2020 (12) TMI 853 - AT - Income Tax

Voilation of Rule 46A of the IT rules committed by the ld. CIT(A) - CIT(A) concluded that there was no suppression of turnover and granted relief to the assessee - Factual details containing input VAT available for set off with output VAT were admittedly not filed before the ld. AO and were filed before the ld. CIT(A) for the first time and the ld. CIT(A) had not sought any remand report from the ld. AO in this regard - HELD THAT -When this was put to both the parties before us both the parties agreed for set aside of the matter to the file of the ld. AO for denovo adjudication. Accordingly in the interest of justice and fair play we deem it fit and appropriate to remand this issue to the file of the ld. AO for denovo adjudication and decide the matter in accordance with law. Accordingly the grounds raised by the revenue are allowed for statistical purposes.

Summary

Issues:
1. Opportunity to assess additional evidence submitted by the assessee.
2. Deletion of addition without cross verification of the set-off issue.
3. Violation of Rule 46A of Income Tax Rules by the CIT(A).

Analysis:
1. The appeal in ITA No. 4309/Mum/2017 for A.Y. 2009-10 concerns the order passed under section 143(3) r.w.s. 263 of the Income Tax Act, 1961. The assessee, engaged in trading paper products, reported a turnover discrepancy leading to an addition of ?4,26,02,221 by the ld. AO. The CIT(A) allowed relief based on new evidence of VAT payments, not presented before the ld. AO, leading to the revenue's grievance of a lack of opportunity for cross-verification under Rule 46A of the IT Rules.

2. The revenue contended that the CIT(A) erred in deleting the addition without subjecting the set-off issue to cross-verification. The CIT(A) found no turnover suppression after considering VAT audit reports and payment details. The new evidence presented before the CIT(A) revealed that the assessee had paid VAT for purchases, which was available for set-off, thereby reducing the outstanding amount significantly. This information was crucial in determining the actual turnover and justifying the deletion of the addition.

3. The main issue highlighted by the revenue was the alleged violation of Rule 46A of the IT Rules by the CIT(A) for not seeking a remand report from the ld. AO regarding the new evidence presented during the appeal stage. Both parties agreed to remand the matter to the ld. AO for denovo adjudication to ensure fair play and justice. Consequently, the grounds raised by the revenue were allowed for statistical purposes, and the appeal of the revenue was allowed accordingly.

In conclusion, the judgment addressed the procedural fairness in assessing additional evidence, the necessity of cross-verification in deletion of additions, and the importance of adherence to IT Rules for a just and lawful decision-making process.