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TMI Blog2013 (9) TMI 1286X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee regarding the booking amount received from 24 farmers without examining the fact whether any of the farmers finally brought the flats/plots from Prithvi Builders; (ii)By holding that there is no need to give any copies of the statement of the 24 farmers to the assessing officer particularly where the statement were recorded by the CIT (A) himself without confirming then to the AO? (II) Whether the Appellate Tribunal is right in law and on facts in confirming the order passed by CIT (Appeals), who had deleted the additions relying upon the statements recorded by him, without giving an opportunity to the Assessing Officer as mandated under Rule 46A of the Income Tax Rules, 1962? (III) Whether the Appellate Tribunal is right in law and on facts in confirming the deletion of addition of ₹ 56 lacs made in respect of unexplained capital of an amount of ₹ 1,25,94,803/- made on account of peak credits? 3.00. As for the reasons stated hereinafter, the matter is to be remanded to the CIT(A) as there is violation of Rule 46A of the Income Tax Rules, 1962, we are not entering into the merits of other substantial question of law. 4.00. Facts leading to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts of the investors recorded by the Inspectors, the investors have confirmed the fact of making investment in the project of M/s.Prithvi Builders through the assessee. The learned CIT(A) also observed that the statements of various investors recorded by the Inspectors substantiate the submission made by the assessee and therefore, he found the same to be correct. Consequently, the learned CIT(A) by the order dtd. 18/10/2002 has allowed the said appeal and deleted addition ₹ 1,93,94,403/- made by the the AO while assessing the block assessment year. 4.03. Feeling aggrieved by and dissatisfied with the order passed by the CIT(A) dtd. 18/10/2002 in allowing the appeal preferred by the assessee and deleting the addition made by the AO, the revenue preferred appeal before the ITAT. It appears that there was delay of 2 days in preferring appeal and for that the revenue submitted an application for condonation of delay which came to be allowed and the delay came to be condoned by the learned tribunal. During the appeal before the tribunal, the revenue raised additional ground for violation of Rule 46A of the Income Tax Rules, 1962 by the CIT(A) and the requested to permit to rai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) and relying upon the statements of all those 24 investors recorded by the inspectors, CIT(A) has deleted addition of ₹ 1,93,94,403/- made by the AO by observing that in the statements of the investors recorded by the Inspectors the investors have confirmed the fact of making investment in the project of M/s.Prithvi Builders through the assessee and the said statements substantiate the submission made by the assessee. It is an admitted position that the CIT(A) has not given any opportunity to the AO to cross-examine those witnesses / investors whose statements came to be recorded during the inquiry ordered by the CIT(A) held during the appellate proceedings and the CIT(A) has relied upon the statements of those 24 investors without giving any opportunity to the AO to cross-examine them. 5.01. It is required to be noted that though before the learned Tribunal, the revenue submitted application requesting to permit the revenue to raise additional ground of violation of Rule 46A of the Income Tax Rules, 1962, the learned tribunal by order dtd. 7/2/2012 did not permit the revenue to raise the aforesaid ground by observing that as per Sub Rule (4) of Rule 46A, CIT(A) is w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the CIT(A). Rule 46A of the Rules reads as under : 46A. Production of additional evidence before the Deputy Commissioner (Appeals) and Commissioner (Appeals) : (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 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 adduce evidence relevant to any ground of appeal. (2) No evidence shall be admitted under sub-rule (1) unless the Deputy Commissioner (Appeals) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rst time before the CIT(A) during the pendency of the appeal and while holding inquiry by the CIT(A) in exercise of the power under section 250(4) of the Act. As stated above, the learned CIT(A) has relied upon the statements of those 24 investors recorded by the Inspectors recorded during the pendency of the appeal and while holding inquiry in exercise of powers under section 250(4) of the Act and has deleted addition of ₹ 1,93,94,403/- made by the AO, without giving any opportunity of being heard to the AO to cross-examine those 24 investors and therefore, the same is in violation of Rule 46A of the Income Tax Rules, 1962, and therefore, the order passed by the CIT(A) cannot be sustained and therefore, the learned tribunal has materially erred in dismissing the appeal preferred by the revenue and confirming the order passed by the CIT(A) and not permitting the revenue to raise additional ground of violation of Rule 46A. 7.00. In view of the above and for the reasons stated above and without further entering into the merits of the case and solely on the ground that the order passed by the CIT(A) is in breach of violation of Rule 46A of the Income Tax Rules, 1962, the orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8BC, the total income of the respondent-assessee was determined at ₹ 1,93,94,403/-. 10.02. The respondent-assessee preferred an appeal before the Commissioner of Income-tax (Appeals) [hereinafter referred to as the CIT(Appeals) ] raising various grounds challenging the additions made by the Assessing Officer. 10.03. The CIT (Appeals) noted that the grounds of appeal Nos.9 to 14 were considered together in view of similarity of nature of additions. In search and seizure action under section 132 of the Act, the computerised data of the unaccounted account of the said firm were found and seized. They were labelled as TEST data in the name of the respondent-assessee and his family members. The details of accounts in the name of the respondent-assessee and his family members were submitted by the respondent-assessee to the Assessing Officer. The respondent-assessee also submitted that various debit and credit entries appearing in the accounts submitted by him were from the premises of M/s.Pruthvi Builders Ltd.. Qua the transaction of the respondent-assessee with M/s.Pruthvi Builders Ltd., when he was directed to prove the source of such credit entries appearing in the above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... challenged by the Revenue before the Tribunal. The Revenue vehemently submitted before the Tribunal that no opportunity was given to the Assessing Officer while accepting the evidence collected by the CIT (Appeals) itself under section 250(4) of the Act, which was in clear violation of principles embodied in Rule 46A of the Rules. 10.06. It was argued by the other side before the Tribunal that it was incidental that the inquiry conducted by the CIT (Appeals) supported the case of the respondent-assessee and not the Revenue. However, there would be no requirement under the law that the First Appellate Authority should invariably permit the Assessing Officer an opportunity every time when the additional evidence, not otherwise adduced before the Assessing Officer, came on record at the instance of the First Appellate Authority, even if the same is on its own motion. 10.07. The Tribunal confirmed the deletion of additions of ₹ 1,93,94,403/- made by the Assessing Officer by not sustaining additional ground of violation of Rule 46A of the Rules. 10.08. Aggrieved by concurrent findings of the CIT (Appeals) and the Tribunal, the Revenue has approached this Court challenging ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner of Income-tax U.P. v. Kanpur Coal Syndicate, reported in (1964) 53 ITR 225 and (ii) the decision rendered by the Rajasthan High Court in the case of Silver Art Palace v. CIT, (1994) 206 ITR 501 (Raj.). The Apex Court in the case of Kanpur Coal (supra) has held that the Appellate Authority can exercise the powers which the Assessing Officer is empowered to exercise. In the case of Silver Art Palace (supra), the Rajasthan High Court has held that the Appellate Authority has powers during the process of appeal under section 250(4) of the Act to make such further inquiry as he deems fit or direct the Assessing Officer to so do it. What has aggrieved the Revenue is non-availment of due opportunity while permitting such additional material which became determinative in effecting deletion of additions made by the Assessing Officer. 13.00. Upon thus hearing both the sides and considering the orders of the revenue authorities, before adverting to the facts of the present case, it can be said at the outset that the powers of Commissioner during the pendency of appeal to inquire or direct the inquiry and adducing evidence, are not under challenge. It would be prof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r production of any additional evidence, oral or documentary, before the Deputy Commissioner (Appeals) and Commissioner (Appeals). This Rule provides for two modes for adducement of additional evidence at the First Appellate stage, either at the instance of the appellant under sub-rules (1) to (3) or at the instance of Appellate Authority under sub-rule (4) of Rule 46A of the Rules. As far as discretion to be exercised by the Commissioner at the instance of appellant is concerned, the Rule explicitly provides for affording an opportunity, however, under sub-rule (4) no such express provision is found. The appellant, except in the circumstances mentioned in sub-rule (1), shall not be entitled to produce oral or documentary evidence before the Deputy Commissioner (Appeals) and Commissioner (Appeals), : (a) where the Assessing Officer ought to have refused to admit the evidence; or (b) where the appellant should have been prevented by sufficient cause from producing the evidence which otherwise he was called upon by the Assessing Officer; or (c) where the appellant would have been prevented by sufficient cause from producing before the Assessing Officer any evidence which is relevant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ercised, it will not be difficult to hold that the reasonable opportunity of hearing to the parties, before the fresh evidence is admitted, requires to be afforded. The Commissioner (Appeals) would have ample power to call for any additional evidence, oral or documentary, if it considers such production necessary in the interest of justice for disposing of the appeal or for any other substantial cause. It goes without saying that while exercising such powers of admission of the additional evidence, the powers are required to be exercised within the limits imposed by the Rule and both sides are required to be afforded due and reasonable opportunity in respect of such evidences. 13.05. Even in absence of any explicit provision, when suo motu powers are exercised by the Deputy Commissioner (Appeals) or Commissioner (Appeals), as the case may be, for meeting the ends of justice as also for fair-play while adducing the additional evidence in the appeal in exercise of powers under sub-rule (4) of Rule 46A, the opportunity is required to be given to both the sides to test the evidence or to counter the effect of the evidence in rebuttal or otherwise. 13.06. It needs to be remembered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ortunity thus is must before the same is taken into account. 13.08. Even at the cost of reiteration, it is being stated that the opportunity of hearing is to be read as interwoven while exercising powers under sub-rule (4) of Rule 46A of the Rules and, therefore, the Tribunal surely committed an error in not allowing the opportunity of hearing to the Revenue, despite its fervent request for affording opportunity in respect of additional evidence. 13.09. At this stage, the learned advocate Mr.R.K. Patel appearing for the respondent-assessee has urged that such opportunity should also be afforded to the respondentassessee, who also had no say in the entire matter and it is a sheer coincidence that such evidence resulted into favouring the cause of the respondent-assessee. He also further urged that the appeal relates to the block period of 1988-1999 and the Tribunal has decided the matter after a decade nearly. Such request from the Revenue also has come belatedly and, therefore, after much lapse of time, when this Court is remanding the matter to the Tribunal, the possibility cannot be ruled out that all the witnesses who were examined by the Commissioner (Appeals) may not be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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