ACIT CORPORATE CIRCLE 2(2), CHENNAI vs. INTELLECT DESIGN ARENA LTD., CHENNAI

सुनवाई क� तार�ख/Date of hearing : 16.10.2019 घोषणा क� तार�ख /Date of Pronouncement : 03.01.2020 आदेश /O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: Both the appeals of the Revenue are directed against the common order passed by the Commissioner of Income Tax (Appeals)–8, Chennai dated 28.01.2019 and pertains to the assessment years 2013-14 & 2014-15. Since common issue arises for consideration in both the appeals, we heard the same together and disposing off the same by this common order.

251. POWERS OF THE COMMISSIONER (APPEALS). (1) In disposing of an appeal, the Commissioner (Appeals) shall have the following powers-- (a) in an appeal against an order of assessment, he may confirm, reduce, enhance or annul the assessment ; (aa) in an appeal against the order of assessment in respect of which the proceeding before the Settlement Commission abates under section 245HA, he may, after taking into consideration all the material and other information produced by the assessee before, or the results of the inquiry held or evidence recorded by, the Settlement Commission, in the course of the proceeding before it and such other material as may be brought on his record, confirm, reduce, enhance or annul the assessment ; (b) in an appeal against an order imposing a penalty, he may confirm or cancel such order or vary it so as either to enhance or to reduce the penalty; (c) in any other case, he may pass such orders in the appeal as he thinks fit. (2) The Commissioner (Appeals) shall not enhance an assessment or a penalty or reduce the amount of refund unless the appellant has had a reasonable opportunity of showing cause against such enhancement or reduction. Explanation In disposing of an appeal, the Commissioner (Appeals) may consider and decide any matter arising out of the proceedings in which the order appealed against was passed, notwithstanding that such matter was not raised before the Commissioner (Appeals) by the appellant.

Section 250(4) enables the CIT(A) to make such further enquiry as he thinks fit or may direct the Assessing Officer to make further enquiry and report the same before him. Section 251 empowers the CIT(A) to confirm, reduce, enhance or annul the assessment. These statutory powers conferred on the CIT(A) under Section 250 & 251 is coterminous that of the Assessing Officer’s power. In other words, the CIT(A) can make further enquiry as he thinks fit before disposing off the appeal before him.

4.1 We have also carefully gone through the provisions of Rule 46A of the Income Tax Rules which read as follows:

46A. PRODUCTION OF ADDITIONAL EVIDENCE BEFORE THE DEPUTY COMMISSIONER (APPEALS) AND COMMISSIONER (APPEALS) (1) The appellant shall not be entitled to produce before the Deputy Commissioner (Appeals) 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 Assessing Officer, except in the following circumstances, namely:-- (a) where the 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 Assessing Officer; or (c) where the appellant was prevented by sufficient cause from producing before the 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 Deputy Commissioner (Appeals) or, as the case may be, the Commissioner (Appeals) records in writing the reasons for its admission.

(3) The Deputy 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 Deputy Commissioner (Appeals) 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 Assessing Officer) under clause (a) of sub-section (1) of section 251 or the imposition of penalty under section 271.

Sub-clause 1 of Rule 46A prevents the assessee / appellant to produce any evidences whether oral or documentary other than the one which was produced by him before the Assessing Officer in the course of assessment proceedings subject to the conditions prescribed therein. Sub-clause 2 restricts the CIT(A) to admit the additional evidences so produced by the assessee without recording reasons for its admission. Sub-clause 3 mandates that the CIT(A) shall confront the Assessing Officer before taking the additional material produced by the assessee. However to deviate from the above procedure, sub-clause 4, enables the CIT(A) to direct the production of document or examination of any witness. This power was conferred on CIT(A) to make an effective further enquiry as provided U/s.250(4) of the Act and also with reference to power conferred on the CIT(A) U/s.251 to enhance the assessment. Therefore this Tribunal is of the considered opinion whenever the CIT(A) in his discretion directs the assessee to produce any additional material in the course of appellate proceedings before him, it is not necessary to confront the Assessing Officer by way of calling for remand report. The Bombay High Court examined this issue in the case of Smt. Prabhavati S Shah, (supra) and found that the restriction placed on the assessee to produce the additional material under Rule 46A(1) of the Income Tax Rules do not affect the power of the CIT(A) under Sub-clause 4 of Section 250 r.w.r 46A(4) of the Income Tax Rules. The power of the CIT(A) U/s.250(4) of the Act is co-terminus with that of the Assessing Officer. Therefore when the CIT(A) examined the additional material in exercise of the power conferred on him U/s.250 & 251 read with Rule 46(4) of the Income Tax Rules, it is not necessary for the CIT(A) to confront the additional material with the Assessing Officer. Therefore, this Tribunal is of the considered opinion that in view of the judgment of the Hon’ble Bombay High Court in the case of Smt. Prabhavati S Shah (supra), the judgment of Andhra Pradesh High Court in the case of M/s. NE Technologies India Pvt. Ltd., may not be applicable to the facts of these cases. Moreover the Patna High Court in the case of CIT vs. Sagar Construction P. Ltd., 56 taxmann.com 434 has taken a similar view as that of the Bombay High Court in the case of Prabhavati S. Shah (supra). The Patna High Court has observed as follows at Para 5 of its judgment:-

“5. In our view the said submissions are not based upon a correct reading of Rule 46A of the Income Tax Rules as Sub-Rule (4) contained therein is an overriding power since it is a non obstante clause beginning with "nothing contained in this Rule". Thus, the power of the appellate authority clearly overrides the provisions of Sub-Rules (1), (2) and (3) of Rule 46 A and it is open to the said authority to look into any additional document if it considers the same as required to dispose of the appeal or for any other substantial cause. As a matter of fact, the principal reason for the CIT (Appeals) in allowing the appeal was the fact that the Assessing Officer had failed to issue specific notice with regard to the investment of Rs. 8 lacs made in M/s Rajesh Corporation Limited and further, he has come to the conclusion that Rs. 8 lacs was fully explained on the basis of balance sheet filed during assessment proceeding itself. It was only to further verify the statements in the balance sheet that he had additionally called for the bank statements to verify the said transaction of Rs. 8 lacs which had resulted in the balance sheet showing NIL in the account of M/s Sagar Sahkari Grih Nirman Samiti Limited in the assessment year in question. Thus, it was a clear cut case of exercise of the overriding power under Rule 46A( 4) of the Rules and not really a case of permitting an assessee to file fresh document on the prayer of the assessee.”

In view of the above, this Tribunal do not find any reason to interfere with the order of the lower authority. Accordingly the order of the CIT(A) is confirmed.

Order pronounced in the court on 3rd January, 2020 at Chennai.