2014 (3) TMI 764 - AT - Income Tax

Compliance of Rule 46A of IT Rules, 1962 Admission of Information/ evidence omitted to furnish at assessment stage without seeking the opinion of AO Deletion of disallowance of claim of expenditure on ad-hoc basis Requisite information not furnished - Held that - The assessee on his own cannot produce any additional evidence not furnished before the assessing officer without meeting he various conditions provided under rule 46A for which satisfaction is to be recorded by the appellate authority in writing and with which the appellate authority is further required to confront the assessing officer and allow him reasonable opportunity to have his say in the matter Relying upon Rajkumar Srimal v. CIT 1974 (12) TMI 31 - CALCUTTA High Court - where the CIT is not acting suo motu in admitting additional evidence, there must be some ground for admitting new evidence. The entire additional evidence has come on the record of the first appellate authority because the first appellate authority decided to examine the facts of the case in depth and adjudicate upon the matter on the basis of evidence and material thus gathered - CIT(A) was empowered to do so under the provisions of Section 250(4) - The results of enquiry conducted by him could either go to further cement the case made out by the assessing officer or to help out the assessee against the findings of the assessing officer - The mere fact that the results of the enquiries thus conducted supported the case of the assessee and not that of Revenue has no bearing on the jurisdiction and powers of the CIT(A). But no such requirement in law is present that the first appellate authority should invariably consult or confront the assessing officer every time additional evidence that was not before the assessing officer comes on the record of the first appellate authority - Where the additional evidence is obtained by the first appellate authority on its own motion, there is no requirement in law to consult / confront the assessing officer with such additional evidence - There may be cases where additional evidence is admitted by the first appellate authority on a request or application being made by the assessee - In such cases Sub-rule (2) of rule 46A requires the first appellate authority to allow the assessing officer a further opportunity to rebut the fresh evidence filed by the assessee - Even that requirement cannot be said to be a rule of universal application - If the additional evidence furnished by the assessee before the appellate authority is in the nature of clinching evidence leaving no further room for any doubt or controversy in such a case no useful purpose would be served on performing the ritual of forwarding the evidence / material to the assessing officer and obtain his report - In such exceptional circumstances the requirement of Sub-rule (3) may be dispensed with thus, there is no merit in the grounds raised by the Revenue Decided against Revenue.

Issues Involved:
1. Deletion of addition made on account of disallowance of claim of expenditure on an ad-hoc basis.
2. Deletion of disallowance of claim of deduction under Section 10A of the Income-tax Act, 1961.
3. Deletion of disallowance of claim of deduction under Section 10(35) of the Income-tax Act, 1961.
4. Consideration of additional evidence by CIT(A) without seeking the opinion of the Assessing Officer (AO) under Rule 46A of IT Rules, 1962.

Detailed Analysis:

1. Deletion of Addition Made on Account of Disallowance of Claim of Expenditure on an Ad-hoc Basis:
The Assessing Officer (AO) disallowed an expenditure of Rs. 20,00,000/- on an ad-hoc basis without any concrete basis, relying purely on surmise and conjecture. The assessee contended that the disallowance was arbitrary and capricious, especially since the profits from the business were eligible for exemption under Section 10A, negating any incentive to inflate expenditures. The CIT(A) observed that the statutory audit report was filed, and maintenance of proper books of accounts by the assessee could not be doubted. Consequently, the CIT(A) directed the AO to delete the disallowance of Rs. 20,00,000/-.

2. Deletion of Disallowance of Claim of Deduction under Section 10A of the Income-tax Act, 1961:
The AO disallowed the deduction under Section 10A amounting to Rs. 8,38,14,524/- on the grounds that the assessee failed to furnish requisite information during assessment proceedings. The assessee argued that they had filed the original and revised returns, annual reports, audit reports, certificates of registration with STPI, and other necessary documents. The CIT(A) verified the assessment record and found that the assessee had indeed furnished the required documents and met all conditions stipulated for deduction under Section 10A. Consequently, the CIT(A) deleted the addition made under Section 10A.

3. Deletion of Disallowance of Claim of Deduction under Section 10(35) of the Income-tax Act, 1961:
The AO added dividend income of Rs. 9,01,245/- to the total income of the assessee, disallowing the claim of exemption under Section 10(35). The assessee provided evidence that the dividend income was received from mutual fund investments and was exempt under Section 10(35). The CIT(A) held that the addition made by the AO on account of dividend exemption was unwarranted and deleted the addition.

4. Consideration of Additional Evidence by CIT(A) without Seeking the Opinion of the AO under Rule 46A of IT Rules, 1962:
The Revenue contended that the CIT(A) admitted fresh evidence without seeking the opinion of the AO, violating Rule 46A of IT Rules, 1962. The Tribunal examined the provisions of Rule 46A and Section 250(4) of the Income-tax Act. It was noted that Rule 46A restricts the right of the appellant to produce additional evidence but does not affect the powers of the CIT(A) to call for further evidence. The Tribunal observed that the CIT(A) had the authority to make further inquiries and collect additional evidence on its own motion. The Tribunal concluded that there was no requirement for the CIT(A) to invariably consult or confront the AO every time additional evidence was obtained. As the additional evidence in this case was clinching and left no room for doubt, the Tribunal found no merit in the grounds raised by the Revenue and dismissed the appeal.

Conclusion:
The Tribunal upheld the CIT(A)'s decision to delete the disallowances and additions made by the AO, emphasizing the CIT(A)'s authority to call for additional evidence and make further inquiries to ensure a proper adjudication of the case. The Revenue's appeal was dismissed in its entirety.

← Previous Next →