2019 (10) TMI 901 - AT - Income Tax

Admission of additional evidence by CIT-A - CIT(A) in violation of sub-rule (3) of Rule 46A has accepted fresh evidences without providing the Assessing Officer a reasonable opportunity of examining the evidence and rebutting it - HELD THAT - In the facts of the present case, the fact that fresh evidence has been admitted which has not been confronted to the AO to offer his rebuttal etc. is not disputed by the ld. AR despite a detailed hearing on the issue. Accordingly, to set right this statutory deficit, the issue is remanded back to the file of the AO with the direction to pass a speaking order in accordance with law after giving the assessee a reasonable opportunity of being heard. The assessee in its own interests is advised to participate fully and fairly in the proceedings as in the eventuality of abuse of the trust reposed, it is made clear that the Assessing Officer shall be at liberty to pass an order on the basis of material available on record. Said order was pronounced in the Open Court at the time of hearing itself. Appeal of the Revenue is allowed for statistical purposes.

Summary

Issues Involved:
1. Whether the CIT(A) erred in law by ignoring the provisions of section 68 of the Income Tax Act, 1961 while deleting the addition of ?2.70 crore made on account of share application money.
2. Whether the CIT(A) erred in law by accepting additional evidence/ground in violation of Rule 46A of the Income Tax Rules.

Issue-Wise Detailed Analysis:

1. Section 68 of the Income Tax Act, 1961:
The Revenue challenged the deletion of ?2.70 crore by the CIT(A), arguing that the assessee failed to provide an explanation for the share application money reflected in the audited books of account. The Assessing Officer (AO) had added this amount as the assessee's income under section 68 due to the inability to establish the identity, creditworthiness, or genuineness of the transactions. The CIT(A) deleted the addition, concluding that since the cheques for the share application money were not encashed, no actual money was received. However, the Revenue contended that the CIT(A) did not appreciate the true facts and failed to verify the audited books of account properly. The Tribunal found that the CIT(A)'s order was not sustainable as it did not address the statutory requirements adequately.

2. Violation of Rule 46A of the Income Tax Rules:
The Revenue argued that the CIT(A) accepted fresh evidence without confronting it to the AO, violating Rule 46A. The Tribunal noted that the CIT(A) did not provide the AO with a reasonable opportunity to examine or rebut the additional evidence, which is a mandatory requirement under sub-rule (3) of Rule 46A. The Tribunal emphasized that the CIT(A)'s acceptance of fresh evidence without following the due process was a significant procedural lapse. Consequently, the Tribunal decided to remand the matter back to the AO to address this statutory violation and ensure compliance with Rule 46A.

Conclusion:
The Tribunal found that the CIT(A) erred in both ignoring the provisions of section 68 and violating Rule 46A by accepting fresh evidence without providing the AO an opportunity to examine it. The Tribunal remanded the matter back to the AO to pass a speaking order in accordance with the law after giving the assessee a reasonable opportunity to be heard. The appeal of the Revenue was allowed for statistical purposes.