2005 (7) TMI 282 - AT - Income Tax

Summary

Issues Involved:
1. Confirmation of additions under Section 69.
2. Issuance of notice under Section 148.
3. Allegations of bias and defamatory language in the CIT(A)'s order.
4. Admission of fresh evidence under Rule 46A.

Issue-wise Detailed Analysis:

1. Confirmation of Additions under Section 69:

The assessee contested the confirmation of additions amounting to Rs. 58,79,785, Rs. 1,96,123, and Rs. 50,000 for the assessment year 1997-98, and Rs. 4,78,100 for the assessment year 1995-96, made by the AO by invoking Section 69. The additions were based on loose papers found during a survey under Section 133A, which contained entries of payments and receipts. The assessee argued that these additions were based on surmises and conjectures, and the loose papers did not conclusively prove undisclosed income. The CIT(A) upheld the additions, stating that the assessee's conduct and the presence of loose sheets indicated undisclosed transactions. However, the Tribunal observed that the CIT(A) did not objectively consider the merits of the affidavits and other evidence provided by the assessee, and the denial of the transactions came only after five years. The Tribunal directed the CIT(A) to re-examine the issue afresh, considering the provisions of Rule 46A and allowing reasonable opportunity to both parties.

2. Issuance of Notice under Section 148:

The assessee challenged the issuance of notice under Section 148, arguing that the AO did not have sufficient grounds for reopening the assessment. The AO issued the notice based on the loose papers found during the survey, which indicated undisclosed transactions. The Tribunal did not specifically address this issue in detail but implied that the reassessment proceedings were initiated due to the inability of the assessee to explain the entries in the loose papers.

3. Allegations of Bias and Defamatory Language in the CIT(A)'s Order:

The assessee alleged that the CIT(A) framed the order with a deep-rooted bias, using irrelevant instances and defamatory language against the assessee and others. The CIT(A) made several derogatory remarks, calling the assessee and others criminals and co-criminals. The Tribunal found these observations uncalled for and irrelevant to the case. The Tribunal held that the CIT(A) should have focused on the evidence and material on record rather than making such comments. The Tribunal set aside the CIT(A)'s order and directed a fresh examination of the appeals.

4. Admission of Fresh Evidence under Rule 46A:

The assessee filed affidavits of partners, employees, and neighbors as fresh evidence before the CIT(A), which were admitted under Rule 46A. The CIT(A) admitted the evidence without proper application of mind and without assigning reasons as required under Rule 46A. The Tribunal noted that the CIT(A) failed to follow the provisions of Rule 46A, which mandates recording reasons for admitting fresh evidence and allowing the AO a reasonable opportunity to examine the evidence. The Tribunal directed the CIT(A) to re-examine the issue of admission of fresh evidence as per the provisions of Rule 46A and decide the appeals afresh after allowing reasonable opportunity to both parties.

Conclusion:

The Tribunal set aside the orders of the CIT(A) and restored the appeals to his file for a fresh decision as per law. The CIT(A) was directed to re-examine the issues regarding the additions under Section 69, the issuance of notice under Section 148, and the admission of fresh evidence under Rule 46A, after allowing reasonable opportunity to both parties. The appeals were allowed for statistical purposes.