BAI KANBAI WD/O SETH PADAMSI DHANJI CHARITABLE TRUST,MUMBA vs. ITO (EXEM) WARD 1(1), MUMBAI

ORDER Per O. P. Kant (A.M.)

This appeal by the Assessee is directed against order dated 08th September, 2025 passed by the Ld. Commissioner of Income Tax (Appeals)-National Faceless Appeal Centre, Delhi [in short the Ld. CIT (A)] for Assessment Year 2017-18 raising following grounds:-

“1. The Learned National Faceless Appeal Centre (Ld. NaFAC) has erred in dismissing on the technical ground that the Appellant did not provide application under rule 46A of the Income Tax Rules 1962 for providing additional evidence, despite the fact that there has not been any additional evidence submitted before the Ld. NaFAC thereby deciding the appeal in an arbitrary manner and without application of mind.

3. Prat the Ld. NaFAC has violated the principles of natural justice by failing to provide a reasonable opportunity of being heard to the appellant.

4. That whether Learned Assessing Officer (Ld. AO) was right in ignoring the submission made on 05/12/2019 and passing the order on 07/12/2019 stating that no compliance has been made against the show cause notice by the Appellant?

5. That whether Ld. AO and Ld. NaFAC was right in ignoring the submission made by the Appellant before them and passing the order in arbitrary manner and without application of mind? Due to the such approach in adjudicating the matter, the genuine taxpayer suffers unwarranted long drawn litigation and erroneous tax demands especially when Appellant being the Charitable Institution.”

2. Briefly stated, the facts of the case are that the assessee filed its return of income electronically on 25th October 2017, declaring a total income of ₹4,76,760/-. The return was selected for scrutiny and statutory notices under the Income-tax Act, 1961 (“the Act”) were duly issued and complied with. The assessment was completed under section 143(3) of the Act on 7th December 2019, wherein the Assessing Officer made an addition of ₹80,08,000/- on account of alleged non-disclosure of sale consideration arising from transfer of immovable property.

2.1 In the first appeal, the learned Commissioner of Income-tax (Appeals) [“Ld. CIT(A)”] dismissed the appeal in-limine, declining to adjudicate the issue on merits on the ground that the assessee failed to comply with Rule 46A of the Income-tax Rules, 1962 (“the Rules”), in respect of certain documents furnished during appellate proceedings. Aggrieved, the assessee is now before this Income-tax Appellate Tribunal (in short the ‘Tribunal’) by way of grounds as reproduced above.

4.1 However, the assessee has brought to our notice material which goes to the foundation of the conclusion reached by the Ld. CIT(A). The learned counsel drew our attention to page 11 of the paper book, containing a show-cause notice dated 1st December 2019 issued by the Assessing Officer, specifically calling for explanation and supporting documents relating to Room Nos. 10 and 11, for hearing scheduled on 5th December 2019.

4.2 Further, reference was invited to page 16 of the paper book, being an authenticated acknowledgment showing that the assessee uploaded the tenancy agreements of both rooms on 5 December 2019 itself, i.e., the very date fixed for hearing before the Assessing Officer. These submissions remain uncontroverted by any material to the contrary.

4.3 It is, therefore, evident that the documents in question were already placed before the Assessing Officer during assessment proceedings. The mere fact that the Assessing Officer, for reasons best known to him, ignored the material so filed and proceeded to finalize the assessment two days later, cannot render such evidence as “additional evidence” under Rule 46A.

4.4 The law is well-settled that evidence already on record of the Assessing Officer cannot be regarded as additional evidence under Rule 46A merely because the authority failed to consider it. An appellate authority is not empowered to shut out relevant material which was already before the original authority but not considered by it. The first appellate authority, being a quasi- judicial body, is required to adjudicate the appeal on merits and cannot dismiss it mechanically on procedural grounds when the evidence was already part of the assessment record.

4.5 In the present case, the finding of the Ld. CIT(A) that Rule 46A was attracted is thus patently erroneous. The dismissal of the appeal on that ground, without considering the issues on merits, is contrary to the scheme of the Act and principles of natural justice.

4.6 In view of the foregoing discussion, we hold that the Ld. CIT(A) erred in declining to admit and examine the evidence on the mistaken premise that the assessee had furnished “additional evidence”. As the documents were already filed before the Assessing Officer during the assessment proceedings, Rule 46A had no application.

4.7 Accordingly, the impugned order of the Ld. CIT(A), to the extent it dismisses the appeal without adjudication on merits, is set aside. The matter is restored to the file of the Ld. CIT(A) with a direction to examine the evidence already on record, afford due opportunity to the assessee, and decide the appeal afresh on its merits in accordance with law. Ground No. 1 is allowed.