2019 (11) TMI 1028 - AT - Income Tax

Powers of the Commissioner (Appeals) - Deletion of accommodation entries without indepth inquiry - addition u/s 68 - CIT(A) admitted additional evidences and went on to delete the aforesaid addition on the basis of additional evidences so admitted - HELD THAT:- CIT(A) was of the view that further inquiry / investigation / verification in these aspects were desirable but, according to the Ld. CIT(A), the AO failed to do this. CIT(A) even directed the AO to make further verification. Similarly, in paragraph 9.3.1. of the aforesaid impugned appellate order dated 27.03.2008, he commented that the AO would have to issue letters u/s 133(6) and if required summons u/s 131. He went on to state, that the AO can still make indepth inquiry, in case he finds it worthwhile and that the AO would have to take pains to issue notices u/s 131, and take further action.

Once CIT(A) taken the view that further inquiries / investigation / verification are necessary, it is incumbent upon the Ld. CIT(A) to have the necessary inquiries / investigation / verification carried out during the appellate proceedings before him either by himself or by remand to the AO. A perusal of Section 251(1)(a) shows that in an appeal against an order of assessment, Ld. CIT(A) may confirm, reduce, enhance or annul, the assessment. However, w.e.f. 1.6.2001, as a result of amendment to Income Tax Act, the power of Ld. CIT(A) to set aside an order of assessment has been withdrawn. Therefore, any necessary inquiry / investigation or verification is required to be carried out during pendency of the appellate proceedings before Ld. CIT(A).

Perusal of Section 250(4) shows that Ld. CIT(A) has powers, before disposing off any appeal, to make such further inquiry as he thinks fit, or he may direct the AO to make further inquiry and report the result of the same to the Ld. CIT(A). It is well settled that powers of CIT(A) are coterminus with powers of the AO.

We may refer to the order of Apex Court decision in CIT vs. Kanpur Coal Syndicate [1964 (4) TMI 18 - SUPREME COURT] in which it was held that AAC has plenary powers in disposing off an appeal; that the scope of his power is co-terminus with that of the ITO, and that he can do what the ITO can do and can also direct him to do what he failed to do.

Considering the statutory position as discussed, that it was gross error, on the part of the Ld. CIT(A), having himself been of the view that further inquiries / investigation / verification; to not ensure that such further inquiries / investigation / verification were done during the pendency of appellate proceedings before the Ld. CIT(A); and in accordance with Section 250(4)

We set aside the order of the CIT(A) in respect of aforesaid additions (subject matter of ground 1 of appeal) and the aforesaid addition (subject matter of ground 2 of this appeal); and direct the CIT(A) to pass fresh order on these issues, after further inquiries, in accordance with Section 250(4) of I.T. Act.

CIT(A) has admitted additional evidences - HELD THAT:- Provisions regarding admission of additional evidences by the Ld. CIT(A) are contained in Rule 46A of Income Tax Rules, 1962 . CIT(A), in accordance with Rule 46A(2) of I.T. Rule, was duty bound to record in writing the reasons for admission of additional evidences. From perusal of records, we find that the Ld. CIT(A) has failed to record any reasons for admission of additional evidences.

In accordance with Rule 46A(3) of I.T. Rules, the Ld. CIT(A) was duty bound to allow a reasonable opportunity to the Assessing Officer to examine the evidence or documents or to cross-examine the witness produced by the appellant or to produce any evidence or document or any witness in rebuttle of the additional evidence produced by the appellant. However, from perusal of records, we find that no such opportunity was provided by the Ld. CIT(A) to the Assessing Officer. Order passed by the Ld. CIT(A), as far as the aforesaid addition of ₹ 1,18,63,549/- (subject matter to ground 3 of appeal) is in gross violation of the requirements prescribed under Rule 46A(2) and 46A(3) of I.T. Rules. Therefore, we set aside the order of the Ld. CIT(A) on the issue of aforesaid addition of ₹ 1,18,63,549/- and direct him to pass a fresh order on this issue while ensuring full adherence to Rule 46A of I.T. Rules. Ground no. 3 of appeal is disposed off accordingly, and is treated as partly allowed for statistical purposes.