COMMISSIONER OF INCOME TAX-I LUDHIANA vs. M/ SAFARI BIKES LTD.

This appeal has been preferred by the revenue under Section 260A of the Income tax Act, 1961 (in short, “the Act”) against the order dated 26.8.2011, Annexure A-III passed by the Income Tax Appellate Tribunal, Chandigarh Bench 'B', Chandigarh in ITA No.287/CHD/2011 for the assessment year 2007-08, claiming following substantial questions of law:- “1. Whether ITAT was correct in law as well as in the circumstances of the case by upholding the order of CIT(A) that Assessing Officer has recomputed the income of the assessee while doing the verification of the additional evidence and consequent submission of report under Rule 46A to the CIT(A), while ignoring the finding of the Assessing Officer that additional evidence cannot be admitted as assessee's case does not fall in any of the four conditions as laid down in Rule 46A?

Whether the ITAT was correct in law while upholding the order of CIT(A) and ignoring that CIT(A) has not recorded any reason for admission of additional evidence as sufficient detailed opportunity was given to the assessee by AO which is verifiable from the record?

Whether ITAT was correct in law as well as in the circumstances of the case that the suo motu reason assumed by the assessee for non-submission of evidence before AO alleging that no notice under section 143(2) was served by the juri iction AO, was adjudicated by the CIT(A) vide order dated 3.12.2010 in favour of the revenue, therefore, no plausible reason remains out of the four conditions laid down in Rule 46A having potential of preventing the assessee to submit the evidence. Hence neither any reason exists, nor it was recorded by the CIT(A) for admitting the additional evidence?

Whether ITAT was correct in law in upholding the order of CIT(A) ignoring the fact that order of CIT(A) was perverse and erroneous as it has been passed by ignoring the provisions contained in Rule 46A of IT Rules by not recording the mandatory reason for admitting the additional evidence and only unilaterally relying on the verification/finding of the AO's report, while the same report of the AO emphatically point out that sufficient and reasonable opportunity has been given to the assessee for submitting the evidence hence, the merits of the case does not allow the additional evidence to be admitted?

Whether ITAT was correct in law in confirming the order of CIT(A) ignoring that law of natural justice has not been followed as Assessing officer has not been given the opportunity of being heard that in which one of the four conditions laid down under Rule 46A the assessee's case fall, so that Revenue being effected party in the instant case may be able to plead the arguments taken by the appellant before the CIT(A)?

Briefly, the facts as narrated in the appeal may be noticed. The respondent-assessee is a company engaged in the business of manufacturing, trading and export of complete bicycle and cycles' parts. It filed its return of income for the assessment year 2007-08 on 31.10.2007 declaring income of ` 22,89,200/-. Vide order dated 15.12.2009, Annexure A.I, the assessment was completed by the Assessing Officer under Section 143(3) read with Section 144 of the Act at the total Income of ` 1,38,48,123/-. Aggrieved by the order, the assessee filed an appeal before the Commissioner of Income tax (Appeals) [CIT(A)]. The CIT(A) vide order dated 3.12.2010, Annexure A.II, partly allowed the appeal, upholding the revenue's contention that in view of its order dated 12.2.2008 to the effect that all the Assessing Officers within a range would have concurrent juri iction over all the cases in their respective ranges, the notice issued under section 143(2) of the Act was a valid notice even though the juri iction in the case laid with ACIT, Circle I, Ludhiana. The assessee filed written submissions/additional evidence before CIT(A) who forwarded the same to ACIT, Circle I, Ludhiana for his comments and remand report. The ACIT, Circle I, Ludhiana vide letter dated 13.10.2010 submitted reply to the effect that the application for admission of additional evidence be rejected and requested to send the comments after 31.12.2010. Again the CIT(A) vide letter dated 19.10.2010 directed the Assessing officer to send comments on additional evidence on merits after examining the books of account of the appellant. The Assessing Officer while sending the report reiterated that the application of the assessee for admission of additional evidence under Rule 46A of the Income Tax Rules, 1962 (for brevity, “the Rules”) deserved to be rejected. Vide order dated 3.12.2010, the CIT(A) admitted the additional evidence furnished by the assessee holding that due to confusion about the juri iction led to non-compliance of various notices issued by the Assessing Officer and thus led to ex parte assessment under Section 144 of the Act. In view of report of Assessing officer dated 15.11.2010, the additions made vide order under section 143(3) read with section 144 of the Act were deleted and income computed vide letter dated 15.11.2010 was upheld by the CIT(A). Aggrieved by the order, the Revenue filed appeal before the Tribunal. Vide order dated 26.8.2011, Anenxure A.III, the appeal as well as cross objections of the assessee were dismissed. Hence the present appeal by the Revenue only.

The primary issue that arises for consideration is whether the CIT(A) as well as the Tribunal were right in accepting the report of the Assessing Officer which was sought by the CIT(A) in view of the application filed by the Assessee under Rule 46A of the Rules seeking to adduce additional evidence. It was claimed by the assessee that it could not appear before the Assessing Officer at the time of individual assessment on account of confusion about the juri iction of the Assessing Officer and therefore, the Assessing Officer had taken recourse to the provisions of Section 144 of the Act. The Assessing Officer while submitting his remand report which had been sought by the CIT(A) came to the conclusion that only an amount of ` 25,19,352/- could be computed as Income of the assessee instead of ` 1,38,48,123/- as has been computed by the Assessing Officer while framing assessment under section 143(3) read with section 144 of the Act. The only grievance of the revenue is that the additional evidence could not have been allowed by the CIT(A) and thus, addition which has been deleted was uncalled for.

After hearing learned counsel for the revenue and perusing the record, we do not find any merit in the aforesaid contention. Learned counsel for the revenue was unable to justify ex parte assessment under Section 144 of the Act except to urge a technical plea that the conditions specified in Rule 46A of the Rules were not complied with in letter and spirit while allowing permission to the assessee to lead evidence. According to the revenue, it was the assessee who had not appeared before the Assessing Officer and not that Assessing officer had failed to provide sufficient opportunity.

We do not find any merit in the contention of learned counsel for the appellant-revenue. The assessee was prevented by sufficient cause in not appearing before the Assessing Officer while framing the assessment under Sections 143(3) read with 144 of the Act due to confusion relating to the juri iction of the Assessing Officer. Moreover, learned counsel for the revenue was unable to substantiate on merits that the additions made in the original assessment order were justified.

No question of law much less substantial question of law arises in the appeal. Accordingly, the same is dismissed. (Ajay Kumar Mittal)