2014 (2) TMI 980 - AT - Income Tax

Additions made u/s 143(3)/153A of the Act Block assessment - Admission of additional evidence under Rule 46A(3) Held that - The revenue wants to adopt an unfair course for ascertaining the tax liability, firstly by making an arbitrary and untenable sort of ex parte assessment and secondly not ensuring the process for proper evidence to come on record - Thus there is no justification for revenue to challenge the CIT(A)s action in admitting the additional evidence after following the due procedure laid down by the act - CIT(A) has been vested with powers coterminous to that of AO, over and above it to undertake further inquiries and even to enhance the assessment - Observations of CIT(A) clearly indicate the fact that the AO not only had an opportunity of submitting its comments on the merits of the case but also he actually submitted requisite comments - the assessments were completed in unjustifiable manner violating even the basic principles of natural justice. Neither sufficient opportunity of hearing nor time was given to the assessee to represent his case - The questionnaire issued by AO had no question about the agricultural income already assessed -This income was not being shown for the first time and has been regularly accepted year to year by department in preceding years thus, the assessee had no remedy except to file additional evidence in first appeal thus, assessee was prevented by sufficient cause in filing these papers during the course of 153A assessment proceedings Relying upon COMMISSIONER OF INCOME TAX Versus TEXT HUNDRED INDIA PVT. LTD. 2013 (6) TMI 72 - DELHI HIGH COURT - In 153A/C assessments additions cannot be made unless they are based on any incriminating material or inquiries based on such material. There is neither reference nor reliance on any incriminating material - Besides there is no reference to any inquiries conducted by AO based on any incriminating material the additions have been rightly deleted by the CIT(A) on this count the assessee owns a fairly large agricultural holding known as Prag Farms - Agricultural income has been returned and accepted by department year after year - Confirmation from agricultural tenant is on record - AO cannot reject documentary evidence on surmises and conjectures - Assessee has supported his claim based on relevant agricultural record - The tenant has confirmed that the agricultural expenses were borne by him and not by the assessee thus, there was no infirmity in the order of the CIT(A) Decided against Revenue.

Summary

Issues Involved:
1. Admission of additional evidence under Rule 46A(3).
2. Deletion of additions made by the Assessing Officer (AO) in respect of agricultural income for the assessment years 2003-04 to 2009-10.

Issue-wise Analysis:

1. Admission of Additional Evidence under Rule 46A(3):
The Revenue contended that the Commissioner of Income Tax (Appeals) [CIT(A)] erred in admitting additional evidence filed by the assessee under Rule 46A(3). The AO argued that sufficient opportunity was given to the assessee to submit necessary evidence, but the assessee failed to do so.

The CIT(A) admitted the additional evidence, noting that the AO issued a notice under section 143(2) at a late stage, giving the assessee insufficient time to respond. The CIT(A) observed that the assessment proceedings were effectively started on 22-12-2010 and completed on 27-12-2010, leaving the assessee with inadequate time to furnish the required evidence. The CIT(A) cited various judicial precedents, including the Hon'ble Delhi High Court's judgments in CIT vs. Text Hundred India Pvt. Ltd. and CIT v. Virgin Securities & Credits (P) Ltd., to justify the admission of additional evidence.

The Tribunal upheld the CIT(A)'s decision, noting that the assessments were completed in an unjustifiable manner, violating the principles of natural justice. The Tribunal found that the assessee was prevented by sufficient cause from filing the evidence during the assessment proceedings and that the CIT(A) followed the due procedure laid down by the Act in admitting the additional evidence.

2. Deletion of Additions Made by AO:
The AO made additions to the assessee's income, treating the declared agricultural income as income from unexplained sources. The AO's additions were based on the lack of evidence to substantiate the agricultural income.

The CIT(A) deleted the additions, accepting the additional evidence provided by the assessee. The assessee submitted documents proving ownership of agricultural land, proof of sale of sugarcane to sugar mills, and confirmation from a cultivating tenant, Shri Swatantra Rai, who paid rent for the use of the land. The CIT(A) found that the AO did not raise any doubts about the veracity of the documents during the remand proceedings and that the assessee had furnished adequate evidence to support the claim of agricultural income.

The Tribunal upheld the CIT(A)'s decision, noting that the AO did not provide sufficient opportunity for the assessee to present the necessary evidence. The Tribunal also observed that the agricultural income had been accepted by the department in regular assessments for preceding years and that the AO's additions were not based on any incriminating material found during the search. The Tribunal cited various judicial precedents, including All Cargo Global Logistics Ltd. v. DCIT and Jai Steel India v. ACIT, to support the view that additions under section 153A can only be made based on incriminating material found during the search.

Conclusion:
The Tribunal dismissed the Revenue's appeals, upholding the CIT(A)'s decisions to admit the additional evidence and delete the additions made by the AO. The Tribunal emphasized the importance of providing adequate opportunity to the assessee to present evidence and the requirement for additions under section 153A to be based on incriminating material found during the search. The judgment reinforces the principles of natural justice and the procedural fairness required in tax assessments.