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2015 (8) TMI 873 - ITAT KOLKATA

2015 (8) TMI 873 - ITAT KOLKATA - TMI - Disallowance u/s 40(a)ia) - non deduction of tds - CIT(A) deleted addition accepting additional evidence - Held that:- CIT(Appeals) ís order, there is no mention of remand report, though in the order sheet there is speci fic mention of the same. Therefore, in any view of the matter, ld. CIT(Appeals) has considered the additional evidence without considering Assessing Officerís comments. Under such circumstances, we are of the opinion that the matter should .....

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d. Commissioner of Income Tax (Appeal s)-I, Kolkata dated 20.08.2010 for the assessment year 2006-07 by taking the following effective grounds of appeal:- 1. That in the facts and the circumstances of the case, Ld. CIT(AI erred in deleting the addition of ₹ 44,15,806/- made u/s.40(a)ia) of the Act for failure of the assessee to prov e deduction of TDS on aforesaid payments in assessment proceedings and by accepting fresh evidence at the appellate stage by violating the provision of Rule 46 .....

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or period. 4. That in the facts and the circumstances of the case, the Ld.CIT(A) erred in deleting the addition of ₹ 16,85,845/- under the head general charges being the expenses related to prior period. 5. That in the facts and the circumstances of the case, Ld. CIT(A) erred in deleting the addition of ₹ 2,81,370/- under the head Sundry Balance Written Off by accepting fresh evidence at the appellate stage by violating the provision of Rule 46A of the I.T. Rul es, 1962. 6. That in t .....

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the business of manufacturing of Railway Tracks and component s. It filed its return of income declaring total loss of ₹ 38,97,476/-. The assessment was completed at a total income of ₹ 1,61,03,215/- after making the following additions:- U/s. 40(a)(ia) as discussed in order Rs.44,15,806/- Claim of provision as discussed in order Rs.22,14,559/- Unrelated prior period expenses as discussed Rs.72,34,464/- Unrelated prior period expenses as discussed Rs.35,37,000/- Disallowance of inter .....

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, the Department is in appeal before the Tribunal. 4. Ld. D.R. at the time of hearing submitted that the ld. CIT(Appeal s) allowed the assessee s various grounds by accepting additional evidences in violation of Rule 46A and without providing opportunity to the Assessing Officer. 5. Ld. counsel for the assessee submitted that the ld. CIT(Appeals) had called for a remand report from the Assessing Officer but even after a lapse of nine months the Assessing officer did not offer his comments on the .....

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sel for the assessee has filed before us a letter dated 02.12.2009 addressed to DCIT, Circle-3, Kolkata along with the copy of order-sheet of the proceeding before the ld. CIT(Appeals). With reference to these detail s, ld. counsel for the assessee pointed out that the letter from the ld. CIT(Appeals) was duly received in the Office of DCIT, Ci rcle-3 and there is specific noting in the order- sheet on 02.12.2009 which reads as under:- 02.12.2009 : Shri D.S. Saharia, FCA and Shri M.A. Asgar, LL. .....

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etter might not have reached the Assessing Officer and, therefore, the matter should be restored to the file of CIT(Appeals) for providing opportunity to Assessing Officer. 7. We have considered the submissions of both the parties and have perused the records of the case. From the submissions made by both the part ies, it is evident that the ld. CIT(Appeal s) had called for a remand report on 02.12.2009, but the remand report was not submitted by the Assessing Officer. In this connect ion, It is .....

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s and in the circumstances of the case and on a proper interpretation of Rule 46A of the Income Tax Rules, 1962, the Tribunal was right in law in taking a decision on the merits of the addition made under Section 68 without affording an opportunity to the assessing officer of being heard as envisaged in sub-Rule (3) of Rule 46A? 2. Whether on the facts and in the circumstances of the case the Tribunal was right in law in holding that since the CIT (A) possesses coterminus powers over the assessm .....

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ing 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 .....

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m customers by way of cheques. Rule 46A is a provision in the Income Tax Rules, 1962 which is invoked, on the other hand, by the assessee who is in an appeal before the CIT (A). Once the assessee invokes Rule 46A and prays for admission of additional evidence before the CIT (A), then the procedure prescribed in the said rule has to be scrupulously followed. The fact that sub-Section (4) of Section 250 confers powers on the CIT (A) to conduct an enquiry as he thinks fit, while disposing of the ap .....

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irement of recording reasons for admitting the additional evidence, the requirement of examining whether the conditions for admitting the additional evidence are satisfied, the requirement that the assessing officer should be allowed a reasonable opportunity of examining the evidence etc. can be thrown to the winds, a position which is wholly unacceptable and may result in unacceptable and unjust consequences. The fundamental rule which is valid in all branches of law, including Income Tax Law, .....

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s, both the department and the assessee, to lead all their evidence at the stage when the matter is in charge of the Income-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 st .....

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he [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 t .....

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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 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 produce any evidence or document or any witness in rebuttal of the additi .....

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on (1) of section 251 or the imposition of penalty under section 271.] We are highlighting these aspects only to press home the point that the conditions prescribed in Rule 46A must be shown to exist before additional evidence is admitted and every procedural requirement mentioned in the Rule has to be strictly complied with so that the Rule is meaningfully exercised and not exercised in a routine or cursory manner. A distinction should be recognized and maintained between a case where the asses .....

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efore 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 addi .....

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y the assessee from the customers who paid the amounts by cheques and asked for comments. Thus, the end result has been that additional evidence was admitted and accepted as genuine without the Assessing Officer furnishing his comments and without verification. 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 comply with sub-rule (3) of Rule 46A. In our opinion and with respect, the erro .....

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-à-vis Section 250(4). Its view that since in any case the CIT (A), by virtue of his conterminous powers over the assessment order, was empowered to call for any document or make any further enquiry as he thinks fit, there was no violation of Rule 46A is erroneous. The Tribunal appears to have not appreciated the distinction between the two provisions. If the view of the Tribunal is accepted, it would make Rule 46A otiose and it would open up the possibility of the assessees contending th .....

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