2012 (10) TMI 537 - AT - Income Tax

Retraction of surrendered income - Disallowance of creditors - additional evidence under Rules 46A regarding confirmation of 23 creditors - CIT(A) deleted the addition - Held that - Though the assessee relied upon a decision of Pullangode Rubber Produce Co. Ltd. Vs. State of Kerala 1971 (9) TMI 64 - SUPREME COURT where it was observed that an admission is an extremely important piece of evidence but it can not be said that it is conclusive and that it is open to the person who made the admission to show that it is incorrect, there is no such dispute with this proposition of law. In the instant case, neither before the ld. CIT(A) nor even before us, the ld. AR attempted to show as to how the surrender was incorrect and what prompted the assessee to file appeal without even retracting the surrender. Even after surrender of the amount, the assessee approached the ld. CIT(A) and furnished additional evidence in terms of rule 46A of the IT Rules,1962. There is nothing in the impugned order as to why the assessee offered the amount to tax suo motu and then preferred the appeal. Nothing to suggest as to whether or not the CIT(A) examined the genuineness of additional evidence submitted by the assessee nor the AO seems to have been asked to verify its genuineness. In these circumstances, it can be concluded that the CIT(A) admitted additional evidence submitted by the assessee in its application under rule 46A of the IT Rules,1962, without following the procedure prescribed therein, thus in the interest of justice vacate the findings of the CIT(A) and restore the issues back to his file, with the directions to follow the mandate in terms of Rule 46A of the IT Rules, 1962 - in favour of revenue for statistical purposes.

Summary

Issues Involved:
1. Deletion of disallowance of creditors due to non-submission of confirmation.
2. Admission of additional evidence under Rule 46A of the Income Tax Rules, 1962.
3. Procedural compliance with Rule 46A.

Issue-wise Detailed Analysis:

1. Deletion of Disallowance of Creditors:
The Revenue challenged the deletion of Rs. 45,76,244/- disallowed by the Assessing Officer (AO) due to non-submission of confirmations from 23 creditors. The AO had added this amount to the taxable income because the assessee expressed its inability to furnish further confirmations and offered the amount to tax to avoid litigation and penalties. Despite this surrender, the assessee appealed to the Commissioner of Income Tax (Appeals) [CIT(A)], who admitted additional evidence in the form of confirmations from these creditors and subsequently deleted the addition.

2. Admission of Additional Evidence under Rule 46A:
The CIT(A) admitted additional evidence under Rule 46A(1)(b) of the Income Tax Rules, 1962, on the grounds that the assessee was prevented by sufficient cause from filing the confirmations during the assessment proceedings. The CIT(A) justified this by noting that the creditors were small traders from regions like Jammu & Kashmir, where adverse weather conditions and other logistical issues prevented timely submission. The CIT(A) also considered the remand report from the AO and the assessee's rejoinder before concluding that the additional evidence should be admitted.

3. Procedural Compliance with Rule 46A:
The Tribunal found that the CIT(A) did not follow the prescribed procedure under Rule 46A. The AO had provided sufficient opportunity to the assessee to submit the confirmations, and the assessee had voluntarily surrendered the amount to tax. The CIT(A) admitted the additional evidence without giving the AO a reasonable opportunity to examine its genuineness, as required by Rule 46A(3). The Tribunal noted that the CIT(A) should have recorded reasons for admitting the additional evidence and allowed the AO to cross-examine the evidence or produce rebuttal evidence.

Conclusion:
The Tribunal vacated the findings of the CIT(A) and restored the issues back to the CIT(A) for fresh adjudication. The CIT(A) was directed to follow the mandate of Rule 46A, ensure compliance with principles of natural justice, and provide a clear explanation of how the assessee was aggrieved by the AO's findings after the voluntary surrender. The Tribunal emphasized the need for a judicious exercise of discretion and procedural compliance under Rule 46A. The appeal was allowed for statistical purposes, and the CIT(A) was instructed to dispose of the matter in accordance with the law after allowing sufficient opportunity to both parties.