DEPUTY COMMISSIONER OF INCOME TAX vs. AUTOCOMPS ENGINEERING (PUNE) PVT.LTD,, PUNE

आदेश / ORDER PER ANIL CHATURVEDI, AM :

This appeal filed by the Revenue is emanating out of the order of 1. Commissioner of Income Tax (A) – 9, Pune dated 20.09.2016 for the assessment year 2005-06.

Assessee is a company stated to be engaged in the business of manufacturing of job work of industrial items. Assessee filed its return of income for A.Y. 2005-06 on 16.11.2005 declaring loss of Rs.34,81,781/-. The return of income was initially processed u/s 143(1) of the Act.

Subsequently, notice u/s 148 of the Act was issued on 31.03.2008 and

served on the assessee on 02.04.2008. Thereafter, the case was taken up

for scrutiny and assessment was framed u/s 144 r.w.s. 147 of the Act

vide order dated 30.11.2009 and the total income was determined at

Rs.91,31,220/-. Aggrieved by the order of AO, assessee carried the matter

before Ld.CIT(A), who vide order dt.29.09.2016 (in appeal No.PN/CIT(A)-

9/DCIT, Cir.8/93/2009-10) allowed the appeal of assessee. Aggrieved by

the order of Ld.CIT(A), Revenue is now in appeal before us and has raised

the following grounds :

“1. Whether on the facts and circumstances of the case the Ld. CIT(A) erred in deleting the addition of Rs.1,26,13,000/- made u/s.41(2) & 28(iv) of the IT Act which provide that the cessation of liability of payment of interest & principal is deemed income. 2. Whether on the facts and in the circumstances of the case, the Ld.CIT(A) was justified in holding that the remission/ cessation of loan liability is a capital receipt overlooking Hon'ble decision of Madras High Court in the case of CIT Vs. Ramaniyam Homes (P) Ltd. Tax appeal No.278 of 2014 which held after distinguishing cases relied on by CIT(A) that the waiver of loan liability is a taxable receipt under section 28(iv) & 41 (2) of IT Act. 3. Whether on the facts and circumstances of the case. the Ld. CIT(A) erred in admitting the submission of assessee & therefore, violated the Rule 46A of IT Act.”

attended on behalf of the assessee nor any adjournment application was

filed though notice of hearing was served on assessee. On the date of

present hearing also none appeared on behalf of the assessee nor any

adjournment application was filed. We therefore proceed to dispose of the

appeal ex-parte qua the assessee on the basis of material available on

record and after hearing the Ld. D.R.

the AO u/s 144 r.w.s. 147 of the Act meaning thereby that the order of AO

was an ex-parte order based on the material available with him. AO had

issued notice for re-opening as it was noticed that assessee had entered

into one time settlement with Vidya Sahakari Bank wherein assessee had

settled the loan account resulting into cessation of liability. During the re-

assessment proceedings despite various opportunities granted by AO,

assessee did not furnish the requisite details and therefore AO made

addition of Rs.1.26 crore (rounded off) u/s 28(iv) and 41(2) of the Act.

When the mattered was carried by the assessee before Ld.CIT(A) he

submitted that Ld.CIT(A) while deciding the issue has stated that the loan

liability was taken over by the erstwhile Directors of the company and it

is not a case of remission per se. He submitted that such facts were never

available with the AO while passing the order and Ld.CIT(A) admitted the

submission of the assessee without calling for the remand report from the

AO and thus there was violation of principles of natural justice and

violation of Rule 46A of the Act. He therefore submitted that the order of

the AO be upheld. In the alternate, he submitted that the matter may be

remanded back to the file of Ld.CIT(A) to decide the issue afresh after

complying with the provisions of Rule 46A of I.T.Rules.

record. In the present case, the issue is with respect to addition made u/s

41(2) & 28(iv) of the Act by the AO which were deleted by Ld CIT(A). It is

an undisputed fact that assessee had entered into one time settlement of

its loan account with Vidya Sahakari Bank Ltd. The benefit derived by the

assessee on the entering of one time settlement was taxable in the opinion

of AO. It is also a fact that before AO, no evidence was placed by the

assessee to justify the non-taxability of the benefit earned by it. AO

accordingly in the order passed u/s 144 of the Act made the addition.

When the matter was carried before Ld.CIT(A), he granted relief to the

assessee. Before us, one of the grounds raised by the Revenue is violation

of provisions of Rule 46A of the Income Tax Rules. At this moment it would

be relevant to refer to provisions of Rule 46A which reads as under:

“Production of additional evidence before the [Deputy Commissioner (Appeals)] [and Commissioner (Appeals)].

(1) The appellant shall not be entitled to produce before the [Deputy 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 [Deputy Commissioner (Appeals)] [or, as the case may be, the Commissioner (Appeals)] records in writing the reasons for its admission.

(3) The [Deputy 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 ITA Nos.1922 to 1927/Ahd/2012 ITO vs. vs. Rahul A.Saboo & Others Asst.Year – 2009-10 - 14 –

(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 [Deputy 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.”

scheme of the act, no appeal is being provided at the end of Revenue

against the assessment order before CIT(A)] shall not be entitled to

produce any evidence before the first appellate authority either oral or

documentary unless the conditions enumerated in clause (a) to (d) of sub

rule exists. Under clause (a) it has been provided that the assessee can be

permitted to produce additional evidence which ought to have been

admitted by the AO, but he refused to admit. Clause (b) provides that

where the assessee was prevented by sufficient cause from producing the

evidence which was called upon to produce by the AO, clause (c) and (d)

provide that if the assessee was prevented by sufficient cause from

producing any evidence which is relevant to any ground of appeal or the

AO has made the order appealed against without giving sufficient

opportunity to the assessee to adduce evidence relevant to any ground of

appeal, then CIT(A) would admit additional evidence. The next requirement

to be followed by the Ld first appellate authority is that the admission of

additional evidence on the record is by way of an order in writing along

with the reasons for its admission. Once the evidence is being admitted

then an opportunity to the AO would be granted to rebut that evidence as

contemplated in sub rule 3. Sub rule 4 is an explanation to all these

situations, the Ld Commissioner for the just decision of an appeal can

direct any party to submit any evidence that is either to the assessee or to

the AO. The comments of the AO in that case would not be required to be

called for. Perusal of sub rule 3 indicate that the CIT(A) shall not take into

account any fresh evidence filed by the Assessee before him unless the AO

has been allowed “a reasonable opportunity” to examine such evidence or

documents etc filed by the assessee or to produce any evidence or

document etc in rebuttal of such additional evidence produced by the

assessee. Thus it is divulged that unless the AO is allowed “a reasonable

opportunity” to do this, the CIT(A) cannot take into account such

additional evidence produced by the assessee before him. The expression

“a reasonable opportunity”, as held by various authorities, would mean an

effective opportunity and not a mere eye wash.

Remand Report from the AO. It is Revenue’s contention that the Assessee

has filed additional evidences. In view of the provisions of the Act and in

the interest of justice we are of view that the issue of addition made by the

AO needs to be set aside to the file of Ld.CIT(A) for him to re-decide the

issue after complying with the requirements of Rule 46A of the I.T Rules,

1962 and in accordance with law and therefore we, without deciding the

issue on merits, restore the issue back to the file of Ld.CIT(A). Thus,

grounds of Revenue are allowed for statistical purposes.

Order pronounced on 1st day of August, 2019.

Sd/- Sd/- (SUSHMA CHOWLA) (ANIL CHATURVEDI) �या�यक सद�य / JUDICIAL MEMBER लेखा सद�य / ACCOUNTANT MEMBER

पुणे Pune; �दनांक Dated : 1st August, 2019. Yamini

आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent 3. CIT(A)-9, Pune. 4. Pr. CIT-5, Pune. 5 �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, “बी” / DR, ITAT, “B” Pune; गाड� फाईल / Guard file. 6.

आदेशानुसार/ BY ORDER

// True Copy //

व�र�ठ �नजी स�चव / Sr. Private Secretary आयकर अपील�य अ�धकरण ,पुणे / ITAT, Pune.