TMI Blog2017 (8) TMI 177X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT vs Rayala Corporation P.Ltd. (1995 (1) TMI 42 - MADRAS High Court), we are of the view that the CIT(A) wrongly substituted the best judgement of the AO with his own judgement contrary to the provisions of section 144 of the Act. Therefore, we set aside the order of the CIT(A) and restore the order of the AO. Appeal of the Revenue is allowed. - I.T.A .No.-4159/Del/2011 - - - Dated:- 13-4-2017 - SH. S.K.YADAV, JUDICIAL MEMBER AND SH.ANADEE NATH MISSHRA, ACCOUNTANT MEMBER For The Revenue : Sh.F.R.Meena, Sr. DR For The Assessee : None ORDER PER ANADEE NATH MISSHRA, ACCOUNTANT MEMBER (A). The present appeal has been filed by the Revenue against the order dated 13.06.2011 of CIT(A)-XVIII, New Delhi pertaining to A.Y. 2007-08. Grounds of appeal are as under:- 1. That on the facts and in the circumstances of the case and in law the Ld. CIT (A) erred in accepting the claim of the assessee representing share capital of ₹ 1,10,75,000/- whereas the facts clearly establish the same as bogus accommodation entry received from entry operator. 2. That on the facts and the circumstances of the case and in law the Id. CIT(A) has erred in relying ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as requested by the AO to furnish the details as per questionnaire dated 26.02.2009, by 04.08.2009, for which notice u/s 142(1) of the Act dated 20.07.2009 was served on him. But no one attended on 04.08.2009. A fresh notice u/s 143(2) was issued on 17.09.2009 fixing the case for hearing on 29.09.2009, through speed post. This notice also remained uncomplied with. On 23.11.2009 Sh. Surjeet Singh, CA and Sh. M.P.Singh, Advocate, both Power of Attorney holders attended before the AO and they were asked by AO to file certain details/information as recorded in order sheet entry dated 23.11.2009. The case was adjourned to 27.11.2009. But no one attended on behalf of the assessee. As the assessment was going to be barred by limitation after 31.12.2009, the AO completed the assessment u/s 144 of the Act vide assessment order dated 10.12.2009. In the aforesaid assessment order dated 10.12.2009, he made additions totaling ₹ 1,45,50,955/-, the breakup of which is as under:- 1. Income on account of share capital As discussed above Rs.1,10,75,000/- 2. Income on account of unsecured As disc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ]. 46A. ( 1) The appellant shall not be entitled to produce before the [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 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 reasons for its admiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mentary evidences in support of the claim made in the return of income but the assessee had failed to avail the same and furnish complete documentary evidences. These facts can be verified by calling assessment record (D.2). However, the Ld. CIT (A) accepted the plea of the assessee that the assessee was prevented by sufficient cause from producing the details during the assessment proceedings and admitted the additional evidences under Rule 46A of the Act. The relevant portion of the appellate order of the CIT (A) is reproduced below: I have carefully considered the assessment order, remand report of the AO and the submissions made by the Id. AR. As per the assessment order, the Id. AR of the assessee appeared during the assessment proceedings on various dates and filed certain details including the computation of income, Balance Sheet, Profit and Loss account, and Tax Audit Report. However, the AO called for certain details vide order sheet entry dated 23.11.2009 which was attended by the Id. AR and the case was adjourned to 27.11.2009. But no one appeared on the above date. The AO has, accordingly, passed the order u/s 144 ex-parte on 10.12.2009 in view of the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the appellant was prevented by sufficient cause from producing the details during the assessment proceedings. The AO, in the remand report, has objected to the admission of the additional evidence. However, considering the facts and circumstances of the case as mentioned above, and the fact that the additional evidences were forwarded to the AO and have been examined by the AO in the course of the remand proceeding, and since the additional evidences are relevant to the issues on which additions have been made and on which grounds of appeals have been raised, the said additional evidences are admitted under Rule 46A of the Income Tax Rules, 1962 in the interest of natural justice. (D.3). We find that the questionnaire was issued by the AO on 26.02.2009 and which was served on the assessee on the same day. We also find that questionnaire was issued by the AO calling for details and the hearing was fixed on 06.03.2009. Since then, a series of hearing were fixed by the AO and the last hearing was fixed on 27.11.2009. Details of the hearings have been given in the first paragraph of the assessment order, and also have been mentioned in foregoing paragraph (C) of this order. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew do not constitute sufficient cause within the meaning of Rule 46A of Income Tax Rules. In these facts and circumstances, we are of the view that the assessee was not prevented by sufficient cause from producing the evidences before the AO and the CIT(A) erred in admitting the additional evidences as the reasons stated by the assessee for not producing the evidences before the AO, do not constitute sufficient cause within meaning of Rule 46A of Income Tax Rules. Therefore, we reject the admission of additional evidences by the Ld. CIT(A) and hold that the merits of the additions made by the AO are to be decided on the basis of materials available to the AO at the time when the aforesaid assessment order dated 10.12.2009 was passed. We further hold that the interference by the Ld. CIT(A) with the assessment order made by the AO on the basis of additional evidences admitted by the Ld. CIT(A) was not warranted in view of the facts and circumstances of this case. (E). We notice that this assessment order has been passed not u/s 143(3) of the Act but it is a best judgement assessment u/s 144 of I.T.Act. Best judgment assessment has been explained by Hon'ble Apex court in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessing authority. If he fails to do his duty, he cannot be allowed to call upon the assessing authority to prove conclusively what turnover he had suppressed. That fact must be within his personal knowledge. Hence, the burden of proving that fact is on him. If the estimate made by the assessing authority is a bona-fide estimate and is made on a rational basis, the fact that there is no good proof in support of that estimate is immaterial. Prima facie, the assessing authority is the best judge of the situation. It is his best judgment and not of anyone else. The question whether the Income-tax Officer has committed any error in his judgment under section 144 of the Act can be decided only on the basis of the materials gathered by him and not on the basis of any materials that are later produced by the assessee. There cannot be a procedure wherein the best judgment of the Income-tax Officer is subjected to the discretion of the assessee to produce evidence/material at the appellate stage and thus convert the proceeding of the best judgment assessment into a proceeding for regular assessment in which the assessee is served with a notice under section 139(2) of the Act. The Tri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the assessment order is reproduced as under:- 3. On perusal of balance-sheet as on 31.03.2007 it is observed that the share capital has increased from ₹ 98,25,000/- to ₹ 2,00,65,000/ and share application money has increased from ₹ 68,15,000/- to ₹ 76,50,000/- during the year under question. Thus, there is total increase of ₹ 1,10,75,000/- in paid up share capital and share application money during the year. As the assessee willfully and knowingly avoided the proceedings and not produced evidences in support of genuineness of the said increase in share capital and share application money. ₹ 1,10,75,000/- is treated cash credits u/s 68 of the Income-Tax Act, 1961 and added to the income of the assessee Being satisfied that the assessee has concealed its above income, penalty proceedings u/s 271(1)(c) of the income-Tax Act, 1961 are being initiated separately. 4. Similarly, there is an increase from ₹ 91,05,385/- in unsecured loans taken by the assessee during the year under question. Thus, the assessee has claimed to have taken fresh unsecured loans amounting to ₹ 29,07,958/-. As the assessee willfully and knowingly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re, conclude that the there was reasonable basis for the additions made by the AO. (H). We have already rejected the admission of additional evidences by the ld. CIT(A) and have held in foregoing paragraph (D.3) that merits of the additions made by the AO are to be decided on the basis of materials available to the AO at the time when the aforesaid assessment order dated 10.12.2009 was passed. We have further already held that the interference by the Ld. CIT(A) with the assessment order made by the AO on the basis of additional evidences admitted by the Ld. CIT(A) was not warranted in view of the facts and circumstances of this case. We have also already held in the foregoing paragraph (G) of this order that there was reasonable basis for the additions made by the AO. This is a best judgement assessment u/s 144 of the Act and the application of section 144 of the Act was not disputed by the assessee before the CIT(A). Even before us, the invocation of s.144 of the Act by the AO is not a matter in dispute. In any case, the protracted non-compliances by the assessee to various statutory notice u/s 142(1) and 143(2) of the Act and further non-compliance with the hearings fixed from ..... X X X X Extracts X X X X X X X X Extracts X X X X
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