2014 (11) TMI 219 - AT - Income Tax

Admission of additional evidence under Rule 46A(3) Held that - The Commissioner has to record in writing as to why she had admitted the additional evidence - Sub Rule-3 contemplates that if additional evidence is taken on record, then it cannot be considered on merit, unless an opportunity to the AO is being given to comment the evidence or documents or to cross examine the witness produced by the assessee - CIT (A) has not called for production of memorandum of understanding - It must have been filed by the assessee - CIT (A) failed to give an opportunity of hearing to the AO thus, the order of the CIT(A) is set aside and the matter is remitted back to the FAA for re-adjudication Decided in favour of revenue. Payment of the expenses in cash exceeding the limit provided u/s 40A(3) Held that - The assessee has not filed any statement of facts before the Tribunal, nor filed any paper book - the assessee has contended that the AO has wrongly arrived at a figure of ₹ 4,36,180 - It also contended in the statement of facts that in the seized papers, aggregate of the payment made to these parties are mentioned - The individual payment to a large extend are within the limit prescribed u/s 40A(3) FAA has gone through the statement of facts and recorded a finding that the assessee failed to substantiate the claim Decided in favour of assessee.

Summary

Issues Involved:
1. Deletion of addition of Rs. 1,09,09,277 under Section 40A(3) of the Income Tax Act.
2. Admission of additional evidence by CIT (A) without allowing opportunity to the Assessing Officer under Rule 46A(3).
3. Deletion of protective addition of Rs. 1,68,40,857.
4. Confirmation of addition of Rs. 4,36,180 under Section 40A(3).

Issue-wise Detailed Analysis:

1. Deletion of Addition of Rs. 1,09,09,277 under Section 40A(3):
The Revenue challenged the deletion of Rs. 1,09,09,277 by the CIT (A), arguing that the assessee made cash payments exceeding the limit provided under Section 40A(3), which should be disallowed. The Assessing Officer had observed that the payments were capital expenses for acquiring land, which should be disallowed as they were made in cash. However, the CIT (A) deleted the addition, noting that the expenses were not claimed by the assessee but were capitalized by M/s Mohitsham Complexes Pvt Ltd. The CIT (A) concluded that since the expenses were capitalized and not claimed as deductions, they did not fall under the ambit of Section 40A(3).

2. Admission of Additional Evidence by CIT (A) without Allowing Opportunity to the Assessing Officer:
The Revenue contended that the CIT (A) admitted additional evidence (the memorandum of understanding) without giving the Assessing Officer an opportunity to examine it, violating Rule 46A(3). The Tribunal noted that Rule 46A requires the CIT (A) to record reasons for admitting additional evidence and to provide the Assessing Officer an opportunity to comment on it. Since the CIT (A) failed to follow these procedures, the Tribunal set aside the order and remitted the issue back to the CIT (A) for re-adjudication, ensuring compliance with Rule 46A.

3. Deletion of Protective Addition of Rs. 1,68,40,857:
The Revenue appealed against the deletion of Rs. 1,68,40,857, which included the substantive addition of Rs. 1,09,09,277. Since the Tribunal had already set aside the order related to the Rs. 1,09,09,277 addition, it also remitted the issue of the protective addition back to the CIT (A) for re-adjudication, contingent on the decision in the case of M/s Mohitsham Estates Pvt Ltd.

4. Confirmation of Addition of Rs. 4,36,180 under Section 40A(3):
The assessee challenged the addition of Rs. 4,36,180 under Section 40A(3), arguing that certain expenses were below Rs. 20,000 and should not be disallowed. However, the CIT (A) found that the assessee failed to substantiate this claim. The Tribunal noted that the assessee did not provide sufficient evidence to support its contention and upheld the CIT (A)'s decision to confirm the addition.

Conclusion:
The Tribunal allowed the appeals in ITA Nos. 1392/Bang/2013 and 1409/Bang/2013 for statistical purposes, remitting the issues back to the CIT (A) for re-adjudication. The appeal in ITA No. 1462/Bang/2013 was dismissed, confirming the addition of Rs. 4,36,180. The Tribunal emphasized adherence to procedural rules, particularly Rule 46A, in handling additional evidence.