2019 (4) TMI 676 - AT - Income Tax

Admission of addition evidence - Denial of natural justice - sufficient cause for non-production of additional evidence during the assessment proceeding - penalty u/s 271(1)(c) - addition u/s section 69A and denial of benefit of deduction u/s 54B - HELD THAT - We find that the valuation report was obtained later on hence, it was not available at the time of assessment proceeding. Further, the lower authorities did not examine the claim of the assessee of deduction under section 54. Thus, the additional evidence submitted by the assessee have a material bearing to decide the issue. Therefore, the assessee is required to be given a fair chance and opportunity to the assessee in the interest of natural justice. As incumbent upon CIT (A) to confront these evidences with the AO by seeking a remand report and to seek his comments. In absence of the same, the order passed by the CIT (A) is passed in violation of principles of natural justice. The principle of audi alteram partem is the basic concept of natural justice. The expression audi alteram partem implies that a person must be given an opportunity to defend himself. This principle is sine qua non of every civilized society. After taking into account all the facts and circumstances of the case, we find it appropriate to send this issue back to the file of the AO. The assessee shall submit all the evidences before the AO in support of its claim and shall be free to raise all legal and factual issues before the AO. The AO shall give adequate opportunity of hearing to the assessee and shall decide the all issues afresh after considering all the details. The assessee may place any evidences and judgements as he wants to supports his case. Penalty u/s 271 (1) (c) - Held that - As in earlier part of this order in respect of items on which penalty was levied remanded for fresh consideration. Hence, the issue on which penalty is levied is no longer survived; therefore, penalty levied is not maintainable as of now. Accordingly, we delete the penalty so levied subject to condition that the AO is free to re-initiate penalty proceedings under section 271 (1)(c) on finalization of denova setaside assessment proceedings, if the circumstances so warrant or he thinks fit. - Decided in favour of assessee

Summary

Issues:
1. Quantum appeal regarding addition under section 69A and denial of deduction under section 54B.
2. Rejection of additional evidence by CIT (A) without proper opportunity.
3. Violation of principles of natural justice by CIT (A).
4. Penalty under section 271(1)(c) confirmed by CIT (A).

Quantum Appeal - Addition under section 69A and Denial of Deduction under section 54B:
The appeals by the Assessee were against orders by the CIT (A) related to Assessment Year 2011-12. The issues included confirming an addition under section 69A and denial of deduction under section 54B. The Assessee argued that the cash deposits in the bank account were from sale proceeds of properties, with only 50% being taxable as she inherited the property. The Assessee submitted additional evidence during appellate proceedings under Rule 46A of Income-Tax Rules, 1962. The CIT (A) rejected the additional evidence, stating it should have been obtained before the sale of properties. The Tribunal found that the additional evidence was crucial and remanded the issue back to the AO for proper consideration, emphasizing the principles of natural justice and the right to be heard.

Rejection of Additional Evidence by CIT (A) without Proper Opportunity:
The Assessee submitted additional evidence under Rule 46A during appellate proceedings, which the CIT (A) rejected, stating there was no sufficient cause for not submitting it earlier. The Tribunal found that the evidence was obtained after the assessment order, justifying its submission during appellate proceedings. The Tribunal emphasized the importance of natural justice and the right to be heard, directing the issue back to the AO for a fair chance for the Assessee to present all evidence and legal arguments.

Violation of Principles of Natural Justice by CIT (A):
The Tribunal noted that the CIT (A) did not give proper opportunity to the Assessee to present additional evidence, violating the principles of natural justice. The Tribunal stressed the importance of fair hearing and remanded the issue back to the AO for a fresh consideration, allowing the Assessee to submit all relevant evidence and legal arguments. The Tribunal highlighted the need for the AO to examine the claim of deduction under section 54 and assess the sale proceeds properly.

Penalty under section 271(1)(c) Confirmed by CIT (A):
The appeal against the penalty under section 271(1)(c) was based on the earlier quantum appeal. The Tribunal set aside the quantum addition for fresh consideration, rendering the penalty no longer sustainable. The penalty was deleted, with the AO having the option to re-initiate penalty proceedings if necessary after finalizing the fresh assessment. The appeal against the penalty was allowed, along with the quantum appeal, for statistical purposes for Assessment Year 2011-12.