Failure to produce docs in respect of grounds of appeal entails CIT(A) to pass ex-parte order
Posted Date : 21-Mar-2014 , 08:04:27 | Posted By: Vimmi
Court : IN THE ITAT AGRA BENCH
Section 251, read with section 144, of the Income-tax Act, 1961 - Commissioner (Appeals) - Powers of [Ex parte order] - Assessment year 2005-06 - Despite several notices issued under sections 143(2) and 142(1), assessee did not attend assessment proceedings, nor filed any explanation - Assessing Officer, therefore, passed an ex parte assessment order under section 144 on assessee - Further assessee in spite of large number of adjournments granted by Commissioner (Appeals) did not produce any document in respect of grounds of appeal, nor made written or oral submissions before him - Commissioner (Appeals), therefore, proceeded ex parte against assessee and confirmed assessment order - Whether both Commissioner (Appeals) and Assessing Officer rightly proceeded ex parte against assessee - Held, yes [Para 6] [In favour of revenue]
Section 254 of the Income-tax Act, 1961 read with rule 29 of the Income Tax (Appellate Tribunal) Rules, 1963 - Appellate Tribunal - Powers of [Powers to admit additional evidence] - Assessment year 2005-06 - Assessing Officer passed an ex parte assessment order under section 144 on assessee - Commissioner (Appeals) in absence of any co-operation from side of assessee proceeded ex parte against assessee and confirmed assessment order - Against order of Commissioner (Appeals), assessee filed appeal before Tribunal - It also moved application under rule 29 of Appellate Tribunal Rules, 1963 for admission of additional evidences - Whether since assessee had not made out any case that authorities below had decided case without giving sufficient opportunity to adduce evidence, requirement of rule 29 had not been satisfied - Held, yes - Whether, therefore, above application was liable to be rejected - Held, yes [Para 7][In favour of revenue]
Shivangi Steel (P.) Ltd.
Assistant Commissioner of Income-tax, Central Circle
Bhavnesh Saini, Judicial Member - This appeal by the assessee is directed against the order of ld. CIT(A)-I, Agra dated 27.01.2012 for the assessment year 2005-06.
2. The facts of the case are that the assessee is a company and the nature of business is manufacture of steel ingots. The return of income was filed on 30.10.2005 The notices u/s. 143(2) and 142(1) were served upon the assessee on 30.09.2005The date was fixed on 08.11.2006, but none attended before the AO on behalf of the assessee. Thereafter a notice u/s. 142(1) dated 14.12.2007 was issued calling for details and information as mentioned in the questionnaire and also to justify the receipts, expenses and income. The date was fixed for compliance on 24.12.2007, but none attended the assessment proceedings before the AO nor any explanation has been filed. Considering it to be time barring case, the AO concluded the assessment, considering the material available on record.
2.1 The AO on perusal of the manufacturing and trading account of the assessee found that there is abnormal increase in stores and spares expenses during the year. This expense is of Rs.43,77,699/- in the year under consideration as against Rs.8,88,982/- in the immediately preceding year. From the comparison of figures of opening stock, purchase, sales and closing stock, power expenses, wages and salary, it has been observed that there is no such increase in these items in the year under consideration. The assessee did not justify the reasons for abnormal increase n stores and spares. Since the assessee has not furnished any evidence to justify such increase, it was held that only proportionate increase could be accepted and balance has to be disallowed for want of supporting evidences. The AO accordingly disallowed Rs.30,25,635/- on this issue.
2.2 The AO further found that the assessee claimed various expenses on account of conveyance, traveling, machinery and repairing, telephone etc. In the absence of any details and non-production of books of account, expenses could not be subjected to verification. Therefore, 1/10th of the expenses were disallowed for want of supporting evidences and on account of unverifiable and personal expenses, addition of Rs.54,881/- was accordingly made.
2.3 From the perusal of the profit and loss account, it was found that the assessee has debited an amount of Rs.11,20,561/- on account of rebate and discount. The corresponding figures of earlier year in this head was only Rs.752/-. In the absence of any evidence and on the face of abnormal increase in rebate and discount, the AO disallowed 11,20,561/-.
2.4 The AO further found that the assessee has taken loans of Rs.14,00,000/-from Kusum Jampala (9,00,000/-) and R.N. Agarwal (6,00,000). The assessee was required to furnish complete addresses of the persons and was directed to file the confirmation and complete details to prove identity of the creditor, creditworthiness and genuineness of the transaction. However, the assessee failed to produce any evidence in this regard. No copy of bank statement was also furnished. Therefore, addition of Rs.14,00,000/- was made on account of unexplained cash credit u/s. 68 of the IT Act. Interest of Rs.1,68,000 was also added on the same cash credit. The income of the assessee was accordingly computed at Rs.57,69,077/-.
3. All the above additions and exparte order passed by the AO were challenged before the ld. CIT(A). The assessee filed appeal before the ld. CIT(A) on 21.01.2008 and assessee was represented by Shri Anurag Sinha, Advocate. The ld. CIT(A) in order to give further opportunity to the assessee fixed the appeal for hearing on various dates and initially the notice of hearing of appeal was issued for 08.07.2008, 31.07.2008, 20.08.2008 and 10.09.2008. However, none of the notices have been responded to by the assessee. The notice for 16.07.2009 was attended by the counsel of the assessee, who sought adjournment. The ld. CIT(A) in para 5.1 to 5.4 at pages 3 to 7 of the appellate order recorded the facts of non-cooperation from the assessee and his counsel. The ld. CIT(A) gave large number of adjournments to the ld. counsel for the assessee on one or the other reasons for preparation of paper and written submissions. Personal difficulties were also considered. Attending the other proceedings were also considered favourably, but the things remained the same that the ld. counsel for the assessee did not prepare the written submissions or the paper and no written or oral submissions were made before the ld. CIT(A). No documents were produced in respect of any of the grounds of appeal. Last date fixed for compliance was on 25.01.2012. From July 2008 to Jan. 2012, the ld. CIT(A) has been tolerating indiscipline caused by the assessee and its counsel in not attending the proceedings. During the last four years from 2008 to 2012, despite seeking numerous adjournments by the assessee or his counsel on one pretext or the other, the ld. CIT(A) considered the same sympathetically for giving opportunity of being heard to the assessee accepting all the adjournments of the assessee, but ultimately nothing was done by the assessee or its counsel before the ld. CIT(A) The assessee, therefore, did not avail any opportunity of hearing before the ld. CIT(A) during four years when sufficient time was given to file the written submissions or preparation of papers. This attitude of the assessee and their counsel was ultimately not tolerated by the ld. CIT(A), who decided the appeal on merits and accordingly, the ld. CIT(A) in absence of any material on record, passed the impugned appellate order. The ld. CIT(A) found that the attitude of the assessee in not complying with the notices of Income-tax Department is still continuing during the appellate proceedings. No written submissions or oral arguments have been produced made to challenge the addition on merits as well as exparte order. Therefore, the exparte order u/s. 144 by the AO was held justified. In the absence of any supporting evidence of expenses, any submissions or production of accounts and confirmation of cash creditors, all the four additions on merits were also confirmed.
4. The assessee on ground No. 1 to 5 challenged the exparte order passed by the AO and the ld. CIT(A) and sustaining of all the above four additions on merits.
5. The ld. counsel for the assessee submitted that merely because the assessee or his counsel did not appear before the ld. CIT(A) and sought several adjournments is no ground to confirm the exparte order u/s. 144 of the IT Act. He has submitted that before making additions, the AO did not issue any questionnaire to call for details or information on the proposed additions. Therefore, principle of natural justice is violated. He has also submitted that he would not justify the act and actions of the counsel of assessee, who has appeared before the ld. CIT(A) and did not cooperate with him. However, he has submitted that for his acts and actions, the assessee should not suffer. He has also moved application u/r. 29 of the Appellate Tribunal rules for admission of additional evidences, copies of which are filed from pages 1 to 224 of the paper book (Addl. Evidence paper book). He has submitted that the exparte order was passed because the assessee could not submit the required details before the AO as well as the ld. CIT(A). The reason for such non-compliance was due to the closure of business of assessee for which intimation is also given to the Revenue Department (PB-36) on 27.11.2006. He has submitted that only two notices u/s. 142(1) were issued by the AO before passing order. Since the books of accounts of the assessee were lying in the closed premises of the assessee, therefore, the assessee was prevented by sufficient cause from producing the evidence before the authorities below. The assessee, therefore, prayed that the additional evidences may be admitted and matter may be remanded. On the other hand, the ld. DR submitted that the assessee has various source of income, which is clear from the audited balance sheet filed in the paper book of the assessee. The ld. DR also pointed out from the audited balance sheet of the year under consideration that electricity charges and excise duty have been paid in part under protest. The DR pointed out that the business premises of the assessee is not closed, but is not functional because of the non-payment of electricity and Excise duty. The ld. DR submitted that the business premises of the assessee is not sealed by any authority. It is closed because of the default on part of the assessee. The ld. DR submitted that the assessee not only defaulted before other authorities but also defaulted statutory notices before the AO and the ld. CIT(A). The assessee's and their counsel's conduct before the ld. CIT(A) was not appropriate or proper in seeking large number of adjournments and ultimately nothing being produced before the ld. CIT(A) in respect of any of the grounds of appeal. He has submitted that the ld. CIT(A) has granted large number of opportunities to the assessee. Therefore, there is no denial of principle of natural justice. No reasons have been given why additional evidences not produced before the authorities below. Therefore, the request for admission of additional evidences should be rejected in the matter. The ld. DR submitted that once notice u/s. 142(1) has been issued against the assessee, if it is not complied with along with the questionnaire, no further opportunity should be given as per law.
6. We have considered the rival submissions and the material available on record. Second proviso to section 144(1) of the IT Act provides "Provided further that it shall not be necessary to give such opportunity in a case where a notice under sub-section (1) of section 142 has been issued prior to the making of an assessment under this section". In the present case, the AO passed exparte order u/s. 144 of the Act on dated 31.12.2007. Prior to this date, notice u/s. 143(2) and 142(1) were served on 30.09.2006 for the date fixed on 08.11.2006. These notices were, however, not complied to by the assessee. Thereafter, a notice u/s. 142(1) dated 14.12.2007 was issued calling for the details and information as mentioned in the questionnaire so as to justify the receipts, expenses and income. The date of hearing was fixed on 24.12.2007, but none attended the assessment proceedings before the AO till the date of passing of the exparte assessment order nor any explanation, reply or evidences have been filed before the AO. Thus, there is sufficient compliance at the end of the AO in issuing statutory notices u/s. 142(1) on various dates seeking information from the assessee as per questionnaire. The AO, feeling no alternate, rightly proceeded to frame exparte assessment order u/s. 144 of the IT Act. Requirement of section 144 of the Act is thus satisfied in this case by the AO. Further, there is no requirement under law as to how many times AO shall have to issue notice u/s. 142(1) of the IT Act for passing the assessment order. Therefore, the contention of the ld. counsel for the assessee that only two notices have been issued u/s. 142(1) is wholly unjustified and would not prove that it is a case of denial of principle of natural justice. Further, the AO issued questionnaire to the assessee calling for the details and information to prove the return of income. Therefore, it is duty of the assessee to produce sufficient evidences before the AO in support of the computation of income filed in the return of income. Thus, burden upon the assessee has not been discharged at the assessment stage. Further before the ld. CIT(A), the assessee's counsel sought large number of adjournments from 08.07.2008 to 25.01.2012. During the last four years, the assessee's counsel was making wrong statements before the ld. CIT(A) that the written submissions are under preparation, because ultimately no written submission was filed. It is difficult to believe that on four grounds of appeal, it would take four years for preparation of filing of written submissions. Thus, since the beginning itself, the assessee's counsel was making wrong statement before the ld. CIT(A) just to seek adjournment on one or the other pretext. It would also show that the assessee was not having any evidence to support any of the grounds of appeal. Complete details are noted by the ld. CIT(A) in paras 5.1 to 5.4 of the appellate order, in which all the details of adjournments sought by the assessee have been noted, but ultimately, hearing of the appeal was not attended and the ld. CIT(A) shall have also to proceed exparte against the assessee. The ld. CIT(A) is a quasi judicial authority, therefore, it is the duty of the assessee and its counsel to assist the ld. CIT(A) in order to arrive at the just decision in the matter. The counsel for the assessee not only has duty to represent the case of the assessee before quasi judicial authority, but he has to assist him in accordance with law. It is a case of glaring example that during the four years, the counsel did not cooperate with the ld. CIT(A) and on one or the other reasons sought adjournments and ultimately written submissions was not filed. Thus, more than proper and sufficient opportunity have been granted by the ld. CIT(A). Therefore, there is no denial of principle of natural justice in this case. The AO and the ld. CIT(A), therefore, in the absence of any co-operation from the side of assessee rightly proceeded exparte against the assessee. It is well settled that justice delayed is justice denied. It is known fact that there are large number of cases pending before courts and quasi judicial authorities. Facts of case before us clearly prove that judicial proceedings have been delayed by the assessee or counsel deliberately. Govt. of India has taken steps to reduce the pendency in tax appeal by inserting section 268A in IT Act and by issuing circular directing the department not to file departmental appeals in certain cases where tax amount is below prescribed limit. No case is made out by the assessee that statutory notices have not been served during the last five years. The ld. counsel for the assessee admitted that all notices have been served upon the assessee, but due to closure of premises, the books of account could not be produced. We do not accept the contention of the ld. counsel about closure of premises because the ld. DR has pointed out that disconnection of power connection was because of the default of the assessee. The assessee not only defaulted in making payment of electricity charges, but also excise duty. The assessee has various sources of income, so story of closer of business is false. Thus, the explanation of the assessee that business premises was closed and the books of account could not be produced is highly improbable and cannot be accepted. No case is made out that the business premises was sealed by any authority so that the record could not be taken out of the premises. The assessee might not be running production activities due to disconnection of power connection, but the business premises remained in possession and control of the assessee. Therefore, not taking books of account and other records from the premises in this case cannot be considered as sufficient. The assessee's contention is therefore rejected and cannot be accepted. Rule 29 of the Appellate Tribunal Rules provides as under :
"29. Production of additional evidence before the Tribunal.— The parties to the appeal shall not be entitled to produce additional evidence either oral or documentary before the Tribunal, but if the Tribunal requires any document to be produced or any witness to be examined or any affidavit to be filed to enable it to pass orders or for any other substantial cause, or , if the income-tax authorities have decided the case without giving sufficient opportunity to the assessee to adduce evidence either on points specified by them or not specified by them, the Tribunal, for reasons to be recorded, may allow such document to be produced or witness to be examined or affidavit to be filed or may allow such evidence to be adduced."
Rule 29 clearly provides that if the Tribunal requires any document to be produced or any witness to be examined or any affidavit to be filed to enable it to pass orders or for any other substantial cause, the Tribunal may record reasons for production of the evidences and the material. In this case conduct of the assessee and their counsel speak against themselves and would not make out a case of any substantial cause for production of any additional evidence. The conduct of the assessee and their counsel noted, before revenue authorities below, clearly reveal that the assessee and their counsel were playing with the administration of justice to defeat the provisions of law. In such type of cases, the ld. CIT(A) should not have waited for long period and after interval of reasonable period should have proceeded exparte against the assessee. The ld. counsel for the assessee has also not made out any case before us as to how the additional evidences are relevant to the matter in issue. The reason given by assessee is thus not proper and sufficient, therefore, no ground for admission of additional evidence. Even for admission of additional evidences before the ld. CIT(A) as per Rule 46A, the assessee shall have to satisfy that what were the reasons by which the assessee could not produce evidence before the AO. Even before us, nothing is clarified as to why the assessee did not move for additional evidences before the ld. CIT(A). It is also not clarified as to how now additional evidences came in power and possession of the assessee. In facts and circumstances of case genuineness of additional evidence produced is highly doubtful. Hon'ble Madras High Court in the case ofCIT v. Krishnaveni Ammal  158 ITR 826 held as under :
"When the only piece of evidence available in a particular case is the statement of the assessee, any judicial authority can accept the same and order assessment on such sole evidence. But when, even according to the assessee, there is other documentary evidence of corroborative value and the same is within the reach of the assessee, the judicial body cannot act on the interested testimony of the assessee alone. The law of evidence mandates that if the best evidence is not placed before the court, an adverse inference can be drawn as against the person who ought to have produced it.
The Income-tax Officer reopened the assessment of the assessee for 1957-58 under Section 147(a) of the Income-tax Act, 1961, on the basis that the credit entries in the names of the various Multani bankers appearing in the books of the assessee did not represent genuine transactions and there was information to the effect that such Multani bankers had only indulged in hawala transactions by merely lending their names. The Tribunal, however, held that the borrowings from the multani bankers were all genuine transactions and the fact that the assessee had produced the discharged hundis was enough to accept her explanation. On a reference:
Held, (1) that, in the instant case, the Tribunal acted on the sole interested statement of the assessee and even though crossed cheques were available, they were not produced and, hence, the Tribunal's conclusion was not correct.
(2) that taking into consideration the difference in peak credit transactions between the assessment years 1956-57 and 1957-58 (under reference), a sum of Rs.16,000 was the income earned by the assessee from other sources. The assessee was not entitled to claim deduction of interest said to have been paid on the hundi loans."
7. The assessee has not made out any case that the authorities below have decided the case of the assessee without giving sufficient opportunity to adduce the evidence. Therefore, the requirement of Rule 29 of the appellate Tribunal Rules has not been satisfied in this case. We, therefore, are not inclined to admit the additional evidences at this stage. Since no evidences were produced before the authorities below on all the four ground, therefore, adverse inference shall have to be drawn against the assessee. The assessee has not deliberately produced the evidences before the authorities below. Considering the facts and circumstances of the case, we do not find any justification to interfere with the exparte orders passed by the authorities below and the additions maintained by them in the absence of any evidences or material before them. The application of the assessee for admission of additional evidences is, accordingly rejected. Grounds Nos. 1 to 5 of appeal of the assessee are also dismissed.
8. On ground No.6, the assessee challenged the order of the ld. CIT(A) n not allowing set off of brought forward losses of Rs.5,10,41,376/- from the assessed income instead of remitting the issue to the AO. Since no such claim was made before the AO, therefore, the ld. CIT(A) correctly directed the AO to make necessary verification from record for set off as per law. Ground No.6 of appeal of the assessee is, accordingly, dismissed.
9. Ground No. 7 is in respect of charging of interest u/s. 234B of the IT Act, which is mandatory in nature and is accordingly dismissed.
10. No other point is argued or pressed.
11. In the result, the appeal of the assessee is dismissed.