2018 (4) TMI 1861 - AT - Income Tax

Admission of fresh evidence in First Appellate proceedings without compliance of Rule 46A(1) (2) of the Income Tax Rules - HELD THAT - CIT (Appeals) admitted additional evidence without giving chance to AO to rebut or cross-examine the fresh material filed as additional evidence. It is a settled position that additional evidence cannot be admitted as matter of right, unless the opposite side is allowed opportunity to controvert. In the present case the additional evidence furnished by assessee were referred to TPO/Assessing Officer for examination and comments. The TPO after examining the documents agreed that manufacturing activity is being carried out by the assessee. Thus, there is due compliance of principles of natural justice. Each case has to be decided on its own facts. The general principle reiterated by the Hon ble High Courts in the cases referred above is that no person should be condemned without giving opportunity of hearing. No infirmity in the impugned order, accordingly, the same is upheld and the appeals of the Revenue for assessment years 2008-09 and 2009-10 are dismissed.

Summary

Issues:
Admission of additional evidence in First Appellate proceedings without compliance of Rule 46A(1) & (2) of the Income Tax Rules.

Analysis:
The Revenue challenged the Commissioner of Income Tax (Appeals) order for assessment years 2008-09 and 2009-10, arguing against the acceptance of additional evidence by the CIT(A) and the contention that the assessee is engaged in manufacturing activity. The Revenue raised identical grounds in both appeals. The Department contended that the assessee, a subsidiary of a German company, was involved in trading activities, importing accessories for resale in India and exporting to the parent company. The Transfer Pricing Officer (TPO) found the assessee engaged only in trading, making adjustments in the assessments. The assessee later provided additional evidence to prove manufacturing activities, which the Revenue objected to, citing non-compliance with Rule 46A(1) & (2) of the Income Tax Rules.

The assessee, on the other hand, argued that they were involved in both manufacturing and trading activities. They submitted evidence including cost sheets, manufacturing process charts, and photographs of manufacturing sites to support their claim. The TPO, upon reevaluation, acknowledged the manufacturing activities of the assessee. The assessee maintained that no new issues were raised before the CIT(A) and urged the dismissal of the Revenue's appeals.

The Tribunal analyzed the evidence and arguments presented by both sides. The key issue was the admission of additional evidence without following Rule 46A(1) & (2) of the Income Tax Rules. The Tribunal noted that the documents submitted by the assessee were crucial in determining the manufacturing activities, as acknowledged by the TPO. The Tribunal distinguished the case laws cited by the Revenue, emphasizing the importance of natural justice in admitting additional evidence. The Tribunal found that in this case, the TPO had the opportunity to examine the additional evidence, ensuring compliance with principles of natural justice.

Ultimately, the Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's appeals for assessment years 2008-09 and 2009-10. The Tribunal emphasized the importance of giving a fair chance to all parties to present and rebut evidence, ensuring a just decision-making process.

In conclusion, the Tribunal found no fault in the CIT(A)'s order and upheld the dismissal of the Revenue's appeals for both assessment years.