of Andaman Timber Industries (supra). Accordingly, we allow the appeal of the assessee and direct the AO to delete the addition"

UNQUOTE

2. In this regard, it is respectfully submitted that the ITAT has not taken into account the arguments presented by the Ld. CIT(DR). The arguments of the ld. CIT (DR) did not form part of the order and were mentioned in paragraph 5 of the order only as "On careful consideration of rival submissions" and no mention has been made of the exact submissions by the Hon'ble ITAT in its order. In view thereof, there is an apparent omission in the order passed by the Hon'ble ITAT and the arguments of the Ld.CIT(DR) are to be incorporated in the Hon'ble ITAT Order.

3. Hence, this Miscellaneous petition is filed before the Hon'ble Tribunal with a humble request to take appropriate remedial steps for including the contentions of the Ld. CIT(DR) as mentioned in Para 2."

3. When this miscellaneous petition was taken up for hearing, the ld. DR has filed written submissions stating as under:

The Department has sought rectification of the Honourable Tribunals order dated 31/03/2022 in ITA No.2072/Chny/2019 with a request to capture the arguments of the CIT (DR) in the interest of Natural Justice as in the said order, the arguments of the CIT(DR) were not captured. When the captioned Miscellaneous Application (MA) came up for hearing on 04/11/2022, the Honourable Member, chairing the MA proceeding of the Tribunal, sought for the evidence of the arguments put-forth by the CIT(DR) before the other Honourable touring Members of the Tribunal, who had heard and passed the original order. Since the original arguments, before the Honourable touring Members of the Tribunal, where through virtual mode, the CIT(DR), who represented the case in the original proceeding, requested

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the Tribunal to access the video recordings of the proceedings and also inspect the case hearing log books maintained by the Tribunal Members, recording the key arguments put-forth by the Counsels representing the parties involved in the appeal. However, the Honourable Members did not accede to this request and asked the bench to post the case before the members who have heard the case originally.

Since, the above suggestion of the bench is not practically a feasible solution as the members involved in the original case hearing, have heard and passed orders in the capacity of being touring Members and the possibility of those two Honourable members again coming together at ITAT, Chennai being a far possibility, the CIT(DR), who represented the Department during the original hearing, sought for the inspection of Tribunal files and records under Rule-50 of the Income Tax Tribunal Rules, 1963 vide letter dated 29/03/2023. However, this request was acceded only on 14/06/2023, after the CIT(DR), who had made such request was transferred out of the Tribunal. Further, when the incumbent CIT(DR) requested for providing access to the case Hearing log book of the Tribunal, it was denied even though the Rule-50 of the Tribunal Rules specifically permits inspection and coping of contents not only from the files maintained but also from the registers maintained by the Tribunal.

Considering the technical bottle neck so created in establishing the content of the arguments put-forth by the CIT(DR) to substantiate the request made through the captioned MA, it is requested that the written submission dated 17/11/2022 made by the CIT(DR) during the captioned MA proceeding, capturing the contents of his submissions made during the course of the original proceeding be taken as the true and correct reflection of oral arguments put forth and the original order dated 31/03/2022 amended to incorporate the arguments of the CIT(DR). The veracity of the contents of the written submission dated 17/11/2022 of the CIT(DR) can be cross verified by your Honourable Members from the video recordings and the hearing log books maintained by the Tribunal. If such materials are indeed absent, then the Honourable Tribunal may consider accepting the contents of the written submission as the true facts of the arguments of the CIT(DR). During the today's hearing, your Honourable member had asked a valid question as why in the grounds of appeal, the Assessing Officer failed to highlight the submission of the Department as its main grounds, while filing the appeal. To this, the undersigned had drawn to the Honourable members attention to the points of arguments of the CIT(DR, as at Sl.no.4 of his written submission dated 17/11/2022 and explained as to how such points of submission could not have been a part of the Grounds raised while filing the appeal and could only have been points of arguments in support of the grounds raised.

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It further suggested that even if the Honourable Members who had heard and passed the original orders are not available for seeking their clarification on the matter, sub-rule (6) of Rule 34 of the Income Tax Tribunal Rules, 1963, permits, any other Honourable Members to pass such orders amending the original order based on the submissions made by the CIT(DR), who had represented the Department in the case hearing.

This request is made to uphold the true spirit of fairness of delivery of justice by the Honourable Tribunal to the parties involved in the appeal proceedings.

4. On the other hand, the ld. Counsel for the assessee has submitted that there is no apparent mistake in the order passed by the ITAT and recalling is unwarranted. He further submitted that non- reproduction of all the arguments would not amount to a mistake apparent on record. The ld. DR cannot suggest as to how the order has to be written. He further submitted that the ITAT has considered entire facts and circumstances of the case and passed detail order.

5. We have heard both the sides, perused the petition filed by the Revenue including written submissions of the ld. DR and gone through the order passed by the ITAT vide I.T.A. No. 2072/Chny/2019 dated 31.03.2022. In the appeal, the Revenue has raised following grounds:

1. The order of the Commissioner of Income Tax (Appeals)-19. Chennai dated 28.05 2019 in ITA No.342/2017-18 for the above assessment year is contrary to law, facts, and in the circumstances of the case

2 The CITA) erred in sustaining the addition of Rs.54,44,672/- based on the cash found in excess of the cash book balance and based on the sworn statement of Shi Rajeev N Narayan under the head income from other sources in the computation of taxable total income without assigning proper reasons and justification.

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3. The CITA) failed to appreciate that the assessment of the cash found as excess/unaccounted cash was wrong, erroneous, unjustified, incorrect and not sustainable in law and ought to have appreciated that the details of advance received for supply of goods from National Pharma Delhi, the details of goods sold on 29.2.2016 against the advance monies received including the details of VAT payments and ledger entries were completely overlooked and brushed aside thereby vitiating double taxation of such amount in the computation of taxable total income.

4. The CITA) failed to appreciate that the reliance placed on the confirmation given by M/s. National Pharma without giving an opportunity to the Appellant to cross-examine despite a request made vide letter dated 21.05.2019 should be reckoned as bad, erroneous and unsustainable in law.

5. The CITA) having not disputed the details/returns filed with the VAT authorities disclosing the impugned transactions ought to have appreciated that the reliance placed on unverifiable examination of M/s. National Pharma was wrong, erroneous, unjustified, incorrect and not sustainable in law.

6. The CIT(A) went wrong in recording the findings in this regard in para 6.5 of the impugned order without assigning proper reasons and justification.

7. The CIT (Appeals) failed to appreciate that there was no proper opportunity given before passing of the impugned order and any order passed in violation of the principles of natural justice would be nullity in law.

8. The Appellant craves leave to file additional grounds/arguments at the time of hearing.

6. It is apparent that all the grounds are relating to addition of ₹.54,44,672/- only. The ITAT, by considering the entire facts as noted by the Assessing Officer in the assessment order dated 29.12.2017 and also the detailed order passed by the ld. CIT(A) and also by considering the submissions of the ld. AR as well as ld. DR, passed the appeal order as under:

"5. On careful consideration of rival submissions, first of all, we note that from para 5 of the assessment order, we clearly observe that the A0 has noted

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that the assessee has submitted the copies of invoices to show that goods were sold on 29.02.20l6 against the advance money received. From the relevant para 6.1 of the first appellate order, we also found that the ld. CIT(A) had called information from M/s National Pharma, Delhi u/s. 133(6) of the Act and in reply M/s informed the AO that M/s National Pharma, Delhi has neither made any purchases nor any transaction during the period under consideration i.e. 01.04.2015 to 30.06.2016. Ld. Assessee 's Representative has placed vehemently reliance on the request letter of the assessee vide dated 21.05.2019, which has been reproduced by the ld. CIT(A) in para 6.4 of the first appellate order, wherein the assessee has contested the letter received by the ld. CIT(A) from M/s. National Pharma on 26.04.2019 and the assessee requested ld. CIT(A) to allow opportunity to cross-examine the competent person/partner/director of M/s. National Pharma, Delhi on the strength of decision of the Hon'ble Supreme Court in the case of Andaman Timber Industries in Civil Appeal No.4228/2006, dated 02.09.2015. But this request and contention of the assessee was dismissed by the ld. CIT(A) by observing that it was bounden duty of the assessee to explain the cash found and it did not do so and did not itself submit the confirmation of the cash from whom it claimed the cash was received and there was no direct evidence of having received cash from National Pharma. Ld. AR strenuously contended that from para 5.6 of the assessment order, it is clear that the assessee has produced the VAT payment, ledger entries, copies of the invoices which shows that goods were sold by the assessee to M/s National Pharma on 29.02.2016 against the amount advance money which was received in cash and found and seized during the search and seizure operation and the AO without doubting, pointing any discrepancy or defect or diminishing such self speaking evidence proceeded to confirm the addition only on the strength of reply letter of M/s National Pharma (received by the ld. CIT(A) on 26.04.2019). Ld. AR also pointed out that despite specific and categorically request of assessee through letter dated 21.05.2019, the CIT(A) dismissed the prayer of assessee for allowing cross examination on the authorized person/partner/director of M/s National Pharma, Delhi, proceeded to confirm the addition on the ground based on his own surmises and conjectures and even the ld. CIT(A) has also not doubted or dismissed the documentary evidence filed by the assessee in the form of sale invoices, VAT payment, ledger entries of M/s National Pharma, which was also filed before the AO as well as before the CIT(A). Therefore, in view of the above factual position, we are inclined to hold that despite a specific request by the assessee to allow cross examination, ld. CITA) denied the same without any cogent justification and valid reason which is a clear violation of proposition rendered by the Hon'ble Supreme Court in the case of Andaman Timber Industries (supra). Therefore, we hold that the ld. CIT(A) was not correct in confirming the addition made by the AO keeping aside the evidence submitted by the assessee in the form of sales vouchers, VAT payment evidence, ledger entries, etc. only on the strength of reply letter received by him on 26.05.2019 from M/s National Pharma, Delhi without allowing cross examination to the assessee on the said letter/reply of M/s National Pharma.

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Therefore, respectfully following the proposition laid down by the Hon'ble Supreme Court, we are compelled to hold that the addition confirmed by the ld. CIT(A) is not sustainable and the observations and findings recorded by the CIT(A) are hit by the proposition rendered by the Hon'ble Supreme Court in the case of Andaman Timber Industries (supra). Accordingly, we allow the appeal of the assessee and direct the AO to delete the addition"

We find that the ITAT has considered all the facts and decided the issue involved in the appeal. Thus, we find no mistake apparent in the order of the ITAT. Accordingly, the MP filed by the Revenue is dismissed.

7. In the result, the Miscellaneous Petition filed by the Revenue is dismissed.

Order pronounced on 09^thAugust, 2023 at Chennai. Sd/- Sd/-

(MANJUNATHA, G.)

ACCOUNTANT MEMBER

(V. DURGA RAO)

JUDICIAL MEMBER

Chennai, Dated, 09.08.2023 Vm/-

आदेश की ितिलिप अ ेिषत/Copy to: 1. अपीलाथ /Appellant, 2. थ / Respondent,

3. आयकर आयु /CIT, 4. िवभागीय ितिनिध/DR & 5. गाड फाईल/GF.