2024 (6) TMI 1350 - AT - Income Tax

Admission of additional evidence by CIT(A) - Test of enquiries in assessment proceedings - Procedures in accepting the additional evidences by CIT(A) - CIT(A) erred in not allowing the A.O. to examine the additional evidence admitted by him as per the provisions u/s. 46A(3) of the I. T. Rules 1962 - Addition of unsecured loans and advances from customers u/s 68 - whether allegation of not providing opportunity to the AO by Ld. CIT (A) is really exists or not? HELD THAT - Information furnished by the assessee before the Ld. CIT (A) is mostly available on record before the AO also. It is also observed that addition u/s. 68 of the Act on account of Unsecured Loan may be treated as such but as far as advance received from customers is concerned it s a settled position of law same can t be considered as income for the purposes of section 68 of the Act. So addition made u/s. 68 on account of customer s advance treatment by AO was void-ab-initio and Ld. CIT (A) rightly handled the issue by analysing the same in the light of the fact that same has been duly reflected in the books of account as per the accounting system followed by the assessee under the head sales advance and booking amount returned. The job which ought to have been done by the AO on amount received by assessee as customer s advance same has been carried out by the Ld. CIT(A) and due assessment has been carried out. As far as amount involved on account of unsecured loans are concerned as mentioned (supra) most of the documents were available before the AO and practically AO may have grievance that due procedure was not followed as prescribed under Rule 46A (3) of the Rules but same was not required as the powers of Ld. CIT (A) was coterminous with that of AO and what an AO can do the same action can be taken by him also. We found the order of Ld. CIT (A) to be reasonable and logical on the given set of facts and other than the issue of giving opportunity to AO under 46A (3) of the Rules AO is not able to make out the case how it is prejudicial to the interest of revenue or what anomaly is there in the order of Ld. CIT (A). No infirmity in the order of Ld. CIT (A) especially when a substantive justice has been delivered within the scope of powers given to him by the statute and confirmed over the period by the Superior Courts. In view of above grounds raised by the Revenue are dismissed. Revenue appeal dismissed.

Summary

Issues Involved:
1. Erroneous order of CIT(A).
2. Non-compliance with Rule 46A(3) of the I.T. Rules, 1962.
3. Acceptance of additional evidence by CIT(A).
4. Validity of additions under Section 68 of the Income Tax Act, 1961.

Detailed Analysis:

1. Erroneous order of CIT(A):
The revenue contended that the order of the CIT(A) was erroneous in law and on the facts of the case. The core issue was whether the CIT(A) was justified in admitting additional evidence without giving the Assessing Officer (AO) an opportunity to examine it as required by Rule 46A(3) of the Income Tax Rules, 1962.

2. Non-compliance with Rule 46A(3) of the I.T. Rules, 1962:
The revenue argued that the CIT(A) erred by not allowing the AO to examine the additional evidence submitted by the assessee. Rule 46A(3) mandates that any additional evidence produced by the appellant should be examined by the AO. The tribunal noted that most of the information furnished by the assessee before the CIT(A) was already available on record before the AO. The tribunal further observed that the CIT(A) had the same powers as the AO and could take similar actions.

3. Acceptance of additional evidence by CIT(A):
The revenue also contended that the CIT(A) erred in accepting additional evidence that had not been scrutinized during the assessment proceedings. The tribunal found that the CIT(A) had appropriately handled the issue by analyzing the evidence in light of the facts and accounting system followed by the assessee. The tribunal cited judicial precedents, including the Supreme Court's decision in Jute Corp. of India Ltd. v. Commissioner of Income-tax, which established that appellate authorities have the power to admit additional evidence if it is necessary for the disposal of the appeal.

4. Validity of additions under Section 68 of the Income Tax Act, 1961:
The AO had made additions of Rs. 2,90,30,000/- on account of unsecured loans and Rs. 12,63,66,352/- on account of advance received from customers under Section 68 of the Act. The CIT(A) deleted these additions, and the revenue appealed against this decision. The tribunal observed that while the addition on account of unsecured loans could be considered under Section 68, the advance received from customers could not be treated as income under this section. The tribunal found that the CIT(A) had correctly assessed the evidence and concluded that the advance received from customers was duly reflected in the books of account and could not be considered as income.

Conclusion:
The tribunal found the order of the CIT(A) to be reasonable and logical. It noted that the AO had not demonstrated how the order of the CIT(A) was prejudicial to the interests of the revenue. The tribunal dismissed the revenue's appeal, stating that the CIT(A) had delivered substantive justice within the scope of his powers, as confirmed by judicial precedents.

Order:
The appeal of the Revenue is dismissed. The order was pronounced in the open court on 29th January, 2024.