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Facts
The Revenue appealed against the CIT(A)'s order deleting additions made by the AO. The AO had added ₹36,32,297 as income under section 56(2)(vii)(b) (difference between stamp duty value and consideration) and ₹88,20,000 as unexplained investment under section 69, relating to the purchase of an immovable property.
Held
The Tribunal held that the CIT(A) had admitted additional evidence without following the mandatory procedure under Rule 46A, which requires affording the AO a reasonable opportunity to examine and rebut such evidence. This procedural lapse vitiates the order.
Key Issues
Whether the CIT(A) erred in deleting additions without strictly adhering to Rule 46A of the Income Tax Rules, 1962, regarding the admission and examination of additional evidence.
Sections Cited
56(2)(vii)(b), 69, 147, 148, 148A, 144, Rule 46A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, MUMBAI BENCH “B” MUMBAI
Before: SHRI OM PRAKASH KANT & MS. KAVITHA RAJAGOPAL
ORDER PER OM PRAKASH KANT, AM
This appeal by the Revenue is directed against order dated 11.06.2025 passed by the Ld. Commissioner of Income-tax (Appeals) – National Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for assessment year 2017-18, raising following grounds:
Rs.36,32,297/ Rs.36,32,297/-u/s.56(2)(vii)(b) u/s.56(2)(vii)(b) of of the the I.T. I.T. Act Act without without appreciating the fact that the required details were not filed appreciating the fact that the required details were not filed appreciating the fact that the required details were not filed before the AO in spite of numerous opportunities given during before the AO in spite of numerous opportunities given during before the AO in spite of numerous opportunities given during the assessment proceedings? the assessment proceedings? 2. Whether in the facts and circ Whether in the facts and circumstances of the case the umstances of the case the learned CIT(A) was right in deleting the addition of learned CIT(A) was right in deleting the addition of learned CIT(A) was right in deleting the addition of unexplained investment of Rs.88,20,000/ unexplained investment of Rs.88,20,000/- u/s.69 of the I.T. u/s.69 of the I.T. Act without appreciating the fact that the required details Act without appreciating the fact that the required details Act without appreciating the fact that the required details were not filed before the AO in spite of numerous were not filed before the AO in spite of numerous were not filed before the AO in spite of numerous opportu opportunities given during the assessment proceedings? nities given during the assessment proceedings? 3. Whether in the facts and circumstances of the case the Whether in the facts and circumstances of the case the Whether in the facts and circumstances of the case the learned CIT(A) was justified in admitting the additional learned CIT(A) was justified in admitting the additional learned CIT(A) was justified in admitting the additional evidence during the appellate proceedings without allowing a evidence during the appellate proceedings without allowing a evidence during the appellate proceedings without allowing a reasonable opportunity to the reasonable opportunity to the Assessing Officer in violation of Assessing Officer in violation of Rule 46A of the Income Tax Rules, 1962 OR remanding back Rule 46A of the Income Tax Rules, 1962 OR remanding back Rule 46A of the Income Tax Rules, 1962 OR remanding back the issue back to the file of the JAO? the issue back to the file of the JAO? Briefly stated, the facts of the case are that Briefly stated, the facts of the case are that Briefly stated, the facts of the case are that the assessee e- 2. filed her return of income for the assessment year under filed her return of income for the assessment year under filed her return of income for the assessment year under consideration ideration ideration on on on 16.03.2018, 16.03.2018, 16.03.2018, declaring declaring declaring a a a total total total income income income of of of ₹3,45,910/- on a presumptive basis. Subsequently, based on on a presumptive basis. Subsequently, based on on a presumptive basis. Subsequently, based on information available with the Assessing Officer, it was noticed that information available with the Assessing Officer, it was noticed that information available with the Assessing Officer, it was noticed that the assessee had purchased an immovable property for a the assessee had purchased an immovable property for a the assessee had purchased an immovable property for a consideration of ₹88,20,000/ 8,20,000/-, whereas the stamp duty authority , whereas the stamp duty authority had adopted a value of ₹1,24,52,297/- for the purpose of stamp had adopted a value of for the purpose of stamp duty.
2.1 On the basis of the aforesaid information, the Assessing On the basis of the aforesaid information, the Assessing On the basis of the aforesaid information, the Assessing Officer formed a belief that (i) income of Officer formed a belief that (i) income of ₹36,32,997/ 36,32,997/-, being the difference between the stamp duty value and the consideration difference between the stamp duty value and the consideration difference between the stamp duty value and the consideration mentioned in the sale agreement, and (ii) income of ₹88,20,000/-, mentioned in the sale agreement, and (ii) income of mentioned in the sale agreement, and (ii) income of representing the cost of acquisition of the flat, had escaped representing the cost of acquisition of the flat, had escaped representing the cost of acquisition of the flat, had escaped assessment within the meaning of section 14 assessment within the meaning of section 147 of the Income 7 of the Income-tax
Bhavini Kartik Mehta Act, 1961 (“the Act”). Accordingly, after following the procedure Act, 1961 (“the Act”). Accordingly, after following the procedure Act, 1961 (“the Act”). Accordingly, after following the procedure prescribed under the amended provisions of section 148 of the Act prescribed under the amended provisions of section 148 of the Act prescribed under the amended provisions of section 148 of the Act and after considering the material available on record, the and after considering the material available on record, the and after considering the material available on record, the Assessing Officer issued a notice under sect Assessing Officer issued a notice under section 148A(b) of the Act. ion 148A(b) of the Act.
2.2 As the assessee failed to respond to the said notice, the As the assessee failed to respond to the said notice, the As the assessee failed to respond to the said notice, the Assessing Officer passed an order under section 148A(d) of the Act Assessing Officer passed an order under section 148A(d) of the Act Assessing Officer passed an order under section 148A(d) of the Act dated 27.07.2022 and thereafter issued notice under section 148 of dated 27.07.2022 and thereafter issued notice under section 148 of dated 27.07.2022 and thereafter issued notice under section 148 of the Act.
2.3 The assessee again did The assessee again did not comply with the reassessment not comply with the reassessment proceedings initiated under section 147 of the Act. Consequently, proceedings initiated under section 147 of the Act. Consequently, proceedings initiated under section 147 of the Act. Consequently, the Assessing Officer framed an ex the Assessing Officer framed an ex-parte assessment under section parte assessment under section 147 read with section 144 of the Act on 16.05.2023, making the 147 read with section 144 of the Act on 16.05.2023, making the 147 read with section 144 of the Act on 16.05.2023, making the following additions: (a) following additions: (a) ₹36,32,297/- as income under section as income under section 56(2)(vii)(b) of the Act, being the differential stamp duty value; and 56(2)(vii)(b) of the Act, being the differential stamp duty value; and 56(2)(vii)(b) of the Act, being the differential stamp duty value; and (b) ₹88,20,000/- as unexplained investment under section 69 of the as unexplained investment under section 69 of the as unexplained investment under section 69 of the Act, being the cost of acquisition of the flat. Act, being the cost of acquisition of the flat.
Aggrieved, the assessee carried t Aggrieved, the assessee carried the matter in appeal before the he matter in appeal before the Ld. Commissioner of Income Ld. Commissioner of Income-tax (Appeals). Before the first appellate Before the first appellate authority, the assessee explained the circumstances under which authority, the assessee explained the circumstances under which authority, the assessee explained the circumstances under which she could not comply with the notices issued by the Assessing she could not comply with the notices issued by the Assessing she could not comply with the notices issued by the Assessing Officer. It was submitted that Officer. It was submitted that all financial affairs of the assessee all financial affairs of the assessee were being managed by her husband, late Shri Kartik Nagendra were being managed by her husband, late Shri Kartik Nagendra were being managed by her husband, late Shri Kartik Nagendra Mehta, who unfortunately passed away at a young age on Mehta, who unfortunately passed away at a young age on Mehta, who unfortunately passed away at a young age on Bhavini Kartik Mehta It was contended that upon receipt of notices, the 14.08.2018. It was contended that upon receipt of notices, the 14.08.2018. It was contended that upon receipt of notices, the assessee had sought time to furnish th assessee had sought time to furnish the requisite details; however, e requisite details; however, before such details could be filed, the Assessing Officer proceeded to before such details could be filed, the Assessing Officer proceeded to before such details could be filed, the Assessing Officer proceeded to pass the assessment order. pass the assessment order.
3.1 It is an admitted position that before the Ld. CIT(A), the It is an admitted position that before the Ld. CIT(A), the It is an admitted position that before the Ld. CIT(A), the assessee filed additional evidence. This is evident from Form No. 35, assessee filed additional evidence. This is evident from Form No. assessee filed additional evidence. This is evident from Form No. wherein column No. 12 specifically records that documentary wherein column No. 12 specifically records that documentary wherein column No. 12 specifically records that documentary evidence, other than what was produced before the Assessing evidence, other than what was produced before the Assessing evidence, other than what was produced before the Assessing Officer, was filed in terms of Rule 46A of the Income-tax Rules, Officer, was filed in terms of Rule 46A of the Income Officer, was filed in terms of Rule 46A of the Income 1962. The relevant column No. 12 of said form No. 35 is reproduced The relevant column No. 12 of said form No. 35 is reproduced The relevant column No. 12 of said form No. 35 is reproduced as under:
12 Whether any documentary evidence other than the evidence Whether any documentary evidence other than the evidence Whether any documentary evidence other than the evidence Yes produced during the course of proceedings before the Income produced during the course of proceedings before the Income produced during the course of proceedings before the Income- tax Authority has been filed in terms of Rule 46A tax Authority has been filed in terms of Rule 46A 12.1 If reply to 12 is Yes, furnish the list of such documentary If reply to 12 is Yes, furnish the list of such documentary If reply to 12 is Yes, furnish the list of such documentary evidence 3.2 However, the Ld. CIT(A), while granting relief on merits, did However, the Ld. CIT(A), while granting relief on merits, did However, the Ld. CIT(A), while granting relief on merits, did not follow the procedure prescribed under Rule 46A, namely, not follow the procedure prescribed under Rule 46A, namely, not follow the procedure prescribed under Rule 46A, namely, forwarding the additional evidence to the Assessing Officer for forwarding the additional evidence to the Assessing Officer for forwarding the additional evidence to the Assessing Officer for examination, objections, and comments. examination, objections, and comments.
3.3 On merits, the Ld. CIT(A) deleted both the additions by holding On merits, the Ld. CIT(A) deleted both the additions by holding On merits, the Ld. CIT(A) deleted both the additions by holding that: (i) the provisions of the proviso to section 56(2)(vii)(b) were that: (i) the provisions of the proviso to section 56(2)(vii)(b) were that: (i) the provisions of the proviso to section 56(2)(vii)(b) were applicable, since the agreement for purchase of the flat preceded applicable, since the agreement for purchase of the flat preceded applicable, since the agreement for purchase of the flat preceded the date of registration and substantial consideration had been paid the date of registration and substantial consideration h the date of registration and substantial consideration h through banking channels well before the year of registration; through banking channels well before the year of registration; through banking channels well before the year of registration;
Bhavini Kartik Mehta hence, the stamp duty value as on the date of agreement was hence, the stamp duty value as on the date of agreement was hence, the stamp duty value as on the date of agreement was required to be adopted; and (ii) the entire purchase consideration of required to be adopted; and (ii) the entire purchase consideration of required to be adopted; and (ii) the entire purchase consideration of ₹88,20,000/- could not be treated as unexplained could not be treated as unexplained investment under investment under section 69 of the Act in the assessment year under consideration, section 69 of the Act in the assessment year under consideration, section 69 of the Act in the assessment year under consideration, as the payments were made over several earlier financial years and as the payments were made over several earlier financial years and as the payments were made over several earlier financial years and were duly were duly were duly supported supported by supported by by documentary documentary documentary evidence evidence evidence and and and bank bank bank statements.
We have carefully considered the rival We have carefully considered the rival submissions and submissions and perused the material available on record. perused the material available on record. There is no dispute with There is no dispute with regard to the fact that the assessee had filed additional evidence regard to the fact that the assessee had filed additional evidence regard to the fact that the assessee had filed additional evidence before the Ld. CIT(A). It is equally undisputed that the said before the Ld. CIT(A). It is equally undisputed that the said before the Ld. CIT(A). It is equally undisputed that the said additional evidence was admitted and relied additional evidence was admitted and relied upon by the Ld. CIT(A) upon by the Ld. CIT(A) while granting relief to the assessee. while granting relief to the assessee.
4.1 However, Rule 46A mandates that where additional evidence is However, Rule 46A mandates that where additional evidence is However, Rule 46A mandates that where additional evidence is admitted, the Assessing Officer must be afforded a reasonable admitted, the Assessing Officer must be afforded a reasonable admitted, the Assessing Officer must be afforded a reasonable opportunity to examine such evidence and to rebut the same. The opportunity to examine such evidence and to rebut the same. The opportunity to examine such evidence and to rebut the same. The procedure prescribed under Rule 46A is mandatory in nature and is ocedure prescribed under Rule 46A is mandatory in nature and is ocedure prescribed under Rule 46A is mandatory in nature and is rooted in the principles of natural justice. Any order passed in rooted in the principles of natural justice. Any order passed in rooted in the principles of natural justice. Any order passed in violation thereof cannot be sustained. violation thereof cannot be sustained.
4.2 In the present case, the Ld. CIT(A) has admittedly not followed In the present case, the Ld. CIT(A) has admittedly not followed In the present case, the Ld. CIT(A) has admittedly not followed the procedure laid d the procedure laid down under Rule 46A before granting relief on own under Rule 46A before granting relief on merits. This procedural lapse vitiates the appellate order, merits. This procedural lapse vitiates the appellate order, merits. This procedural lapse vitiates the appellate order, notwithstanding the merits of the case. notwithstanding the merits of the case.
Bhavini Kartik Mehta In view of the above facts and circumstances, we deem it 4.3 In view of the above facts and circumstances 4.3 In view of the above facts and circumstances appropriate to set aside the impugned order of the Ld. CIT(A) and appropriate to set aside the impugned order of the appropriate to set aside the impugned order of the restore the matter to his file with a direction to adjudicate the restore the matter to his file with a direction to adjudicate the restore the matter to his file with a direction to adjudicate the issues afresh, strictly in accordance with law, after complying with issues afresh, strictly in accordance with law, after complying with issues afresh, strictly in accordance with law, after complying with the provisions of Rule 46A and after affording due opportunity of the provisions of Rule 46A and after affording due opportunity of the provisions of Rule 46A and after affording due opportunity of being heard to the Assessing Officer as being heard to the Assessing Officer as well as to the assessee. well as to the assessee.
4.4 The grounds of appeal of the Revenue are accordingly allowed The grounds of appeal of the Revenue are accordingly allowed The grounds of appeal of the Revenue are accordingly allowed for statistical purposes. for statistical purposes.
In the result, the appeal of the Revenue is allowed for In the result, the appeal of the Revenue is allowed for In the result, the appeal of the Revenue is allowed for statistical purposes.