2018 (6) TMI 1819 - AT - Income Tax

Unexplained investment - non reliance on additional evidences by CIT-A - procedure prescribed by law - Denial of natural justice - necessity of passing speaking order in accordance with law after giving the assessee a reasonable opportunity of being heard - As per assessee property was purchased by the assessee and his other co-owner and taken bank loan and balance was paid by his brother - HELD THAT - CIT(A) being aware of the procedures should have provided the assessee a specific opportunity to place its evidences by way of a proper application under Rule 46A. Opportunity to do so in all fairness should have been provided. CIT(A) in the discharge of his responsibilities is not visualized to function in a mechanical manner. Merely because the assessee s counsel apparently ignorant about the procedure relies upon evidences without following the due procedure does not entitle the First Appellate Authority to function mechanically. The Ld. CIT(A) is expected to act fairly and responsibly utilizing the powers with which he is endowed with the single minded aim that justice is done and not to frustrate a valid claim of the assessee on a hyper technical ground. The Appellate Forum provided under law must perform by ensuring that only just and due taxes for the state are only collected. The orders passed should not rely on the ignorances of the tax payers. The claims of the assessee must succeed or fail on merits, facts and evidences and not on account of the ignorance of the assessee or his counsel. Admittedly where the assesse s Counsel himself is ignorant about the procedures, the occasion to castigate the assessee for not being conversant with the legal requirements is, in the least, unfortunate. It is further seen that qua the specific property there were three other co-owners. The loan as per the claim put forth was from Nainital Bank as per the finding in the impugned order which also has been taken by these persons apart from the assessee. The purpose of referring to the co-sharers is relevant as exercise of administrative and quasai judicial orders passed by the authorities is legitimatized only if it is seen to be fair, equal and impartial. If identically situated persons are differently taxed, such orders of Quasi Judicial Authority strike at the very root of the principles of legitimate expectation of the tax payers and thus is open to the challenge of being whimsical, arbitrary and perverse. Such an approach cannot be given legal sanction. In the interest of substantial justice, the impugned order is set aside and remanded back to the file of the CIT(A) with a direction to admit the fresh evidences - Appeal of assessee is allowed for statistical purpose

Summary

Issues:
1. Correctness of the order of CIT(A) Meerut pertaining to 2009-10 AY.
2. Addition of Rs. 11,02,500 as unexplained investment in property.
3. Rejection of adjournment application and ex-parte proceeding.
4. Failure to explain the source of receipt in property sale.
5. Dismissal of additional evidence by CIT(A).
6. Power of CIT(A) to direct production of documents.
7. Relevance of evidence and fair treatment of the assessee.

Analysis:

Issue 1: Correctness of CIT(A) Order
The appeal was filed to challenge the order of CIT(A) Meerut for the 2009-10 Assessment Year. The appellant raised concerns regarding the correctness of the order based on specific grounds related to the treatment of unexplained investment in property and the admissibility of additional evidence.

Issue 2: Addition of Unexplained Investment
The Assessing Officer (AO) made an addition of Rs. 11,02,500 as unexplained investment in a property sale, which the assessee failed to explain adequately. The CIT(A) dismissed the explanation provided by the assessee, leading to the confirmation of the addition. The Tribunal highlighted the necessity for the CIT(A) to provide specific opportunities for presenting evidence and following due procedures under Rule 46A before making conclusive decisions on such matters.

Issue 3: Rejection of Adjournment Application
The Tribunal rejected the adjournment application moved by the assessee and proceeded with an ex-parte hearing due to the absence of representation. It emphasized the importance of deciding appeals based on the available record while ensuring fair treatment and adherence to procedural requirements.

Issue 4: Failure to Explain Source of Receipt
The AO required the assessee to explain the source of receipt in a property sale, which the assessee failed to do satisfactorily. This led to the addition of the unexplained amount in the hands of the assessee, further contested in the appeal before the CIT(A).

Issue 5: Dismissal of Additional Evidence
The CIT(A) dismissed the additional evidence provided by the assessee, citing lack of proper procedure and supporting documentation. The Tribunal emphasized the need for the CIT(A) to consider the relevance and adequacy of evidence before making decisions, ensuring fair treatment and adherence to legal requirements.

Issue 6: Power of CIT(A) to Direct Production of Documents
The Tribunal highlighted the powers of the CIT(A) to direct the production of documents and examination of witnesses under Section 250 of the Income Tax Act and Rule 46A. It stressed the importance of utilizing these powers to ensure a just and thorough appeal process, avoiding mechanical decisions and providing opportunities for presenting relevant evidence.

Issue 7: Relevance of Evidence and Fair Treatment
In the interest of substantial justice, the Tribunal set aside the impugned order and remanded it back to the CIT(A) for proper consideration of the fresh evidence. It emphasized the need for fair treatment of the assessee, proper adherence to legal procedures, and the importance of just and due tax collection based on merits, facts, and evidence rather than procedural technicalities.

This detailed analysis of the judgment highlights the key issues involved, the arguments presented by the parties, and the Tribunal's emphasis on fair treatment, adherence to legal procedures, and the importance of evidence in tax-related appeals.