2014 (12) TMI 670 - AT - Income Tax

Admission of additional evidences by CIT(A) - Penalty order barred by limitation or not Held that - As per provisions of Section 250(4) and 250(5) of the Income Tax Act the CIT(A) may dispose of the appeal after making such enquiry as he thinks fit or may ask the AO to carry out certain further enquiry - The CIT(A) can also admit such other additional ground which is not specified in the ground of the appeal if he is satisfied that the omission of the ground from the form of appeal was not willful or unreasonable - AO has made the order without giving sufficient opportunity to the assessee to adduce the evidence relevant to any ground in appeal - Before admission of additional evidence the CIT(A) has to give reasonable opportunity to the AO either to examine the additional evidence or to produce any evidence or document as any witness in rebuttal to the additional evidence produce by the assessee. In the case of CIT vs. Kanpur Coal Syndicate 1964 (4) TMI 18 - SUPREME Court it has been held that there is no reason to justify the curtailment of power of CIT(A) to entertain the additional grounds of appeal raised by assessee in seeking modification of assessment order passed by AO - CIT(A) has not given proper opportunity to the AO, thus, the order of the CIT(A) is reversed and the matter is remitted back to the CIT(A) for adjudication Decided in favour of assessee.

Issues Involved:

1. Timeliness and validity of the 271D penalty order.
2. Change in classification of amounts by the AO.
3. Jurisdiction of the AO and JCIT.
4. Characterization of amounts as JV participations or deposits.
5. Contradiction with regulatory authorities' findings.
6. Retention of part of the 271D penalty.
7. Reasonable cause for belief regarding section 269SS.
8. Analysis based on Google Maps.
9. Sustaining the 271D penalty amount.

Detailed Analysis:

1. Timeliness and Validity of the 271D Penalty Order:
The assessee argued that the 271D penalty order passed by the JCIT was barred by limitation as it was passed beyond the permissible time limit. The CIT(A)-Panaji held that the penalty order was indeed barred by limitation, referencing a similar case decided by the ITAT Jaipur bench.

2. Change in Classification of Amounts by the AO:
The assessee contended that the AO had changed his opinion from the assessment order, where amounts were observed as "JV participations" but later classified as "deposits" in the reference to the JCIT. The CIT(A) did not hold that the AO had changed his opinion.

3. Jurisdiction of the AO and JCIT:
The assessee claimed that the AO was functus officio at the time of making the reference to the JCIT, rendering the JCIT's jurisdiction invalid. The CIT(A) did not hold this view.

4. Characterization of Amounts as JV Participations or Deposits:
The assessee argued that the amounts received were JV participations and not deposits violating section 269SS of the ITA, 1961. The CIT(A) did not appreciate this characterization, despite the JV Participation Agreement and related documents.

5. Contradiction with Regulatory Authorities' Findings:
The assessee highlighted that regulatory authorities such as the Ministry of Corporate Affairs, SEBI, and CBI had categorized the amounts as a collective investment scheme (CIS) and not deposits. The CIT(A) did not align with this view.

6. Retention of Part of the 271D Penalty:
The CIT(A) retained part of the 271D penalty, despite acknowledging that most JV participants were from rural areas with agricultural backgrounds. The assessee argued that the entire penalty should have been deleted.

7. Reasonable Cause for Belief Regarding Section 269SS:
The assessee believed there was a reasonable cause to think there was no violation of section 269SS, as the transactions were perceived as JV participations, not deposits. The CIT(A) did not fully appreciate this belief.

8. Analysis Based on Google Maps:
The CIT(A) admitted additional evidence based on Google Maps to analyze the distance of JV participants' addresses. The department argued that this evidence was admitted without giving the AO an opportunity to verify it, violating Rule 46A of the IT Rules.

9. Sustaining the 271D Penalty Amount:
The CIT(A) sustained the 271D penalty to a rounded ad-hoc amount of Rs. 20 CR instead of Rs. 16.95 CR as argued by the assessee, based on the method of objective filters used on the data-file.

Conclusion:
The Tribunal found that the CIT(A) admitted additional evidence without giving the AO a chance to verify it, violating Rule 46A. The Tribunal remanded the matter back to the CIT(A) to pass an order after giving proper opportunity of hearing to the AO and to decide the appeal on merit. Both cross appeals were allowed for statistical purposes.

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