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Facts
The assessee, a firm, did not file its income tax return for AY 2020-21. Based on information of professional fees received, the AO initiated reassessment proceedings under Section 148. Although the assessee filed a nil return, the AO completed the assessment by disallowing employee remuneration and other expenses totaling Rs. 58,00,832/- for lack of substantiation. The CIT(A) rejected the assessee's additional evidence, citing the absence of a formal application under Rule 46A.
Held
The Tribunal held that the requirement of a Rule 46A application is merely a procedural functionality and the CIT(A) ought to have admitted the additional evidence. Therefore, the matter was remanded to the Assessing Officer for a de novo assessment to consider the additional evidence, after providing the appellant a reasonable opportunity of hearing.
Key Issues
Whether the CIT(A) was justified in refusing to admit additional evidence due to the lack of a formal application under Rule 46A, and whether the disallowance of expenses by the AO was proper without considering such evidence.
Sections Cited
139(1), 148, 148A, 46A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, COCHIN BENCH
Before: SHRI INTURI RAMA RAO, AM & SHRI MANU KUMAR GIRI, JM
O R D E R Per: Inturi Rama Rao, AM This appeal filed by the assessee is directed against the order of the National Faceless Appeal Centre, Delhi (NFAC) dated 27.08.2025 for Assessment Year (AY) 2020-21.
Brief facts of the case are that the appellant is a firm. No return of income was filed under the provisions of section 139(1) of the Income Tax Act, 1961 (the Act) for AY 2020-21. Based on the information that the appellant was in receipt of professional fees and technical services of Rs. 22,60,000/- from Getit Communications Pvt.
Hubspire Ltd., the AO formed an opinion that income escaped assessment to tax. Accordingly, a notice u/s. 148 was issued to the appellant on 28.03.2024 after complying with the procedures laid down u/s. 148A of the Act. In response to the notice u/s. 148, the appellant company filed return of income on 09.05.2024 declaring Nil income. Against the said return of income, the assessment was completed by the Assessment Unit, Income Tax Department (hereinafter called "the AO") vide order dated 04.12.2024 at a total income of Rs. 58,00,832/-. While doing so, the AO disallowed the entire expenditure claimed on account of employees remuneration and benefit of Rs. 44,46,916/- and other expenses of Rs. 13,53,468/- for the alleged failure of the appellant to substantiate the above expenditures.
Being aggrieved, an appeal was filed before the CIT(A) who vide the impugned order had refused to admit the additional evidence on the ground that no application under rule 46A of the I.T. Rules was made for admission of the additional evidence.
Being aggrieved, the appellant is in appeal before this Tribunal in the present appeal.
When the appeal was called on nobody appeared on behalf of the assessee despite due service of notice of hearing. Therefore, we proceeded to dispose of the appeal after hearing the learned Sr. DR.
The AO had disallowed the claim for deduction on account of employees remuneration and other benefits solely on the ground of Hubspire that the appellant had failed to substantiate the incurring of the above expenditure. During the course of proceedings before NFAC, he appellant had filed additional evidence to prove genuineness of the above expenditure. However, the CIT(A) rejected the same on the ground that no application for admission of additional ground was filed by the appellant. We are of the considered opinion that formal application under rule 46A is only a mere procedural functionality. The CIT(A) ought to have admitted the additional evidence after complying with the provisions of rule 46A and decide the issue in appeal. However, since the additional evidence is required to be considered by the AO we are of the considered opinion that the matter requires to be remanded to the AO for fresh assessment taking into consideration the additional evidence filed before the CIT(A). Accordingly, the matter is restored to the file of the AO for de novo assessment in accordance with law after affording reasonable opportunity of hearing to the appellant.
In the result, the appeal filed by the assessee stands partly allowed for statistical purposes.
Order pronounced in the open court on 19th November, 2025.
Sd/- Sd/- (MANU KUMAR GIRI) (INTURI RAMA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER Cochin, Dated: 19th November, 2025 n.p.