2022 (1) TMI 1478 - AT - Income Tax

Admission of additional evidence by CIT-A - As per AO evidences not been forwarded to the AO to examine verify the same and thereby violated the provisions contained under Rule 46A(3) of IT Rules 1962 - HELD THAT - Since the evidence entertained by Ld. CIT(A) during the appellate proceedings has not seen the light of the day during assessment proceedings and AO has never been given an opportunity to look into and verify the facts taken in the additional evidence the order passed by the Ld. CIT(A) is not sustainable hence liable to be set aside. Consequently case is remitted back to the AO to decide afresh in the light of the directions issued by the co-ordinate Bench of the Tribunal BAJAJ ENERGY LTD (FORMERLY KNOWN AS BAJAJ ENERGY PVT. LTD.) 2017 (10) TMI 1595 - ITAT MUMBAI after providing opportunity of being heard to the parties. Appeal filed by the Revenue is allowed for statistical purposes.

Summary

Issues:
1. Tax treatment of interest income on non-earmarked fund as income from other sources
2. Tax treatment of rental income as income from other sources

Analysis:

1. Interest Income on Non-Earmarked Fund:
The appeal filed by the Revenue and cross objections by the assessee revolved around the tax treatment of interest income on a non-earmarked fund. The Revenue contended that the interest income of Rs. 1,86,73,436 should be taxed as income from other sources. The AO treated this interest income as revenue receipt and brought it to tax. The assessee, a Bajaj Group Company, had set up a Thermal Power Plant, and during the relevant assessment year, construction was in progress. The Ld. CIT(A) partly allowed the appeal, leading to both parties approaching the Tribunal. The Tribunal noted that the Ld. CIT(A) entertained additional evidence without providing the AO an opportunity to verify it, contravening Rule 46A(3) of IT Rules, 1962. As a similar issue in the assessee's case had been remitted back to the AO previously, the Tribunal decided to set aside the Ld. CIT(A)'s order and remit the case back to the AO for fresh consideration in line with previous directions and after giving both parties a hearing.

2. Rental Income:
Additionally, the Revenue also raised the issue of rental income of Rs. 1,46,000 received by the assessee from Abhitek Developers Pvt. Ltd., which was not disclosed in the computation of income or accounts as rental income. The AO included this amount in the total income under section 143(3) of the Act. The Tribunal's decision to remit the case back to the AO for fresh consideration would also cover the tax treatment of this rental income. Both the appeal by the Revenue and the cross objections by the assessee were dealt with in this composite order for the sake of avoiding repetitive discussions. The Revenue's appeal was allowed for statistical purposes, and the cross objections by the assessee were dismissed as they were not pressed during the proceedings.

In conclusion, the Tribunal's decision in this case emphasized procedural fairness and adherence to rules governing the admission of additional evidence. The matter was remitted back to the AO for fresh consideration in light of previous directions, ensuring that both parties have an opportunity to present their case.