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TMI BlogAppeals filed casually a cause of brain drain and source of harassment by tax authorities - a case study in respect of appeal filed for alleged violation of Rule 46A when there was no additional evidence at allX X X X Extracts X X X X X X X X Extracts X X X X ..... Appeals filed casually a cause of brain drain and source of harassment by tax authorities - a case study in respect of appeal filed for alleged violation of Rule 46A when there was no additional evidence at all - By: - CA DEV KUMAR KOTHARI - Income Tax - Dated:- 3-11-2016 - - Link and references: Rule 46A of the Income-tax Rules 1962 ACIT, Circle-5, Kolkata Versus Vishnu Webtech Pvt.** and Vica-Versa 2015 (10) TMI 2538 - ITAT KOLKATA ITA No1241/Kol /2010 C.O. No.82/Kol/2010 Dated: - 20 October 2015 ** (Vishnu for short hereafter) Rule 46A of the Income-tax Rules, 1962 is reproduced below with highlights: Production of additional evidence before the Deputy Commissioner (Appeals) and Commissioner (Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peals). 46A. (1) The appellant shall not be entitled to produce before the Deputy Commissioner (Appeals) or, as the case may be, the Commissioner (Appeals), any evidence, whether oral or documentary, other than the evidence produced by him during the course of proceedings before the Assessing Officer, except in the following circumstances, namely :- ( a ) where the Assessing Officer has refused to admit evidence which ought to have been admitted ; or ( b ) where the appellant was prevented by sufficient cause from producing the evidence which he was called upon to produce by the Assessing Officer ; or ( c ) where the appellant was prevented by sufficient cause from producing before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessing Officer any evidence which is relevant to any ground of appeal ; or ( d ) where the Assessing Officer has made the order appealed against without giving sufficient opportunity to the appellant to adduce evidence relevant to any ground of appeal . (2) No evidence shall be admitted under sub-rule (1) unless the Deputy Commissioner (Appeals) or, as the case may be, the Commissioner (Appeals ) records in writing the reasons for its admission. (3) The Deputy Commissioner (Appeals) or, as the case may be, the Commissioner (Appeals) shall not take into account any evidence produced under sub-rule (1) unless the Assessing Officer has been allowed a reasonable opportunity ( a ) to examine the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vidence or document or to cross-examine the witness produced by the appellant, or ( b ) to produce any evidence or document or any witness in rebuttal of the additional evidence produced by the appellant. (4) Nothing contained in this rule shall affect the power of the Deputy Commissioner (Appeals) or, as the case may be, the Commissioner (Appeals) to direct the production of any document, or the examination of any witness, to enable him to dispose of the appeal, or for any other substantial cause including the enhancement of the assessment or penalty (whether on his own motion or on the request of the Assessing Officer) under clause ( a ) of sub-section (1) of section 251 or the imposition of penalty under section 271. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... According to this Rule CIT(A) can admit additional evidence in given circumstances. However, the CIT(A) , if he admit an additional evidence, he must record reason for the same and should provide an opportunity to the AO for examination of additional evidence/ documents and cross examination of a new witness etc. Opportunity of hearing to the AO: CIT(A) is required to give an opportunity to the AO. Generally when an appeal is filed, a copy of the same is forwarded to the AO. When an appeal is fixed for hearing, a copy of notice is forwarded to the AO who can make his representations before the CIT(A) himself or through his authorised representative. Generally when a notice for adjournment is issued , a copy of the same is fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rwarded to the AO also. Ground reality: However, ground reality is that rarely the AO makes any representation before the CIT(A). Even when any new explanation, evidence or document is filed, and the CIT(A) requires comments, observations and objections of the AO, general practice is that AO rely on his order or just request not to admit additional evidence in a routine manner. We find that even in case of hearing of appeals before the Tribunal, major reliance is on the assessment order passed by the AO, when a relief allowed by CIT(A) is disputed by the Revenue/ AO. However, in many cases, disputes are raised by Revenue for alleged violation of Rule 46A. Facts and date sheets of the case of Vishnu (supra.): Previous yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r ended on 31.03.2005 Original order of AO u/s 143(3) dt. 27.12.2007 Appeal filed before CIT(A) on 18.01.2009 Order of CIT(A) on above appeal was passed on 17.03.2010 Order u/s 263 dated 23.02.2009 Order u/s 263/ 143.3 passed by AO on 27.11.2009 Appeal filed before CIT(A) on 12.01.2010. Order of CIT(A) dt. 17.03.2010 The appeal of revenue was filed on 16.06.2010 Appeal by way of Cross objections was filed by assessee on 30.06.2010 and request was also made for providing details of additional evidences, alleged by revenue. For this specific ground was taken in grounds of Cross Objections. However, in spite of repeated request of assessee and direction of Tribunal, the AO and the Departmental Representative could ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not point out a single piece of paper as additional or new evidence in violation of Rule 46A, based on which CIT(A) allowed relief which was challenged merely on ground of violation of Rule 46A. Original assessment u/s 143(3): During original assessment proceedings for AY 2005-06, orders of assessment for earlier years were considered. Books of accounts, bank statements, confirmations, return of allotment of shares, and all relevant documents were considered. There was no lack of enquiry and the order was also not erroneous. The proceedings u/s 263, and assessment u/s 263 /143(3) were on frivolous reasons : The assessee had started construction of a building during earlier years and as on 31.03.2004 capital work-in-progre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss was substantial which was carried forwarded to PYE 31.03.2005. The assessment order of AY 2004-05 clearly showed this aspect. In original assessment, detailed enquiry was made and any addition was not made because sources of funds were duly examined- these were promoter s contribution over more than three years against which allotment of shares was made in last week of March 2005. During hearing for original assessment, books were produced, confirmations of all money received from promoters were filed with bank statements and other supporting documents. There was neither any lack of enquiry nor there was any erroe in original assessment. Major part of sources of funds were in earlier years out of which construction was in progress an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d carried forwarded as on 31.03.2004. Which could not at all be considered for AY 2005-06. However, learned CIT in his order u/s 263 for AY 2005-06 directed to examine all sources of funds ignoring balance sheets of earlier years and documents available on record for AY 2005-06. This was a fit case for dropping proceedings u/s 263, however, learned CIT passed an order for making a-fresh assessment with direction to verify sources of funds for entire cost of building. During fresh proceedings again all sources of funds were fully established. However learned A|O made addition on totally wrong contention that allotment of shares was made later so before that there was unexplained source. The learned AO ignored that promoters and directors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have brought funds by way of A/c payee cheques which were deposited in bank account of assessee and those funds were used for construction of building. The contribution made were also confirmed and accounted for in their books of account. The learned AO made addition of entire construction expenses (including work-in-progress brought forwarded from earlier year for which assessment was made u/s 143(3) and no addition was made). One of most funny reason (as experienced by author) given by the learned AO was that as per return of allotment shares were allotted on 7 th March 2005, therefore funds were not available before that date and sources for construction cost is not established. Therefore, he made addition of full cost of bui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lding. Certified copies of order sheets were not provided by the AO: Assessee vide letter dt.13.05.200 8 requested for certified copy of order sheets, for aY 2004-05 and 2005-06. However the application was rejected for funny reasons - at the first time learned AO denied for wrong reason that fees has not been paid, whereas fees was duly paid by assessee in advance on estimated basis and learned AO did not asked of further amount, in addition to fees paid by assessee. Learned AO in his order dt. 27.05.08 (served on 19.06.2008) made order as follows: Your request is rejected as you have not paid requisite fees and have not submitted a copy of challan to this office The learned AO ignored payment made by assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, and in any case did not ask to make payment and rejected application. This was not proper and is not in accordance with Circulars of Board. When fact of payment and Boards Circular were pointed out to the learned AO, he again refused to provide certified copy of order sheets for the following reasons mentioned in his order dt. 16.07.2008: Your request is rejected as order sheet cannot be provided to the assessee and are made for intra departmental use only. Both rejections are totally contrary to the instructions of the CBDT. This shows very casual approach of Who care for instructions or judgment and also approach of who care for assessee adopted by many government officers including IRS officers. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Grounds of appeal as approved by the CIT, Kolkata- II, Kolkata and taken in appeal by revenue in its appeal before ITAT: 1. That the Ld. CIT(A) has erred in law as well as on facts in deciding the issue in favour of the assessee by deleting the addition made u/s 69 as unexplained investment of ₹ 3,48,00,000/-, by accepting new evidence produced by the assessee during the appeal proceedings, which is contrary to provisions of Rule 46A of the Income Tax Rules. 2. That the appellant craves for leave to add, delete or modify any of the grounds of appeal before or at the time of hearing. GROUNDS OF CROSS OBJECTIONS by assessee: 1. For that learned CIT(A) has rightly deleted addition of ₹ 3,48,00,000/- a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd that learned CIT(A) had not relied on any new material or evidence , contrary to Rule 46A of the Income Tax Rules, as very vaguely alleged by the revenue without pointing out any such material. 2) For that the onus is on the Appellant / Revenue to point out any new evidence relied on by the CIT(A) in violation of Rule 46A, while deleting addition of ₹ 3,48,00,000/-. 3) For that on the facts and in circumstances of the case the appeal of revenue may be dismissed summarily if the revenue fails to point out any new evidence as allegedly relied on by the CIT(A). 4) The Honorable Tribunal may kindly grant costs of appeal u/s 254((2B) in favor of the assessee/ respondent/ Cross Objector. 5) The respondent/ cro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss objector seeks kind permission to raise new contentions and grounds in these Cross Objections. Date of hearings: The hearing of cases was fixed for the first time on 26.08.201, the assessee filed paper book and also requested for details of alleged additional evidences in violation of Rule 46A. Thereafter hearing was fixed several times inter alia (there can be some more dates) on the following dates: 1. 26.08.2010 2. 04.11.2010 3. 25.02.2011 4. 11.07.2013 5. 23.12.2013 6. 16.12.2014 7. 23.02.2015 8. 01.06.2015 9. 20.10.2015 - finally heard and order pronounced. Thus it took more than five years to decide the appeal from the date of first hearing . The D/R as well as the AO could not provide deta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ils of alleged additional evidence in violation of Rule 46A as agitated in ground of appeal by revenue. This is simply because there was no additional evidence and appeal was filed just for sake or filing of appeal because relief allowed by CIT(A) was a bit higher. It is surprising as to how in scrutiny of appeal, a case was made out for filing of appeal and more surprisingly is, how the CIT approved filing of appeal? Application for details of additional evidence, as alleged by Revenue : In the grounds of appeal by way of Cross Objections assessee has specifically raised ground that Revenue must pin-point additional evidence considered by CIT(A) while allowing relief. At the time of every hearing fixed, A/R of assessee requested h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onourable Bench as well as the Departmental Representative to provide such details. Written applications were also made to the Departmental Representative and the Assessing Officer to provide such details at number of times including on 19.08.2010, 18.02.2011, 24.05.2011, 07.09.2011, 23.12.2011. The assessee also filed entire set of documents filed before the CIT(A) before the AO and the D/R with request to find out and pin-point what is additional evidence considered by the CIT(A) for allowing relief to assessee. Both authorities kept matter pending and could not point out any additional evidence. The revenue, surprisingly with specific approval of CIT, filed appeal. This shows that the appeal was filed without application of mind and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... without looking into records. - - Scholarly articles for knowledge sharing authors experts professionals Tax Management India - taxmanagementindia - taxmanagement - taxmanagementindia.com - TMI - TaxTMI - TMITax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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