ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-41(4)(1), MUMBAI, MUMBAI vs. M/S. SINGA INFRASTRUCTURE, MUMBAI

In the statement of facts filed before the Ld. Commissioner, the Assessee stated that it executed excavation work for Afcons Infrastructure and received diesel, oils, lubricants, stores and spares whose value was adjusted against its excavation invoices. It asserted that a duly confirmed ledger had been furnished to the AO on 22.01.2024 and was ignored. It further relied upon audited books, the absence of their rejection, the AO’s power of verification u/s 131/133(6), comparative net-profit rates, and contended that section 69 was inapplicable because the purchases stood recorded in the books.

During appellate proceedings, the Assessee furnished, inter alia, a fresh debit note on Afcons’ letterhead; month-wise and detailed date-wise purchase break- ups; a confirmed ledger for the subsequent F.Y. 2022-23; and a confirmation letter dated 06.03.2024 regarding the purchases and their recovery/adjustment. The Ld. Commissioner while relying upon these documents, held that the identity, business activity and genuineness of the supplier stood established, and therefore deleted the addition. The impugned order does not disclose that these documents were forwarded to the AO or that a remand report was called for.

Thus, the Revenue, in its grounds before the Tribunal, challenges the deletion on the ground that the Assessee failed to establish the genuineness and source of the alleged investment. It specifically points to the absence of purchase bills, delivery challans, transportation receipts, weighment slips, stock records and corresponding sales/work records. Its principal procedural objection is that fresh evidence was accepted without independent verification and without affording the AO an opportunity under Rule 46A of the Income-tax Rules, 1962 (‘the Rules’).

The Ld. DR relied upon the assessment order and the Revenue’s grounds and submitted that the documents were

The Ld. AR, on the contrary, submitted that the confirmed ledger was already before the AO and the later documents merely corroborated the same transaction. The Ld. AR also placed reliance upon the following judgements: i. International Tractors Ltd. v. DCIT (LTU) [2021] 127 taxmann.com 822 (Delhi)/435 ITR 85 (Delhi){specifically para nos. 12 to 17} and ii. Smt. Prabhavati S. Shah v. CIT [1998] 231 ITR 1 (Bombay).

We have heard the parties and perused the material available on record and given thoughtful consideration to the rival claims of the parties.Rule 46A(1) restricts an appellant from producing evidence not produced before the AO except in the circumstances specified in clauses (a) to (d). Sub-rule (2) requires written reasons for its admission. Sub-rule (3) mandates a reasonable opportunity to the AO to examine the evidence and produce material in rebuttal. Section 250(4), read with Rule 46A(4), independently enables the Ld. Commissioner to direct further inquiry or production of evidence; however, the record must show that such power was exercised by the appellate authority and not used merely to receive evidence tendered by the appellant without the safeguards under Rule 46A(1) to (3).

The decision in International Tractors Ltd. (supra) is distinguishable. There, the supporting report and details were placed before the AO, who declined the fresh claims principally because no revised return had been filed; the CIT(A) thereafter scrutinised the material in exercise of power u/s 250(4). The Hon’ble High Court held that a remand required identification of what was wrong or missing in that scrutiny. Here, the missing examination is specific: authenticity of the new third-party documents, their reconciliation with the Assessee’s books and contract receipts, and verification of the claimed recovery/adjustment trail.

Thus, without expressing any opinion on the genuineness of the purchases or the applicability of sections 69 and 115BBE, the impugned order qua this issue is set aside. The case is thus, remanded to the file of the Ld. Commissioner for decision afresh.

The Ld. Commissioner shall identify the evidence not produced before the AO; decide its admissibility under Rule 46A by a reasoned order; forward it to the AO; allow necessary third-party verification and a remand report; and permit the Assessee to respond. The seller ledger, debit note, purchase break-ups, subsequent-year ledger, confirmation dated 06.03.2024, bank/adjustment trail and the objections concerning primary supporting records shall be examined.

All legal and alternative contentions shall thereafter be decided by a speaking order after affording both parties a

In the result, the appeal filed by the Revenue is allowed for statistical purposes.