Matrix Automotive Vs ITO (ITAT Mumbai)
Accountant & AR Exit – Reasonable Cause Accepted; Ex-parte Additions for Unsecured Loan & Partner’s Capital Set Aside- Rule 46A Relief: ITAT Restores Case as Evidence Rejected by NFAC Without Sufficient Cause
Assessee, a partnership firm engaged in Yamaha two-wheeler dealership, filed its return declaring a loss of ₹51.45 lakh. The case was selected for limited scrutiny to verify (i) large increase in unsecured loans & (ii) loans from non-filers.
During assessment, AO sought details of ₹3 crore unsecured loans (from Shri Rushi C. Mali / Rushi Hospitality Services Pvt. Ltd.) & ₹7.71 lakh capital introduced by a partner. Assessee failed to respond due to the accountant’s resignation & discontinuation of AR’s services. AO, finding no explanation, added ₹3.07 crore u/s 68 treating both the loan & partner’s capital as unexplained credits.
Before CIT(A) (NFAC), Assessee produced additional evidences — including loan account, bank statements of lender, ITR acknowledgment, & Religare Finvest loan sanction letter — & explained the earlier non-compliance. However, CIT(A) rejected these documents citing non-fulfilment of conditions under Rule 46A, & upheld the addition in full.
ITAT noted that Assessee had shown sufficient cause under Rule 46A(1)(c) since both accountant & AR had left mid-proceedings, preventing timely compliance. This constituted a reasonable ground for not producing evidence earlier.
