2017 (7) TMI 1054 - HC - Income Tax

Admission of additional evidence - Held that - The production of additional evidence has to be within the parameters as set out in Rule 46A of the Income Tax Rules. The Tribunal has found that the assessee was prevented by a reasonable cause for not being able to file the books of accounts earlier. The reasons given for production of additional evidence, it appears, are plausible, and would be within the purview of Rule 46 of the Income Tax Rules. The discretion has been exercised by the Tribunal. However, it is found that the Tribunal has exceeded and gone beyond the scope of Rule 46. The Tribunal could not have directed the Assessing Officer to compute the income only on the basis of books of accounts. It will have to be left to the Assessing Officer to test the genuineness and authenticity of the entries in the books of accounts and thereafter pass fresh assessment order. In light of above, we pass the following order i) The order of the Tribunal to the extent of allowing the production of additional evidence, that is, books of accounts, is maintained. However, we clarify that it will be open for the Assessing Officer to test the genuineness and authenticity of the entries in the books of accounts and thereafter pass assessment order afresh. ii) The directions of the Tribunal with regard to determination of unaccounted investments, disallowance of deduction on account of interest expenditure, disallowance of deduction on account of other expenditure, to hold the sale of shares as capital gains and allow deduction under Section 48 of the Income Tax Act, will all depend upon the decision of the Assessing Officer with regard to the books of accounts and its decision upon the genuineness of the entries therein.

Summary

Issues:
Appeals regarding Assessment Year 1991-92 with a common question.

Analysis:
The appellant's counsel argued that the Commissioner of Income Tax had rightfully rejected the production of additional evidence in the form of books of accounts that were submitted after ten years, with unknown sources of entries. The counsel contended that the Tribunal should not have interfered with the Commissioner's decision, citing Rule 43 of the Income Tax Rules. The counsel highlighted a similar case for the Assessment Year 1992-93 where the Tribunal directed computation as per the books of accounts, leading to an appeal by the Department. The counsel emphasized the potential chaos if allowing the submission of books of accounts after such a long period.

The respondent's counsel countered by stating that the Tribunal had previously directed the Assessing Officer to consider books of accounts for other assesses in the same group, with the Revenue accepting those orders. The respondent's counsel pointed out that similar orders were issued for over 90 assesses of the same group, emphasizing consistency in decisions. Furthermore, the Assistant Commissioner in a related case had directed a reassessment based on the evidence from books of accounts.

The Court considered the submissions and noted that the production of additional evidence must adhere to Rule 46A of the Income Tax Rules. While finding the reasons for delayed submission plausible, the Court determined that the Tribunal had overstepped its authority by directing the computation of income solely based on the books of accounts. The Court ruled that the Assessing Officer should verify the authenticity of entries before issuing a fresh assessment order.

In alignment with a previous Supreme Court decision, the Court maintained the Tribunal's decision to allow the submission of additional evidence but clarified that the Assessing Officer must verify the entries' genuineness. The Court stated that various determinations, such as unaccounted investments and deductions, would depend on the Assessing Officer's assessment of the books of accounts. The Assessing Officer was granted the authority to make decisions anew on all aspects of the case and instructed to provide the material relied upon to the assessee before issuing any order. The appeals were disposed of with the aforementioned observations and directions.