2016 (1) TMI 1486 - AT - Income Tax

Admission of additional evidence by CIT-A - CIT(A) refused to admit the additional evidence and rejected the same - HELD THAT - As in Shahrukh Khan 2006 (7) TMI 532 - ITAT MUMBAI under similar circumstances the Tribunal found from the record that it was not discernible whether the ld. CIT(A) had granted permission to adduce additional evidence by recording reasons in writing under Rule 46A(2) of the I.T. Rules. However the ld. CIT(A) had directly sent it to the AO under Rule 46A(3) for verification. The Tribunal held that it was implied that the additional evidence was relevant material and that the ld. CIT(A) had entertained it and had only thereafter sent it to the AO for verification calling for a remand report on merits. On this it was held that after doing so the ld. CIT(A) was precluded from refusing to admit the additional evidence. It was observed that the ld. CIT(A) could have at that stage rejected the evidence as not sufficient or not proved but it had to be construed that the evidence had been taken on record. It was observed that this apart as per Rule 46A(4) the ld. CIT(A) has vast powers under which he can exercise his discretion for entertaining any evidence even if the case of the assessee does not fall within the exceptions provided under Rule 46A(1)(a) to (d). It was observed that the moment the ld. CIT(A) arrives at a conclusion that the evidence sought to be produced by the assessee is essential for the just decision of the appeal or for the cause of substantial justice, . it is necessary to call such material on record and that in that situation the interdiction provided in Rules 46A(1) and (2) would not come in the way. Since the matter requires fresh adjudication on merits right from the stage of assessment in the light of the additional evidence filed by the assessee as admitted by me and the AO s comments thereon as made in the remand report which was never put to the assessee I remit the matter to the AO to be decided afresh in accordance with law. Appeal of the assessee is treated as allowed for statistical purposes.

Summary

Issues involved:
1. Refusal to admit additional evidence by CIT(A)
2. Interpretation of Rule 46A of the Income Tax Rules, 1962

Issue 1: Refusal to admit additional evidence by CIT(A)

The assessee appealed against the order of the CIT(A) for the assessment year 2008-09. The grounds raised by the assessee included challenges to the assessment of income, addition of unexplained credits, non-charging of interest from debtors, and disallowance of expenses. The primary contention was the refusal of the CIT(A) to admit additional evidence despite the evidence being forwarded to the Assessing Officer (AO) for comments. The CIT(A) rejected the evidence, stating that the assessee failed to provide a valid reason for not submitting it before the AO. The assessee argued that the evidence, including affidavits, bank certificates, and account statements, was crucial and had been sent to the AO for verification. The CIT(A) did not mention the AO's comments on the evidence in the final order, leading to a dispute regarding the refusal to admit additional evidence.

Issue 2: Interpretation of Rule 46A of the Income Tax Rules, 1962

The dispute revolved around Rule 46A of the Income Tax Rules, 1962, which governs the production of additional evidence before the CIT(A). The rule outlines specific circumstances under which additional evidence can be admitted, such as when the AO refused to admit relevant evidence or when the appellant was unable to produce it before the AO. Rule 46A(2) mandates that the CIT(A) must record reasons for admitting additional evidence. In this case, the CIT(A) did not provide reasons for rejecting the evidence but instead forwarded it to the AO for verification. The assessee relied on a precedent, "Shahrukh Khan vs. DCIT," which emphasized that once additional evidence is sent to the AO for verification, the CIT(A) cannot refuse to admit it. The Tribunal held that if the evidence is crucial for a just decision, it should be considered, even if it does not fall under the exceptions listed in Rule 46A(1). Consequently, the matter was remitted to the AO for fresh adjudication based on the additional evidence, ensuring a fair opportunity for the assessee.

This detailed analysis of the legal judgment highlights the key issues of the case, focusing on the refusal to admit additional evidence by the CIT(A) and the interpretation of Rule 46A of the Income Tax Rules, 1962.