Loading judgment…
Facts
The Revenue appealed against an order that deleted an addition made under Section 68 of the Income Tax Act. The addition pertained to the purchase of a property where the assessee claimed the source of funds was unsecured loans from its directors.
Held
The Tribunal held that the CIT(A) violated the principles of natural justice by admitting additional evidence without confronting the Assessing Officer (AO) and obtaining a remand report. The matter was set aside and remanded for de novo adjudication.
Key Issues
Whether the CIT(A) erred in admitting additional evidence without confronting the AO, thereby violating principles of natural justice.
Sections Cited
147, 144B, 68, 271AAC, 46A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH, ‘C’: NEW DELHI
Before: SHRI ANUBHAV SHARMA&
ORDER
PER AMITABH SHUKLA, AM,
The captioned appeal has been preferred by the Revenue against order dated 06.12.2024 of the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre, New Delhi, [hereinafter referred to as ‘ld. CIT(A)’] arising out of assessment order dated 24.03.2022 passed u/s 147 r.w.s. 144B of the Income Tax Act, 1961 pertaining to Assessment Year 2017-18. The word ‘Act’ herein this order would mean Income Tax Act, 1961.
2. The Revenue has raised altogether three grounds of appeal to assail the order of the ld. CIT(A). The principal grievance of the Revenue is that its right under Rule-46A were violated inasmuch as the ld. CIT(A) did not afford the opportunity of being heard to the ld. AO by asking for a remand report. As per the brief factual matrix of the case, the ld. AO had passed order under section 147 r.w.s. 144B and made the addition of Rs.5,41,00,000/- under section 68 of the Act. A perusal of the order shows that the assessee was not forthcoming in providing requisite details to the ld. AO. From the order of ld. CIT(A) reproduced herein below. It is evident that the ld. First Appellate Authority had based his relief on the basis of additional evidences filed by the assessee before him.
5. Observation and Decision : (i) From the facts of the case it emanates that the assessment was reopened on the basis of information that a property has been purchased by the Appellant for Rs.9,00,00,000/- and the income returned by it for the relevant assessment year was a loss of Rs.2,09,658/-. Therefore, prima facie, a decision had been reached by the Assessment Unit that with such meagre income, the Assessee could not have purchased such property and hence the source of the investment in property remained unexplained. (ii) The Appellant during the course of assessment proceedings had explained that the property was purchased by way of unsecured loan from its directors namely Sri Sunil Onkar and Smt. Roopa Grover. The said fact was also explained in the course of assessment proceedings by way of filing bank accounts of the Appellant and copy7 of the purchase deed for the impugned property under consideration. The transactions which had been Page 2 of 6 Insight portal have matched with the information filed by the Appellant. (iii) In the written submission, the Appellant had explained the source of the source in the hands of the Appellant i.e. the source from which the Directors had received the required funds for investing in the property in the name of the Appellant. The Directors had received the funds out of sale of another property which was held in their individual names and the proceeds received from such sales had been invested in the property in the name of the Appellant by way of advancing unsecured loan. (iv) To substantiate the above claim, following documents has been submitted by the Appellant in the course of the proceedings : (a) The bank accounts of the directors in pages 3 to 5 of the written submission dated 27/11/2024. (b) The Income Tax Computation and ITR-V of the Directors i.e. the lenders namely Mr. Sunil Onkar and Smt. Roopa Grover for the AY: 2017-18 & 201819 in pages 3 to 5 of the written submission dated 27/11/2024. (c) Copy of the sale deed of the property in the name of the directors dated 08/09/2016 attached as per pages 4 to 5 of the submission. (v) While examining the documents filed in the course of the Appellate proceedings proves the three following ingredients of section 68 of the Income Tax in the following manner : (a) Identity : The lenders are the directors of the Appellant company and their PAN, address and other details are as follows which proves that their identity has been verified : (i) Name : Sri Sunil Onkar (ii) Address : A-14, Gujrawala Town, Part-1, New Delhi110009 Page 3 of 6 (iii) PAN : AEIPG9862N (b)Source : The source of loan has been proved to be from the sale of House property at B-22, G.T. Karnal Road Industrial Area, Delhi which was sold on 08/09/2016 for the year 2016-17. (c) Genuineness. The transactions have been done through bank transfers/cheques which are verifiable at both ends. The bank statements of the lenders as well as the Appellant had been submitted in the course of the Appellate proceedings. The bank details submitted are as follows : (i) Appellant bank details Name of Bank : Punjab National Bank Branch 110033. : A-25, GT Karnal Road, Delhi IFSC Code : PUNB0032810 Account No. : 1470002100039344 (ii) Lender /director’s bank details Name of Bank : Dena Bank Account No. : 051410000131 -and- Name of Bank : Axis Bank Account No. : 910010009590790. (vi) The details of loan received from the lender directors and payment of the purpose of purchase of property has already been provided which has been reproduced above. From the explanation of source and application of funds for the purpose of purchase of house property by the Appellant, it is found that the alleged discrepancy as highlighted in the Assessment Order is not correct. (vii) In view of the above, the addition made by the Assessment Unit is not correct and hence the same is deleted in full. (viii) If the addition under section 68 is not sustained, then initiation of penalty under section 271AAC is also not Page 4 of 6 sustained. But, as the penalty has not been imposed the same cannot be a matter of consideration in this order. Hence, this ground is rejected with a liberty to raise the same if penalty order is passed in the future. Conclusion : In the result, the appeal of the appellant is allowed……
The ld. DR vehemently opposed the relief given by the ld. CIT(A) by admitting additional evidences which were not confronted to the ld. AO.
The ld. Counsel for the assessee relied upon the order of the ld. CIT(A).
We have heard rival submission in the light of material available on records. Rule-46A of Income Tax Rules stipulates that the ld. CIT(A) can entertain additional evidences during appellate proceeding before him and which were not provided during assessment proceedings subject to the condition that the ld. Assessing Officer is afforded an opportunity of considering the same. In the instant case, it is crystal clear that the ld. First Appellate Authority rested his relief on additional evidences provided to him during the appellate proceedings. It is also clear that the same were not confronted to the ld. AO. Thus, Revenue’s right of natural justice is adversely impacted. Accordingly, we set-aside the order of ld. CIT(A) and direct him to readjudicate the matter denovo after obtaining remand report from the ld. AO qua evidences produced by the assessee before him. The assessee shall be entitled to due opportunity of being heard by the ld.
In the result, the appeal of the Revenue is allowed for statistical purposes.
Order pronounced in the open court on 11th December, 2025.