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TMI Blog2019 (10) TMI 130X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A), with the direction to pass fresh order. If the Ld. CIT(A) decides to admit Additional Evidences, he should clearly state the specific clause(s) of Rule 46A(1) of I.T. Rules that would apply; while recording the reasons under Rule 46A(2) of I.T. Rules. Further, if the Ld. CIT(A) decides to admit Additional Evidences, reasonable opportunity prescribed under Rule 46A(3) of I.T. Rules must be provided by the CIT(A) to the AO. Even if Ld. CIT(A) accepts the Additional Evidences / Materials under Rule 46A(4) of I.T. Rules, even then reasonable opportunities must be provided by the CIT(A) to the Assessing Officer to examine such Additional Evidences / Materials and to produce any evidence or document in rebuttal of Additional Evidences / Materials submitted or produced by the Assessee before the Ld. CIT(A). By way of abundant caution, we expressly clarify that we have not expressed any opinion on merits of the various quantum additions made by the Assessing Officer in the Assessment Order [and deleted by the Ld. CIT(A) in aforesaid impugned appellate order dated 24.04.2015] which are under dispute in the present appeal. - ITA No:- 4451/Del/2015 - - - Dated:- 27-9-2019 - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the hands of the directors and their family members, from 20% disallowed by the AO to 10%. 7. That the order of the Ld. CIT(A) is erroneous and is not tenable on facts and in law. 8. That the grounds of appeal are without prejudice to each other. 9. That the appellant craves leave to add, alter, amend or forego any ground(s) of the appeal raised above at the time of the hearing. (B) Assessment Order dated 30.03.2013 was passed by the Assessing Officer ( AO , for short) U/s 143(3) of Income Tax Act, 1961 ( I.T. Act , for short) wherein total income was assessed at ₹ 2,55,15,803/- as against return income of ₹ 22,52,024/-. The Assessee filed appeal against the aforesaid Assessment Order dated 30.03.2013 before the Learned Commissioner of Income Tax (Appeals). The issues raised by the Assessee in the appeal before the Ld. CIT(A) have been summarized in tabular form at pages 2 and 3 of the appellate order dated 24.04.2015 of the Ld. CIT(A) and is reproduced below for the ease of reference: (C) During the appellate proceedings before the Ld. CIT(A) the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... On careful perusal of the aforesaid impugned appellate order dated 24.04.2015 of the Ld. CIT(A), we find that nowhere he has stated whether the Additional Evidences / Materials were produced by the assessee suo-moto [and were admitted under rule 46A(1) of I.T. Rules] or in pursuance of direction of the Ld. CIT(A) under Rule 46A(4) of I.T. Rules. Moreover, we find that Ld. CIT(A) has not discussed in any detail anywhere in his impugned appellate order, as to which specific Additional Evidences / Materials [submitted or produced by the Assessee during the appellate proceedings before the Ld. CIT(A)] were relevant for granting which particular ground(s) of appeal before the Ld. CIT(A). To that extent, therefore, the order of the Ld. CIT(A) is not compliant with the norm to pass speaking order. In fact, the Ld. CIT(A) has omitted to even mention that Additional Evidences or Materials were admitted or accepted at all; whether under Rule 46A(1) or under Rule 46A(4) of I.T. Rules; although, as we have observed in foregoing paragraph (C.1) of this order; admittedly from the assessee s side, the assessee filed Additional Documents during appellate proceedings before Ld. CIT(A). Ld. CIT(A) a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hout following the well established principle of natural justice. This is so, because AO is an interested party in the appellate proceedings before the Ld. CIT(A) and in accordance with well settled principles of natural justice, Ld. CIT(A) was required to confront the AO, if any Additional Evidences / Materials submitted or produced by assessee were going to be used by Ld. CIT(A) for granting relief to the assessee. If any Additional Evidences or Materials are gathered by the Ld. CIT(A) at the back of the AO, and used by the Ld. CIT(A) to grant relief to the Assessee, this is violative of the principle of natural justice. The Assessing Officer is, it goes without saying, an interested party in the appellate proceedings before Ld. CIT(A). The role of the Assessing Officer as an interested party in appellate proceedings before the Ld. CIT(A) is, moreover, specifically recognized in Sections 250 of I.T. Act, with particular reference to sub sections 1, 2 and 4 of Section 250 of I.T. Act. Further, this is also recognized in Rule 46A of I.T. Rules, with particular reference to Rule 46A(3) of I.T. Rules. For ease of reference, Section 250 of I.T. Act and Rule 46A of I.T. Rules are repro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings before the [Assessing Officer], except in the following circumstances, namely:- (a) whether 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)whether the appellant was prevented by sufficient cause from producing before the [Assessing Officer]any evidence which is relevant to any ground of appeal; or (d) whether 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment apart from appellate powers, there was no violation of Rule 46A committed by him ? 22 . As we have with the consent of the learned counsel, heard them on merits, we proceed to decide the aforesaid substantial questions of law. Since the CIT (A) himself refers to Rule 46A and has also admitted that the confirmation letters adduced by the assessee before him were technically fresh evidence, it is not possible to accept the plea of the learned counsel for the assessee that the CIT (A), in examining the confirmation letters, was exercising his independent powers of enquiry under sub-Section (4) of Section 250 of the Income tax Act. It is true that the CIT (A) as first appellate authority has conterminous powers over the sources of income constituting the subject matter of the assessment, except the power to tackle new sources of income not considered by the Assessing Officer, and can do what the Assessing Officer can do and can direct the Assessing Officer to do what he has failed to do, as held by the Supreme Court in the case of CIT v. Kanpur Coal Syndicate , [1964] 53 ITR 225 , but in this case, the CIT (A) did not exercise this right. This po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome-tax Officer. 23 . It is for the aforesaid reason that Rule 46A starts in a negative manner by saying that an appellant before the CIT (A) shall not be entitled to produce before him any evidence, whether oral or documentary, other than the evidence adduced by him before the assessing officer. After making such a general statement, which is in consonance with the principle stated in the above judgment, exceptions have been carved out that in certain circumstances it would be open to the CIT (A) to admit additional evidence. Therefore, additional evidence can be produced at the first appellate stage when conditions stipulate in the Rule 46A are satisfied and a finding is recorded. Rule 46 A reads:- Production of additional evidence before the [Deputy Commissioner (Appeals)] [and Commissioner (Appeals)]. 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 follow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... maintained between a case where the assessee invokes Rule 46A to adduce additional evidence before the CIT (A) and a case where the CIT (A), without being prompted by the assessee, while dealing with the appeal, considers it fit to cause or make a further enquiry by virtue of the powers vested in him under sub-Section (4) of Section 250. It is only when he exercises his statutory suo moto power under the above sub-section that the requirements of Rule 46A need not be followed. On the other hand, whenever the assessee who is in appeal before him invokes Rule 46A, it is incumbent upon the CIT (A) to comply with the requirements of the Rule strictly. 24 . In the present case, the CIT (A) has observed that the additional evidence should be admitted because the assessee was prevented by adducing them before the assessing officer. This observation takes care of clause (c) of sub-rule (1) of Rule 46A. The observation of the CIT (A) also takes care of sub-rule (2) under which he is required to record his reasons for admitting the additional evidence. Thus, the requirement of subrules (1) and (2) of Rule 46A have been complied with. However, sub-rule (3) which int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the AO on the admissibility of the fresh evidences was required to communicate the decision to admit the evidence to the AO and provide him a reasonable opportunity to rebut the same. In the absence of any such exercises the order is in violation of the Statutory Rules and is open to the challenge of being perverse. Support is drawn from the decision of Jurisdictional High Court in the case of CIT v. Manish Buildwell (P.) Ltd.[2012]204 Taxman106/[2011]16 taxmann.com 27 (Delhi). A perusal of the said decision shows that considering the non-fulfillment of the requirements set out in sub-Rule (3) of Rule 46A the Hon'ble Court was pleased to restore the issue back to the CIT(A) directing the said Authority to address the shortcomings. The Hon'ble Court took into consideration the off repeated argument in such cases by noting that it is true that the powers of CIT(A) as First Appellate Authority are co-terminous with that of the AO by drawing attention to the distinction that the powers of the CIT(A) as First Appellate Authority are coterminous power over the sources of income constituting the subject matter of the assessment, except the power to touch new sources of inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d was wholly unacceptable and may result in unacceptable and unjust consequences. The Hon'ble Court held that the procedural requirements mentioned in the Rule must be strictly complied with so that the Rule is meaningfully exercised and not exercised in a routine or cursory manner. The Tribunal in view thereof in the facts before the Court was faulted with for over-looking the requirements of sub-Rule (3) of Rule 46A and confusing it with sub-Rule (4) of Rule 46A. Addressing the rationale for the Rule the Hon'ble Court observed that the fundamental rule which is valid in all branches of law, including Income Tax Law is that the assessee should adduce the entire evidence in his possession at the earliest point of time. This ensures full, fair and detailed enquiry and verification. Referring to the decision in Keshav Mills Co. Ltd. v. CIT [1965] 56 ITR 365 (SC), 7-Judge Bench judgement of the Supreme Court, it was observed that the Court held that Proceedings taken for the recovery of tax under the provisions of the Act are naturally intended to be over without unnecessary delay, and so, it is the duty of the parties, both the department and the assessee, to lead all th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT (A) it was held would also take care of sub-rule (2) under which he is required to record his reasons for admitting the additional evidence. Thus, the requirement of sub-rules (1) and (2) of Rule 46A it was held had been complied with. However, the Hon'ble Court found that sub-rule (3) which interdicts the CIT (A) from taking into account any evidence produced for the first time before him unless the Assessing Officer has had a reasonable opportunity of examining the evidence and rebut the same, had not been complied with. The Court found that there was nothing in the order of the CIT (A) to show that the Assessing Officer was confronted with the confirmation letters received by the assessee from the customers who paid the amounts by cheques and asked for comments. Thus, the end result the Hon'ble Court held was that additional evidence were admitted and accepted as genuine without the Assessing Officer furnishing his comments and without verification. In these circumstances the Court held:- Since this is an indispensable requirement, we are of the view that the Tribunal ought to have restored the matter to the CIT (A) with the direction to him to compl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to pass Assessment Order afresh. In this context, we have noted with concern that the assessee had failed to avail of six opportunities spanning over a period of eight months during the assessment proceedings. Thus, we are of the view that opportunities provided by the AO during assessment proceedings were reasonable, and despite that, the assessee had failed to avail of the opportunities. We are also mindful that statutory provisions U/s 153(1) of I.T. Act prescribe tight time-line for completion of assessment proceedings and a strict limitation period. The AO is required to complete the assessment after necessary inquiries, investigations and scrutiny, within this strict limitation period. Having regard to constraints of limitation period in completion of assessment proceedings, one cannot have unreasonable expectations for opportunity that can be provided by the Assessing Officer. When the assessee failed to avail of reasonable opportunities provided by the AO during assessment proceedings, the assessee cannot claim as a matter of right, to go back to the AO on the setting aside of the order of the Ld. CIT(A) thereby seeking to avail of more opportunity from the Assessing Office ..... X X X X Extracts X X X X X X X X Extracts X X X X
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