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Facts
The Revenue's appeal arose from an assessment order where additions were made under Section 144. The CIT(A) partly allowed the assessee's appeal, deleting some additions and directing treatment of others. The Revenue appealed this decision.
Held
The Tribunal held that the CIT(A) erred in admitting additional evidence without giving the AO an opportunity for rebuttal, as required by Rule 46A of the Income Tax Rules. The Tribunal allowed the Revenue's appeal on this ground.
Key Issues
Whether the CIT(A) was justified in admitting additional evidence without providing the AO with an opportunity to examine or rebut it, in violation of Rule 46A.
Sections Cited
144, 68, 46A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “A” BENCH : BANGALORE
Before: SHRI PRASHANT MAHARISHI & SHRI SOUNDARARAJAN K.
Per Prashant Maharishi, Vice President
This appeal is filed by Asst. CIT, Circle 1(1)(1), Bengaluru (the assessee/appellant) for the assessment year 2016-17 against the appellate order passed by the National Faceless Appeal Centre, Delhi (NFAC) [ld. CIT(A)] dated 10.10.2024 wherein the appeal filed by the assessee against the assessment order passed by the ITO, Ward 7(2)(1), Bangalore u/s. 144 of the Income-tax Act, 1961 [the Act] dated 28.12.2018 was partly allowed.
The ld. AO is aggrieved with the same and has preferred this appeal raising the following two grounds of appeal:-
1. Whether in the facts and circumstances of the case, the Ld. CIT(A) was right in law in admitting the fresh details filed for the first time in appellate proceedings without allowing sufficient and meaningful opportunity to the Assessing Officer for verification of the same as provided in Rule 46A of Income Tax Rules? 2. Whether in the facts and circumstances of the case, the Ld. CIT is right in law in deleting addition made towards unsecured loans without appreciating that assessee failed to prove the genuineness of these transactions during assessment proceedings and thus, matter is required to be remitted back to Assessing Officer for verification?
At the beginning it was pointed out that the appeal filed by the revenue is delayed by 17 days. The ld. DCIT, Circle 1(1)(1), Bengaluru has submitted a petition for condonation of delay stating that pressing time barring matters and change in the incumbent in the office, the appeal filing was delayed by 17 days. The condonation petition was filed on 1.5.2025. It was further stated that the appellate order was received on 10.10.2024 and appeal was approved by the PCIT on 16.12.2024, however same got to be filed on 26/12/2024. Thus, delay of 17 days was caused. It was submitted that delay was due to sufficient cause and therefore may be condoned.
The ld. DR reiterated the same and requested for condonation of delay.
The ld. AR vehemently objected to the same.
We have considered the reasons for delay in filing of appeal by 17 days by the ld. AO. On perusal of the facts as well as the argument of the ld.
DR shows that delay was nominal and was caused due to sufficient reasons, hence the same is condoned.
The brief facts of the case show that the assessee is a partnership firm engaged in the business of contract execution, filed its return of income on 14.2.2017 at a total income of Rs.43,13,050. The case of the assessee was selected for scrutiny. During the assessment proceedings several notices were issued, but in absence of any response, an order was passed u/s. 144 on 28.12.2018 wherein the addition of unsecured loan of Rs.2,96,97,039 and also the difference in contract receipt offered for tax and contract receipt on which tax is deducted as per Form 26AS amounting to Rs.2,47,08,168 resulted into addition @ 8% amounting to Rs.19,76,653/-. Thus total income was assessed at Rs.3,59,86,742.
The assessee preferred an appeal before the CIT(Appeals), who passed an order on 10.10.2024 admitting additional evidence as per ground No.4. The ld. CIT(A) deleted the addition u/s. 68 of the Act of the unsecured loan holding the same are advances with respect to contract receipts received in advance. With respect to the difference in the contract receipt, the AO was directed to treat only Rs.2,63,34,857 as suppressed contract receipts. Thus, the appeal of the assessee was partly allowed.
The assessee preferred appeal before the coordinate Bench of the Tribunal in which came to be disposed of on 11.12.2024. Meanwhile the ld. AO filed an appeal on 26.12.2024 after
the disposal of the appeal of the assessee. In the appeal of the assessee, the addition confirmed by the ld. CIT(A) was deleted. Thus, the issue in appeal of assessee was with respect to deletion of 8% profit on suppressed contract receipt of Rs.2,63,34,857, which was decided in favour of assessee.
In the appeal of the revenue, the AO is aggrieved with deletion of addition u/s. 68 by the ld. CIT(A) by admission of the additional evidence without giving proper opportunity to the AO and in clear violation of Rule 46A of the I.T. Rules. Both the grounds in appeal of the ld. AO are on the issue of deletion of addition u/s. 68 of the Act.
The ld. DR vehemently referred to para 10.1 of the CIT(A)’s order stating that as per ground no.4, the additional evidences were admitted by the ld. CIT(A), however neither remand report was called for nor the ld. AO was given an opportunity to at least look at the evidences furnished by the assessee. She referred to the provisions of Rule 46A and submitted that there is a clear-cut violation of sub-Rule (3).
The ld. AR submitted that the CIT(Appeals) is empowered to admit the additional evidence. Thus, there is no infirmity in the order of ld. CIT(A). On merits, it was submitted that the CIT(A) has decided the issue after elaborate discussion and hence the appeal of the ld. AO deserved to be dismissed.
We have carefully considered the rival contentions and perused the orders of the ld. lower authorities. The issue involved in this appeal is that the during the course of assessment proceedings, the ld. AO selected the case for scrutiny to verify the unsecured loans whether they are genuine and from disclosed sources. During the assessment proceedings the assessee did not furnish any information about these loans. Therefore the ld. AO made an addition u/s. 68 of the Act of Rs.2,96,97,039. Before the ld. CIT(A), the assessee submitted that out of the unsecured loan of Rs.2,96,97,039,/- Rs.2,63,34,857/- is advances received from various contractees. The assessee submitted copies of the ledger account from the books of assessee. With respect to the balance sundry creditors of Rs.33,62,182, the assessee submitted various confirmation letters. This is evident as per page 6 of the appellate order. It was also claimed that advance received of Rs.2,63,34,857/- were also subjected to TDS. The ld. CIT(A) also raised certain queries wherein the assessee also submitted computation of total income and details of TDS. Further the treatment of advances was also explained. The ld. CIT(A) also asked the assessee to file the return of income of the parties from whom the advances have been received, which the assessee could not. After considering the explanation of the assessee n para 10.1, the ld. CIT(A) had categorically mentioned that as per the prayer made by the assessee in ground No.4, the additional evidence furnished by the assessee were admitted for the purpose of effective adjudication.
When additional evidence is placed before an appellate authority such as CIT (A), provision of Rule 46A permits them to consider such evidence subject to the conditions mentioned therein. Rule 46 provides that: -
Rule - 46A , Income-tax Rules, 1962
Production of additional evidence before the [Joint Commissioner] (Appeals)] [and Commissioner (Appeals)].
46A. (1) The appellant shall not be entitled to produce before the 8[8a[Joint Commissioner] (Appeals)] 9[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 10[Assessing Officer], except in the following circumstances, namely :—
(a) where the 10[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 10[Assessing Officer] ; or (c) where the appellant was prevented by sufficient cause from producing before the 10[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)] 12[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 17[17a[Joint Commissioner] (Appeals)] 18[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 19[Assessing Officer]) under clause (a) of sub- section (1) of section 251 or the imposition of penalty under section 271.]
On perusal of the order of the ld CIT (A), we do not find that the additional evidence submitted by the assessee were forwarded to the ld. AO for his comment. According to the provisions of Rule 46A of the I.T. Rules, the CIT(A) is authorised to admit the additional evidence in specified circumstances. For admission of additional evidence, the appellate authority must record in writing the reasons for admission and further according to sub-Rule (3), such additional evidence cannot be taken into account, unless the AO has been allowed a reasonable opportunity to examine such evidence or to produce any evidence in rebuttal to the evidence produced by the assessee. As the ld. CIT(A) has neither recorded any reason for admission of additional evidence nor mentioned what are those additional evidences that he has considered for allowing the appeal of the assessee and then deleting the addition u/s. 68 of the Act. Ffurther failure to grant an opportunity to the AO in terms of Rule 46A (3), the ld. CIT(A) has erred in admitting the additional evidence and thereby deleting the addition. Thus, we have no hesitation in allowing the ground no 1 of appeal of the ld. AO. Thus, now we restore the appeal back to the file of the ld. CIT(A) to follow the provisions of Rule 46A and pass a speaking order on the issue of addition u/s. 68 of the Act.
The second ground of appeal on the merits of the addition becomes infructous in view of our decision in Ground no. 1 of the Appeal, hence same is dismissed.
Accordingly, the appeal of the ld. AO is allowed for statistical purposes.
Pronounced in the open court on this 27th day of May, 2025.