2021 (4) TMI 326 - AT - Income Tax

Additional expenses for purchase of sites from the owner of land on which a project by name Gokul Gardens was developed - Admission of additional evidence by assessee - before the A.O., the assessee had not furnished any details as to which are the sites purchased out of the additional consideration paid - CIT(A) during the course of appellate proceeding had not called for the remand report from the Assessing Officer and has decided the issue in favour of the assessee without giving opportunity to the A.O. to rebut the additional evidence produced before him - HELD THAT - The prescription of Rule 46A is clear. The assessee is ordinarily not entitled to produce additional evidence before the CIT(A) other than that furnished to the AO except in the four circumstances enumerated in clause (a) to (d) of sub-rule (1). Sub-rule (2) however provides that no evidence shall be admitted under sub-rule (1) unless the CIT(A) records in writing the reasons for its admission. Sub-rule (3) further stipulates that the CIT(A) shall not take into account any evidence produced under sub-rule (1) unless the AO has been allowed a reasonable opportunity to examine the evidence or document or to cross examine the witness produced by the assessee or to produce any evidence or document or any witness in rebuttal of the additional evidence produced by the assessee. In the instant case, as mentioned earlier, the CIT(A) has admitted as fresh evidence, the sale deeds executed by the assessee with third parties. These were properties purchased by the assessee from the land owner for which additional consideration was paid. The CIT(A) had allowed the appeal of the assessee by placing reliance on documents / evidence not produced before the A.O. The admission of additional evidence without giving an opportunity to the A.O. to rebut the same, goes against the principles laid down under Rule 46A of the I.T. Rules. Accordingly, the impugned order of the CIT(A) is set aside and the matter is remitted to the A.O. for deciding the issue afresh as per law after affording a reasonable opportunity of being heard to the assessee. Needless to state, the assessee shall extend full cooperation to the A.O. so as to facilitate him for proper framing of the assessment and would be entitled to file any additional evidence before the A.O. in support of its claim. It is ordered accordingly.

Summary

Issues:
1. Allowance of appeal by CIT(A) based on new evidence without providing AO an opportunity to examine it.
2. Correctness of allowing a sum as purchases without trading receipts in the Profit and Loss account.

Issue 1:
The case involved an appeal by the Revenue against the CIT(A)'s order allowing the assessee's appeal without providing the Assessing Officer (AO) an opportunity to examine new evidence. The assessee, a real estate developer, claimed additional expenses for purchasing sites from a landowner. The AO disallowed the expenses of ?2,93,75,000, bringing it to tax. The CIT(A) allowed the claim based on documents produced during the appeal, including joint development agreements and sale deeds. However, the Tribunal held that the CIT(A) erred in admitting new evidence without giving the AO a chance to rebut it, contravening Rule 46A of the Income-tax Rules. The matter was remitted to the AO for fresh assessment after affording a reasonable opportunity to the assessee and following proper procedures.

Issue 2:
Regarding the correctness of allowing the sum as purchases without trading receipts in the Profit and Loss account, the Revenue contended that the CIT(A) wrongly accepted the expenditure of ?2,93,75,000 as purchases since there were no trading receipts in the relevant assessment year. The Tribunal noted that the CIT(A) based the decision on evidence not presented before the AO, which was a violation of Rule 46A. Therefore, the Tribunal allowed the Revenue's appeal for statistical purposes, setting aside the CIT(A)'s order and remitting the matter to the AO for a fresh decision in compliance with the law.

In conclusion, the Tribunal's judgment highlighted the importance of following procedural rules, especially Rule 46A, in admitting and considering new evidence during appellate proceedings. The decision emphasized the need for fairness and proper examination of evidence to ensure a just outcome in tax assessment cases.