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2019 (11) TMI 1028 - AT - Income TaxPowers of the Commissioner (Appeals) - Deletion of accommodation entries without indepth inquiry - addition u/s 68 - CIT(A) admitted additional evidences and went on to delete the aforesaid addition on the basis of additional evidences so admitted - HELD THAT - CIT(A) was of the view that further inquiry / investigation / verification in these aspects were desirable but, according to the Ld. CIT(A), the AO failed to do this. CIT(A) even directed the AO to make further verification. Similarly, in paragraph 9.3.1. of the aforesaid impugned appellate order dated 27.03.2008, he commented that the AO would have to issue letters u/s 133(6) and if required summons u/s 131. He went on to state, that the AO can still make indepth inquiry, in case he finds it worthwhile and that the AO would have to take pains to issue notices u/s 131, and take further action. Once CIT(A) taken the view that further inquiries / investigation / verification are necessary, it is incumbent upon the Ld. CIT(A) to have the necessary inquiries / investigation / verification carried out during the appellate proceedings before him either by himself or by remand to the AO. A perusal of Section 251(1)(a) shows that in an appeal against an order of assessment, Ld. CIT(A) may confirm, reduce, enhance or annul, the assessment. However, w.e.f. 1.6.2001, as a result of amendment to Income Tax Act, the power of Ld. CIT(A) to set aside an order of assessment has been withdrawn. Therefore, any necessary inquiry / investigation or verification is required to be carried out during pendency of the appellate proceedings before Ld. CIT(A). Perusal of Section 250(4) shows that Ld. CIT(A) has powers, before disposing off any appeal, to make such further inquiry as he thinks fit, or he may direct the AO to make further inquiry and report the result of the same to the Ld. CIT(A). It is well settled that powers of CIT(A) are coterminus with powers of the AO. We may refer to the order of Apex Court decision in CIT vs. Kanpur Coal Syndicate 1964 (4) TMI 18 - SUPREME COURT in which it was held that AAC has plenary powers in disposing off an appeal; that the scope of his power is co-terminus with that of the ITO, and that he can do what the ITO can do and can also direct him to do what he failed to do. Considering the statutory position as discussed, that it was gross error, on the part of the Ld. CIT(A), having himself been of the view that further inquiries / investigation / verification; to not ensure that such further inquiries / investigation / verification were done during the pendency of appellate proceedings before the Ld. CIT(A); and in accordance with Section 250(4) We set aside the order of the CIT(A) in respect of aforesaid additions (subject matter of ground 1 of appeal) and the aforesaid addition (subject matter of ground 2 of this appeal); and direct the CIT(A) to pass fresh order on these issues, after further inquiries, in accordance with Section 250(4) of I.T. Act. CIT(A) has admitted additional evidences - HELD THAT - Provisions regarding admission of additional evidences by the Ld. CIT(A) are contained in Rule 46A of Income Tax Rules, 1962 . CIT(A), in accordance with Rule 46A(2) of I.T. Rule, was duty bound to record in writing the reasons for admission of additional evidences. From perusal of records, we find that the Ld. CIT(A) has failed to record any reasons for admission of additional evidences. In accordance with Rule 46A(3) of I.T. Rules, the Ld. CIT(A) was duty bound to allow a reasonable opportunity to the Assessing Officer to examine the evidence or documents or to cross-examine the witness produced by the appellant or to produce any evidence or document or any witness in rebuttle of the additional evidence produced by the appellant. However, from perusal of records, we find that no such opportunity was provided by the Ld. CIT(A) to the Assessing Officer. Order passed by the Ld. CIT(A), as far as the aforesaid addition of ₹ 1,18,63,549/- (subject matter to ground 3 of appeal) is in gross violation of the requirements prescribed under Rule 46A(2) and 46A(3) of I.T. Rules. Therefore, we set aside the order of the Ld. CIT(A) on the issue of aforesaid addition of ₹ 1,18,63,549/- and direct him to pass a fresh order on this issue while ensuring full adherence to Rule 46A of I.T. Rules. Ground no. 3 of appeal is disposed off accordingly, and is treated as partly allowed for statistical purposes.
Issues Involved:
1. Deletion of the addition of ?18,54,625/- on account of accommodation entries. 2. Deletion of the addition of ?4,28,50,000/- under Section 68 towards share capital. 3. Deletion of the addition of ?1,18,63,549/- on account of unsecured loans. 4. Procedural compliance by the Commissioner of Income Tax (Appeals) [CIT(A)]. Detailed Analysis: 1. Deletion of the Addition of ?18,54,625/- on Account of Accommodation Entries: The Assessing Officer (AO) added ?18,54,625/- to the income of the assessee, treating it as income from undisclosed sources due to accommodation entries. The AO based this on the non-production of evidence by the assessee within the given timeframe. The CIT(A) deleted this addition, noting that the AO did not conduct adequate verification or inquiry into the accommodation entries. The CIT(A) directed the AO to make further verification by obtaining more precise details from the Directorate and cross-checking the books and bank accounts of the assessee. The ITAT found that the CIT(A) erred by not ensuring that such further inquiries were conducted during the appellate proceedings, leading to the setting aside of the CIT(A)'s order for fresh examination. 2. Deletion of the Addition of ?4,28,50,000/- Under Section 68 Towards Share Capital: The AO added ?4,28,50,000/- under Section 68, questioning the genuineness of the share capital received. The AO argued that the mere submission of documents like share application forms and income tax returns was insufficient to prove the genuineness of the transactions. The CIT(A) deleted this addition, suggesting that the AO should have issued letters under Section 133(6) and summons under Section 131 to verify the genuineness of the share capital. The ITAT held that the CIT(A) should have ensured that these inquiries were completed during the appellate proceedings, thus setting aside the CIT(A)'s order for further investigation. 3. Deletion of the Addition of ?1,18,63,549/- on Account of Unsecured Loans: The AO added ?1,18,63,549/- due to the lack of sufficient evidence to prove the genuineness of unsecured loans. The CIT(A) admitted additional evidence and deleted the addition without providing the AO an opportunity to examine the new evidence, violating Rule 46A of the Income Tax Rules. The ITAT set aside the CIT(A)'s order, directing a fresh examination while ensuring compliance with Rule 46A. 4. Procedural Compliance by the CIT(A): The ITAT noted that the CIT(A) failed to record reasons for admitting additional evidence and did not provide the AO an opportunity to examine or rebut the new evidence, violating Rule 46A(2) and 46A(3) of the Income Tax Rules. The ITAT emphasized the importance of proper inquiry and verification during appellate proceedings, as mandated by Section 250(4) of the Income Tax Act. Conclusion: The ITAT set aside the CIT(A)'s orders regarding the additions of ?18,54,625/- and ?4,28,50,000/-, directing further inquiries and verification. The order concerning the addition of ?1,18,63,549/- was also set aside for fresh examination in compliance with Rule 46A. The appeal was partly allowed for statistical purposes, emphasizing the need for thorough inquiry and procedural adherence during appellate proceedings.
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