What did the Tribunal hold?

The Tribunal held that the CIT(A) erred by admitting fresh evidence (muster rolls) without giving the Assessing Officer an opportunity to rebut it, violating Rule 46A of the IT Rules. The issue was restored to the Assessing Officer for fresh examination.

The Assessing Officer disallowed expenses under Section 40A(3)(a) for failure to furnish muster rolls and supporting evidence for wages paid. The CIT(A) admitted fresh evidence in the form of payroll details, allowing the assessee's appeal.

What were the issues?

Whether the CIT(A) correctly admitted fresh evidence without providing the Assessing Officer an opportunity to respond, and if the disallowance under Section 40A(3)(a) was justified.

ITO vs M/S. Dynamic Brentford Services… | ITAT Delhi 2019

Income Tax Appellate Tribunal, DELHI BENCH ‘B’ NEW DELHI

Before: SHRI N.K. BILLAIYA & SHRI SUDHANSHU SRIVASTAVA

For Respondent: Ms Ashima Neb, Sr. DR

Hearing: 30.05.2019Pronounced: 31.05.2019

PER SUDHANSHU SRIVASTAVA, J.M. This appeal filed by the revenue is directed against the order of ld. CIT(A)-3, Delhi dated 20.09.2016 for assessment year 2012-

13.

The sole ground agitated by the department in this appeal is that the ld. CIT(A) had erred in law and on facts by accepting fresh/additional evidence in contravention of Rule 46A of the IT Rules 1962.

2.0 None put in an appearance on behalf of the assessee respondent when the appeal was called out for hearing. However, Assessment year 2012-13 the notice of hearing has been returned unserved and is placed on record. We note that the Registry had dispatched the notice on the address mentioned in the assessment order. In such circumstances, we have no option but to hear the appeal ex parte qua the assessee respondent.

2.1 Ld. Sr. DR has pointed out to the observations of the Assessing Officer on page 1 wherein it has been mentioned that the assessee had failed to furnish muster roll of payment made to workers along with supporting evidence with respect to wages paid. Thereafter, the Assessing Officer proceeded to make a disallowance u/s 40A(3)(a) of the Income Tax Act, 1961 (hereinafter referred to as "the Act"). It has been further pointed out by the ld. Sr. DR that the ld. CIT(A) in para 3 has noted that the complete month wise detail of the pay rolls have been submitted which clearly indicate that no payment of Rs. 20,000 or above in cash had been made during the year under consideration and, therefore, provisions of section 40A(3)(a) of the Act could not be invoked. Ld. Sr. DR submitted that it was very much apparent that the muster rolls were never produced before the Assessing Officer and the ld. CIT(A) had admitted a copy of muster rolls without requiring the Assessing Officer to furnish the Assessment year 2012-13 remand report. It was prayed that the issue deserves to be restored to the Assessing Officer for making appropriate inquiries and verification.

We have heard the ld. Sr. DR and have also perused the orders of both the lower authorities and we agree with the contentions of the ld. Sr. DR that the ld. CIT(A) had admitted fresh evidence in the form of muster rolls without giving an opportunity to the Assessing Officer to rebut the same. Thus, it is a clear violation of provisions of Rule 46A of the Income Tax Rules 1962. Accordingly, while allowing the appeal of the department statistically, we restore the issue to the file of the Assessing Officer who shall examine this issue again after giving due opportunity to the assessee to present its case.

In the result, the appeal of the department stands allowed for statistical purposes.

Order pronounced in the open court on 31st May, 2019.

ITO, NEW DELHI vs. M/S. DYNAMIC BRENTFORD SERVICES PVT. LTD., NEW DELHI

What did the Tribunal hold?

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What were the issues?

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