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TMI Blog2012 (10) TMI 537X X X X Extracts X X X X X X X X Extracts X X X X ..... ions during the assessment proceedings and case was decided on merits and material available on record. 3 The appellant craves to be allowed to add any fresh grounds of appeal and/or delete or amend any of the grounds of appeal." 2. Facts, in brief, as per relevant orders are that e-return declaring income of Rs.51,71,338/- filed on 28.09.2008 by the assessee, engaged in exports of carpets, handicrafts etc., was revised on 28.3.2009,declaing income of Rs.1,81,76,221/-. Thereafter, the return selected for scrutiny with the service of a notice u/s 143(2) of the Income Tax Act, 1961 (hereinafter referred to as the 'Act') issued on 18.08.2009. During the course of assessment proceedings, the Assessing Officer [AO in short] asked the assessee to submit complete details, name and address of sundry creditors exceeding Rs.80,000/- each along with their confirmations as also the amount outstanding on 31.03.2008. On the basis of details obtained from the assessee, the AO issued a notice u/s 133(6) of the Act to 32 parties, of which 5 notices were returned back unserved with the remarks 'incomplete' address or 'left without address'. In 22 cases, confirmations were received while i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... confirmations of the 23 persons, in terms of Rule 46A of the Income Tax Rules, 1962 on the ground that the confirmations could not be filed due to shortage of time and non allowability of opportunity by the AO against the principles of natural justice. The ld. CIT(A) admitted additional evidence under rule 46A(1)(b) of the IT Rules 1962 while mentioning that the assessee was prevented by sufficient cause from filing the confirmations of all the sundry creditors exceeding Rs.80,000/- each and deleted the addition, after having a remand report of the AO and comments of the assessee thereon,holding as under:- "As discussed above, the Assessing Officer made an addition of Rs.45,76,244/- to the income of the appellant on account of 23 sundry creditors exceeding Rs. 80,000, outstanding as on 31.03.2008, for no production of their confirmations by the appellant before the finalization of the assessment proceedings. On going through the submissions of the appellant as well as the copies of correspondence between the appellant and the AO, submitted before me, it is observed that initially the Assessing Officer asked the appellant to furnish confirmations of sundry creditors 'above practica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er dated 20.12.2010. Copy of the same is enclosed herewith vide annexure no. "L" pages no. 126 to 127. Query:-(b) In several accounts in the ledger of sundry creditors, only payments have been made against opening balance and no purchases have been made during the year. Reply:- If amount is payable against the opening balance B/f, legally payment was to be made, further purchase not compulsory for making payment and nothing wrong is there. Goods used to be purchased as per the requirements, considering the demand of goods with supplier, quality, etc. Same Query was raised during the Assessment proceedings and replied vide Para 3(B) letter dated 20.12.2010. Copy enclosed herewith vide annexure no. "L" page no. 127. Query:-(c) Notices u/s 133(6) issued to various parties on specific addresses as provided by the assessee. However, in two cases, viz., M/s Chirag Enterprises, Jaipur, the notice came back with remark 'incomplete address' and M/s Libas Impex, New Delhi, the notice has been returned with remarks "No such firm'. The assessee, in response to Show Cause notice in this respect, expressed its inability to produce the persons for cross-examination. Reply:- Respected Madam, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time to enable us to file the remaining confirmations. It will not be out of place to mention that creditors belong to the weaver community, small time traders, belong to the cottage industries sector and from unorganized sector. Belongs to Kashmir (J & K) and this is the winter weather, temperature is very low and usually in those days used to go for business purposes outside of Kashmir, their families also shift to other convenient areas. Hence, requested to waive the requirement of filing the remaining confirmations of accounts. Otherwise they are bona fide creditors." Para 1 of letter dated 23.12.2010 Copy enclosed vide annexure no. "M" page no.128 to 129. B). "On the last date of hearing further asked to furnish addresses of the all creditors and filing of confirmations of all the Sundry Creditors exceeding Rs. 80,000/-. Most of the creditors are from the weaver community, small time traders belonging to the cottage industries sector and from unorganized sector of mini suppliers of trading goods. The creditors are ranging from mere Rs.2,000.00 or even below the same. Total Creditors consist of approximately 550 creditors. Your honours have reduced the figure to Rs.80,000.00. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion cannot be made. 2). No order can be passed against the principle of the natural law of justice:- ld. A.O. have relied the case of "Sumati Dayal V/s CIT(SC) 214 ITR 801". The ratio given in the above case, are mentioned below:- "The word 'may" has been used in all of the sections, thereby given the discretion to the Assessing Officer to treated a particular sum as income or not. Therefore, even if the assessee does not provide an explanation, or provides one i.e unsatisfactory, it is not necessary in all cases for the amount to be treated as the assessee's taxable income". Kanga Palkhiwala and Vyas, 9th Edition, Page no-1266. In view of the above, your honor is requested o kindly accept the additional evidence and delete the addition made & oblige." 4.3 After careful consideration of the discussion in the assessment order, the submission of the appellant along with the additional evidences, the remand report of the A.O and the rejoinder of the appellant to the same, I am of the view that the appellant was prevented by sufficient cause from producing the confirmations of the 23 sundry creditors above Rs. 80,000/- before the Assessing Officer. For the reasons discussed in par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be said to be aggrieved with the order of the AO and, therefore, the ld. CIT(A) was not justified in admitting the additional evidence without allowing any opportunity to the AO ,even when sufficient opportunity had been allowed during the assessment proceedings to file the confirmations. In any case, since the AO did not have occasion to examine the genuineness of the confirmations, the matter should be restored back. 5. On the other hand, the ld. AR on behalf of the assessee relied upon the findings of the ld. CIT(A).To a query by the Bench as to what prompted the assessee to file appeal when the assessee itself surrendered the amount to tax and how could the assessee be aggrieved, the ld. AR did not reply. The ld. AR merely added that the AO did not provide sufficient opportunity to submit the confirmations. After much discussion, to a further query by the Bench, the ld. AR replied that the assessee has no objection if the matter is restored back , as contended by the ld. DR. 6.. We have heard both the parties and gone through the facts of the case. Indisputably, the assessee surrendered an amount of Rs. 45,76,244/- in relation to 23 creditors ,when the AO asked the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... circumstances, we are of the opinion that the ld. CIT(A) admitted additional evidence submitted by the assessee in its application under rule 46A of the IT Rules,1962,without following the procedure prescribed therein. As is apparent from the findings in the assessment order, the assessee was given sufficient opportunity by the AO to submit the confirmations. The ld. CIT(A) without taking cognizance of the fact that the assessee itself surrendered the amount to tax, proceeded to admit additional evidence, without allowing any opportunity to the AO.. In this situation, how the assessee could be said to be aggrieved with the findings of the AO, is not evident from the impugned order. The assessee in its application submitted that the AO refused to grant time to enable it to submit the balance confirmations. The ld. CIT(A) without ascertaining the veracity of this statement admitted additional evidence. Before admitting the additional evidence, the ld. CIT (A) did not allow any opportunity to the AO or confronted him with this statement of the assessee. In nutshell, the ld. CIT(A) deleted the addition without following the procedure laid down under Rule 46A of the IT Rules,1962 . The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sub section (1) of section 251 or the imposition of penalty under section 271.." 6.1 It is evident from the aforesaid provisions that the ld. CIT(A) can take into account any evidence produced under sub-r. (1)(b) & (c) of Rule 46A of the IT Rules, 1962 if the assessee was prevented by sufficient cause . In Haji Lal Mohd. Biri Works' case [2005] 275 ITR 496 (All), by making an elaborate discussion on rule 46A of the Rules in paragraph 10 at page 500 and 501, it was held that under rule 46A the authority is not permitted to act whimsically while exercising the jurisdiction under it .In the case under consideration, the assessee placed before the ld. CIT(A), certain additional evidence and admittedly, the said documents were not submitted before the AO. The powers of the CIT(A) in terms of rule 46A to admit fresh evidence, entail an element of discretion which is required to be exercised in a judicious manner. The powers of the CIT(A) to admit additional evidence are not only in situations where the evidence could not be produced before lower authorities owing to lack of adequate opportunity but also in situations where the fresh evidence would enable the CIT(A) to dispose of the app ..... 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