AP RAJIV SWAGRUHA CORPORATION LIMITED,VIJAYAWADA vs. DCIT., CIRCLE-1(1), HYDERABAD

Aggrieved, the assessee company carried the matter in appeal before the CIT(A).

During the course of the appellate proceedings before the CIT(A), the assessee company filed an application seeking admission of certain documents as “additional evidence” under Rule 46A of the Income Tax Rules, 1962. On a perusal of the record, we find that the assessee company had sought for admission of the following documents as additional evidence in its application filed under Rule 46A of the Income Tax Rules, 1962 :

Ledger extract of Service Tax Liability.

The assessee company in its application while seeking liberty for admission of additional evidence, had submitted that it is a Government company which was in the course of the assessment proceedings issued a “Show Cause Notice” (SCN) on 26.11.2019 through e-proceedings wherein it was called upon to put forth an explanation that as to why its claim for deduction of certain expenses may not be declined. The assessee company submitted that as it had remained unaware about the “Show Cause Notice” (SCN), dated 26.11.2019, therefore, for the said reason, it failed to participate in the assessment proceedings. Elaborating further on 5 AP Rajiv Swagruha Corporation Ltd., Vijayawada its contention, the assessee company submitted before the CIT(A) that as it had for bonafide reasons failed to respond to the “Show Cause Notice” (SCN), dated 26.11.2019, the A.O., without providing any further opportunity, had framed the assessment, wherein its claim for deduction of expenditure was declined by him.

It was the claim of the assessee company that though it had, in the course of the assessment proceedings, submitted most of the evidence to substantiate its claim for deduction of expenditure, but in addition to the same, it was seeking liberty to place on record as additional evidence the ledger extracts of the its service tax liability, RA Bills, and its financials for F.Y. 2016-17. However, we find that the CIT(A) did not find favour with the application filed by the assessee company for admission of the aforesaid documentary evidence as additional evidence.

Ostensibly, the CIT(A), after deliberating at length on the e- assessment proceedings that was launched by the CBDT during October 2015, wherein the taxpayers were assessed vide online communications through e-portal, SMS and e-mail and further 6 AP Rajiv Swagruha Corporation Ltd., Vijayawada drawing support from various CBDT instructions, observed as under:

The CIT(A), based on his aforesaid observations, was of the view that all the communications/notices/reminders, etc., in the backdrop of the facts and circumstances of the case were to be considered as having been duly served upon the assessee. Also, it was observed by him that as per Clause (23C) of Section 2 of the Income Tax Act, 1961, as applicable from 01.06.2016, the term “hearing” includes communication of data and documents through electronic mode. It was thus, observed by him that adequate and sufficient opportunity of hearing was afforded by the A.O. to the 7 AP Rajiv Swagruha Corporation Ltd., Vijayawada assessee in the course of the assessment proceedings carried out through electronic mode. Accordingly, the CIT(A) rejected the assessee’s claim that it was not aware of the proceedings/Show Cause Notice, due to which, it had failed to place on record the aforementioned documents that were now being filed before him as an “additional evidence”. Thereafter, the CIT(A), holding a firm conviction that the case of the assessee did not fall within either of the situations contemplated in Rule 46A(1), declined its request for admission of the aforementioned documents as “additional evidence”.

Thus, the CIT(A), after declining the assessee’s application for admission of additional evidence proceeded with the adjudication of the appeal on merits. The CIT(A), finding no infirmity in the view taken by the A.O., upheld his order and dismissed the appeal.

The assessee, being aggrieved with the order of the CIT(A), has carried the matter in appeal before us.

Ms. DVN Manasa, C.A. the learned Authorized Representative (for short “Ld.AR”) for the assessee company, at the threshold of hearing of the appeal, submitted that the CIT(A) had grossly erred 8 AP Rajiv Swagruha Corporation Ltd., Vijayawada in law and on facts of the case by most arbitrarily rejecting the assessee’s request for admission of certain documents as additional evidence without giving any cogent reason for doing so. Elaborating further on her contention, the Ld. AR submitted that as the documents filed by the assessee company had a strong bearing on the additions/disallowances made by the A.O., which were assailed before the CIT(A), therefore, the latter, in all fairness, ought to have admitted the same. Explaining the reason for not filing the aforementioned documents in the course of the assessment proceedings before the A.O., it was submitted that the same was due to the negligence on the part of the assessee’s erstwhile counsel and the assessee remained oblivion of the same.

Per contra, Shri U. Mini Chandran, Learned CIT- Departmental Representative (for short “CIT-DR”) relied upon the orders of lower authorities.

We have thoughtfully considered the contentions advanced by the learned authorized representatives of both parties in the backdrop of the orders of the lower authorities.

We deem it apposite to cull out Rule 46A of the Income Tax Rules, 1962, as the controversy involved in the present appeal hinges around the sustainability of the view taken by the CIT(A), who had declined to admit the documentary evidence as an “additional evidence” that was filed by the assessee before him, which reads as under:

On a careful perusal of Rule 46A, we find that the same carves out a set of four circumstances, wherein the assessee is permitted to adduce certain evidence, whether oral or documentary, other than the documentary evidence produced by him during the course of assessment proceedings before the A.O. On a careful perusal of the exceptions, we find that the same contemplates situations, viz., (i) where the A.O. has refused to admit evidence which ought to have been admitted; (ii). where the appellant was prevented by sufficient cause from producing the evidence which he was called upon to produce by the Assessing Officer; (iii). where the appellant was prevented by sufficient cause from producing before the Assessing Officer any evidence which is relevant to any ground of 11 AP Rajiv Swagruha Corporation Ltd., Vijayawada appeal; and (iv). 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.

We, thus, not being able to persuade ourselves to concur with the summary rejection of the assessee’s application for admission of additional evidence by the CIT(A), set aside his order and direct him to admit the same and re-adjudicate the appeal after considering the said documents. Needless to say, the CIT(A) shall, in the course of the set aside proceedings afford a reasonable opportunity of being heard to the assessee company. As we have set aside the matter to the file of the CIT(A) for de novo adjudication, we refrain from adverting to the grounds based on which the assessee company has assailed the sustainability of the additions/ disallowances made by the A.O., which are, thus, left open.

Resultantly, the appeal of the assessee company is allowed for statistical purposes in terms of our aforesaid observations.