TMI Blog2018 (12) TMI 132X X X X Extracts X X X X X X X X Extracts X X X X ..... correct in contending that the powers of the CIT (A) are wide under Section 250 of the Act; that the authority can adduce fresh findings. A close scrutiny of the ITAT s findings impugned in this case, would reveal that the tribunal took note of the assessee s lapses in replying to the AO s specific queries. It then considered the materials on record, in the form of statements made on behalf of M/s RKDNP with regard to what was actually paid. The other findings regarding improbability of such huge amounts remaining outstanding, no interest payable to the commission agent were to bolster the finding that the transactions reported were not credible. AO went to great lengths to find out whether and if any genuine transactions were entered into by its suppliers; the CIT (A) brushed aside those findings based on a solitary instance of export: of rice by another party. However, the findings with respect to the seven supplies and those involved in it- and the statements recorded of representatives of those entities, were a matter of record. What the ITAT did was to analyze the CIT (A) s findings. That it was entitled to do, clearly. And while doing so, it frowned upon the CIT (A) s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ordingly, we permit the appellant to file a review application before the High Court within two weeks from today. If such an application is filed, the same shall be considered in accordance with law without raising the question of limitation. All the questions raised in this appeal are left open to be raised again, if occasion so arises. The Civil Appeal is disposed of with aforesaid observations. 2. In the appeal, under Section 260A, several questions of law were urged. The one relating to additional evidence, read as follows: Whether in the absence of any ground against admission of additional evidence, the Tribunal was right in law in holding that the CIT(A) was not entitled to consider the evidence of payment to the commission agent; 3. The original order of this court, dismissing the appeal, reads as follows: Sub-Section (3) of Section 145 of the Income Tax Act, 1961 empowers an assessing officer to proceed to make assessment of the total income or loss to the best of his judgment and determine the sum payable by the assessee, as envisaged under Section 144, in a case where he is not satisfied about the correctness or completeness of the accounts of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITAT was correct in holding that the Appellate Commissioner was not entitled to consider the evidence of payment to the commission agent. Thus, the present appeal is confined to that question of law. 5. The facts are that the assessee traded in rice. In relation to some of its transactions, the assessee claimed loss. All the transactions of purchase and sale were carried by the assessee through M/s Ramkishan Dass Narender Prakash who acted as commission agent on the assessee s behalf. The Assessing Officer (AO) summoned Shri Ramkishan Dass of the above concern under Section 131 of I.T. Act and recorded his statement. The AO obtained information about parties who had purchased and sold rice and basmati to M/s Ramkishan Dass Narender Prakash, who acted as the assessee s agent. The transactions of rice shown to have been purchased from M/s Vijay Kumar Anil Kumar and M/s Ramkishan Aggarwal and Company were doubted. Similarly, the transaction with Shri Dinesh Trading company was doubted and the party was summoned under Section 131 of I.T. Act. From the statement made by that party, the AO concluded that M/s Ramkishan Dass Narender Prakash sold basmati to the party and statement of Sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... along with the statement of M/s Bhagwati Rice Mills, M/s Amar Rice Mills and Aggarwal Rice Mills to establish that their alleged statements are totally incorrect. In any case it is submitted that it can never be within the exclusive knowledge of the assessee that its commission agent purchased the rice from which source and as to who was the suppliers of the commodity sold. Your reliance on the market rate quoted in the Financial Express is totally misleading. It is submitted that the allegation that the rate of the rice has not fallen in the month of the sale when compared with the price at the time of purchase is also unjustified. It is submitted that it was specially for this purpose that the assessee had requested you to examine M/s RDNP. On inquiry had been made by you in this behalf. It is further submitted that through you have recorded the statement of on 122-1991, however, the same is being confronted by you in March, 1992 when the assessment is getting barred by limitation, thus providing no time to the assessee to meet any of your allegations. In this view of the matter it is submitted that the proposed disallowance of loss of ₹ 79,91,056 be dropped ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... file the same. You are once again requested to file confirmations from these creditors. (e) Please intimate the amounts paid by you to your commission agent M/s. RKDNP till date if any. 10. After considering the explanations given by the assessee, and noting the fact that on several occasions, it did not appear or could not produce the requisite information, the AO added the amounts and brought them to tax. The AO s findings indicated that the purchases said to have been made were at unrealistic prices; the sale too was likewise undervalued. The payments due to the commission agents, were disbelieved. The findings of the AO were appealed against to the CIT (A) who allowed the assessee s request to consider additional evidence and thereafter proceeded to delete the amounts brought to tax during the assessment. The revenue appealed to the ITAT, which set aside the CIT (A) s order. The findings of the ITAT are, inter alia, as follows: 11. We have considered the rival submissions at length in the light of material placed before us. From the factual position noted above it is obvious that M/s RKDNP, who acted as the agent of the SSD for sale and purchase of rice, had show ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eque and no money was received or paid by cash or by cheque or by draft. When the AO called upon the assessee to furnish details of payment, if any, having been made to M/s RKDNP, the copy of the account was filed by the assessee, which divulged that after the opening balance the debit and credit entries were only in respect of sale and purchase of rice and no payment whatsoever had been shown to have been made or received. Even during the original assessment proceedings assessee could not lead any evidence as to whether the whether any payment was made towards advance or commission. Despite this factual position learning CIT (A) entertained the submissions of the assessee that it had actually made the payment to M/s RKDNP. When the statement of Shri Rama Krishna partner of RKDNP is categoric that no payment is made throughout the year by the assessee and no further evidence was produced either before or the during the original proceeding or in second round it is not known as to how the Ld CIT (A) entertained the contention of the assessee with regard payments. Rule 46A of the IT rules, 1962, clearly provides that the assessee shall not be entitled to produce before the first appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e are at a loss to understand how the CIT (A) could have admitted any such contention which was not substantiated with any evidence disregarding the AO s observations which was on based on specific reports. It is further noted, that the AO had held that no commission or advance was paid by the assessee to RKDNP, whereas the CIT (A) held that it was duly shown in the account and the findings of the AO were incorrect. From the perusal of the assessment order will find what the AO had stated in his order is the factum of non-payment of any advance of commission by the assessee to M/s RKDN Pand not the fact that no commission was shown to have become due to them. It becomes more apparent from the assessment order and the statement of Shri Ram Krishna recorded by the AO in which it was stated in reply to the last question whether total commission on by the assessee to M/s RKDNP was ₹ 3.77 lakhs out of which a sum of ₹ 3.50 lakhs was obtained from the assessee and its sister concern. It is further noted that the opening and closing balance of M/s RKDNP in the books of the assessee was exceeding ₹ 55 lakhs on which no interest was charged by them. Even if we go by the or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er as well. It is seen that the grievance of the assessee even before the tribunal at the first round of proceedings was that the material used against the assessee was not supplied to it for rebuttal. It is obvious from the assessment order in the second round that the assessee made inspection of the file and also obtained photocopies of all relevant documents which are listed as item nos. 1 to 11 on page 11 of the assessment order. After going through the aforesaid letter dated 18.3.92 in entirety we could not find even a single work requesting the AO to allow cross examination of the concerned parties. Even the 4th line of page 15 of the assessment order clearly reveals that the consequence of the enquiries were confronted to the assessee and the photocopies were copies given on 24.8.94. This shows that the assessee was not interested at any stage to make cross examination of the parties. It is too late in the day to come out with such a contention, after the gap of around 15 years from the relevant time. 13. The next alternate contention raised by the assessee's counsel was that in the absence of any purchase and sale of rice it should be treated as speculative transac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the agent, and there was an actual payment of `8.25 lacs on 27.8.87 by cheque. The commission agent would credit the account of the appellant with the sale proceeds less their commission and debit the account with purchases plus commission. Ultimately, the net outstanding balance was paid by the assessee to the commission agent through twelve cheques between 22-10-1990 and 29-011991. These clarified that the assessee was a trusted client of the commission agent. If the AO thought that transactions were false on this ground the A.O should have cross examined both, the commission agent and the petitioner, to draw any possible adverse inference. This was not done by the AO. 12. Learned counsel also argued that the CIT(A) noted that the transactions have been accepted by the revenue in the earlier assessment year under Section 143(3). For the subsequent year the return had been accepted u/s 143(1) and there is no indication that the case has been selected for scrutiny. All payments had been much later than the dates of transactions. 13. Learned counsel submitted that the decision in Commissioner of Income Tax UP v. Kanpur Coal Syndicate [53 ITR 225 (SC)] of the Supreme Court has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rect the production of any document or the examination of any witness to enable him to dispose of the appeal. Even Circular no.108 dated 20.3.1973 explaining the amendment pertaining to introduction of Rule 46A echoes the same view. 17. It is argued that the additional evidence produced before the CIT(A) pursuant to his direction stand on a different footing than the new evidences produced before him by the assessee. In the former case, the restriction contained in sub-clause (1) of Rule 46A shall not be applicable and there shall not be any necessity on the part of the CIT(A) to get them subjected to scrutiny by the AO. Counsel also relied on the Bombay High Court decision in Smt. Prabhavati Shah 's (1998) 231 ITR 1 which explained the provisions relating to admission of new evidence before the CIT( A) under Rule 46A of the Income tax Rules 1962. The Court held that: It does not deal with the powers of the Appellate Assistant Commissioner to make further enquiry or to direct the Income-tax officer to make further enquiry and to report the result of the same to him. This position has been made clear by sub-rule (4) which specifically provides that the restrictions p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ult in such an adverse finding as to reject the assessee s claims as bogus, and two, that the previous years assessments had showed a consistent pattern with regard to the Revenue s behavior, accepting the assessee s claims regarding the same suppliers and agents. 19. This court is of the opinion that the ITAT s reasoning is not entirely based on the consideration of the fresh evidence under Rule 46-A. It is based on its independent analysis and appreciation of the evidence on record. The assessee s counsel is correct in contending that the powers of the CIT (A) are wide under Section 250 of the Act; that the authority can adduce fresh findings. 20. A close scrutiny of the ITAT s findings impugned in this case, would reveal that the tribunal took note of the assessee s lapses in replying to the AO s specific queries. It then considered the materials on record, in the form of statements made on behalf of M/s RKDNP with regard to what was actually paid. The other findings regarding improbability of such huge amounts remaining outstanding, no interest payable to the commission agent were to bolster the finding that the transactions reported were not credible. Furthermore, the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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