2020 (7) TMI 10 - AT - Income Tax

Non admission of additional evidence - CIT(A) has not admitted the copy of ledger account of the sundry creditors and copy of the their confirmation filed by assessee as additional evidence under Rule 46A of the Income Tax Rules, 1962 - HELD THAT - On perusal of the Rule 46A(1) of the Rules, it is evident that the assessee has been prohibited from producing the additional evidence except the four circumstances. The first circumstances is where the Assessing Officer has refused to admit additional evidence, which ought to have been admitted. In the instant case before us the assessee has pleaded that the assessee had filed such copy of confirmation of the some of the sundry creditors before the AO, however, there was some delay in collecting the confirmed copy of the ledger account from the 13 parties, which he could collect in last week of the December 2017 only. When the assessee approached with those copies of the ledger accounts, the Assessing Officer refused to accept in view of the limitation of completing assessment was approaching. In our opinion, in view of the refusal by the AO for admission of those evidences, there was no option with the assessee except producing the same before the Ld. CIT(A). CIT(A) has rejected admission of those evidences on the ground that the assessee did not file the said documents in the DAK of the said Assessing Officer. In our opinion, merely not filing those documents in the DAK counter of the Assessing Officer, the assessee cannot be denied substantial justice and examination of the said documents, which had been filed before learned CIT(A) immediately after filing of the appeal, following the rules provided in the Income-tax Rules. We set aside the finding of the Ld. CIT(A) on the merit of the appeal and restore the matter to him with the direction to the admit the additional evidences filed by the assessee and thereafter decide the issue in dispute on merit after providing sufficient opportunity of being heard to both the parties i.e the assessee and the Assessing Officer. The relevant grounds of the appeal of the assessee are accordingly allowed for statistical purposes.

Summary

Issues Involved:
1. Rejection of Additional Evidence by CIT(A) under Rule 46A of Income Tax Rules, 1962.
2. Non-consideration of inquiries conducted by the Assessing Officer during remand proceedings.
3. Legality of the addition of ?3,17,23,335/- to the assessee's income.

Issue-Wise Detailed Analysis:

1. Rejection of Additional Evidence by CIT(A) under Rule 46A of Income Tax Rules, 1962:

The primary issue in this appeal is the rejection of additional evidence by the CIT(A) under Rule 46A of the Income Tax Rules, 1962. The assessee argued that the additional evidence, which included ledger accounts and confirmations from sundry creditors, was not admitted by the Assessing Officer (AO) due to the approaching deadline for completing the assessment. Despite multiple opportunities provided by the AO, the assessee failed to submit the required documents on time. The CIT(A) denied the admission of additional evidence, stating that the case did not fall within the ambit of Rule 46A, which allows for the admission of additional evidence only under specific circumstances, such as refusal by the AO to admit evidence or insufficient opportunity provided by the AO. The Tribunal found that the assessee had indeed approached the AO with the documents, but they were refused due to time constraints. The Tribunal held that the mere failure to file the documents in the DAK counter should not deny the assessee substantial justice. Consequently, the Tribunal set aside the CIT(A)'s finding and directed the CIT(A) to admit the additional evidence and decide the issue on merit after providing sufficient opportunity to both parties.

2. Non-consideration of Inquiries Conducted by the Assessing Officer During Remand Proceedings:

The assessee contended that the CIT(A) did not consider the inquiries conducted by the AO during the remand proceedings. The AO had conducted field inquiries and issued notices to all creditors, confirming their existence and the balances appearing in the assessee's books. Despite this, the CIT(A) ignored the factual report submitted by the AO under section 250(4) of the Income Tax Act. The Tribunal acknowledged this grievance but noted that since the CIT(A)'s decision on the merit of the appeal had already been set aside, this issue became academic. Therefore, the Tribunal did not adjudicate on this matter, rendering the related grounds of appeal as infructuous.

3. Legality of the Addition of ?3,17,23,335/- to the Assessee's Income:

The AO made an addition of ?3,17,23,335/- to the assessee's income due to unexplained credit balances of 13 parties. During the assessment proceedings, the AO observed sundry creditors amounting to ?8,97,51,952.87/- in the assessee's balance sheet and requested confirmations along with documentary evidence. The assessee failed to provide the necessary information despite multiple opportunities. Consequently, the AO added the unexplained credit balances to the assessee's income. The CIT(A) upheld this addition, but the Tribunal set aside the CIT(A)'s finding on the merit of the appeal. The Tribunal directed the CIT(A) to admit the additional evidence and decide the issue afresh, providing both parties with sufficient opportunity to present their case.

Conclusion:

The Tribunal allowed the appeal for statistical purposes, setting aside the CIT(A)'s findings and directing the CIT(A) to admit the additional evidence and decide the issue on merit after providing sufficient opportunity to both the assessee and the AO. The Tribunal emphasized the importance of substantial justice and the need to adhere to procedural requirements under Rule 46A of the Income Tax Rules, 1962. The appeal was pronounced in the open court on 20th March 2020.