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TMI Blog2019 (10) TMI 130X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) has erred in deleting the addition of Rs. 5,44,314/- made being speculation loss falls within the purview Explanation to Sec. 73 of the Act. 3. That on the facts and circumstances of the case & in law, the Ld. CIT(A) has erred in deleting the disallowance of Rs. 43,98,987/- u/s 36(i)(iii), being amount charged as interest on loans and advances. 4. That on the facts and circumstances of the case & in law, the Ld. CIT(A) has erred in deleting the addition of Rs. 71,95,000/- made u/s 68, as the assessee failed to discharge its onus to prove the genuineness of the transaction by way of name, address, confirmation, bank a/c and PAN details of the persons/party who have given amount for purchase of property. 5. That on the facts and circumstances of the case & in law, the Ld. CIT(A) has erred in deleting the addition of Rs. 43,00,000/- made u/s 69 being unexplained investment, as the assessee failed to substantiate its stand despite given repetitive opportunity. 6. That on the facts and circumstances of the case & in law, the Ld. CIT(A) has erred in reducing the disallowance made under the head telephone Rs. 1,24,603/- & car exp. Rs. 3,95,844/-, being personal in nature in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive ("Ld. DR", for short) submitted in connection with the first ground of appeal, that the Ld. CIT(A) erred in admitting Additional Evidences; having regard to the fact that the assessee had failed to avail of numerous opportunities, spanning over a prolonged period of time, provided by the AO to the Assessee during the assessment proceedings. The Ld. Authorized Representative ("Ld. AR", for short) for the assessee, however, contended that the Additional Evidences / Materials were submitted to the Ld. CIT(A) under the directions of the Ld. CIT(A) and not under Rule 46A(1) of Income Tax Rules, 1962 ("I.T. Rules, " for short) . He drew attention to Rule 46A(4) of I.T. Rules, and submitted that restrictions on production of Additional Evidences under Rule 46A(1) are not applicable in a situation when the Additional Evidences / Materials are submitted to the Ld. CIT(A) under direction of Ld. CIT(A) under Rule 46A(4) of I.T. Rules. We have given anxious consideration to the rival contentions. On careful perusal of the aforesaid impugned appellate order dated 24.04.2015 of the Ld. CIT(A), we find that nowhere he has stated whether the Additional Evidences / Materials were produced by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estrictions on production of Additional Evidences as prescribed under Rule 46A(1) of I.T. Rules are not applicable when Ld. CIT(A) invokes Rules 46A(4) of I.T. Rules. Therefore, whether Rule 46A(4) of I.T. Rules was invoked is a critical factor in deciding admissibility of Additional Evidences during appellate proceedings before Ld. CIT(A). The second infirmity is, that impugned appellate order dated 24.04.2015 of Ld. CIT(A) is also not fully compliant with the norm to pass speaking order, as observed earlier in this paragraph. Thirdly, failure at the end of the Ld. CIT(A) to confront the AO with aforesaid Additional Evidences / Materials, and his further failure to provide reasonable opportunity to the Assessing Officer to examine the Additional Evidences / Materials and to provide Evidences / Materials in rebuttal of the Additional Evidences / Materials submitted by the Assessee before the Ld. CIT(A); has caused further infirmity in the aforesaid order, having been passed, as it was, without following the well established principle of natural justice. This is so, because AO is an interested party in the appellate proceedings before the Ld. CIT(A) and in accordance with well settl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al, the Commissioner (Appeals), where it is possible, may hear and decide such appeal within a period of one year from the end of the financial year in which such appeal is filed before him under sub-section (1) of section 246A.] (7) On the disposal of the appeal, 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]. Rule 46A of Income Tax Rules, 1962 "46(A). (1) the appellant shall not be entitled to produce before the [Deputy Commissioner of (Appeals) [or, as the case may be 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) whether 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)whether the appellant was prevented by sufficient cause from producing before the [ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1. Whether on the facts 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 co-terminus powers over the assessment apart from appellate powers, there was no violation of Rule 46A committed by him ?" 22. As we have with the consent of the learned counsel, heard them on merits, we proceed to decide the aforesaid substantial questions of law. Since the CIT (A) himself refers to Rule 46A and has also admitted that the confirmation letters adduced by the assessee before him were technically fresh evidence, it is not possible to accept the plea of the learned counsel for the assessee that the CIT (A), in examining 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 f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ime. This ensures full, fair and detailed enquiry and verification. A 7-Judge Bench of the Supreme Court in Keshav Mills Co. Ltd. v. CIT [1965] 56 ITR 365 had observed as under:- "Proceedings taken for the recovery of tax under the provisions of the Act are naturally intended to be over without unnecessary delay, and so, it is the duty of the parties, 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 stated in the above judgment, exceptions have been carved out that in certain circumstances it would be open to the CIT (A) to admit additional evidence. Therefore, additional evidence can be produced at the first appellate stage when conditions stipulate in the Rule 46A are satisfied and a finding is recorded. Rule 46 A reads:- "Production o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vidence 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 assessee invokes Rule 46A to adduce additional evidence before the CIT (A) and a case where the CIT (A), without being prompted by the assessee, while dealing with the appeal, considers it fit to cause or make a further enquiry by virtue of the powers vested in him under sub-Section (4) of Section 250. It is only when he exercises his statutory suo moto power under the above sub-section that the requirements of Rule 46A need not be followed. On the other hand, whenever the assessee who is in appeal before 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at is a consequence which cannot at all be countenanced." ITO vs Pardeepa Rani 73 taxmann.com 392 (Delhi-Trib.) "6.3 We are of the view that the CIT(A) after over-ruling the objection of the AO on the admissibility of the fresh evidences was required to communicate the decision to admit the evidence to the AO and provide him a reasonable opportunity to rebut the same. In the absence of any such exercises the order is in violation of the Statutory Rules and is open to the challenge of being perverse. Support is drawn from the decision of Jurisdictional High Court in the case of CIT v. Manish Buildwell (P.) Ltd.[2012]204 Taxman106/[2011]16 taxmann.com 27 (Delhi). A perusal of the said decision shows that considering the non-fulfillment of the requirements set out in sub-Rule (3) of Rule 46A the Hon'ble Court was pleased to restore the issue back to the CIT(A) directing the said Authority to address the shortcomings. The Hon'ble Court took into consideration the off repeated argument in such cases by noting that it is true that the powers of CIT(A) as First Appellate Authority are co-terminous with that of the AO by drawing attention to the distinction that the powers of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessing officer should be allowed a reasonable opportunity of examining the evidence etc. can all be thrown to the winds, a position which the Hon'ble Court held was wholly unacceptable and may result in unacceptable and unjust consequences. The Hon'ble Court held that the procedural requirements mentioned in the Rule must be strictly complied with so that the Rule is meaningfully exercised and not exercised in a routine or cursory manner. The Tribunal in view thereof in the facts before the Court was faulted with for over-looking the requirements of sub-Rule (3) of Rule 46A and confusing it with sub-Rule (4) of Rule 46A. Addressing the rationale for the Rule the Hon'ble Court observed that the fundamental rule which is valid in all branches of law, including Income Tax Law is that the assessee should adduce the entire evidence in his possession at the earliest point of time. This ensures full, fair and detailed enquiry and verification. Referring to the decision in Keshav Mills Co. Ltd. v. CIT [1965] 56 ITR 365 (SC), 7-Judge Bench judgement of the Supreme Court, it was observed that the Court held that "Proceedings taken for the recovery of tax under the provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvation it was held would take care of clause (c) of sub-rule (1) of Rule 46A. The observation of the CIT (A) it was held would also take care of sub-rule (2) under which he is required to record his reasons for admitting the additional evidence. Thus, the requirement of sub-rules (1) and (2) of Rule 46A it was held had been complied with. However, the Hon'ble Court found that sub-rule (3) which interdicts the CIT (A) from taking into account any evidence produced for the first time before him unless the Assessing Officer has had a reasonable opportunity of examining the evidence and rebut the same, had not been complied with. The Court found that there was nothing in the order of the CIT (A) to show that the Assessing Officer was confronted with the confirmation letters received by the assessee from the customers who paid the amounts by cheques and asked for comments. Thus, the end result the Hon'ble Court held was that additional evidence were admitted and accepted as genuine without the Assessing Officer furnishing his comments and without verification. In these circumstances the Court held:- "Since this is an indispensable requirement, we are of the view that the Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sues should be remanded to the file of the AO with the direction to pass Assessment Order afresh. In this context, we have noted with concern that the assessee had failed to avail of six opportunities spanning over a period of eight months during the assessment proceedings. Thus, we are of the view that opportunities provided by the AO during assessment proceedings were reasonable, and despite that, the assessee had failed to avail of the opportunities. We are also mindful that statutory provisions U/s 153(1) of I.T. Act prescribe tight time-line for completion of assessment proceedings and a strict limitation period. The AO is required to complete the assessment after necessary inquiries, investigations and scrutiny, within this strict limitation period. Having regard to constraints of limitation period in completion of assessment proceedings, one cannot have unreasonable expectations for opportunity that can be provided by the Assessing Officer. When the assessee failed to avail of reasonable opportunities provided by the AO during assessment proceedings, the assessee cannot claim as a matter of right, to go back to the AO on the setting aside of the order of the Ld. CIT(A) there ..... X X X X Extracts X X X X X X X X Extracts X X X X
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