2019 (9) TMI 1076 - AT - Income Tax

Admission of additional evidences under rule 46A by the CIT(A) - HELD THAT - The law in relation to admission of Additional Evidences, as contained is Rule 46A of I.T. Rules has already been reproduced in foregoing paragraph (C.2) of this order. The circumstances under which Ld. CIT(A) may admit Additional Evidences have been exhaustively listed in clauses (a), (b), (c) and (d) of Rule 46A(1) of I.T. Rules. However, on perusal of the impugned order of CIT(A) we find that she has nowhere commented which of the aforesaid clauses of Rule 46A(1) of I.T. Rules were applicable in the instant case. Moreover, we find that under Rule 46A(3) of I.T. Rules, the CIT(A) is duty bound, once the Ld. CIT(A) admits the Additional Evidences, to allow a reasonable opportunity to the AO, as per clauses (a) and (b) of Rule 46A(3) of I.T. Rules. However, after admitting the Additional Evidences, Ld. CIT(A) failed to provide such opportunity to the AO as has been prescribed under Rule 46A(3) of I.T. Rules. After commissioner of Income Tax (Appeals) admits Additional Evidences produced by assessee, scrutiny of such Additional Evidences admitted by Commissioner of Income Tax (Appeals) is the statutory right of the AO, conferred under Rule 46A(3) of I.T. Rules. Following the aforesaid precedents in the cases of CIT vs. Manish Buildwell 2011 (11) TMI 35 - DELHI HIGH COURT and ITO vs. Pardeepa Rani 2016 (8) TMI 1461 - ITAT DELHI ; we set aside the aforesaid impugned appellate order dated 29.06.2012 of Ld. CIT(A) with the direction to pass fresh order. If the Ld. CIT(A) decides to admit Additional Evidences, he should clearly state the specific clause(s) of Rule 46A(1) of I.T. Rules that would apply; while recording the reasons under Rule 46A(2) of I.T. Rules. Further, if the Ld. CIT(A) decides to admit Additional Evidences, reasonable opportunity prescribed under Rule 46A(3) of I.T. Rules must be provided by the Ld. CIT(A) to the AO.

Issues Involved:

1. Admission of Additional Evidence under Rule 46A.
2. Deletion of Additions by CIT(A) without providing opportunity to the AO.
3. Best Judgment Assessment under Section 144.
4. Specific Additions made by AO and their Deletion by CIT(A).

Detailed Analysis:

1. Admission of Additional Evidence under Rule 46A:

The Revenue argued that the CIT(A) erred in admitting additional evidence under Rule 46A despite repeated opportunities given to the assessee by the AO. The CIT(A) admitted additional evidence without recording which specific clause of Rule 46A(1) was applicable and without providing a reasonable opportunity to the AO to examine the evidence or produce rebuttal evidence as mandated by Rule 46A(3).

2. Deletion of Additions by CIT(A) without providing opportunity to the AO:

The Revenue contended that the CIT(A) failed to provide any opportunity to the AO to appear personally during the hearing, despite a request made by the Addl. CIT. The CIT(A) admitted additional evidence and deleted several additions made by the AO without allowing the AO to rebut the evidence, violating Rule 46A(3).

3. Best Judgment Assessment under Section 144:

The AO passed the assessment order under Section 144 due to the assessee's failure to produce books of account and other details despite repeated opportunities. The AO made several additions based on the best judgment assessment, including income from house property, bogus purchases, unexplained sundry creditors, unexplained addition in capital, unexplained investment in assets, and deemed dividend.

4. Specific Additions made by AO and their Deletion by CIT(A):

Income from House Property:
The AO added ?1,31,761 as income from house property, which the CIT(A) deleted based on additional evidence submitted by the assessee. The Revenue argued that the CIT(A) ignored the reasons mentioned in the assessment order.

Bogus Purchases:
The AO added ?20,69,898 for bogus purchases due to the assessee's failure to furnish complete addresses or confirmations of the persons from whom purchases were claimed. The CIT(A) deleted this addition, which the Revenue contended was erroneous.

Unexplained Sundry Creditors:
The AO added ?54,29,787 as unexplained sundry creditors due to the assessee's failure to furnish complete addresses or confirmations. The CIT(A) deleted this addition, which the Revenue argued was incorrect.

Incorrect Claim of Depreciation:
The AO added ?4,83,994 for incorrect claim of depreciation, which the CIT(A) deleted. The Revenue contended that the CIT(A) ignored the reasons mentioned by the AO.

Unexplained Addition in Capital:
The AO added ?44,32,000 as unexplained addition in capital due to the assessee's failure to explain the source. The CIT(A) deleted this addition, which the Revenue argued was erroneous.

Unexplained Investment in Assets:
The AO added ?8,59,643 as unexplained investment in assets, which the CIT(A) deleted. The Revenue contended that the CIT(A) ignored the reasons mentioned by the AO.

Deemed Dividend:
The AO added ?45,29,191 as deemed dividend under Section 2(22)(e), which the CIT(A) deleted. The Revenue argued that the CIT(A) ignored the reasons mentioned by the AO.

Interest Payment on Housing Loan:
The AO added ?1,20,239 for interest payment on housing loan, which the CIT(A) deleted. The Revenue contended that the CIT(A) ignored the reasons mentioned by the AO.

Conclusion:

The ITAT found that the CIT(A) failed to comply with the procedural requirements of Rule 46A, particularly Rule 46A(3), by not providing a reasonable opportunity to the AO to examine the additional evidence. The ITAT set aside the CIT(A)'s order and directed the CIT(A) to pass a fresh order, specifying the applicable clause of Rule 46A(1) and providing the AO with a reasonable opportunity to rebut the additional evidence as per Rule 46A(3). The appeal was partly allowed for statistical purposes.

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