TMI Blog2000 (3) TMI 179X X X X Extracts X X X X X X X X Extracts X X X X ..... ss to the Government of Assam through M/s. Assam Tea Corporation on account of purchase of green leaves from Bholaguri T.E. The Assessing Officer had stated that the assessee did not pay the amount till the filing of the return of income and as such it hit the provisions of section 43B of the Act. It was also stated by the Assessing Officer that the assessee also could not be able to produce any evidence to show that the amount of assessee had been paid. The assessee filed appeal before the first appellate authority against the aforesaid disallowance. 4. During the course of hearing of the appeal before the first appellate authority the assessee filed a copy of the agreement entered upon with the M/s. Assam Tea Corporation Ltd. for green leaves purchase and also a copy of the letter from M/s. Assam Tea Corporation Ltd. for payment of additional bill in respect of cess and submitted that the cess levied was payable by the seller. The assessee argued before the first appellate authority that invoking of the provisions of section 43B of the Act on the purchaser was unjustified and against the principle of law. The learned CIT(A) on the basis of the evidences and materials filed befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he basis of new evidences without giving opportunity to the Assessing Officer in violation of rule 46A of the Income-tax Rules, 1962. On the other hand, the learned authorised representative of the assessee, Shri A. Bhattacharjee, supported the order of the CIT(A) and submitted that the assessee did not furnish copies of the documents before the Assessing Officer, as the same were not asked for by him. 8. We have considered the submissions of the learned representatives and the orders of the authorities below. On perusal of the order of the CIT(A) we agree with the learned Departmental Representative that the CIT(A) has deleted the addition of Rs.2,66,682 on being satisfied that the liability to pay cess to the State Government was the liability of the seller as per the agreement entered into between the assessee and M/s. Assam Tea Corporation Ltd. and the clarification given by M/s. Assam Tea Corporation Ltd. by its letter dated 6-11-1992 admittedly the copies of the aforesaid papers were not the two produced by the assessee to the Assessing Officer. Similarly we also observe from the order of the CIT(A) that the assessee furnished the copy of the resolution dated 10-5-1990 appr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 43B of the Act. The CIT(A) agreed with the contention of the assessee and held that the aforesaid two payments of Rs.31,886 and Rs.43,593 are not hit by section 43B of the Act and allowed the same. Hence the Department is in appeal before the Tribunal. 14. At the time of hearing of the appeal the Departmental Representative, Shri S.K Malakar, submitted that as per the Employees Provident Fund Scheme, 1952, the amount is to be paid within 15 days of the close of every month and the assessee had not paid the amount within due date. The order of Assessing Officer to disallow the amount of contribution as per section 43B of the Act is as per law. On the other hand, the teamed authorised representative of the assessee, Shri A. Bhattacharjee, justified the impugned order and relying on the annual report (1984-85) on the working of Assam Tea Plantation Provident Fund and Pension Fund and Deposit Linked Insurance Fund Scheme, submitted that the due date as per section 43B to deposit the amount within one month or if paid by cheque another 15 days i.e. within 45 days and as such the assessee had paid the money within due date. 15. We have considered the submissions of the learned repr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity to the Assessing Officer. 4. In my view the evidence that have been relied upon by the CIT(A) were before the Assessing Officer as well as in much on both the grounds the Department is in appeal before us, the Assessing Officer has himself accepted certain basis which according to him were not satisfactory and hence disallowance were framed. (a) In the case of cess payable to the Government on the basis of procurement of green leaves through Assam Tea Corporation Ltd., the learned Assessing Officer has made detailed discussion with respect to establishing the fact that Cess collected from the assessee-company (in appeal before us) was actually to be paid by Assam Tea Corporation. Having established that the said sum remaining to the credit of Assam Tea Corporation, he infact allowed Rs.68,480 being the sale of tea from Assam Tea Corporation, which is claimed to be adjusted against the amounts payable by it. Therefrom, he concluded that the balance amount of cess payable came to Rs.2,66,682 which he disallowed under section 43B. This indicates that the amount of cess remaining unpaid was with Assam Tea Corporation and not the assessee respondent before us. The ld. CIT(A) app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he learned Assessing Officer added difference in the rate of interest changed and paid. The Department has raised the ground of having accepted the Board Resolution for allowing the contention of the assessee respondent in violation of Rule 46A by the CIT(A). In my view the Assessing Officer allowed interest @ 6 per cent and sought to add the difference of 15 per cent on amount of undercharge of interest. The acceptance of 6 per cent interest is the acceptance of having granted loan at lower rate of interest. What the Assessing Officer sought to add was the difference between the higher rate of interest the funds were borrowed and the lower rate of interest the assessee-company recovered from its directors. 5. There was no need of additional evidence as has been brought out by the Departmental Representative. The ld. CIT(A) simply recapitulated the reasons for the allowance thereof which could not have been brought out by a copy of the Board Resolution. Apart from this as part of requirement of the return, the Assessing Officer was equipped with the Director's report, the notes attached to the Balance Sheet, wherein such advances (debit balances of directors above Rs.1,000) have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ECTION 255(4) OF THE INCOME-TAX ACT, 1961 THIRD MEMBER ORDER 1. In this case because of the difference between the two Members the Hon'ble President, Income-tax Appellate Tribunal, was requested to appoint the Third Member for deciding the differences. The Hon'ble President was pleased to appoint me as the Third Member and, therefore, the matter was heard by me. The question referred to me is as under:-- "Whether in the facts and circumstances of the case the Judicial Member is right to hold that the first appellate authority admitted fresh evidence in violation of rule 46A of the Income-tax Rules, 1962, or the Accountant Member is right to hold that no violation of rule 46A has been made by the first appellate authority in deleting the disallowances made by the Assessing Officer?" 2. The question actually relates to provisions of section 250 and also section 251 of the Income-tax Act, 1961 (hereinafter referred to as "the Act") which relate to procedure in appeal as also the powers of the CIT(A) in the context of additional evidence. It will be necessary to consider first certain legal aspects in connection with the issue concerned. The proceedings before the CIT(A) a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 reason 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 evidence or document or to cross-examine the witness produced by the appellant, or (b) to prod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y is the assessee. The assessee purchased certain quantity of green leaves for which an amount was debited in the purchase and expenses account at the rate of Rs. 5.11 per kg. plus Rs. 0.50 in respect of the cess imposed by the Government of Assam as per Assam Taxation (specified lands) Rule, 1990. At the end of the year, out of this purchase certain amount of cess remained payable to M/s. Assam Tea Corporation Ltd. The Assessing Officer mentioned in his order as under:-- "On scrutiny of the accounts it is also seen that the cess payable to the Government of Assam through the M/s. Assam Tea Corporation was not paid till the filing of the return. As such it hits the provisions of section 43B of the Income-tax Act. However, in source of hearing it was pointed out that the assessee was to receive a sum of Rs.68,480 being sale of tea from M/s. Assam Tea Corporation, which is claimed to be adjusted against the amounts payable to it. As such by giving benefits to the adjustment of Rs.68,480 towards its liability, the balance amount of cess payable came to Rs.2,66,682 which was not paid during the year and upto the filing of the return as required undo section 43B of the Income-tax Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of the appellant." 6. In respect of the addition of Rs.60,000 it was explained by the assessee that the Board of Directors of the Company vide resolution dated 10-5-1990 had approved the temporary loan of Rs.1,00,000 each to four fulltime Directors of the company at the rate of 6% interest per annum and this loan was granted to the Directors to enable the construction of residential house for them and since the company was not paying any house rent the grant of small amount of loan to each Director was decided. Besides it was pointed out that this resolution was approved by the company's shareholders in an extraordinary general meeting and this arrangement benefited the company because otherwise the company would have to spend much more by way of house rent on the accommodation required to be hired. Thereafter the CIT(A) passed the following order:-- "9. I have given due consideration to the submissions put forward by the A/R. After going through the resolution dated 10-5-1990 of the Board of Directors duly approved by the shareholders of the appellant company and on the facts of the case, I agree that by way of advancing Rs.1,00,000 to each of four full-time Directors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer and hence the mistake. 11. With regard to the next point I am certainly of the view that the CIT(A) considered the additional evidence without giving opportunity to the Assessing Officer. I do not find a copy of the resolution dated 10-5-1990 on record of the Tribunal. Even before me at the time of hearing neither of the parties placed before me the copy of the said resolution. It would be worthwhile to consider in this context the explanation given in writing by the assessee vide latter dated 4th September, 1992, written to the DCIT (assessment) and the same reads as under:-- "The above loan was sanctioned to four Directors of the company by the Shareholders in 1985 for a special purpose with a subsidised rate of interest to tide over the Directors from their acute financial crisis. The Shareholders considered the proposal of granting the loan considering the sincere services rendered by the Directors and passed in an extraordinary general meeting held on 16-4-1985. During the year under assessment, this is only a carried forward figure and no fresh loan was granted to them." This explanation before the Assessing Officer is totally invariance with the expl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate authority and he restored the matter back to the file of the CIT(A) with the direction to redecide the issue afresh after giving the opportunity of being heard to both the Assessing Officer as well as to the assessee. But the learned Accountant Member was of the view that there was no violation of rule 46A. Therefore, the matter was restored to the President of the Incometax Appellate Tribunal, Mumbai, who accordingly appointed a Third Member, Shri P.J. Goradia, the then Vice-President of the Income-tax Appellate Tribunal, Calcutta, to decide the controversy. The Third Member vide his order dated 9-7-1999 discussed the issue at length and finally agreed with the observation made by the learned Judicial Member that the CIT(A) admitted additional evidence without giving opportunity to the Assessing Officer. He also made a request that the matter should go back to the Division Bench for passing proper order in accordance with the majority. Therefore, this matter has come before us. 2. In the instant case, now the majority decision (the learned Judicial Member and the Third Member) is that the CIT(A) has admitted the additional evidence without giving the opportunity to the Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X
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