2020 (2) TMI 511 - AT - Income Tax

CIT(A) allowing additional evidence without intimating to the AO - violation of rule 46A - HELD THAT - In the present case, we are dealing with a situation as envisaged under rule 46A(1). It is evident from the facts on record, learned Commissioner (Appeals) on his own has neither made any enquiry nor has called for any evidences from the assessee. It is the assessee who, on his own, has furnished the additional evidences to explain the information contained in CIB/AIR report. Therefore, the procedure laid down in sub rule (2) and (3) or rule 46A, has to be followed. In the facts of the present case, undisputedly, the procedure laid down in sub rule (2) and (3) of rule 46A, have not been followed. While granting relief to the assessee by relying upon the additional evidences, learned Commissioner (Appeals) has violated the conditions of rule 46A, as discussed above. As regards the decision of the Hon'ble Jurisdictional High Court in Smt. Prabhavati S. Shah 1998 (2) TMI 107 - BOMBAY HIGH COURT there cannot be two opinions with regard to the ratio laid down in the aforesaid decision. However, the Hon'ble Jurisdictional High Court was dealing with a case where the first appellate authority refused to admit the additional evidences filed by the assessee. In that context, the Hon'ble Jurisdictional High Court explaining the power of the first appellate authority under section 250(4) and (5) of the Act, held that the additional evidences filed by the assessee should not be rejected as the power of the learned Commissioner (Appeals) in making enquiry and calling for evidences is much wider and is not restricted by rule 46A - we are inclined to set aside the impugned order of learned Commissioner (Appeals) and restore the issue back to his file for fresh adjudication after necessary compliance with the provisions of rule 46A. Grounds are allowed. Revenue s appeal is allowed for statistical purposes.

Summary

Issues involved:
Appeal by Revenue against CIT(A) order - Addition of unexplained investment under section 69C - Additional evidence allowed by CIT(A) - Violation of rule 46A - Jurisdiction of CIT(A) to admit additional evidence.

Analysis:
1. Grounds raised by Revenue: The Revenue challenged the CIT(A)'s decision to allow additional evidence without intimating the Assessing Officer, violating section 45A of the Income Tax Act, 1961, and accepting additional grounds without seeking a remand report. The assessee, an individual, filed a return of income for the assessment year 2014-15, but non-compliance led the Assessing Officer to complete the assessment under section 144 of the Act. Reasons for scrutiny included interest income mismatch, derivative transactions, assets/liabilities details, sales turnover mismatch, and securities transactions.

2. Addition of unexplained investment: The Assessing Officer added an amount to the income due to discrepancies in interest income. The CIT(A) deleted the addition based on additional evidence provided by the assessee during the appellate proceedings. The Departmental Representative argued that the CIT(A) should have sent the evidence for verification by the Assessing Officer, as per rule 46A, instead of solely relying on the assessee's submissions.

3. Admissibility of additional evidence: The Assessing Officer was in possession of CIB/AIR information regarding the investment made by the assessee, but the assessee did not furnish any evidence during the assessment. However, additional evidence was presented before the CIT(A), leading to the deletion of the addition. The Tribunal noted that the CIT(A) violated rule 46A by not following the procedure for admitting additional evidence suo-motu.

4. Jurisdiction of CIT(A) to admit evidence: The Tribunal referred to a previous case but concluded that the present case differed, emphasizing the violation of rule 46A by the CIT(A). Consequently, the Tribunal set aside the CIT(A)'s order and remanded the issue for fresh adjudication after complying with rule 46A. The assessee must be given a reasonable opportunity to be heard before the final decision.

5. Final decision: The Revenue's appeal was allowed for statistical purposes, and the cross objection by the assessee was dismissed as infructuous. In conclusion, the Revenue's appeal was allowed, and the cross objection was dismissed. The order was pronounced in open court on 07.02.2020.