1992 (8) TMI 112 - AT - Income Tax

Issues Involved:
1. Delay in filing the appeal.
2. Violation of Rule 46A(2) of the Income-tax Rules, 1962.
3. Application of Section 41(1) of the Income-tax Act, 1961.
4. Validity of the original appeal filed.

Detailed Analysis:

1. Delay in Filing the Appeal:
The department's appeal was delayed by 50 days. The delay was attributed to several factors:
- The original appeal filed on 3-5-1991 was withdrawn due to a lack of proper authorization by the Commissioner of Income-tax (CIT).
- The CIT was out of station from 1-5-1991 to 4-5-1991, and the original appeal was filed without his authorization.
- The file was misplaced and later found with the Departmental Representative.
- The appeal was re-filed on 24-6-1991 after receiving proper authorization on 18-6-1991.

The Tribunal found that the delay was due to reasonable cause and condoned the delay, admitting the appeal for consideration.

2. Violation of Rule 46A(2) of the Income-tax Rules, 1962:
The department argued that the CIT(A) erred in accepting fresh evidence (copies of bank accounts and ledger accounts) without giving the Assessing Officer an opportunity to examine them, violating Rule 46A(2). However, the Tribunal noted:
- The ledger accounts were already examined by the Assessing Officer.
- The addresses of the firms were found in their bank accounts, which were not fresh evidence.
- The CIT(A)'s decision did not rely solely on the fresh evidence but on the facts and the ITO's findings.

The Tribunal concluded that there was no prejudice to the department and no significant violation of Rule 46A(2).

3. Application of Section 41(1) of the Income-tax Act, 1961:
The ITO added Rs. 20,90,829 under Section 41(1), treating the liabilities as non-genuine and ceased. The CIT(A) found:
- The correct addresses of the firms were different from those used by the ITO.
- There was no remission or cessation of liability as the liabilities were paid during the year.
- The ITO treated the purchases as bogus, which should be addressed in the year the purchases were claimed.

The Tribunal upheld the CIT(A)'s decision, stating that Section 41(1) could not be applied to bogus liabilities as they never existed and could not cease. The liabilities were paid, and thus, there was no cessation.

4. Validity of the Original Appeal Filed:
The original appeal filed on 3-5-1991 was without proper authorization from the CIT, making it invalid. The Tribunal stated:
- The authorisation under Section 253(2) must be by the CIT, not the Income-tax Officer.
- The original appeal was a nullity in the eyes of law.
- The subsequent withdrawal and the Tribunal's order permitting the withdrawal were of no consequence.

The Tribunal recognized the appeal filed on 24-6-1991 as the proper appeal and proceeded to consider it on merit.

Conclusion:
The Tribunal dismissed the department's appeal, upholding the CIT(A)'s order. The Tribunal found no error in the CIT(A)'s decision to delete the addition of Rs. 20,90,829 made under Section 41(1) and no significant violation of Rule 46A(2) or (3) that would prejudice the department's interests.

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