JCIT, TRICHY vs. THE TIRUCHIRAPALLI DISTRICT CENTRAL CO-OPERATIVE BANK LTD, TRICHY

आयकर अपीलीय अधिकरण ‘बी’ न्यायपीठ, चेन्नई। IN THE INCOME TAX APPELLATE TRIBUNAL ‘B’ BENCH: CHENNAI माननीय श्री जॉजज जॉजज के.,उपाध्यक्ष एवं श्री गगन गोयल लेखा सदस्य के समक्ष BEFORE HONOURABLE GEORGE GEORGE K., VICE PRESIDENT AND SHRI GAGAN GOYAL, ACCOUNTANT MEMBER आयकर अपील सं./ITA No. 1499/Chny/2026 ननिाजरण वर्ज /Assessment Years: 2020-21 Joint Commissioner of Income Tax, v. The Tiruchirappalli District Circle-1, Central Cooperative Bank Ltd., Trichy. No.324, Fort Station Road Trichy, Tiruchirappalli, Tamil Nadu – 620 002. [PAN: AAAAT5036C] (अपीलार्थी/Appellant) (प्रत्यर्थी/Respondent) अपीलार्थी की ओर से/ Assessee by : Mr. N. Arjun Raj, Advocate, Ld. AR प्रत्यर्थी की ओर से /Revenue by : Mr. Shiva Srinivas, CIT, Ld. DR सुनवाईकीतारीख/Date of Hearing : 03.07.2026 घोषणाकीतारीख /Date of Pronouncement : 29.07.2026 आदेश / O R D E R PER GAGAN GOYAL, AM: This is an appeal preferred by the Revenue against the order of Ld. Commissioner of Income Tax (A), / NFAC, (hereinafter referred as the ‘Ld. CIT(A)’), Delhi dated 22.01.2026 for the Assessment Year (hereinafter referred as the ‘AY’) 2020-21.

GROUNDS OF APPEAL (1) The order of the Ld. CIT (A) is opposed to law on the facts and in the circumstances of the case. (2) The Ld. CIT (A) failed to consider the provision of clause (a) of section 251(1) of the Act in which assessment made u/s 144 alone can be set-aside and refer back to the Assessing Officer for making fresh assessment. (3) The Ld. CIT (A) erred by setting aside and referring back to the Assessing Officer in the instant case which was made u/s 143(3) read with section 144B of the Act.

(4) The Ld. CIT (A) erred in setting aside the disallowance made u/s 40(a) (ia) towards interest payments of Rs. 35, 63, 19,214/- and remitting the matter back to the Assessing Officer on the basis of additional evidences filed by the assessee during the appellate proceedings without providing an opportunity to the Assessing Officer in gross violation of Rule 46A of the Income Tax Rules, 1962. (5) The Ld. CIT (A) erred in setting aside the disallowance made u/s 40(a) (ia) towards rent payments of Rs. 6, 58,072/- and remitting the matter back to the Assessing Officer on the basis of additional evidences filed by the assessee during the appellate, proceedings without providing an opportunity to the Assessing Officer in gross violation of Rule 46A of the Income Tax Rules, 1962. (6) The Ld. CIT (A) erred in setting aside the disallowance made u/s 40(a) (ia) towards audit fees of Rs. 1, 46,766/- and remitting the matter back to the Assessing Officer on the basis of additional evidences filed by the assessee during the appellate proceedings without providing an opportunity to the Assessing Officer in gross violation of Rule 46A of the Income Tax Rules, 1962. (7) The Ld. CIT(A) erred by not satisfying the requirement of Rule 46A of the Income Tax Rules 1962 by admitting and accepting additional evidences without Assessing Officer furnishing his comments and without verification, as held in CIT Vs Manish Buildwell (P) Ltd. (2011) 16 taxmann.com 27 (Delhi) dated 15.11.2011. (8) For these and such other grounds that may be adduced at the time of hearing and it is prayed that the order of the Ld. CIT (A) may be reversed and that of the Assessing Officer be restored. 2. The brief facts of the case are that the assessee filed its return of income on 22.03.2021 declaring a total income of Rs. 14, 40, 13, 080/-. The case was selected for scrutiny under CASS for the reasons as under:

i) High liability as compared to low income / receipts. ii) Lower amount disallowed u/s. 40(a) (ia) in ITR in comparison to default found u/s. 201 as per data received form CIT (CPC-TDS). iii) Demand raised u/s. 201 for no deductions or short deductions. The assessee is a cooperative bank mainly engaged in receiving deposits from public, lending money to agriculturists on the pledge of jewels, purchase of tractors and agricultural implements etc. During the year under consideration the assessee has derived its income under the head Profits and Gains from Business and Profession. Ultimately, the return of the assessee was assessed after making following additions / disallowances as under:

Description Amount (Rs.) Income as per latest order 14,40,13,080/- Add: Disallowance u/s. 40(a) (ia) as per para 3.5 for not deducting 35, 63, 19, 214/- TDS on interest. Add: Disallowance u/s. 40(a) (ia) as per para 3.8 3,45,124/- Add: Disallowance u/s.40(a) (ia) as per para 3.11 for not deduction 6,58,072/- TDS on rent Add: Disallowance u/s. 40(a) (ia) as per para 3.14 for not deduction 1,45,766/- TDS on Audit fees Total Assessed Income 50,14,81,256/- 3. The assessee being aggrieved with the same preferred an appeal before the Ld. CIT (A) who in turn Partly Allowed the appeal of the assessee for statistical purposes. Now, the Revenue being aggrieved with this order of the Ld. CIT (A) preferred the present appeal before us. We have gone through the order of the AO, the order of the Ld. CIT (A) and the submissions of the Revenue along with grounds taken before us. It is observed that the whole issue on which the Revenue is aggrieved pertains to setting aside the matter back to the file of the AO in contravention of the provisions of section 251(1) (a) of the Act. It is further observed that technically with this order of Ld. CIT (A) there cannot be any grievance to the Revenue as none of the grounds raised by the assessee are allowed by the First Appellate Authority. Rather, in all fairness of the matter, after considering the arguments of the assessee and the order of the AO, he restored the matter back to the file of AO.

Powers of the Joint Commissioner (Appeals) or the Commissioner (Appeals). 251. (1) in disposing of an appeal, the Commissioner (Appeals) shall have the following powers— (a) in an appeal against an order of assessment, he may confirm, reduce, enhance or annul the assessment: Provided that where such appeal is against an order of assessment made under section 144, he may set aside the assessment and refer the case back to the Assessing Officer for making a fresh assessment; (aa) in an appeal against the order of assessment in respect of which the proceeding before the Settlement Commission abates under section 245HA, he may, after taking into consideration all the material and other information produced by the assessee before, or the results of the inquiry held or evidence recorded by, the Settlement Commission, in the course of the proceeding before it and such other material as may be brought on his record, confirm, reduce, enhance or annul the assessment; (b) in an appeal against an order imposing a penalty, he may confirm or cancel such order or vary it so as either to enhance or to reduce the penalty; (c) In any other case, he may pass such orders in the appeal as he thinks fit. (1A) in disposing of an appeal, the Joint Commissioner (Appeals) shall have the following powers— (a) in an appeal against an order of assessment, he may confirm, reduce, enhance or annul the assessment; (b) in an appeal against an order imposing a penalty, he may confirm or cancel such order or vary it so as either to enhance or to reduce the penalty; (c) In any other case, he may pass such orders in the appeal as he thinks fit. (2) The Joint Commissioner (Appeals) or the Commissioner (Appeals), as the case may be, shall not enhance an assessment or a penalty or reduce the amount of refund unless the appellant has had a reasonable opportunity of showing cause against such enhancement or reduction. Explanation.—In disposing of an appeal, the Joint Commissioner (Appeals) or the Commissioner (Ap- peals), may consider and decide any matter arising out of the proceedings in which the order appealed against was passed, notwithstanding that such matter was not raised before the Joint Commissioner (Appeals) or the Commissioner (Appeals), as the case may be, by the appellant. Production of additional evidence before the Joint Commissioner (Appeals) and Commissioner (Appeals). 46A. (1) The appellant shall not be entitled to produce before the Joint 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 Joint Commissioner (Appeals) or, as the case may be, the Commissioner (Appeals) records in writing the reasons for its admission.

(3) The Joint 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 Joint 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. 5. Now, in view of material vide para 4 (supra) we examined the order of the Ld. CIT (A) and observed that there is a categorical finding by the Ld. CIT (A) vide para 4.1.6, 4.1.7 and 4.1.8, page-7:

“I find merit in the appellant’s contention that adequate opportunity was not provided to furnish the voluminous data. The principles of natural justice require that a reasonable opportunity must be provided to the assessee to present its case. In the case of a bank dealing with thousands of depositors, a period of 4 days to furnish party-wise details of all interest payments is clearly inadequate. The Hon’ble Supreme Court in the case of Sahara India (Firm) Vs. CIT 300 ITR 403 (SC) has held that “the principles of natural justice are those rules which have been laid down by the courts as being the minimum protection of the rights of the individual against the arbitrary procedure that may be adopted by a judicial, quasi-judicial and administrative authority while making an order affecting those rights. These principles are intended to prevent such authority from doing injustice. In the present case, the Assessing Officer has made substantial additions aggregating to Rs. 35, 74, 68, 176/- without properly considering the submissions of the appellant and without providing adequate opportunity to furnish the required details. This is clearly violative of the principles of natural justice”. 6. In addition to the above, on the issue of petition filed by the assessee u/s. Rule 46A of the Income Tax Rules, 1962, the Ld. CIT (A) held as under:

“In the present case, the appellant has demonstrated that it was prevented by sufficient cause from producing the party-wise details of interest payments before the Assessing Officer. The appellant was given only 4 days’ time to furnish voluminous data relating to thousands of depositors across 62 branches. The data size was 98 MB, which could not be uploaded on the portal due to technical limitations. Further, the Assessing Officer has made the order without giving sufficient opportunity to the appellant to adduce evidence relevant to the grounds of appeal. The Show Cause Notice was issued on 09.09.2022 with a compliance date of 13.09.2022, and the assessment order was passed on 24.09.2022, giving the appellant very limited time to compile and furnish the required details. The Hon’ble Delhi High court in the case of CIT vs. Smt. Poonam rani 394 ITR 526 (Delhi) has held that “Rule 46A is not intended to shut out relevant evidence from the consideration of the appellate authority. The Rule only requires that the assessee should satisfy the appellate authority that he was prevented by sufficient cause from producing the evidence before the Assessing Officer. In view of the above, I am satisfied that the appellant was prevented by sufficient cause from producing the party-wise details of interest payments before the Assessing Officer. Accordingly, the petition under Rule 46A is allowed, and the additional documents filed by the appellant are admitted on record. 7. Considering the categorical findings of the Ld. CIT (A) as reproduced (supra) we do not have any doubt in our minds that the Ld. CIT (A) acted judicially and fairly, while deciding the issue under consideration, keeping in view the provisions of the Rule 46A of the Income Tax Rules, 1962, namely- Sub-Rule (1) (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 Joint Commissioner (Appeals) or, as the case may be, the Commissioner (Appeals) records in writing the reasons for its admission. As far as Sub-Rule-2 is concerned, the same is applicable in case, based on additional evidences, the Ld. CIT (A) is going to decide the matter at his own. But, in this case, as an admitted position, he restored the matter back to the file of AO with directions after considering the additional evidences, hence, there is no violation of Sub-Rule-2. As far as proviso to section 251(1) (a) of the Act is concerned, i.e. “Provided that where such appeal is against an order of assessment made under section 144, he may set aside the assessment and refer the case back to the Assessing Officer for making a fresh assessment”.

Sd/- Sd/- (जॉजज जॉजज के.) (गगन गोयल ) (GAGAN GOYAL) (GEORGE GEORGE K.) लेखा सदस्य/ACCOUNTANT MEMBER उपाध्यक्ष /VICE PRESIDENT चेन्नई/Chennai, ददनाांक/Dated: 29th July, 2026. KB आदेश की प्रततललपप अग्रेपषत/Copy to: 1. अपीलार्थी/Appellant 2. प्रत्यर्थी/Respondent 3. आयकर आयुक्त/CIT, Chennai /Madurai/Coimbatore/Salem 4. पवभागीय प्रतततनधि/DR 5. गार्ड फाईल/GF