Clause (mm) was inserted vide
Finance Act, 1972, with effect from 01.04.1972 in section 295(2) to empower
the rule-making authority to
prescribe the circumstances in which, the conditions subject to which, and the
manner in which, the Commissioner (Appeals) may permit an appellant to produce
evidence, which could not be produced before the Assessing
Officer. Armed by the said power, CBDT framed rule 46A in the Income-tax Rules, 1962 with effect from 01.04.1993.
Additional evidence
The Evidence in respect of an issue arising before the
Assessing Officer and required to be submitted before him is not submitted by
the assessee but is sought to be submitted before the CIT(A). This is a
technical term used under Rule46A which explains that additional evidence would
be evidence other than already submitted before Assessing Officer and is sought
to be submitted first time before CIT(A). Additional evidence can be allowed
only after (i) recording the reasons by the CIT(A), (ii) the case of the
assessee falls under any of the four exceptions provided under Rule 46A(1) and
(iii) to provide reasonable opportunity of being heard to the Assessing Officer
to examine the document, to cross examine the witness and to adduce
evidence/witness to rebut the additional evidence submitted by the assessee.
CIT (A) is the first stage where
additional evidences could be moved under rule 46A. There is a proper mechanism
to deal with such application. On receiving the application under rule 46A, the
CIT (A) is required to remanded it to the assessing officer to verify
the evidences moved by the appellant. CIT (A) admission of evidences without
remanding it to assessing officer were not found substance in the eye of law
and the cases have been set aside by the higher appellant authorities.
Text
of Rule 46A
PRODUCTION
OF ADDITIONAL EVIDENCE BEFORE THE DEPUTY COMMISSIONER (APPEALS) AND
COMMISSIONER (APPEALS)
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 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 in this rule shall affect the power
of the Deputy Commissioner (Appeals) or, as the case may be, the Commissioner
(Appeals) to direct the production of any document, or the examination of any
witness, to enable him to dispose of the appeal, or for any other substantial
cause including the enhancement of the assessment or penalty (whether on his
own motion or on the request of the Assessing Officer under clause (a) of
sub-section (1) of section 251 or the imposition of penalty under section 271. CIT(A)
can admit additional evidence or documents only after applying rule 46A.
Circumstances
for which production of additional evidence may be allowed [Rule 46A(1)]
The appellant shall not be entitled to produce before
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.
CIT(A)
to record in writing the reasons of its admission of additional evidence [Rule
46A(2)]
No
evidence shall be admitted under rule 46A(1) unless the Commissioner (Appeals)
records in writing the reasons for its admission.
Reasonable
opportunity to be provided to the Assessing Officer [Rule 46A(3)]
Rule
46A(3) of Income Tax Rules, 1962 provides that the CIT(A) shall not take into
account any evidence produced under rule 46A(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.
Thus,
Sub-rule (3) of Rule 46A of the Rules provides that the Commissioner unless
provides a reasonable opportunity to the Assessing Officer in respect of the
evidence produced under sub-rule (1), such evidence shall not be taken into account.
Where the Assessing Officer is not only to be permitted to examine or
cross-examine the evidence/document or the witnesses, but also to be offered an
opportunity of rebuttal of evidence.
Violation of rule 46A - Consequences
Any order passed by the Commissioner
(Appeals) granting relief to the appellant by admitting additional evidence but
without giving a specific opportunity of being heard to the Assessing Officer
to rebut the same is in contravention of rule
46A(3). Such orders are liable to be set aside and the matters are
normally restored back to the file of the Assessing Officer for fresh examination.
Additional
evidence can be obtained by the CIT(A) on its own motion [Rule 46A(4)]
Nothing contained in rule 46A shall affect the power
of the CIT(A) to direct the production of any document, or the examination of
any witness, to enable him to dispose of the appeal, or for any other
substantial cause including the enhancement of the assessment or penalty
(whether on his own motion or on the request of the Assessing Officer under
section 251(1)(a) or the imposition of penalty under section 271. In other
words, Rule 46A(4) empowers the CIT(A) to direct the appellant to produce
evidences or documents or examination of any witness to enable him to dispose
of the appeal or for any other substantial cause.
Power
of the CIT(A) shall not affect [Rule 46A(4)]
As
far as sub-rules (4) of Rule 46A of the Rules is concerned, it speaks of the
power of Commissioner (Appeals) to direct production of any document or
evidence or examination of witness, (i) to enable him to dispose of the appeal,
(ii) for any other substantial cause including the enhancement of the
assessment, (iii) for imposition of penalty under clause (a) of sub-section (1)
of section 251 or (iv) imposition of penalty under section 271.
As
far as sub-rule (4) of Rule 46A is concerned, the powers are exercised by the
Deputy Commissioner (Appeals) or Commissioner (Appeals) directing the appellant
to produce any document or examination of witness. These powers are needed to
be exercised for enabling the Commissioner to dispose of the appeals or for any
substantial cause or for the purpose of imposition of penalty as provided under
this Rule.
The
Commissioner (Appeals) would have ample power to call for any additional
evidence, oral or documentary, if it considers such production necessary in the
interest of justice for disposing of the appeal or for any other substantial
cause. It goes without saying that while exercising such powers of admission of
the additional evidence, the powers are required to be exercised within the
limits imposed by the Rule and both sides are required to be afforded due and
reasonable opportunity in respect of such evidences.
Notice
of hearing to Assessing Officer – Whether is tantamount to compliance under
Rule 46A
As per section 250(1), the CIT(A) has to give notice
of hearing to the Assessing Officer against whose order appeal is preferred.
When such a notice is given, often a plea is raised on behalf of the assessee
that there is sufficient compliance of rule 46A as the Assessing Officer has
been given opportunity of being heard and such an opportunity may also be
construed to be an opportunity to rebut the additional evidence produced by the
assessee. This view has not found favour with the courts.
Spacimen of Grounds of Appeal to be
taken before the CIT(A) for accord kind permission for producing of additional
evidences under Rule 46A of Income Tax Rules, 1962
I.
That the assessee
praying to produce additional evidence as the assessee has fulfilled the
condition prescribed under Rule 46A of
the Income Tax Rules, 1962 and prays for admission of additional evidence
before the CIT (A) as the appellant was prevented by
sufficient cause from producing evidence before the Ld. Assessing Officer which
is relevant to the grounds of appeal
II.
That the assessee
praying to produce additional evidence as these go to the very root of the
matter and involve a substantial cause in determining the correct income and
the correct tax liability of the assessee for the year under appeal as the Ld. Assessing
Officer has made the order appealed against exparty to adduce evidences.
III.
That the assessee
praying to produce additional evidence in your honour in the Form of Computation
of Income alongwith documentary evidences……….
Spacimen
of Application for prayer to accord kind permission for producing of additional
evidences under rule 46A of Income Tax Rules, 1962
To
The
Commissioner of Income Tax (Appeals)
………………….
Sir,
Subject : Prayer to accord kind
permission for producing of additional evidences under Rule 46A of Income Tax
Rules, 1962 in the case of Shri …………….. - PAN …………. for Assessment year ….. – Regarding
***
Kindly
refer to appeal filed on ……………. in respect of above mentioned case.
2.
In this connection, it is submitted that as per the provisions of Rule 46A para(b),
(c) & (d), the assessee may kindly be accorded permission to produce additional
evidences in the form of following documents to further justify our claims as
per the provisions of Income-tax Act and involved a substantial cause in determining
the correct tax liability of the assessee for the year under appeal.
.
(i) Explanation regarding ……………………,
(ii)
Copy of Bank account statement of the appellant for the relevant period,
(iii)
Copy of Bank account statement of ………………..
(iv)
Copy of evidence of………..
(v)
Copy of affidavit which confirmed the …………………
(vi)
Copy of evidence of ………………….
(vii)
…………………………………………
3.
The assessee was prevented by sufficient cause from producing these evidences
which was called upon by the Assessing Officer to produce. The Assessing
Officer thereby passed an order and made the additions without any material.
These additional evidence, establishes that notwithstanding the exercise of due
diligence, such evidence was not within her knowledge or could not, after the
exercise of due diligence, be produced by her at the time when the order
appealed
against was passed. They go to the very root of the matter and involve a substantial
cause in determining the correct income and the correct tax liability of the
assessee for the year under appeal.
4.
It is, therefore, praying in your honour to accord kind permission under Rule 46A
of the Income Tax Rules, 1962 to produce the above mentioned additional evidences
as the assessee has fulfilled the conditions prescribed under Rule 46A of the
Income Tax Rules, 1962.
Enclosures:
As above Yours Sincerely
Where claim for business
expenditure was not made in original return of income, said claim was rightly
decided by Tribunal; said issue not be remitted back to Assessing Officer as no
claim of expenditure was made before Assessing Officer
Rule
46A(3) of the Income-tax Rules, 1962 - Assessee-company was engaged in business
of distilieries - Claim for prior period expenses and excise transport fees was
made for first time before Commissioner (Appeals). Tribunal allowed said claim.
On appeal, revenue contended that fresh claim could not be made without filing
revised return and Tribunal ought to have remitted matter to Assessing Officer.
On other hand, Tribunal recorded finding that assessee had claimed deduction
before Commissioner (Appeals) for first time and same was not claimed
originally on an erroneous impression that these expenses were not allowable
under Act. Tribunal further noted that even though detailed submission was made
before Commissioner (Appeals), claim of assessee was rejected on ground that
expenses did not pertain to current assessment year. Tribunal recorded findings
based on evidence on record that expenses were incurred during relevant
assessment year. Since findings of Tribunal was finding of facts which was
based on meticulous appreciation of evidence on record and further Commissioner
(Appeals) had dealt with claims of assessee on merit, Tribunal had rightly
dealt with claims of assessee on merits and had rightly allowed deduction even
though same was not claimed in original return and there was no need to remand
matter as claim was not adjudicated earlier. [In favour of assessee] (Related
Assessment year : 2002-03) – [CIT v. Shaw Wallace Distilleries Ltd. (2021) 278 Taxman
67 : 124 taxmann.com 510 (Karn.)]
Where Commissioner (Appeals) admitted additional
evidences/enclosures submitted by assessee without confronting same to
Assessing Officer and without obtaining comments/remand from Assessing Officer
on said additional evidence and deleted an addition under section 68 made to
assessee’s income on basis of such evidences, impugned order of deleting
addition on basis of such additional evidenced was unjustified
Rule 46A clearly shows that assessee is not entitled to
produce fresh oral or documentary evidence as a matter of right before
Appellate authority until and unless appellate authority gives specific
directions to assessee for production of any such document to enable him to
dispose off appeal. Assessing Officer passed an assessment order against assessee
making an addition under section 68. Before Commissioner (Appeals), assessee
produced certain additional evidences/enclosures on basis of which he deleted
impugned additions made to income of assessee under section 68. It was noted
that these additional evidences were submitted by assessee for first time
before Commissioner (Appeals) on his own without any direction from
Commissioner (Appeals). Further, Commissioner (Appeals) had admitted additional
evidences/enclosures without confronting same to Assessing Officer and without
obtaining comments/remand from Assessing Officer on said additional enclosures.
On facts, Commissioner (Appeals) had admitted additional evidences without
complying to rule 46A, hence, impugned order of deleting additions on basis of such
additional documents by Commissioner (Appeals) was unjustified, therefore, set
aside the order of the ld CIT (A) and restore the appeal to his file to the
first appellate stage with the direction that he should allow proper
opportunity of hearing to the Assessing Officer as well as to the assessee and
re-decide the appeal afresh in accordance with law. (Related Assessment year :
2009-10) – [ACIT v. Kandoi Transport Ltd. (2020) 185 ITD 358 : 120 taxmann.com
92 (ITAT Cuttack)]
Where Commissioner (Appeals) deleted addition made under
section 68 by accepting fresh evidence submitted by assessee without providing
Assessing Officer a reasonable opportunity of examining said evidence and
rebutting it, there being violation of sub-rule (3) of Rule 46A of Income-tax
Rules, 1962, impugned order was to be set aside
Pursuant to search proceedings, assessee filed its return
wherein certain amount was shown as share application money. On account of
assessee’s failure to submit documentary evidence in support of amount so
received, Assessing Officer added same to assessee’s taxable income under
section 68. Commissioner (Appeals) taking into consideration certain additional
evidence produced by assessee, deleted addition made by Assessing Officer. It
was found that Commissioner (Appeals) in violation of sub-rule (3) of Rule 46A,
accepted fresh evidence without providing Assessing Officer a reasonable
opportunity of examining said evidence and rebutting it. In view of a foresaid,
impugned order passed by Commissioner (Appeals) was to be set aside and, matter
was to be remanded back to Assessing Officer for disposal afresh. [In favour of
revenue/Matter remanded] (Related Assessment year : 2010-11) – [DCIT v. Genex
Industries Ltd. (2019) 178 ITD 855 : 109
taxmann.com 402 (ITAT Chandigarh)]
Where in course of
appellate proceedings, Commissioner (Appeals) deleted addition of interest
after considering additional evidence produced by assessee under Rule46A of
1962 Rules without granting an opportunity of hearing to AO, impugned order
passed by him was to be set aside
During assessment
proceedings, Assessing Officer made addition to assessee’s income on ground
that interest component was not included in closing work-in-progress. Commissioner
(Appeals) considering additional evidence filed by assessee under Rule46A of
1962 Rules, granted relief in terms of section 36(1)(iii). Since Commissioner (Appeals)
had granted relief on altogether different premises from that of Assessing
Officer, only recourse available to him was to grant an opportunity of hearing
to Assessing Officer before deleting addition. Therefore, impugned order was to
be set aside and, matter was to be remanded back to Commissioner (Appeals) to
decide issue in proper perspective in accordance with law. [Matter remanded] (Related
Assessment year : 2013-14) – [DCIT
v. Jain Housing (2019) 178 ITD 814 : 109 taxmann.com 428 (ITAT
Chennai)]
Where High Court had not
taken into consideration issue of powers of Commissioner (Appeals) under rule
46A specifically
raised before it, remedy for assessee would be to file an application for
review of order of High Court
Assessee, on appeal
filed against order of High Court, contended that issue of powers of
Commissioner (Appeals) under rule 46A was specifically raised before High Court and it had
not been taken into consideration by High Court. If indeed such issue was
raised specifically before High Court and it had not been taken into
consideration by High Court while passing impugned order, appropriate remedy
for assessee would be to file an application for review of said order. [Partly
in favour of assessee] – [Mathur Marketing (P) Ltd. v. CIT, Delhi
(2018) 400 ITR 26 : (2017) 299 CTR 461 : 251 Taxman 3 : 86 taxmann.com 153
(SC)]
Where additional
evidences filed under rule 46A was relevant for calculation of real income of
assessee, same was to be admitted
Before the Commissioner
(Appeals), the assessee filed an application under section 250, read with rule
46A of the Income-tax Rules, 1962. The said application was not admitted by the
Commissioner (Appeals) holding that the assessee was given various
opportunities to produce books of account and thus his case was not covered under rule46A of the Rules. The Commissioner (Appeals), dismissed the appeal.
On appeal, the Tribunal
directed the Commissioner (Appeals) to admit additional evidence and decide
the case afresh after affording reasonable opportunity to the
assessee of being heard by holding that to deliver natural justice despite the
non-co-operative attitude of the assessee towards assessment proceedings, real
income was to be assessed. On appeal to the High Court:
The matter was examined
by the Tribunal in detail on the basis of the entire material available on
record. It was noticed by the Tribunal that the assessment was completed under
section 144 as the assessee did not co-operate in assessment proceedings. On
account of sickness of the assessee, he wanted to file additional evidence
under rule 46A of the rules before the Commissioner (Appeals). It has been recorded
by the Tribunal that no doubt the assessee did not co-operate with the
Assessing Officer in completion of the assessment proceedings and that the
books of account etc were not produced inspite of opportunity but the said
evidence might have been relevant for the calculation of the real income of the
assessee. The Tribunal keeping in view the overall facts and circumstances of
the case rightly directed the Commissioner (Appeals) to admit
additional evidence and decide the case afresh after affording reasonable opportunity to the
assessee of being heard.
In view of the above
facts and circumstances, there is no doubt assessee did not co-operate with the
Assessing Officer in completion of assessment proceedings but the fact remains
that in the delivery of justice the real income of assessee has to be assessed
and that too after hearing the assessee. The Commissioner (Appeals) has not
commented upon the nature of evidence filed under rule46A. Such evidence might have been relevant for the calculation
of real income of the assessee, therefore, in view of the substantial justice,
Commissioner (Appeals) was directed to admit additional evidence and decide
the case afresh after affording a reasonable opportunity to the
assessee of being heard. [In favour of assessee] – [PCIT v. Daljit Singh Sra
(2017) 247 Taxman 240 : 80 taxmann.com 271 (P&H)]
Where assessee due to
his wife’s illness was prevented from producing evidences before Assessing
Officer in support of its claim, Commissioner (Appeals) could not refuse to
admit such evidences for want of an appropriate application under rule
46A
The tax administration
cannot be expected to be so divorced from the realities that the pains and
agonies of an ill-informed tax illiterate person cannot be heard and
understood. The pain of such a taxpayer is further compounded by factors beyond
his control, as in the facts of the present case, where the counsel entrusted to represent him was also an
equal 'novice' as admittedly being ignorant of the rules and procedures under which additional evidence could
have been produced he failed to exercise due care and attention. The tax
collected on the foundation of the ignorances of a 'tax illiterate taxpayer'
cannot be termed to be a collection of either 'just' nor 'due' taxes collected
by the State in accordance with law. It is viewed that the assessee represented by an equally
ignorant counsel, should have been appropriately guided by the First Appellate
Authority. The fact that the Commissioner (Appeals) while exercising his
discretion refused to admit evidence inspite of sufficient cause being shown as
a matter of record is unwarranted and arbitrary. It cannot be ignored that
First Appellate Authority also had a duty to discharge, i.e., to
ensure that only just and fair taxes due to the ‘State’ may be collected. While
adjudicating and determining the issues, it cannot be countenanced that the
Adjudicating Authority is afraid to give appropriate directions. In a case like the instant case such a direction could not have been perceived to be
not given on account of the fear of being considered a negative reflection on
the 'fair' conduct of the Commissioner (Appeals). The performance and discharge
of duties would not be said to be found wanting or faulted with if the
Commissioner (Appeals) in the performance of his duty apprises and grants
opportunity to the assessee to meet the requisite procedural requirements
of rule
46A. The Commissioner (Appeals) sitting
in an authoritative adjudicating position necessarily would have complete
knowledge of the Income-tax Act and rules. He is presumed to have more than adequate experience and
should have been inculcated with a sense of public service to give the benefit
of his learning to a disadvantaged taxpayer by putting him to notice in case of violation of procedure, as in the instant case that any evidence not made available to the Assessing
Officer requires that an application seeking fresh evidences under rule
46A with reasons for their
admission is necessary. Any such opportunity to produce fresh evidence
under rule 46A given during the
proceedings to my mind, would not in any way reflect on his impartiality. If
fresh evidence is being relied upon by an assessee before the First Appellate
Authority without any appropriate applications under rule46A, it would be arbitrary to deny the taxpayer an opportunity
to produce the same as per law.
The prayer that the
evidences could not be placed before the Assessing Officer because of
pre-occupation of the assessee with illness of his spouse is a consistent fact
on record. The explanation offered which though reproduced has not been
rebutted by the Commissioner (Appeals) considering the material available on
record, is accepted and the fresh evidences are directed to be admitted. A
marginal taxpayer, as in the present case, battling with unforeseen and unfortunate circumstances of
the illness of a life partner and further disadvantaged by lack of proper legal
advise, should have been assisted instead of being trampled heartlessly in the
name of technicalities. The technicalities can co-exist with a humane approach.
There is an urgent need to inculcate a sense of public service and humane
approach in the tax administration and to ensure that the marginal taxpayers are
encouraged, assisted and guided on procedural requirements by the tax
authorities with sound advise instead of instilling in them a sense of fear and
panic and thus forcing them away from tax compliances and in the arms of
unsavoury advisors who thrive and prey on this fear of the population. Such
positive steps to my mind will go a long way in ensuring a tax compliant
population.
Accordingly, on a
consideration of the facts, circumstances and material available on record, it
is viewed that since in the facts of the present case due to his wife’s illness the assessee was prevented by
sufficient cause from producing the evidences in support of its claim, it would
be appropriate and in the interests of justice that in the peculiar facts and
circumstances of the case, the impugned order is set aside and the issue is restored
back to the Commissioner (Appeals) with a direction to permit the assessee to
produce the evidences in support of its claim. The Commissioner (Appeals) after
confronting the same to the Assessing Officer and directing the Assessing
Officer to file a remand report shall confront the same to the assessee and
thereafter pass a speaking order in accordance with law after giving the assessee a reasonable opportunity of
being heard. .
[In favour of assessee] (Related Assessing Year : 2011-12) – [Padam Lal Dua v.
ITO, Faridabad (2017) 162 ITD 524 (2016) 76 taxmann.com 354 (ITAT Delhi)]
Even if additional evidence produced by assessee are in
nature of clinching evidence leaving no further room for any doubt or
controversy, Commissioner (Appeals) is under statutory obligation to put
additional material/evidence taken on record by him to Assessing Officer
Reading of the finding of the Tribunal would suggest that according
to it, if additional documents are summoned by the Commissioner (Appeals) and
produced or if the additional evidence produced by the assessee are in the
nature of clinching evidence leaving no further room for any doubt or
controversy, it is not necessary to give an opportunity to the Assessing
Officer to contradict the same. In other words, the finding of the Tribunal
would suggest that in cases where documents are summoned by the Commissioner
(Appeals) and in cases where the documents produced are conclusive, the
principles of natural justice are excluded. These findings of the Tribunal
could not be enclosed. As held by Delhi High Court in CIT v. United Towers
(I.) (P) Ltd. (2008) 296 ITR 106 : 172 Taxman 267 (Del.), 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, the
finding of the Tribunal set aside. [In favour of revenue] – [CIT, Trichur v.
E.D. Benny (2016) 283 CTR 212 : (2015) 234 Taxman 802 : 62 taxmann.com 302 (Ker.)]
Where Assessing Officer had
disallowed assessee’s claim for exemption under section 10A and, on appeal,
assessee, in support of its claim, furnished various documents and Commissioner
(Appeals) after considering said documents and without bringing same to notice
of Assessing Officer allowed claim for exemption, matter required to be
remanded to Commissioner (Appeals) for passing a fresh order after providing
said documents to Assessing Officer
Assessing Officer passed a best judgment
assessment order under section 144 on assessee and disallowed its claim for
exemption under section 10A. Assessee, in support of its claim, furnished
before Commissioner (Appeals) various documents - Commissioner (Appeals) after
considering said documents allowed claim for exemption. He did not bring said
documents to notice of Assessing Officer. Documents furnished by assessee
before Commissioner (Appeals) could not be entertained by him except on
fulfillment of following conditions: recording reasons in writing for receiving
such evidence and giving Assessing officer an opportunity to examine documents.
Matter required to be remanded back to Commissioner (Appeals) for passing a
fresh order after providing said documents to Assessing Officer and giving him
an opportunity of being heard. [In favour of revenue/Matter remanded] (Related
Assessment year : 2010-11) – [CIT
v. NE Technologies India (P) Ltd (2016) 237 Taxman 151 : 65 taxmann.com
180 (AP)]
Since admission of additional evidence is prerogative of Commissioner
(Appeals) and revenue was not able to point out as to which of conditions had
been violated in process of adjudication by Commissioner (Appeals), order of
Commissioner (Appeals) was to be held as valid
Assessee filed return of income and declared a loss of Rs.
66.32 lakhs. Assessing Officer held that assessee had an income of Rs. 79.50
lakhs and levied tax thereon. In support of its contention, assessee placed
some additional material/evidence before Commissioner (Appeals). Taking same
into account, Commissioner (Appeals) partly allowed appeal and permitted
certain deduction. Revenue contended that Commissioner (Appeals) ought to have
afforded an opportunity to Assessing Officer before admitting fresh evidence. It
was noted that opportunity to be given to Department is only in context of ‘taking
into account additional evidence’ but not ‘admitting additional evidence. Since
admission of additional evidence is prerogative of Commissioner (Appeals) and
Revenue was not able to point out as to which of conditions had been violated
in process of adjudication by Commissioner (Appeals), order of Commissioner
(Appeals) was to be held as valid. [In favour of assessee] (Related Assessment
year : 1998-99) – [CIT v. Unique
Plastics (P) Ltd. (2015) 373 ITR 201 : 60
taxmann.com 481 (Andhra Pradesh and Telangana)]
Where Assessing Officer sought one month time for due
verification of additional evidence produced by assessee by stating that he was
on election duty and number of cases of assessment in which time limitation was
going to expire was pending, Commissioner (Appeals) should accept his demand
In the case where the CIT(A) is convinced about reasonable
cause then, he has to follow a procedure contemplated under rule 46A(3) by
providing sufficient opportunity to the Assessing Officer
to examine the evidence or document or to cross-examine the witnesses, as
the case may be.
It is not in dispute that additional evidence filed by the
assessee could not be verified by the Assessing Officer because, he was engaged
in the time bound matters involving more than 140 block assessments and also to
the fact that he had been assigned the duties of expenditure in the UP. State
Election in Ghaziabad Constituency by the Election Commission of India and,
therefore, it was practically impossible for him to offer the comments on the
aforesaid additional evidence and, therefore, he sought one month further time for
due verification of the same. The aforesaid facts are not disputed by the
learned authorities nor by the assessees.
In the case in hand, the reasons assigned by the Assessing Officer
for asking for further time to verify the documents filed by the assessee was
bona fide as he was on election duty and number of cases of assessment in which
limitation was going to expire was pending and, therefore, Assessing Officer
was busy and thus, the reason assigned by him for asking more time was
sufficient. He was prevented by sufficient cause from submitting the report.
The learned CIT(A) as well as learned Tribunal have not been able to consider
these relevant facts in their correct perspective before passing the impugned
order. The discretion exercised by the CIT(A) while refusing to grant further
time to admit the additional evidence has not been based on sound judicial
principles. The assessing authority had given satisfactory explanation and
sufficient cause for not verifying the additional evidence filed before the
appellate authority. The authorities ought to have granted some reasonable time
to the Assessing Officer to verify the additional evidence.
On due consideration of the aforesaid, we are of the view
that learned CIT(A) as well as learned Tribunal erred in proceeding with the
matter and admitting the additional evidence filed by the assessee without
granting further time to verify the same and submit a report. Thus, we set
aside the impugned orders passed by the Tribunal, by answering the question of
law in favour of the appellant/Department and remit the matter back to the
learned CIT(A) with a direction that sufficient time be granted to the
Department to verify the documents and rebut that evidence and thereafter
decide the controversy afresh in accordance with law, as early as possible, and
endeavour shall be made to conclude it within a period of six months from the
date of receipt of certified copy of the order. [In favour of revenue] (Related
Assessment years : 2003-04 to 2009-10) – [CIT v. Essence Commodities Ltd. (2015) 274 CTR 413 : 233 Taxman 564 : 114 DTR 393 : 61
taxmann.com 87 (MP)]
Where Commissioner (Appeals) exercised only overriding power
under rule 46A(4) in considering documents furnished by assessee and found
investment proper, Assessing Officer was not justified in submitting that he
did not get opportunity to consider same
Assessing Officer made addition on ground that assessee did
not explain source of investment. Commissioner (Appeals) had gone through
balance sheet, bank account and explanation furnished by assessee. Accordingly,
he held investment justified’ Assessing Officer sought to assail order that
Commissioner (Appeals) at time of considering new evidences, did not give
opportunity to Assessing Officer to meet same’. In our view the said
submissions are not based upon a correct reading of Rule46A of the Income Tax
Rules as Sub-Rule (4) contained therein is an overriding power since it is a
non obstante clause beginning with “nothing contained in this Rule”. Thus, the
power of the appellate authority clearly overrides the provisions of Sub-Rules
(1), (2) and (3) of Rule 46 A and it is open to the said authority to look into
any additional document if it considers the same as required to dispose of the
appeal or for any other substantial cause. As a matter of fact, the principal
reason for the CIT (Appeals) in allowing the appeal was the fact that the
Assessing Officer had failed to issue specific notice with regard to the
investment of Rs. 8 lacs made in M/s Rajesh Corporation Limited and further, he
has come to the conclusion that Rs. 8 lacs was fully explained on the basis of
balance sheet filed during assessment proceeding itself. It was only to further
verify the statements in the balance sheet that he had additionally called for
the bank statements to verify the said transaction of Rs. 8 lacs which had
resulted in the balance sheet showing NIL in the account of M/s Sagar Sahkari
Grih Nirman Samiti Limited in the assessment year in question. Thus, it was a
clear cut case of exercise of the overriding power under Rule 46A(4) of the
Rules and not really a case of permitting an assessee to file fresh document on
the prayer of the assessee. Hence, submission of Assessing Officer was not
acceptable. Addition as unexplained investment was to be deleted. [In favour of
assessee] (Related Assessment year : 1997-98) – [CIT(C) v. Sagar
Construction (P) Ltd. (2015) 56
taxmann.com 434 (Pat.)]
Where Commissioner
(Appeals) allowed assessee to produce additional evidence after calling remand
report and permitting Assessing Officer to comment on such additional evidence,
said order of Commissioner (Appeals) did not require any interference
In course of assessment,
notice of hearing issued by Assessing Officer was received by assessee on date
of hearing itself. Assessee thus could not produce necessary evidence on such
date. Subsequently, when assessee attended office of Assessing Officer with
necessary evidence, he learnt that order of assessment was already passed. In
such circumstances, Commissioner (Appeals) permitted additional evidence to be
produced before him and while doing so, he also called remand report from
Assessing Officer. On facts, admission of additional evidence could not be
stated to be in breach of requirement of rule 46A particularly when interest of
revenue was safeguarded by calling for remand report and permitting Assessing
Officer to comment on such additional evidence. [In favour of assessee] – [CIT
v. Kamlaben Sureshchandra Bhatti (2014) 367
ITR 692 : 44 taxmann.com 459 (Guj.)]
Where in course of appellate proceedings, revenue raised a
plea that Commissioner (Appeals) wrongly considered additional evidence without
following procedure laid down under Rule 46A of Income-tax rules, 1962, in view
of fact that such an objection was not raised before Tribunal, it could not be
entertained for first time before High Court
Neither from
the record nor from any other source, it could be pointed out that any
objection was raised before Tribunal with regard to adducement of additional
material before CIT(A). It also does not appear that any order had been
insisted upon and was not granted.
It appears
that from the first time such ground is raised before us, even otherwise both
the Questions which are raised before us and which are held to be
pre-dominantely factual in nature are based on sufficient material available from
the order of Assessing Officer. Again CIT(Appeals) and ITAT have concurrently
held against Revenue, in the aforementioned background, we do not find it
necessary to interfere. Hence, this Tax Appeal is dismissed. [In favour of assessee] – [CIT v. Jignesh Dhanpal Sheth (2014)
223 Taxman 12 : 42 taxmann.com 413 (Guj.)]
Where Commissioner
(Appeals) before admitting fresh evidence, had called for remand report from
Assessing Officer and full opportunity was provided to both parties, no
interference with Commissioner (Appeals)’s order was called for
In scrutiny assessments,
various additions were made to assessee’s income. On appeal, Commissioner
(Appeals) admitted fresh evidence and deleted said addition. Department
submitted that admission of fresh evidence was in breach of rule 46A. Since
remand report was obtained by Commissioner (Appeals) from Assessing Officer and
fullest opportunity was provided to both sides, there was no violation of rule 46A
and, Commissioner (Appeals) was justified in its decision. [In favour of
assessee] – [CIT v. Dharamdev
Finance (P) Ltd. (2014) 43 taxmann.com
395 (Guj.)]
Unless and until Assessing Officer is given an opportunity to
cross-examine witnesses who are examined during pendency of appeal in exercise
of powers under sub-rule (4) of rule 46A of 1962 Rules, Commissioner (Appeals)
cannot rely upon statements/depositions of such witnesses, as it would be in
violation of principles of natural justice
Considering sub-rule (4) of rule 46A of 1962 Rules, it is
always open for the Commissioner (Appeals) to direct production of any document
or examination of any witness to enable him to dispose of the appeal. However,
while exercising such powers and examining any witness, who are permitted to be
examined in exercise of the powers under sub-rule (4) of rule 46A, Assessing
Officer is required to be given an opportunity to cross-examine such witness. Unless
and until the Assessing Officer is given an opportunity to cross-examine such
witnesses who are examined during the pendency of the appeal in exercise of the
powers under sub-rule (4) of rule 46A, Commissioner (Appeals) cannot rely upon
the statements /depositions of such witnesses, as it would be in violation of
the principles of natural justice. The Commissioner (Appeals) having relied
upon the statements of those 24 investors recorded by the Inspectors, deleted
addition made by the Assessing Officer, without giving any opportunity of being
heard to the Assessing Officer to cross-examine those 24 investors and
therefore, the same is in violation of rule 46A of the Income Tax Rules, 1962,
and therefore, the order passed by the Commissioner (Appeals) cannot be
sustained. The Tribunal has materially erred in dismissing the appeal preferred
by the revenue and confirming the order passed by the Commissioner (Appeals)
and not permitting the revenue to raise additional ground of violation of Rule 46A.
In view of the above, without further entering into the merits of the case and
solely on the ground that the order passed by the Commissioner (Appeals) is in
breach of violation of rule 46A of the Income Tax Rules, 1962, the order passed
by the Commissioner (Appeals) as well as by the ITAT deserve to be quashed and
the matter is remanded to the Commissioner (Appeals) to decide and dispose of
the appeal afresh in accordance with law. [In favour of revenue] - [CIT v. Pradyuman
M. Patel (2014) 41
taxmann.com 405 (Guj.)]
Where despite surrender of amount
before Assessing Officer, assessee filed appeal before Commissioner (Appeals)
producing additional evidence, Commissioner could not admit additional evidence
without following mandate in terms of rule 46A
During course of assessment proceedings Assessing
Officer asked assessee to submit complete details of sundry creditors along
with their confirmations. Assessee expressed its inability to furnish further
confirmations nor did it produce creditors for cross-examination and ultimately
offered amount to tax. Despite surrender, assessee preferred appeal before
Commissioner (Appeals) and submitted additional evidence. Commissioner
(Appeals) admitted additional evidence. Commissioner (Appeals) was not
justified in admitting additional evidence without ascertaining as to whether
or not assessee was prevented by sufficient cause from submitting aforesaid
additional documents/information before Assessing Officer as per provisions of
rule 46A. Therefore, issue was to be restored back with directions to follow
mandate in terms of rule 46A. [Matter remanded] (Related Assessment year 2008-09) – [ACIT v. Nirula
Handicrafts Bazar (P) Ltd. (2013) 56
SOT 97 : (2012) 28 taxmann.com 225 (ITAT Delhi)]
Where assessee filed an
application under rule 46A,
Commissioner (Appeals) must dispose of the application by way of a reasoned
order and thereafter proceed to dispose of appeal on merits
In course of assessment,
Assessing Officer found that assessee had deposited certain amount in a bank.
Assessee’s case was that said deposit had come from sale of agricultural income
- Assessing Officer did not accept assessee’s explanation because no evidence
was produced to support such claim. Accordingly Assessing Officer treated
investment as undisclosed and added same to income of assessee. On appeal,
Commissioner (Appeals) deleted said addition. On revenue's appeal, it was noted
that assessee had made application under rule 46A of Income-tax Rules, 1962
before Commissioner (Appeals) in backdrop of fact that he did not have
sufficient time to produce evidence before assessing authority. Commissioner
(Appeals) without disposing of said application, accepted additional evidence
brought on record and deleted addition. Application of assessee made under rule
46A was required to be disposed of first before Commissioner (Appeals) heard
appeal and decided same on merits. Since Commissioner (Appeals) failed to do
so, impugned order passed by him was to be set aside and, he was to be directed
to first dispose of assessee’s application made under rule 46A by way of a
reasoned order in terms of sub-rule (2) of rule 46A and thereafter proceed to
dispose of appeal on merits. [Matter remanded] – [ACIT v. Mohar Singh
(2012) 49 SOT 129 : (2011) 16 taxmann.com 37 (ITAT Jodhpur)]
No contravention of Rule 46A if CIT(A) sends document
submitted by Assessee for Remand Report
There is no cogency in the ground raised by the Revenue
that Ld. CIT(A) has not duly afforded adequate opportunity to the Assessing
Officer to consider the submissions and evidences filed before him at the
appellate stage. The Ld. CIT(A) has duly sent the documents furnished by the
assessee at the appellate stage to the Assessing Officer for a remand report.
Under the circumstances, there cannot be any issue that Assessing Officer was
not provided adequate opportunity in this regard. Ld. Departmental
Representative in this regard fairly agreed that the contravention of Rule 46A
does not arise in this case, as the Assessing Officer has been provided with
adequate opportunity and the remand report obtained from him. In this view of
the matter, we do not find any infirmity in the order of the Ld. CIT(A). Accordingly,
we uphold the same. (Related Assessment year : 2006-07) – [ITO v. Bhavya Lakhani Traders & Suppliers (P)
Ltd. – date of Judgement : 16.10.2012 (ITAT Delhi)]
Admitting Additional Evidence without calling for
Remand Report violates Rule 46A
We find that certain fresh documents have been
produced before CIT(A) and CIT(A) without calling for remand report or
confronting such material to the Assessing Officer has passed the impugned
order in a very precise manner to delete the impugned addition which is not
justified. So, action of the CIT(A) is not only violate of Rule 46A of the Income
Tax Rules, but also against the natural justice because sufficient and cogent
reasons have not been given in this case. Therefore, considering the entirety
of facts, circumstances and material on record, we set aside the order of the
CIT(A) and restore the matter back on his file with the direction to re-decide
the appeal afresh after giving due opportunity to the assessee as well as to
the Assessing Officer by passing a speaking order giving cogent reasons in
support thereof. (Related Assessment Year : 2007-08)- [ACIT v. Late Avtar
Singh Bahl – Date of Judgement : 21.06.2012
(ITAT Delhi)]
If Assessing Officer objects to Admission of
Additional Evidence, then CIT(A) should give categorical finding in terms of
Rule 46A for admission thereof
In our considered view, CIT(A) has admitted the
additional evidence without fulfilling the categorical conditions laid down in
Rule 46A, as explained by Hon’ble Delhi High Court in the case of CIT v. Manish
Build Well (P) Ltd. (2011) 63 DTR
369 (Del.) wherein their lordships
held that after admission of additional evidence, it is mandatory to follow
Rule 46A(3) of the Income Tax Rule. Consequently, his order on this issue is not
tenable; however, the issue of merits remains. Besides, from the record it
emerges that the assessee wanted to file only government records and revenue
record about crops. In the entirety of facts and circumstances, the interest of
justice will be served if the matter is set aside, restored back to the file of
Assessing Officer to decide the same afresh after affording the assessee
sufficient opportunity of being heard. – [ITO v. Kuber Chand
Sharma – Date of Judgement : 13.02.2012 (ITAT Delhi)]
CIT(A) should admit the additional evidence if he finds that
the same is crucial for the disposal of the appeal
While completing the assessment of the assessee, the
Assessing Officer made additional by disallowing the loss claimed by the
assessee on account of sale of shares of ‘D’ Ltd. and on account of expenses
debited to the profit and loss account under section 41(1). Before the
Commissioner (Appeals), the assessee produced requisite material, though for
the first time justifying both claims. The Commissioner (Appeals) called for a
remand report from the Assessing Officer and thereafter deleted the addition,
inter alia, observing that the Assessing Officer, in his remand report, had not
specifically commented upon the additional evidence submitted by the assessee.
The Tribunal upheld the order of the Commissioner (Appeals).
Held that it was a matter of record that before admitting the
additional evidence, the Commissioner (Appeals) had obtained a remand report
from the Assessing Officer. While submitting his report, the Assessing Officer
had not objected to the admission of the additional evidence, but had merely
reiterated the contentions in the assessment orders. It was only after
considering the remand report, the Commissioner (Appeals) had admitted the
additional evidence. It could not be disputed that this additional evidence was
crucial to the disposal of the appeal and had a direct bearing on the quantum of
claim made by the assessee. The plea of the assessee which was taken before the
Assessing Officer remained the same. The Assessing Officer had taken adverse
note because of non-production of certain documents to support the plea and it
was in these circumstances, the additional evidence was submitted before the
Commissioner (Appeals). It could not be said nor was it the case of the revenue
that additional evidence was not permissible at all before the first appellate
authority. On the contrary, rule 46A of the Income-tax Rules permits the
Commissioner (Appeals) to admit additional evidence if he finds that the same
is crucial for disposal of the appeal. In the facts of the instant case,
therefore, no substantial question of law arose. [In favour of assessee] – [CIT
v. Virgin Securities and Credits (P) Ltd. (2011) 332 ITR 396 : (2012) 20 taxmann.com 681 (Del.)]
After admission of additional evidence,
it is mandatory to follow Rule 46A(3) of the Rule
It was held that after admission of additional
evidence, it is mandatory to follow Rule 46A(3) of the Rule. However, sub-rule
(3) which interdict 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, has not been complied
with. There is 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 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 subrule (3) of Rule 46A. – [CIT v.
Manish Build Well (P) Ltd. (2011) 63 DTR 369 (Del.)]
Rule 46A(3) is a
mandatory provision and non-compliance of same would vitiate order itself - Where
assessee had produced additional evidence before Commissioner (Appeals) not on
direction of Commissioner (Appeals) but by itself and Commissioner (Appeals),
on being satisfied with assessee’s explanation regarding non-production of that
evidence before Assessing Officer, had permitted assessee to lead evidence in
terms of sub-rule (3) of rule 46A, he was bound to give an opportunity to
Assessing Officer to examine documents and to produce any evidence to contrary,
if he so desired
The Assessing Officer,
as a result of non-appearance of the assessee before him on the date fixed for
hearing, framed its assessment under section 144 and made certain addition to
its income. The assessee filed an appeal before the Commissioner (Appeals) and
produced books of account and other materials in support of its claim. The
Commissioner (Appeals) accepted the material filed by the assessee to be
correct and allowed its appeal. The revenue filed an appeal before the Tribunal
contending that even if evidence was permitted to be adduced by the assessee at
the appellate stage, the Assessing Officer should have been given an
opportunity to verify/rebut the evidence. The Tribunal rejected the submission
of the revenue on the ground that rule 46A does not warrant giving of any
opportunity to the Assessing Officer. It also held that the power to admit
additional evidence under section 250 could not be circumscribed by rule 46A. On
the revenue’s appeal to the High Court :
Held : A bare perusal of
the provisions of section 250(4) shows that the Commissioner (Appeals), at the
time of hearing of the appeal, can make such further inquiry as he deems fit
and may ask the Assessing Officer to make such an inquiry. This provision in
the Act vests in the appellate authority the power to make further inquiry
which would include the power to admit further evidence.
The procedure and the
manner in which additional evidence is to be produced is laid down in rule46A.
Rule 46A(1) lays down the grounds on which the appellate authority can allow
additional evidence. Sub-rule (2) provides that the appellate authority, while
admitting such evidence, must record its reasoning in writing. Sub-rule (3)
provides that no evidence produced under sub-rule (1) shall be taken into
account unless the Assessing Officer is given a reasonable opportunity of
examining the evidence or documents produced or is permitted to cross-examine
the witnesses examined or is permitted to produce any evidence or document in
rebuttal to the additional evidence produced by the assessee. Sub-rule (4) is
more in the nature of suo motu power given to the appellate authority to direct
the production of any document or witness to enable him to dispose of the
appeal or for any other substantial cause. In the instant case, admittedly, the
evidence was produced not on the direction of the Commissioner (Appeals) but by
the assessee itself. Since the assessee could not produce that evidence because
of its non-appearance before the Assessing Officer, which was explained by it
satisfactorily before the Commissioner (Appeals), the Commissioner (Appeals)
was justified in permitting the assessee to lead additional evidence. However,
once he permitted the assessee to lead evidence in terms of sub-rule (3), he
was bound to give an opportunity to the Assessing Officer to examine the
documents and also give an opportunity to produce any evidence to the contrary
if he so desired. This is also in accordance with the rule of natural justice.
Further, the said provision is a mandatory provision and non-compliance of the
same would vitiate the order itself. Hence, the impugned order of the appellate
authorities deserved to be set aside and the matter was to be remanded to the
Commissioner (Appeals) for decision afresh. (Related Assessment year : 1996-97)
– [CIT, Shimla v. Shri Kangra Steel (P) Ltd. (2010) 320 ITR 691 : 231 CTR 413 : 188 Taxman 392 (HP)]
Proper reasons must be given
for non-acceptance of additional evidence under rule 46A
It is not the case of the assessee, at this stage,
that the Assessing Officer has not given sufficient opportunity; the case of
the assessee is that the additional evidence produced before the CIT(A) ought
to have been admitted under Rule 46A. If additional evidence is not admitted,
the ld. CIT(A) ought to have furnished reasons for non-admission so that the
assessee could explain properly as to whether the reasons for non-admission of
additional evidence are in accordance with law or not. In the instant case, the
ld. CIT(A) completely ignored to take notice of the additional evidence.Under
these circumstances, we are of the view that in the interests of substantial
justice the matter requires to be sent back to the CIT(A), who is directed to
give the assessee a reasonable opportunity of heard. Suffice to say that the
ld. CIT(A) should consider the additional evidence in accordance with law. If
there are no justifiable reasons for admission of the additional evidence, the
ld. CIT(A) has to pass a speaking order so that a superior forum can consider
the correctness of the reasons mentioned therein. With these observations, the
issue concerning the disallowance under section 68 of the Act, other than
Rs.6,97,688/-, is hereby set aside to the file of CIT(A). (Related Assessment
Year : 2005-06) – [Dinesh Khemabhai Patel v. ITO - Date of Judgement :
04.06.2010) (ITAT Mumbai)
Tribunal was correct, in law, in
permitting the assessee-company to lead additional evidence in accordance with
rule 46A
It appeared that the assessee wanted to lead additional evidence before
the Commissioner (Appeals) but the request was declined. Against that view of
the Commissioner (Appeals), the assessee approached the Tribunal which held
that the Commissioner (Appeals) ought to have taken the additional evidence on
record. No substantial question of law would arise for consideration out of
that finding.
That apart, as a result of the Tribunal permitting the assessee to lead
additional evidence, the matter was remanded to the file of the Assessing
Officer and then, the Assessing Officer had, after taking the additional
evidence on record, passed a fresh assessment order accepting the contention of
the assessee on merits. The assessment order appeared to have been accepted by
the revenue and, therefore, the entire exercise in that regard had become
academic. Even otherwise, in R. Dalmia v. CIT (1978) 113 ITR 522 (Delhi),
the High Court held that it is entirely for the Tribunal to decide whether to
admit additional evidence or not. The Tribunal has a discretion for doing so
and no question of law would arise if additional evidence was led, provided the
Tribunal had not acted on any wrong principle.
Nothing had been shown to suggest that in the instant case, the Tribunal
had acted on a wrong principle. Clearly, therefore, no substantial question of
law would arise for consideration. (Related Assessment year : 2001-02) –
[CIT v. Hewlett Packard India (P) Ltd. (2009) 314 ITR 55 : (2008) 173
Taxman 162 (Del.)]
Scope of powers of
Commissioner (Appeals) is co-terminus with that of Assessing Officer and he is
empowered to do what Assessing Officer can do and he has power to direct
Assessing Officer to do what he has failed to do
It is well-settled that
the powers of the Commissioner (Appeals) are not restricted and he has plenary
powers to dispose of an appeal. The scope of his power is co-terminous with
that of the Assessing Officer and he is empowered to do what the Assessing
Officer can do and he has also power to direct the Assessing Officer to do what
the Assessing Officer has failed to do. Thus, it will be within the power of
the Commissioner (Appeals) to give directions while disposing of an appeal.
(Related Assessment year : 2004-05) – [L. Dee’s v. ITO (2009) 120 ITD 138 (ITAT
Delhi)]
Under
Rule 46A(4), the CIT(A) on its own discretion can ask the assessee to produce
documents or evidence. Additional evidence gathered by the CIT(A) on his own is
not required to be produced before Assessing Officer for his comments. –
[DCIT v. Thoresen Chartery Singapore (2009) 118 ITD 416 (ITAT Mumbai)]
Assessee sold
some shares, held by him as an investment, to his wife at a loss, but his claim
to set off said long-term capital loss against short-term capital gains was
disallowed by Assessing Officer on ground that those shares were never
transferred in name of assessee’s wife as per letter dated 06.12.2000 issued by
Registrar and share transfer agent concerned’ On appeal, Commissioner (Appeals)
admitting an additional evidence produced by assessee by way of a letter dated
16.03.1998 issued by said agent to show that those shares were actually
transferred to assessee’s wife on 16.03.1998, allowed assessee’s said claim.
Since sale price at which shares were said to be sold by assessee to his wife
was as per market quotation on date of sale, no interference was called for
with order of Commissioner (Appeals) on that issue. Since Assessing Officer had
not given an opportunity to assessee before drawing adverse inference from
letter dated 06.12.2000 of said agent, admission of additional evidence by
Commissioner (Appeals) was as per exceptions in rule 46A. Therefore, order of
Commissioner (Appeals) needed no interference. [In favour of assessee]
(Related Assessment year : 1998-99) – [DCIT v. Rajesh
R. Gupta (2008) 20 SOT 171 (ITAT Mumbai)]
Where before assessing
authority, assessee failed to adduce any sort of evidence to prove sale
proceeds of utensils received by him but at appellate stage, appellate
authority, without recording any valid or plausible reason and without giving
any opportunity of hearing to revenue, allowed assessee to produce xerox copy
of sale proceeds as additional evidence, appellate authority acted in violation
of rule 46A
Appellant is not
entitled to produce oral or documentary evidence afresh before appellate
authority, as a matter of right. As per sub-rules (1), (2) and (3) of rule 46A
if additional evidence is permitted to be produced, then firstly there must be
reasons to be recorded in writing and, secondly, reasonable opportunity has to
be given to assessing authority to refute and reject such production. Rule
46A(4) does not permit to do away with procedural law prescribed under
sub-rules (1), (2) and (3) of rule 46A, once additional evidence is produced.
Where before assessing authority, assessee failed to adduce any sort of
evidence to prove sale proceeds of utensils received by him but at appellate
stage, appellate authority, without recording any valid or plausible reason and
without giving any opportunity of hearing to revenue, allowed assessee to
produce xerox copy of sale proceeds as additional evidence, appellate authority
acted in violation of rule 46A. (Related Assessment year : 1998-99) [CIT v. Ranjit Kumar Choudhury (2007) 288 ITR 179 : 162 Taxman 257 (Gau.)
Under
section 250(4), Commissioner (Appeals) is empowered and duty bound to make such
further enquiry as he thinks fit or to direct Assessing Officer to make further
enquiry if facts and circumstances of a case warrant such an enquiry to be made
- Matters to be considered by Commissioner (Appeals) need not be confined to
what was considered by Assessing Officer while making order appealed against -
The fact that results of enquiries conducted supported case of assessee and not
that of revenue has no bearing on jurisdiction and powers of Commissioner
(Appeals) - Purpose of rule 46A is to place fetters on rights of an appellant
to produce additional evidence before first appellate authority and not on
rights of first appellate authority to call for production of any fresh
evidence or information - Where additional evidence is obtained by first
appellate authority on its own motion, there is no requirement, in law, that he
should invariably consult/confront Assessing Officer with such additional
evidence - If additional evidence furnished by assessee before first appellate
authority is in nature of a clinching evidence leaving no further room for any
doubt or controversy, in such a case no useful purpose would be served by
forwarding evidence/material to Assessing Officer to obtain his report and in
such exceptional circumstances, said requirement may be dispensed with
Having regard
to the provisions of Part A of Chapter XX relating to the appeals before the
first appellate authority, a distinction has to be made between the evidence
and material voluntarily furnished by an assessee in support of his appeal and
the evidence/material requisitioned from an assessee by the first appellate
authority with a view to have proper disposal of proceedings before him. While the
provisions of rule 46A apply to the former, the same have no application to the
latter.
Provision of
rule 46A enjoins upon the first appellate authority not to admit any fresh
evidence unless he records in writing his reasons for its admission. Further,
rule 46A enjoins upon him to provide the Assessing Officer with a reasonable
opportunity to examine the fresh evidence or to cross examine the witness
produced by the assessee or to produce any evidence or document or any witness
in rebuttal of the additional evidence produced by the assessee.
The provisions
of section 250(4), on the other hand, empower the first appellate authority to
make such further enquiry as he thinks fit or to direct the Assessing Officer
to make further enquiry and report the result of the same. There are many
judgments to the effect that in view of the provisions of section 250(4), the
first appellate authority is duty bound to make an enquiry even if such an
enquiry was not made by the Assessing Officer if the facts and circumstances of
the case warrant such an enquiry to be made. It, therefore, follows that the
matters to be considered by the first appellate authority need not be confined
to what was considered by the Assessing Officer while making the order appealed
against.
There are of
course several judgments where it has clearly been laid down that the assessee
on his own cannot produce any additional evidence not furnished before the
Assessing Officer without meeting the various conditions provided under rule
46A for which satisfaction is to be recorded by the appellate authority in
writing and with which the appellate authority is further required to confront
the Assessing Officer and allow him a reasonable opportunity to have his say in
the matter.
From the
various authorities of courts, the legal position is that the first appellate
authority has wide powers over the order of assessment appealed against before
him. In the course of exercise of such power the first appellate authority can
direct the assessee to produce any evidence, information or material that was
not produced before or was not considered by the Assessing Officer. The purpose
of rule 46A is to place fetters on the rights of an appellant to produce
additional evidence before the first appellate authority and not on the rights
of the first appellate authority to call for production of any fresh evidence
or information. This aspect of the provisions of rule 46A is clear from the
provisions of sub-rule (4) of rule 46A itself that nothing contained in rule 46A
shall affect the power of the first appellate authority to direct the
production of any document or to examine any witness to enable him to dispose
of the appeal or for any other substantial cause including the enhancement of
the assessment or penalty (whether on his own motion or on the request of the
Assessing Officer).
In the instant
case, the entire additional evidence had come on the record of the Commissioner
(Appeals) because he had decided to examine the facts of the case in depth and
then adjudi- cate upon the matter on the basis of evidence and material, thus,
gathered. The Commissioner (Appeals) was empowered to do so under the
provisions of section 250(4). The result of enquiry conducted by him could
either go to further cement the case made out by the Assessing Officer or to
help out the assessee against the findings of the Assessing Officer. The mere
fact that the results of the enquiries thus conducted supported the case of the
assessee and not that of the revenue, it has no bearing on the jurisdiction and
powers of the Commissioner (Appeals). The Commissioner (Appeals) could have
confronted the Assessing Officer with the evidence thus received and the
material thus gathered and allowed the Assessing Officer to have his say in the
matter and perhaps had he done so the dispute in question would not have
arisen. But there is no requirement, in law, that the Commissioner (Appeals)
should invariably consult or confront the Assessing Officer every time an
additional evidence that was not before the Assessing Officer comes on the
record of the Commissioner (Appeals). Where the additional evidence is obtained
by the first appellate authority on its own motion, there is no requirement, in
law, to consult/confront the Assessing Officer with such additional evidence.
There may be cases where additional evidence is admitted by the first appellate
authority on a request or application made by the assessee. 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
first appellate authority is in the nature of a clinching evidence leaving no
further room for any doubt or controversy, in such a case no useful purpose
would be served by performing the ritual of forwarding the evidence/material to
the Assessing Officer to obtain his report. In such exceptional circumstances
the requirement of sub-rule (3) may be dispensed with.
Therefore,
there was no infirmity in the impugned order of the Commissioner (Appeals) who
had taken pains to comprehensively examine the issue before him and arrive at a
correct finding of fact and he should be congratulated for having done so.
Therefore, his order was to be upheld and the appeals were to be dismissed. (Related
Assessment years : 1998-99 to 2000-01) - [ITO v. Industrial Roadways (2008)
112 ITD 293 : (2007) 112 TTJ 157 (ITAT Mumbai)]
Assessee, in an appeal against addition made by Assessing Officer,
filed additional evidence before Commissioner (Appeals) - Commissioner
(Appeals) called for a remand report on such evidence from Assessing Officer
and after going through remand report, concluded that sufficient opportunities
were granted to assessee and his case did not fall in any of exceptions
available in sub-rule (1) of rule 46A - Commissioner (Appeals), therefore,
refused to admit additional evidence and confirmed addition - After calling of
remand report on merit as contemplated in sub-rule (3) of rule 46A,
Commissioner (Appeals) was precluded with his discretion for refusing to admit
additional evidence - Therefore, Commissioner (Appeals) had wrongly refused to
admit additional evidence produced by assessee
The Assessing Officer made certain
addition to the income of the assessee on account of unexplained cash credits
available in the books of the assessee. On appeal, the assessee filed
additional evidence under rule 46A, in order to explain the cash credits appeared
in his books. The Commissioner (Appeals), after receiving the additional
evidence, called for a remand report on such evidence from the Assessing
Officer. In the remand report, apart from commenting on the merits, the
Assessing Officer raised an objection for entertaining the fresh evidence under
rule 46A. The Commissioner (Appeals), after going through the remand report,
arrived at a conclusion that sufficient opportunities were granted to the
assessee and his case did not fall in any of the exceptions available in
sub-rule (1) of rule 46A. Thus, the Commissioner (Appeals) refused to admit the
additional evidence and confirmed the addition. On second appeal :
From reading of rule 46A, it is
discernible that sub-rule (1) contemplates certain conditions, which are
required to be fulfilled by an assessee before permission to produce additional
evidence can be granted to him. Such conditions are specified in clauses (a) to
(d). Whenever any additional evidence is produced before the first appellate authority
under the Act, the appellate authority, i.e., the Dy. Commissioner
(Appeals) or the Commissioner (Appeals) would record reasons in writing for
admitting such additional evidence, as per the requirement of sub-rule (2).
After permitting an assessee to
adduce additional evidence, next stage would be that the Assessing Officer is
to be granted an opportunity to examine the evidence or the documents or to
examine the witness produced by the assessee. The Assessing Officer would
further be at liberty to produce any other evidence in rebuttal of the
additional evidence produced by the assessee. Thus, the first stage is that the
assessee seeks permission for the admission of additional evidence, the next
stage would be that such permission would be granted by recording reasons and
thereafter, the additional evidence would be sent to the Assessing Officer for
examination. In the instant case, though from the record, it was not
discernible whether permission to adduce additional evidence was granted by
recording reasons in writing, but impliedly it was discernible that after
filing the additional evidence, the Commissioner (Appeals) took step provided
in sub-rule (3). So it gave an inference that the additional evidence sought to
be produced by the assessee was a relevant material and the Commissioner
(Appeals) had entertained this additional evidence and only thereafter sent it
to the Assessing Officer under sub-rule (3) for verification. Thus, after
calling of the remand report on merit as contemplated in sub-rule (3) of rule
46A, the Commissioner (Appeals) was precluded with his discretion for refusing
to admit the additional evidence. He could reject it as not sufficient or not
proved but it was to be construed that evidence had been taken on record. Apart
from all these things, sub-rule (4) of rule 46A, provides vast powers to the
Commissioner (Appeals). He can exercise his discretion to enter any evidence
even though the case of the assessee does not fall within the exceptions
provided in clauses (a) to (d) of sub-rule (1). The moment Commissioner
(Appeals) arrives at a conclusion that the evidence sought to be produced by
the assessee is essential for the just decision of the appeal or for the
substantial cause of justice, it is necessary to call such material on record.
In that situation, interdiction provided in sub-rules (1) and (2) would not
come in his way. Therefore, the Commissioner (Appeals) had wrongly refused to
admit the additional evidence produced by the assessee and his order deserved
to be set aside. Therefore, the said issue was restored to the file of the
Assessing Officer for re-adjudication. (Related
Assessment year : 1993-94) – [Shahrukh
Khan v. DCIT (2007) 13 SOT 61(ITAT Mumbai)]
Commissioner (Appeals)
has power to examine fresh evidence himself, without conducting an enquiry
through Assessing Officer - If matter is complex and voluminous evidence is
required to be examined, better course for Commissioner (Appeals) would be to
get evidence examined and decided by Assessing Officer instead of himself doing
it, though he has power, in law, to do so himself - Assessing Officer made a
substantial addition to income of assessee-company - Commissioner (Appeals)
admitted fresh evidence furnished by assessee and after examining evidence
himself, without conducting an enquiry through Assessing Officer deleted part
of addition - Since amount of addition was very substantial and it involved
considerable evidence, Commissioner (Appeals) ought to have remanded case to
Assessing Officer for examining evidence and to decide issue accordingly
It would depend on the facts of each case as to
whether the Commissioner (Appeals) should conduct the inquiry himself or should
leave it to the Assessing Officer. If the matter is complex and voluminous
evidence is required to be examined, the better course for the Commissioner
(Appeals) would be to get the evidence examined and decided by the Assessing
Officer instead of himself doing it, though he has the power, in law, to do so
himself. In the instant case, the Commissioner (Appeals) had considered copious
evidence which he had himself listed in his order. It would have been better if
these details were to be verified by the Assessing Officer, as the Assessing
Officer had all the paraphernalia and the infrastructure to get the evidence
examined and verified and he would be in a better and more appropriate position
to do so than the Commissioner (Appeals). In such matters, where a detailed
enquiry is required, it would be more appropriate that the Assessing Officer is
entrusted with the task instead of the Commissioner (Appeals) doing it all by
himself. In the instant case, the amount of the addition was also very
substantial, and it involved considerable evidence. Therefore, the Commissioner
(Appeals) would have been justified if he had got the evidence verified by the
Assessing Officer under section 250(4). Even with regard to the verification of
the existence of the shareholders, the Commissioner (Appeals) appeared to have
merely accepted the confirmatory letters in which the addresses and the
income-tax file numbers of the shareholders were given. The Commissioner
(Appeals) had not verified the income-tax records of the shareholders, nor had
he verified it from the shareholders themselves by contacting them or summoning
them. Thus, even with regard to the existence of the shareholders, it did not
stand established beyond doubt merely by the confirmatory letters, unless they
were subjected to further verification. That exercise had not been carried out
by the Commissioner (Appeals). Since the instant case was not a simple case but
a complex one, the Commissioner (Appeals) ought to have remanded the case to
the Assessing Officer for examining the evidence and to decide the issue,
accordingly.
Hence, the order of the Commissioner (Appeals) was to
be set aside and the matter was to be restored to the file of the Assessing
Officer with a direction to examine the evidence adduced by the assessee before
the Commissioner (Appeals) and take a decision afresh. (Related Assessment year : 1999-2000) – [ACIT v. Prime
Telesystems Ltd. (2007) 11 SOT 361 (Del.)]
Assessee in his accounts
had shown that he had received loans during relevant year - Assessing Officer,
however, did not accept same for want of confirmation letters from creditors,
and, accordingly, made additions under section 68 - On appeal before
Commissioner (Appeals), assessee produced confirmation letters - Commissioner
(Appeals) rejected said additional evidence by holding that assessee’s case did
not fall under any of exceptional circumstances mentioned in rule 46A - Appeal
filed against said order was allowed by Tribunal - In view of sub-rule (4) of
rule 46A and provisions of section 250, Commissioner (Appeals) was not
justified in rejecting confirmation letters produced by assessee straightaway
and he should have directed Assessing Officer to consider said confirmation
letters and find out identity, creditworthiness, etc., of persons who had made
fixed deposits
On a
consideration of the provisions of rule 46A, particularly sub-rule (4) thereof
and the provisions of section 250(1) conferring power on the Commissioner
(Appeals), it is clear that in spite of the provisions of rule 46A(1), the
provisions of section 250 enable the Commissioner (Appeals) to accept
additional evidence in appropriate cases which power has been preserved by
sub-rule (4) of rule 46A also. If the provisions of rule 46A, sub-rule (4)
thereof are held to be mandatory that would go against the provisions of
section 250 conferring power on the first appellate authority to enquire into
the matter and pass appropriate orders. In other words, rule 46A without
sub-rule (4) would be open to challenge as ultra vires section
250. [Para 5]
In the instant
case, the first appellate authority, as already noted, had rejected the
additional evidence solely on the ground that the assessee did not satisfy the
provisions of rule 46A. The Tribunal had, however, considered the matter
keeping in mind the provisions of sub-rule (4) of rule 46A and the provisions
of section 250 though the provisions were not specifically mentioned and
observed that the Commissioner (Appeals) was not justified in rejecting the
confirmation letters straightaway and that he should have directed the
Assessing Officer to consider the said confirmation letters and find out the
identity, creditworthiness, etc., of the persons who had made the fixed
deposit. It was in the above circumstances that the Tribunal directed the
Assessing Officer to consider the two confirmatory letters produced by the
assessee before the first appellate authority and to decide the question
afresh. It must be noted that, neither the Assessing Officer, nor the first
appellate authority had any case that the appellant was given several
opportunities to produce the confirmation letters and that the assessee did not
avail of the said opportunities by obtaining and producing the confirmation
letters from the two persons mentioned above. Only reason stated was that no
evidence was produced. In view of the above-mentioned circumstances, no reason
was found to interfere with the order of the Tribunal in the instant issue. This Income-tax appeal is dismissed as above. - [CIT
v. K. Ravindranathan Nair (2004) 265 ITR 217 : (2003) 184 CTR 46 : 131 Taxman 743 (Ker.)]
First appellate
authority has to give his reason in writing for admission of additional
evidence produced by assessee and further an opportunity must be given to
Assessing Officer either to examine or rebut that evidence - Where additional
evidence produced by assessee was received and relied upon without giving any
reason as contemplated under sub-rule (2) of rule 45A and furthermore no
opportunity was given as required under sub-rule (3) of rule 46A, order of
Commissioner (Appeals) admitting such additional evidence was to be set aside
The assessee produced additional
evidence before the Commissioner (Appeals). The Commissioner (Appeals), relying
on that evidence, deleted the addition made by the Assessing Officer. On
appeal, the revenue contended that the Commissioner (Appeals) did not record
his reason in writing and further no opportunity was given to the Assessing
Officer before taking into account the additional evidence, thereby violating
the provisions of rule 46A.
Held : The first appellate authority
has all the plenary powers for the purpose of disposal of the appeal before
him. The first appellate authority can direct the production of any document or
evidence by exercising his power under section 250(4) read with sub-rule (4) of
rule 46A. Whenever that power of the Commissioner (Appeals) is exercised and
the additional evidence is produced by the assessee before the first appellate
authority, it has to be decided as per the principles laid down in sub-rule (1)
of rule 46A and the first appellate authority has to give his reason in writing
for admission of the aforesaid documents. Furthermore, the mandatory
requirement under sub-rule (3) of rule 46A is that an opportunity must be given
to the Assessing Officer either to examine these evidences or to rebut these
evidences.
In the instant case, admittedly, the
Commissioner had not exercised his power under sub-rule (4) of rule 46A. The
additional evidence produced by the assessee was received and relied upon
without giving any reason as contemplated under sub-rule (2) of rule 46A.
Furthermore, no opportunity was given as required under sub-rule (3) of rule
46A. Notice of appeal cannot be equated with notion of future application to
lead additional evidence which no one could have anticipated or reasonably
foreseen. In view of the above discussion, it was very clear that the two
documents produced by the assessee were additional evidences and the same were
received by the first appellate authority in violation of rule 46A and also
against the principles of natural justice behind the back of the Assessing
Officer. Therefore, the order of the Commissioner (Appeals) was to be set aside
and the matter was to be remanded back to the Assessing Officer to examine the
issue and also the evidence produced by the assessee. (Related Assessment year
: 1993-94) – [ITO (OSD) v. Dr. N.C. Doka
(2002) 82 ITD 275 : 76 TTJ 596 (ITAT
Gauhati)]
Restrictions placed on an appellant by rule 46A to produce
additional evidence do not affect powers of AAC under section 250 - As summons
issued to creditors of assessee from whom assessee allegedly took loan were
returned unserved, loan amount was treated as addition to income - Before AAC
assessee sought to produce documentary evidence which was refused to be
entertained - AAC should have admitted evidence in exercise of power under
section 250(5) - Even otherwise case fell within rule 46A(1)(c)
In
the instant case, the ITO treated the amount of two loans as income of the
assessee from undisclosed sources because the summons issued by him could not
be served on the creditors. At the time of hearing of the appeal against the
above order before the AAC, the assessee wanted to prove the genuineness of the
loan from one of the borrowers by relying upon the fact that the amount had
been received by the assessee by cheque and repaid by cheque. In support of
this contention, the assessee wanted to produce photostat copies of the cheques
and a certificate from the bank to show that the sum was received by the
assessee from the creditor by cheque and a copy of the account of the assessee
with the said bank. Prima facie, this information was necessary to decide
the controversy in regard to the genuineness of the loan.
The
AAC should have considered this evidence in exercise of his powers under
sub-sections (4) and (5) of section 250 which he failed to do. Thus, it was a
fit case where the AAC should have exercised the powers conferred upon him and
taken on record the zerox copies of the cheque, the certificate from the bank
and the copy of the account of the assessee with the said bank and considered
the same for deciding the genuineness of the loan.
In
the facts and circumstances of this case, even under rule 46A the assessee
should have been allowed to produce the additional evidence. The AAC, thus, was
not correct in holding that the case of the assessee did not fall in any of the
four exceptions set out in sub-rule (1) of rule 46A. In fact, the present case
would fall under clause (c) of sub-rule (1) of rule 46A because the assessee
had no occasion to collect this evidence earlier. He would have reasonably
expected that the creditors will appear before the ITO in compliance with the
summons issued by him. He was never informed by the ITO that the creditors were
not available or identifiable. If he had been informed by the ITO in the course
of assessment proceeding that he was not inclined to accept the loans as genuine
because of the non-availability of the creditors, he could have tried to
satisfy him about the genuineness of the loan by producing other evidence. The
case was remanded to examine the genuineness of the loan afresh in the light of
the evidence produced by the assessee. [In favour of the assessee] – [Smt.
Prabhavati S. Shah v. CIT (1998) 231 ITR 1 : 148 CTR 192 : 100 Taxman 404
(Bom.)]
Assessing Officer in ex
parte assessment under section 144 made additions to assessee’s total income
for not explaining deposits made under sections 80CCA and 80CCB and also on
account of low household withdrawals - Under section 250(4), Commissioner
(Appeals) has ample power and jurisdiction to take additional evidence
necessary for disposal of appeal, and, thus, in instant case, discretion was
properly exercised by him - Assessee could make above mentioned deposits from
his income, and ‘for want of details’, conclusion that investments were not
made out of taxable income of the year could not be reached - Commissioner (Appeals)
having found that rental income from HUF account was available to assessee to
meet household expenses, addition on this account was rightly deleted by him
It is settled law that even an ex
parte assessment made under section 144 must conform to rules of justice,
equity and good conscience and cannot be arbitrary and capricious. There may be
some guess-work, but still there should be some nexus between the material
available on record and the income taken for assessment. It is further settled
law that all relevant material relied upon by the assessee is to be placed
before the Assessing Officer in the course of assessment proceedings. The
assessee as a matter of right cannot file any additional evidence in appeal.
Such right is regulated by provision of rule 46A of the Income-tax Rules. The
appellate authority has to record reasons for admitting additional evidence and
allow a reasonable opportunity to the Assessing Officer to examine the
additional evidence. But such right to file additional evidence is different
from the requirements of the appellate authority to take further evidence to
dispose of the appeal.
Under section 250(4), the first
appellate authority may make such further enquiry as he thinks fit. In
deserving cases, the appellate authority is obliged to hold such further
enquiry, which necessarily includes the production of additional evidence. Where
fresh evidence is available and the assessee is in a position to produce the
same, there is no reason why the first appellate authority should not examine
it on merit and pass an appropriate order. It is not correct that in every
case, the first appellate authority should provide opportunity to the Assessing
Officer to examine any evidence produced by the assessee in the appellate
proceeding and obtain a remand report from the Assessing Officer. There is
ample power and jurisdiction with the first appellate authority to take
evidence necessary for disposal of the appeal. However, in complex cases and
where new material is placed in appeal, an opportunity to the Assessing Officer
to find rebutting material should be provided in terms of rule 46A. In the instant
case, apart from the salary income of Rs. 69,597, the assessee had interest
income of Rs. 8,229. Prima facie, from that income, the assessee
could deposit Rs. 50,000 for claiming deduction under sections 80CCA and 80CCB.
The Assessing Officer added Rs. 30,000 for investment made under section 80CCA
as ‘details of investment’ were not given. Likewise, he added Rs. 20,000 for
investment under section 80CCB as the said investment was also not made out of
the taxable income of the assessee. Without elaboration, the observations made
were prima facie untenable. ‘For want of details’, the conclusion that
investments were ‘not made out of taxable income of the year’ could not be
reached. There was no nexus between the material or want of it (details) and
the conclusion reached. Likewise, the addition of Rs. 15,000 on account of low
household withdrawal was made without specifying the amount actually withdrawn
or the amount that should reasonably be withdrawn in the circumstances of the
case. There was no reference to past records, the order of the Assessing
Officer hardly satisfied any of the principles applicable even in an ex
parte assessment. The additions, even without additional evidence, could
not have been sustained by the appellate authority. The revenue had not shown
any material to state that the conclusion arrived at by the Commissioner
(Appeals) was erroneous and if an opportunity were allowed to the revenue, a
different conclusion would have followed. Hence, the discretion was properly
exercised by the Commissioner (Appeals), and his order was, therefore,
confirmed. The revenue’s appeal was, accordingly, dismissed. (Related Assessment year : 1989-90) - [ITO v.
Jitender Mehra (1995) 53 ITD 396
(ITAT Delhi)]
Mere fact that the notice of hearing of the appeal was given
to the 1TO would not meet the requirements of rule 46A
It was held that by the admittance
of additional evidence, something adverse to the ITO is sought to be done in
the course of appeal by way of augmenting the record. Therefore, ITO need to be
heard for the purpose and be given an opportunity to meet with the additional
material by way of cross-examination,
counter evidence and urging submissions in the context of the augmented
record. Any order admitting additional evidence behind the back of the ITO is
the order passed in violation of the principles of natural justice. – [CIT
v. Valimohmed Ahmedbhai (1982) 134 ITR 214 (Guj.)]
Rule
46A is not ultra vires the Act - It does not affect power of AAC conferred upon him by
sections 250 or 251 and, therefore, rule 46A is not ultra vires sections 250
and 251
The validity to rule 46A was under challenge before the
Allahabad High Court in Smt. Mohindar Kaur v. Central
Government. The Court analysed the provisions of section 250(4) and section
250(5) of the Act and observed that no part of rule 46A whittles down or impairs the
power to make further inquiry conferred upon the first appellate authority by
section 250(4). Similarly, section 250(5) confers power upon Commissioner
(Appeals) to permit the appellant to raise a fresh point, which has not been
even touched by rule 46A. The
Court finally held that rule 46A is
not ultra vires section 250 or 251. On the contrary, it gives
a right to the appellant to produce additional evidence which was earlier not
available to him. – [Smt. Mohindar Kaur v. Central Government (1976) 104 ITR
120 (All)].
As
regards the powers of appellate authority are concerned, it is well settled that
the appellate authority’s powers are wide enough to cover power to admit additional
evidence. - [State of Orissa v. Babulal Chhapalia (1966) 18 STC 17
(SC)]
