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2015 (11) TMI 190 - KERALA HIGH COURT

2015 (11) TMI 190 - KERALA HIGH COURT - TMI - Assessment under Section 153A read with Section 144 - On the filing of the additional evidence before him, the Commissioner of Income Tax (Appeals) forwarded the paper books itself to the Assessing Officer and required the Assessing Officer to examine the new evidences/details/submissions of the assessee and to give a report - satisfaction of conditions laid down in Rule 46A of the Rules - Held that:- This is a case where the Commissioner (Appeals) h .....

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eafter, that the First Appellate Authority proceeded to adjudicate the appeal, duly taking into account the additional evidence produced by the appellant.

One of the contentions raised in these appeals that having admitted the additional evidence, the Commissioner (Appeals) should have remanded the case to the Assessing Officer for his consideration cannot be accepted in the light of sub rule 4, a reading of which shows that it was open to the Commissioner (Appeals) to dispose of the .....

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moned by the Commissioner (Appeals) and in cases where the documents produced are conclusive, the principles of natural justice are excluded. We are unable to enclose these finding of the Tribunal. As held by Delhi High Court in Commissioner of Income Tax v. United Towers (I,) P. Ltd. [2007 (4) TMI 177 - DELHI HIGH COURT] Rule 46A(4) of the Rules does not specifically exclude the principles of natural justice and, therefore, these principles are to be read into the Rules. Therefore, we disprove .....

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4, 129 & 136 of 2015, ANTONY DOMINIC AND SHAJI P. CHALY, JJ. For The Appellant : P.K.R. Menon, Sr. Counsel, GOI (Taxes) and Jose Joseph, SC For The Respondent : Joseph Kodianthara, (Sr.), M.V. Das, Smt. Lekshmi Swaminathan, Smt. Marian G.M. Tharakan, S. Jayakumar and V.S. Chandrasekharan, Advs. JUDGMENT Antony Dominic, J. The issues raised in these appeals are connected. Therefore, these appeals were heard together and are disposed of by this common judgment treating, with the consent of the .....

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rtners on 26.3.2008. During the course of the search, various incriminating documents were found and seized and statements of the partners were also recorded. Consequent to the search, notices under Section 153A of the Act were issued for the assessment years 2002-2003 to 2007-2008 and notice under Section 142(1) of the Act was issued for the assessment year 2008-2009. In response to the notice under Section 153A of the Act, the assessee filed his returns of income on 10.7.2009 and on 13.7.2009, .....

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paper books containing detailed written statements on various issues raised, cashflow statements filed before the Assessing Officer, replies filed in response to various notices issued by the Assessing Officer and the evidences/workings in support of various claims made in the appeals were also filed. 4. On the filing of the additional evidence before him, the Commissioner of Income Tax (Appeals) forwarded the paper books itself to the Assessing Officer and required the Assessing Officer to exam .....

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he assessee were verified. These are fresh evidences filed by the assessee before the Appellate Authority. None of them were filed during the course of assessment proceedings. Detailed investigations were made on the fresh evidences placed by the assessee on record. They are summarized as under: 21. AGRICULTURAL INCOME EARNED BY THE ASSESSEE: The Inspector attached to this Circle was deputed to inspect the various agricultural land holdings of the assessee and to verify the genuineness of the bi .....

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which 12 acres are paddy field. The agricultural income claimed by the assessee as per bills/vouchers produced as fresh evidences were verified with the original bills/vouchers with dealers and the genuineness was verified. I have verified the original bills/vouchers from the following dealers for the period from 2.4.2010 to 3.8.2010 and found genuine. Sl. No Name of trader/dealer Period From To 1 KPK Oil Mills 2.4.2010 15.6.2010 2 Kottayam Rubbers 28.4.2010 19.7.2010 3 Anna Coconut Products 1. .....

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before the appellate authority as fresh evidence. These were not produced at the time of assessment proceedings. 23. Investment in immovable properties: The investment in immovable property was ascertained on the basis of seized documents. For the AY 2007-08, the assessee had invested ₹ 7,15,887/- in immovable property for which he had shown only ₹ 85,687/- in cash flow statement. For the AY 2008-09, the assessee had invested ₹ 4,27,749/- in immovable property where as the cas .....

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cted on the ground that this is a fresh evidence. 25. Opening Balance in the cash flow statement. The opening cash balance of ₹ 25,000/- shown by the assessee in the cash flow statement can not be accepted on the ground that the cash flow statement is a fresh evidence filed before the CIT(A). He has not even produced the copy of his balance sheet for the financial year ended 2001-2002 relevant to the AY 2002-03 for verification. Hence, this can not be accepted as genuine. 26. In view of th .....

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ed Annexure B order, in which after dealing with each of the justification offered by the assessee, he concluded that: "Considering these circumstances, I am of the opinion that the appellant was prevented by reasonable and sufficient causes from furnishing various details/evidences at the assessment stage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Therefore, considering the totality of the facts and circumstances of the .....

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ls that were considered was with regard to the admission of fresh/new evidences filed by the assessee before the Commissioner of Income Tax (Appeals) without satisfying the conditions laid down in Rule 46A of the Rules. In paragraph 4 to 9 of its order, the Tribunal dealt with the above contention in the light of the provisions contained in Section 250 of the Income Tax Act and Rule 46A of the Rules. In conclusion, the Tribunal held that it did not find any merit in the contention urged by the R .....

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als were heard, the sole contention raised by the Senior Counsel for the Revenue was that the Commissioner of Income Tax (Appeals), ought not have admitted additional evidence that were produced by the assessee and that even if it was decided to admit the additional evidence, the Commissioner of Income Tax (Appeals) ought to have remanded the cases leaving to the Assessing Officer, to consider the additional evidence produced and to render his findings thereon. In support of this contention, lea .....

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r Rule 46A of the Rules were established by the assessee and, therefore, the First Appellate Authority was entitled to admit the documents in evidence. He also pointed out that before deciding to admit the additional documents and considering the same, the First Appellate Authority had complied with the principles of natural justice. Therefore, according to the learned counsel, no grounds have been made out for interference with the orders impugned. 11. We have considered the submissions made. I .....

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l. On production of these materials, admittedly, the First Appellate Authority forwarded the paper books to the Assessing Officer and required the Assessing Officer to examine the new evidences/details/submissions and to give his report. 12. It was in response to that letter of the First Appellate Authority that the Assessing Officer submitted Annexure C Remand Report. Reading of this Report shows that in paragraphs 1 to 19, the Assessing Officer has justified his conclusions in the assessment o .....

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the remaining issues are concerned, although each one of them were separately dealt with, all that he has stated is that the claim of the assessee may be rejected for the reason that the materials mentioned were not produced at the time of assessment. 13. It was considering this report submitted by the Assessing Officer that the First Appellate Authority passed Annexure B order. In this order, the First Appellate Authority considered the circumstances pleaded by the assessee and held that the a .....

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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 t 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 appellan .....

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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 additional evidence produced by the appellant. (4) Nothing contained i .....

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271.]" 15. Reading of this provision shows except on establishing the circumstances enumerated in clauses (a) to (d) under sub rule 1, an appellant shall not be entitled to produce the Commissioner (Appeals) any evidence whether oral or documentary. Sub rule 2 mandates that the Commissioner (Appeals) shall not admit any evidence, unless he records in writing the reasons for its admission. Once the documents are so admitted, sub rule 3 comes into operation, which further mandates that the Co .....

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ing Officer calling for his report. It was in response to the letter calling for remand report that the Assessing Officer submitted Annexure C report. 16. Therefore, this is a case where the Commissioner (Appeals) has allowed the Assessing Officer adequate opportunity as provided under sub rule 3 to examine the evidence produced by the appellant. In the remand report that he has furnished apart from requesting for its rejection, the Assessing Officer did not, either dispute the genuineness of th .....

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uld have remanded the case to the Assessing Officer for his consideration. In our view, this contention cannot be accepted in the light of sub rule 4, a reading of which shows that it was open to the Commissioner (Appeals) to dispose of the appeal by himself or even to remit the matter to the Assessing Officer. This power of the Appellate Authority is also evident from Section 250 of the Act, which reads thus: "250. Procedure in appeal: (1) The [Commissioner (Appeals)] shall fix a day and p .....

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he [Commissioner (Appeals)] may, before disposing of any appeal, make such further inquiry as he thinks fit, or may direct the [Assessing] Officer to make further inquiry and report the result of the same to the [Commissioner (Appeals)] (5) The [Commissioner (Appeals)] may, at the hearing of an appeal, allow the appellant to go into any ground of appeal not specified in the grounds of appeal, if the [Commissioner (Appeals)] is satisfied that the omission of that ground from the form of appeal wa .....

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l, the [Commissioner (Appeals)] shall communicate the order passed by him to the assessee and to the [Principal Chief Commissioner or] [Chief Commissioner or [Principal Commissioner or Commissioner]" 18. Reading of sub section 4 shows that the Commissioner (Appeals) may, before disposing of any appeal, make such further inquiry as he thinks fit, or may direct the Assessing Officer to make further inquiry and report the result of the same to the Commissioner (Appeals). From the above provisi .....

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emanded to the Assessing Officer. In our view, this judgment does not support the proposition canvassed by the learned Senior Counsel. This judgment was rendered by the Apex Court in the background of the Income Tax Act,1922 and Income Tax Rules, 1922. The facts of this case show that assessment was completed and appeal was filed by the assessee. The Appellate Authority, after issuing notice to the assessee, fixed the income of the assessee enhancing the tax liability, presumably relying on the .....

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ome Tax Officer for fresh consideration. Therefore, this judgment does not support the contention raised by the learned Senior Counsel for the Revenue. 20. Insofar as the Bombay High Court judgment in Smt.Prabhavati Shah v. CIT [1998] 231 ITR 1 (Bom.) is concerned that was a case where the provisions contained in Section 250 of the Act and Rule 46A of the Rules were dealt with. The relevant paragraphs of the judgment reads thus: "On a plain reading of rule 46A, it is clear that this rule is .....

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e to him. This position has been made clear by sub rule (4) which specifically provides that the restrictions placed on the production of additional evidence by the appellant would not affect the powers of the Appellate Assistant Commissioner to call for the production of any document or the examination of any witness to enable him to dispose of the appeal. Under sub-section (4) of section 250 of the Act, the Appellate Assistant Commissioner is empowered to make such further inquiry as he thinks .....

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Commissioner are much wider than the powers of an ordinary court of appeal. The scope of his powers is coterminous with that of the Income-tax Officer. He can do what the Income-tax Officer can do. He can also direct the Income tax Officer to do what he failed to do. The power conferred on the Appellate Assistant Commissioner under sub-section (4) of Section 250 being a quasi-judicial power, it is incumbent on him to exercise the same if the facts and circumstances justify. If the Appellate Assi .....

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of rule 46A appears to be to ensure that evidence is primarily led before the Income tax officer." 21. This judgment also does not lead to the conclusion that in every case where additional evidence are produced, the Appellate Authority is bound to remand the case to the Assessing Officer. 22. However, in paragraph 9 of the order passed by the Tribunal it has stated thus: "In the instant case the entire additional evidence has come on the record of the first appellate authority becaus .....

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ed supported the case of the assessee and not that of Revenue has no bearing on the jurisdiction and powers of the learned CIT(A). The learned CIT(A) has confronted the assessing officer with the evidence thus received and the material thus gathered and allow the assessing officer to have his say in the matter vide remand report dated 29.4.2013 and being done so this dispute have no merits. We do not see any requirement in law that the first appellate authority should invariably consult or confr .....

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ssee. In such cases sub rule (2) of rule 46A requires the first appellate authority to allow the assessing officer a further opportunity to rebut the fresh evidence filed by the assessee. Even that requirement cannot be said to be a rule of universal application. If the additional evidence furnished by the assessee before the appellate authority is in the nature of clinching evidence leaving no further room for any doubt or controversy in such a case no useful purpose served on performing the ri .....

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