DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1, RANGE-, LUCKNOW., LUCKNOW vs. SH. SHARAD DEORA, LUCKNOW.

The Ld. CIT(A) erred on facts, in deleting addition of unsecured loan of Rs 1.77 Cr under section 68 of the Act by accepting Credit Worthiness of Sapphire Developers which had a meager income of Rs.28,51,243 during the year.

“1. That the learned CIT(A) has erred in law and facts by deleting addition made u/s 68 of the Act for Rs.2.09 crores on account of failure on part of assessee to establish creditworthiness in the hands of lenders even by not furnishing loan confirmation account from such lenders.

2. That the learned CIT(A) has erred in law in admitting additional evidence produced by the assessee before him in contravention of Rule 46A(1) of the Income Tax Rules 1962 without giving reasonable opportunity to Assessing Officer in accordance with Rule 46(3) of the Income Tax Rules, 1962.”

2. The facts of the case, in brief, are that the assessee is an individual and engaged in the business of electrical installation & commissioning, electrical repairs & maintenance and DG running & maintenance. The assessee filed his return of income on 30/10/2017 declaring total income of Rs.42,37,060/-. The Assessing Officer completed the assessment and passed order u/s 143(3) of the Income Tax Act, 1961 (“the Act” for short) and determined the total income of the assessee at Rs.2,54,20,360/- by making addition of Rs.2,09,00,000/- u/s 68 on account of unexplained cash credit and Rs.2,83,300/- on account of loss on chit funds. Aggrieved with the additions made by the Assessing Officer, the assessee carried the matter in appeal before the learned CIT(A), who deleted the addition of Rs.2,09,00,000/- made on account of unexplained cash credit and confirmed the addition of Rs.2,83,300/- made by the Assessing Officer on account of loss on chit funds. Aggrieved with the deletion of addition of Rs.2,09,00,000/-, Revenue is in appeal before the Income Tax Appellate Tribunal.

3. During the course of hearing before us, learned Sr. Departmental Representative strongly supported the order passed by the Assessing Officer. He submitted that the details filed by the assessee in the form of additional evidences during appellate proceedings before the learned CIT(A) were not filed before the Assessing Officer. Though the learned CIT(A) had written letter seeking the comments of the Assessing Officer on the additional evidences filed by the assessee, however, without waiting the comments of the Assessing Officer, the learned CIT(A) passed the order on 16/08/2022 accepting the additional evidences filed by the assessee. Learned Sr. D.R. also submitted that learned CIT(A) has accepted additional evidence during appellate proceedings without waiting the comments of the Assessing Officer and to examine the same and the Assessing Officer could not verify the validity and interpretation of the additional evidence submitted by the assessee during appellate proceedings which is procedural flaw. He submitted that the order of learned CIT(A) should be vacated and order passed by the Assessing Officer be restored. On the other hand, learned Counsel for the assessee supported the order passed by learned CIT(A).

4. We have heard the rival parties and have gone through the material placed on record. Under Rule 46A, the CIT(A) can accept the additional evidence whether oral or documentary during the course of appellate proceedings, provided the contentions stipulated under clause A to D are complied with. Sub Rule (3) of Rule 46A debars the CIT(A) not to take into account any additional evidence produced under rule 40A(1) unless the Assessing Officer has been allowed a reasonable opportunity to examine these evidences or to cross examine the witness produced by the assessee or to produce any evidence or document or any evidence in rebuttal of the additional evidence produced by the assessee. We noted from the order of CIT(A) that in this case the assessee made the written submissions before the CIT(A) and the CIT(A) asked for the remand report of the Assessing Officer. However, without waiting for the remand report of the Assessing Officer, the learned CIT(A) passed the appellate order. From these facts, it is clear that proper opportunity has not been given to the Assessing Officer to file his comments on the admissibility of the fresh evidences and examine the same and file the remand report. On this basis itself and in the specific facts & circumstances of the present case before us and in view of the foregoing, we set aside the order of CIT(A) and restore the issues in dispute to the file of Assessing Officer with the direction to pass de novo assessment order after considering the additional evidences submitted by the assessee during the appellate proceeding before the learned CIT(A) after affording due and reasonable opportunity of being heard to the assessee.

(Order pronounced in the open court on 30/06/2025)