2017 (4) TMI 1187 - AT - Income Tax

Admission of additional evidences - CIT(A) in the second round of litigation refused to admit the additional evidences by invoking Rule 46A of 1962 Rules - Held that - The assessee has produced large number of documents with respect to the complaint lodged by the assessee with The Institute of Charted Accountants of India against its erstwhile erring CA Mr Vijay Patil who was not handing over relevant records to the assessee which disabled assessee in filing evidences before the AO. Thus in our considered view the assessee has established a reasonable cause for not presenting the evidences before the AO at the time of framing of the assessment order dated 25-11-2010 passed by the AO u/s 143(3)(ii) of 1961 Act. The Rule 46A of 1962 Act is an aid to advance justice to compute correct income which can be brought to tax under the provisions of 1961 Act in the hands of tax-payer so as to achieve mandate of 1961 Act which itself derives its powers from Article 265 of Constitution of India which stipulates that taxes are not to be imposed save by authority of law and No tax shall be levied or collected except by authority of law. Rule 46A of 1962 Act cannot be used as sword to stifle bona-fide tax-payers rather it is a shield in the aid of bona-fide tax-payers as well Revenue to advance the cause of justice and to achieve mandate of 1961 Act. Keeping in view the factual matrix of the case as it emerges from the records and to advance justice we are of the considered view that in the interest of substantial justice and fair play this matter needs to be set aside and restored to the file of the ld. CIT(A) with a direction to admit all the additional evidences

Issues Involved:
1. Dismissal of the appeal by CIT(A) without proper hearing.
2. Non-admission of additional evidence by CIT(A).
3. Alleged failure of the Chartered Accountant to conduct proper audit.
4. Application of Rule 46A of Income Tax Rules, 1962.
5. Adherence to principles of natural justice.

Detailed Analysis:

1. Dismissal of the appeal by CIT(A) without proper hearing:
The assessee contended that the CIT(A) erred in dismissing the appeal without giving a full and proper opportunity to be heard. The tribunal in the first round of litigation noted that the CIT(A) dismissed the appeal through a "non-speaking order" which did not state the points for determination, decision thereon, or reasons in support as required under Section 250(6) of the Income-tax Act, 1961. The tribunal set aside the CIT(A)’s order and directed to decide the appeal on merits in accordance with law.

2. Non-admission of additional evidence by CIT(A):
In the second round of litigation, the CIT(A) again dismissed the appeal without admitting additional evidence provided by the assessee. The CIT(A) held that the conditions under Rule 46A of the Income Tax Rules, 1962 were not met. The tribunal observed that the CIT(A) did not admit additional evidence, which included correspondences and complaints against the previous Chartered Accountant, Mr. Vijay Patil, who allegedly did not hand over relevant records to the assessee.

3. Alleged failure of the Chartered Accountant to conduct proper audit:
The assessee argued that the failure to present evidence was due to the previous Chartered Accountant, Mr. Vijay Patil, who did not conduct a proper audit and failed to hand over necessary documents. The assessee provided correspondences with the Institute of Chartered Accountants of India (ICAI), including a complaint lodged against Mr. Vijay Patil, to substantiate their claim. The tribunal found that there was a reasonable cause for the assessee's failure to present evidence during the initial assessment.

4. Application of Rule 46A of Income Tax Rules, 1962:
The CIT(A) invoked Rule 46A to reject the additional evidence, stating that the conditions for admitting new evidence were not met. The tribunal, however, emphasized that Rule 46A should not be used to stifle bona fide taxpayers but rather to aid in achieving justice. The tribunal noted that the assessee had established a reasonable cause for not presenting the evidence earlier and directed the CIT(A) to admit the additional evidence and forward it to the AO for examination and verification.

5. Adherence to principles of natural justice:
The tribunal highlighted the importance of adhering to principles of natural justice. It directed the CIT(A) to provide proper and adequate opportunities for the assessee to be heard, ensuring that the appeal is adjudicated on merits in accordance with law. The tribunal stressed that the additional evidence and explanations should be considered to compute the correct income and achieve the mandate of the Income-tax Act, 1961.

Conclusion:
The tribunal set aside the CIT(A)’s order and restored the matter to the CIT(A) with directions to admit the additional evidence and adjudicate the appeal on merits after considering the additional evidence and explanations. The tribunal emphasized the need for adherence to principles of natural justice and proper opportunity for the assessee to present their case. The appeal was allowed for statistical purposes.

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