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Before: SHRI PAWAN SINGH & SHRI PRABHASH SHANKAR
PER PRABHASH SHANKAR [A.M.] :- The above captioned appeals have been filed by the assessee against the orders of even date as passed by the Learned Commissioner of Income- tax, Appeal, ADDL/JCIT(A)-2, Kolkata [hereinafter referred to as “CIT(A)"] pertaining to intimation orders passed u/s.143(1) of the Income- tax Act, 1961 [hereinafter referred to as “Act"] for the Assessment Years [A.Y.] 2020-21 and 2021-22. Since the issues are common and also the fact that appeals were heard together, they are being taken up together for adjudication vide this composite order for the sake of brevity. We take up
the appeal for AY 2020-21 first.
The grounds of appeals are as under:
On the facts and the circumstances of the case and in law, the Learned Commissioner of Income Tax (Appeals) erred in confirming the addition of Rs.13,67,83,660/- on account of contingent liabilities, made by CPC while processing the return u/s 143(1) of the Act.
Both the lower authorities failed to consider that the addition was without juri iction, as no “Notice of proposed adjustment” was served on the appellant.
Both the lower authorities failed to consider that, the addition made in the intimation order u/s 143(1) in respect of “Contingent Liabilities” is beyond the juri iction of CPC u/s 143(1) of the Act.
On the facts and the circumstances of the case and in law, the Learned Commissioner of Income Tax (Appeals) failed to consider that the said amount of Rs.13,67,83,660/- was neither debited to profit and loss account, nor it was claimed as a deduction.
On the facts and the circumstances of the case and in law, both the lower authorities failed to consider that “Contingent Liabilities” were reported in the audited financials as under: Contingent Liabilities not provided for Amount (Rs) Letters of credit outstanding 5,80,23,255 Bank Guarantee Issued 3,99,68,666 Income Tax Matters 2,33,64,073 Sales Tax Matters 1,54,27,666 Total 13,67,83,660. 6. Having regard to the facts and circumstances of the case and the provisions of law, the appellant submits that the addition of Contingent Liability of Rs. 13,67,83,660/- is uncalled for and requires to be deleted, even though in the original 143 (1) (a) only an amount of Rs.12,68,29,840 was considered by CPC.
Without prejudice to all the forgoing grounds, the Learned Commissioner of Income Tax (Appeals) erred in not granting a video conference hearing, which was requested for by the appellant.
Brief facts of the case are that the assessee is a Public limited company engaged in the business of mining and trading of steel and other metal ores. The original return was filed on 31.03.2022 declaring total income of Rs.4,64,43,800/- which was processed and an intimation u/s 143(1) of the Act passed by CPC, Bengaluru was issued with certain additions/disallowances resulting in increase in total income to Rs.20,21,01,390/-. The assessee filed an appeal before ld. CIT(A) who gave relief on all other grounds except the ground of Contingent liability amounting to Rs.15,21,93,806/- which was added by the CPC and is the only bone of contention in the instant appeal.
According to the appellate order, it was submitted before him by the assessee that the addition made by the CPC of Rs.15,21,93,806/- on the basis of the Tax Audit Report was not in accordance with law and without appreciating the relevant facts. It inter alia relied on the decision given by the hon'ble Delhi ITAT in the case of DCIT Vs. Dwarikadhish Spinners Ltd (I.T.A. Nos.4782 & 4783/Del/2012) wherein it has held that, “However, it is a matter of record that this liability has not been debited to the Profit and loss account. Under such situation we agree with the Ld. CIT(A) that Assessing Officer has not justified. In adding the contingent liability of Rs.329.54 lacs without verifying the profit and loss account and balance sheet of the assessee company for the concerned period. Assessing Officer has failed to comprehend the Accounting treatment in this regard. Under the circumstances, we do not find any infirmity in the order of the Ld. CIT(A) that the contingent lability added by the Assessing Officer is liable to be deleted."
1 The ld.CIT(A) observed that the assessee was specifically asked for detailed break-up of the liabilities. However, it uploaded only the copy of the annual report. Break up or any ledger copy showing the amount of Letter of Credit Outstanding, Bank Guarantee or Income tax matters had not been furnished. The assessee also did not furnish any document to show how the amount of outstanding Letter of credit of Rs. 6,71,52,098/- had been arrived at. As per the Annual Report, the assessee had not provided and considered huge interest income from a company namely M/S Samruddha Resources Ltd amounting to Rs. 13,44,85,948/-. The assessee had not informed whether the Outstanding Letter of Credit was related to the above party or not. Also, it did not inform whether the Bank Guarantee was provided for self or some other parties. Further, it had also not furnished any document relating to Bank guarantee and income tax matters. He finally concluded that without verifying the above, it could not be confirmed how those huge contingent liability had been accumulated as duly reported by the auditor in the Tax Audit Report. It is also pointed out that the assessee had not furnished as to on what basis, the Auditor mentioned the same in the Tax Audit Report. From the TAR, it was apparent that the assessee was required to add the amount in the computation of Business Income. Hence, the explanation that the amount of liability was not required to be added was not found acceptable. In view of the above, the appeal was dismissed by him.
Before us, the ld.AR has made a detailed submission in support of the above mentioned grounds of appeal. However, we find it necessary at the outset to ponder over the request for admission of Additional evidence vide letter dated 18.06.2025. It is stated that the assessee had also amended the TAR issued u/s.44 AB of the Act dated 13.06.2025 and issued a certificate dated 14.06.2025 by way of clarification with a request in the interests of justice to admit the said additional evidence. It is contented that the only reason that it was not submitted earlier was a bonafide belief, held by the company that the mistake was so apparent that it did not require a clarification. A letter from the Tax Auditors P.P.Jayraman and Co. dated 14.06.2025 is also placed on record in which they have admitted that there was inadvertent mistake in the TAR filed originally, stating that no amount was required to be reported under clause 21(g) of Form 3CD as none of the amounts were debited to the profit and loss account nor any amount had been claimed as deduction.
1 The ld.CIT(DR) objected to the additional evidence as the same was not produced before any of the lower authorities. However, he submitted that the entire issue needs to be remitted back to the AO for due verification of the grounds as well the additional evidences.
We have carefully considered the contents of the application for admission of additional evidence. We find from the records that before the lower authorities the assessee never raised this issue of inadvertent mistake on part of the Tax Auditors. Rather, it contested the adjustment u/s 143(1) on merits only, claiming that the impugned amount being Contingent liability was incorrectly added as it was neither claimed as deduction nor was debited to the profit and loss account. It was also claimed that the assessee was neither issued any show cause notice before making the adjustment by the CPC nor its replies were not duly considered.
1 On careful appreciation of all the relevant facts of the case, we notice that the whole issue revolves around the alleged misreporting in the TAR which is now being admitted as a bonafide mistake and in such a situation and also in view of the admission of the Tax Auditor of having committed inadvertent mistake, the additional evidence filed before us appears to be very germane having nexus with the facts of the case and very vital and essential for the fair and just resolution of the lis involved in this appeal. We think it is very vital and essential for deciding the second appeals fairly and justly. Various Courts have opined that if additional evidence has nexus with the facts of the case and the appellate authority is of the opinion that the lis/controversy cannot be decided without appreciating and evaluating the additional evidence, then the same can be admitted in order to dispense substantial justice to the parties before it. The Courts have held that additional evidence should be admitted if it was vital and essential for the purpose of consideration of the subject matter of appeal and to arrive at a final and ultimate decision in a fair and just manner. Further, the Tribunal under Rule 29 has the power to admit additional evidence in the interest of justice as also if there existed substantial cause. In this connection, we may refer to Rule 29 of the Appellate Tribunal Rules, 1963 which runs as under :- "The parties to the appeal shall not be entitled to produce additional evidence either oral or documentary before the Tribunal, but if the Tribunal requires any document to be produced or any witness to be examined or any affidavit to be filed to enable it to pass orders or for any other substantial cause, or, if the income-tax authorities have decided the case without giving sufficient opportunity to the assessee to adduce evidence either on points specified by them or not specified by, them, the Tribunal, for reasons to be recorded, may allow such document to be produced or witness to be examined or affidavit to be filed or may allow such evidence to be adduced."
2 If one analyses the language of this rule what emerges is that although no right is vested in the parties to an appeal before the Tribunal to produce additional evidence whether oral or documentary, if the Tribunal required any document to be produced or witnesses to be examined or affidavit to be filed, it may for reasons to be recorded, do so. However, it is not as if this power vested in the Tribunal is arbitrary or unbridled. This rule itself prescribes the contingencies under which the exercise of such power is permissible. One such situation is whether the taking of additional evidence 'enables the Tribunal to pass orders' or 'for any other 'substantial cause'. It would, thus, be noticed that where additional evidence enables the Tribunal to pass orders or for any other 'substantial cause' it could require the parties to do so. There is no gain saying that while this power could be exercised by the Tribunal suo motu, the juri iction vested in the Tribunal could be got invoked at the instance of one of the parties before it.
3 In this connection, reference may be made to a decision of the Apex Court in the case of K. Venkataramiah v. A. Seetharama Reddy AIR 1963 SC 1526, wherein the hon'ble Supreme Court had occasion to interpret and outline the object of rule 27 of the Order 41 of the Civil Procedure Code, 1908. Interestingly, the language of Order 41 Rule 27 CPC and Rule 29 of the Appellate Tribunal Rules are almost the same inasmuch as with a little different wording. Rule 27 of Order 41 of the CPC also says that parties to an appeal shall not be entitled to produce additional evidence whether oral or documentary, in the Appellate Court. But, if, inter alia, as provided by clause (b) of clause (1) of rule 27 of Order 41 CPC the 'Appellate Court' requires any document to be produced or any witness to be examined to enable it to 'pronounce judgment' and for any 'other substantial cause', the Appellate Court may allow such evidence or document to be produced. In K. Venkataramiah's case (supra), the Hon'ble Supreme Court held as under :- "Under Rule 27(1), the Appellate Court has the power to allow additional evidence not only if it requires such evidence to enable it to pronounce judgment', but also for 'any other substantial cause'. There may well be cases where even though the Court finds that it is able to pronounce judgment on the stage of record as it is, and so it cannot strictly say that it requires additional evidence to enable it to pronounce judgment, it still considers that in the interest of justice something which remains obscure should be filled up so that it can pronounce its judgment in a more satisfactory manner. Such a case will be one for allowing additional evidence for any other substantial cause under rule 27(1)(b) of the Code. Such requirement of the Court is not likely to arise ordinarily unless some inherent lacuna or defect becomes apparent on an examination of the evidence. It may well be that the defect may be pointed out by a party, or that a party may move the Court to supply the defect, but the requirement of the Court upon its appreciation of the evidence as it stands. Held on facts that the High Court allowed additional evidence to be admitted as it required such evidence either to enable it to pronounce judgment or for any other substantial cause within the meaning of R. 27(1)(b) of O. 41 of the Code."
4 The powers that are vested in the Appellate Tribunal in the matter of admission of additional evidence, therefore, are identical to the power vested in an Appellate Court under the Civil Procedure Code. The two provisions as has been noticed are not only similar but identical and that being so the view taken by the Hon'ble Supreme Court while interpreting the relevant CPC provision applies in law with equal force to the Appellate Tribunal while exercising powers under rule 29 of the Appellate Tribunal Rules, 1963.However, it may be stated that once additional evidence is required to be admitted, there could be no gainsaying that the department should be afforded reasonable opportunity of rebutting it. Audi alteram Partem is a valuable right of the parties to any lis. Nobody can be or should be condemned unheard is one of the strongest edifices on which the entire administration of justice stands.
5 We have gone through the documents which are part of additional evidence and we are of the opinion that they are required to be admitted by this Tribunal as they have a close relation and nexus with the facts of the case and are very vital and essential for deciding the second appeals fairly and justly. Therefore, we of the opinion that the cause of justice will be better served, if additional evidence is admitted in terms of Rule 29 of Rules of 1963 and we, therefore, admit the same, because those documents have a nexus with the facts of the case and also very vital and essential for proper appreciation, consideration and adjudication of the lis/controversy involved.
6 Accordingly, as the Assessing Officer has not got opportunity to consider these evidences, thus in the interest of justice, we are of considered opinion entire matter needs to be restored to the AO for considering it afresh. Accordingly, we set aside the appellate order and remit the issue in dispute to the AO for deciding it afresh in the light of additional evidence submitted by the assessee and in accordance with the law. The AO is directed to provide sufficient opportunity of hearing to the assessee who, in turn, is also directed to submit all the evidences before him. Accordingly, this grounds of appeal are allowed for statistical purpose.
ITA No.2902/MUM/2025 (A.Y. 2021-22)
On the facts and the circumstances of the case and in law, the Learned Commissioner of Income Tax (Appeals) has erred in confirming the addition of Rs.15,21,93,806/- on account of contingent liabilities, made by CPC while processing the return u/s 143(1) of the Act.
Both the lower authorities failed to consider that the intimation u/s 143(1) was without juri iction, as the appellant's reply to the notice of proposed adjustment was ignored.
Both the lower authorities failed to consider that, the addition made in the Intimation order u/s 143(1) in respect of “Contingent Liabilities” is beyond the juri iction of CPC u/s 143(1) of the Act.
On the facts and the circumstances of the case and in law, the Learned Commissioner of Income Tax (Appeals) failed to consider that the said amount of Rs.15,21,93,806/- was neither debited to profit and loss account, nor it was claimed as a deduction.
On the facts and the circumstances of the case and in law both the lower authorities failed to consider that “Contingent Liabilities” were reported in the audited financials as under: Note No. 32 Standalone financials for March 31, 2021. Contingent Liabilities Not Provided For 31.03.2021 Amount (Rs) Letters of credit outstanding 6,71,52,098 Bank Guarantee Issued 4,42,61,944 Income Tax Matters 2,33,63,988 Sales Tax Matters 1,74,15,776 Total 15,21,93,806
Having regard to the facts and circumstances of the case and the provisions of law, the appellant submits that the addition of Rs.15,21,93,806/- is uncalled for and requires to be deleted.
Without prejudice to all the forgoing grounds, the Learned Commissioner of Income Tax (Appeals) erred in not granting a video conference hearing, which was requested for by the appellant.
As stated in preceding paras that the issues involved in both the appeals of the assessee are exactly identical, barring figures here and there, our decision in respect of appeal for AY 2020-21 in para 6.6 above would apply mutatis mutandis in the instant appeal as well. Accordingly, the appeal alongwith additional evidence are remanded back to the file of the AO for deciding afresh, thus allowing the appeal for statistical purposes.
In the result, both the appeals are allowed for statistical purposes. Order pronounced in the open court on 02.07.2025. PAWAN SINGH (न्यायिक सदस्य / JUDICIAL MEMBER) Place: मुंबई/Mumbai दिनांक / Date 02.07.2025 Lubhna Shaikh / Steno PRABHASH SHANKAR (लेखाकार सदस्य/ACCOUNTANT MEMBER) आदेश की प्रतिलिपि अग्रेषित/