SRI SRI CREATIONS JEWELS & HANDICRAFTS PVT LTD,NEW DELHI vs. ITO WARD 24(2), NEW DELHI

This appeal filed by the assessee is directed against the order dated 21.02.2019 of the CIT(A)-8, New Delhi, relating to Assessment Year 2015-16.

First of all we would take up grounds No.4 and 5 of the assessee wherein the assessee has challenged the rejection of additional evidence by the ld. CIT(A) filed under Rule 46A of the Income-tax Rules, 1962 (for short, ‘the Rules’). The ld. Counsel submitted that the ld. CIT(A) has erred in law and on facts in refusing to admit the additional evidence furnished by the assessee in violation of principles of natural justice and in denying the assessee due and proper opportunity of hearing and representation of its case. The ld. Counsel also pointed out that there was no notice by the ld.CIT(A) intimating the assessee about the rejection of additional evidence before proceeding with the hearing and there is no plausible reason for the ld.CIT(A) in rejecting the cause shown by the assessee for non-furnishing of additional evidence before the AO during assessment proceedings and such application was not appreciated in the right perspective. The ld. Counsel vehemently pointed out that the ld. First appellate authority has erred in refusing to admit additional evidence by citing irrelevant and extraneous reasons, hence, the order of rejection may kindly be set aside and additional evidence filed by the assessee may kindly be admitted and considered for just and proper adjudication of this appeal. The ld. Counsel also submitted that the assessee should be allowed due opportunity to explain and substantiate its claim as per principles of natural justice.

Replying to the above, the ld. Sr. DR drew our attention to relevant part of the first appellate order and submitted that the ld.CIT(A) was right in dismissing the application for admission of additional evidence as the case was selected for limited scrutiny on a particular issue and the assessee should have complied with all the requirements at the very first instance during the first appellate proceedings.

On careful consideration of the above rival submissions and on careful perusal of the relevant para 4.2 and 4.3 of the first appellate order, we are in agreement with the tax jurisprudence narrated by the ld.CIT(A) that one cannot be allowed to do something indirectly which he/she is prohibited to do directly. However, in a case where the assessee while submitting additional evidence under Rule 46A of the Rules is showing certain circumstances as mentioned in the said Rules, then, such evidence has to be admitted and considered for adjudication of grievance of the assessee. From the assessment order, we note that the case was selected for limited scrutiny and the AO issued notices to the assessee which was replied by the assessee vide letter dated 08.11.2017 and, again, on 27.11.2017 the assessee also filed certain documents which were not upto the satisfaction of the AO as per para 2.8 of the assessment order. Thereafter, the AO, without providing any further opportunity to the assessee, proceeded to hold that the AR has failed to produce any documents which were being asked during the course of assessment proceedings on a very limited issue of scrutiny of unsecured loans.

Under above circumstances, we are of the considered view that the assessee, is obviously duty bound to furnish all relevant documentary evidence under his command at the earliest possible and the assessee did so in the present case. Further, in a case where the AO is not satisfied with the completeness of the said documents, then, he should have asked the assessee to comply with the directions of the AO to his satisfaction. In such a situation, the assessee fails to provide any documentary evidence to the satisfaction of the AO, then, the AO is very well empowered to make addition to the taxable income of the assessee. Per contra, where the AO, without providing an opportunity to furnish all relevant documentary evidences to his satisfaction, then, the assessee should be allowed an opportunity to submit the remaining documents. In our humble understanding, the assessee has good cause for non-furnishing of documentary evidence before the AO during the assessment proceedings. Therefore, the additional evidence submitted by the assessee before the ld.CIT(A) deserves to be admitted for consideration. Hence, the 3 conclusion of the ld.CIT(A) in rejecting the admission of additional evidence is set aside and the additional evidences are admitted for consideration by the ld.CIT(A). The matter is restored to the file of the ld.CIT(A) to the first appellate stage with a direction to adjudicate the issue, after considering the entire documentary evidences filed by the assessee including the additional evidence as admitted by us in the earlier part of this order, without being prejudiced from the earlier first appellate order and after allowing due opportunity of hearing to the assessee.