2015 (9) TMI 1 - AT - Income Tax

Disallowance of unexplained expenditure - CIT(A) deleted addition - Held that - CIT(A) granted relief to the assessee on all five grounds viz., ground no. 4 to 8 before the first appellate authority, in a cryptic and slip shod manner without separate adjudication on every issue and without addressing the explanation and additional and other relevant evidence of the assessee and objections of the AO on the particular issue. It is expected from judicial and quasi judicial authorities that they should adjudicate and address all the issues/grounds which have been raised before them for adjudication and which may be subject to further legal scrutiny before higher forum or authority. We are unable to appreciate manner and approach of the ld. CIT(A) in which he granted relief to the assessee deleted the ex parte and ad hoc additions made by the AO. Under above noted facts and circumstances of the present case, we have no hesitation to hold that the Revenue authorities were not justified in making ex parte ad hoc additions and also deleting the same without detailed and separate adjudication as per provisions of the Act. In this situation we are of the considered opinion that all five issues as mentioned and raised by the assessee before ld. CIT(A) require de novo adjudication at the end of AO. Thus, we restore the same to the file of the AO for proper adjudication after affording due opportunity of hearing for the assessee and without being prejudiced and influenced by the earlier assessment and impugned order. Since the case is restored for limited purpose only on five counts as stated above, accordingly, ground no. 2 & 3 of the Revenue are deemed to be allowed- Decided in favour of revenue for statistical purposes.

Summary

Issues involved:
Admission of additional evidences during appellate proceedings, failure to adjudicate on each issue involved, ex parte assessment proceedings, deletion of impugned additions without detailed reasoning, application of Rule 46A of IT Rules, restoration of case for de novo adjudication.

Analysis:

1. Admission of additional evidences during appellate proceedings:
The Revenue contended that the CIT(A) erred in law by admitting additional evidences during the appellate proceedings despite opportunities provided earlier. The AO completed assessment ex parte due to the assessee's lack of cooperation. The CIT(A) admitted additional evidence without allowing the AO to comment on it, leading to the deletion of impugned additions. The AR argued that the CIT(A) rightly considered the additional evidence submitted under Rule 46A of IT Rules, 1962. The Tribunal noted the AO's failure to provide a fair opportunity to the assessee during assessment, leading to the impugned additions.

2. Failure to adjudicate on each issue involved:
The Revenue argued that the CIT(A) failed to adjudicate on specific issues related to repair and maintenance expenses, freight and forwarding expenses, advertisement expenses, unexplained credit, and unexplained expenditure. The AR contended that the CIT(A) correctly granted relief to the assessee by substantiating that the additions made by the AO were not sustainable. However, the AR acknowledged the lack of separate adjudication by the CIT(A) on the core issues and suggested a de novo adjudication on these issues.

3. Ex parte assessment proceedings and deletion of impugned additions:
The Tribunal observed that the AO completed the assessment ex parte, depriving the assessee of the opportunity to explain and support its income return. The CIT(A) considered the additional evidence without allowing the AO to comment on it, leading to the deletion of impugned additions. The CIT(A) granted relief to the assessee without separate adjudication on each issue, prompting the Tribunal to restore the case for de novo adjudication by the AO.

4. Application of Rule 46A of IT Rules:
The Revenue highlighted Rule 46A of IT Rules, which restricts the assessee from producing additional evidence during first appellate proceedings under certain circumstances. The AR argued that the assessee submitted additional evidence under Rule 46A, which the CIT(A) rightly considered. However, the Tribunal emphasized the need for proper adjudication and examination of evidence as per the provisions of the Act.

5. Restoration of case for de novo adjudication:
Considering the lack of detailed reasoning and separate adjudication by the CIT(A) on the core issues, the Tribunal restored the case to the AO for de novo adjudication. The Tribunal emphasized the importance of addressing all issues raised before the appellate authority and providing a fair opportunity for hearing. The appeal of the Revenue was allowed for statistical purposes, and the case was remanded to the AO for proper adjudication on the identified issues.