Rule 46A compliance is essential when appellate relief relies on additional material; both additions were remitted for fresh examination.

Where the first appellate authority relies on additional material without complying with Rule 46A and without giving the Assessing Officer an opportunity to examine it, deletion of the related additions cannot be sustained. In the stated context, the pension-related addition and the unexplained bank deposit addition were both remitted for fresh adjudication because the appellate relief was founded on material not properly tested through remand proceedings. The matter was therefore returned for de novo consideration by the Assessing Officer with opportunity of hearing to the assessee.

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Issues: (i) Whether the deletion of addition relating to pension received from a foreign pension fund was vitiated for breach of Rule 46A; (ii) Whether the deletion of addition relating to unexplained bank deposits was likewise liable to be set aside for the same procedural defect.

Issue (i): Whether the deletion of addition relating to pension received from a foreign pension fund was vitiated for breach of Rule 46A.

Analysis: The assessment had been completed ex parte under section 144 read with section 147 of the Income-tax Act, 1961, and the assessee had not fully cooperated before the Assessing Officer. The material relied upon before the appellate authority had not been subjected to a remand report, and the Assessing Officer had no opportunity to examine the assessee's submissions at that stage. In these circumstances, admission and reliance on such material without following the procedure under Rule 46A of the Income-tax Rules, 1962, was found to be improper.

Conclusion: The deletion of the pension-related addition could not be sustained and the matter was remitted to the Assessing Officer for fresh adjudication.

Issue (ii): Whether the deletion of addition relating to unexplained bank deposits was likewise liable to be set aside for the same procedural defect.

Analysis: This issue was connected with the first issue and arose from the same appellate procedure. Since the main issue was sent back for fresh consideration and the same infirmity under Rule 46A affected this addition as well, consistency required that this matter also be reconsidered by the Assessing Officer after giving due opportunity to the assessee.

Conclusion: The deletion of the bank-deposit addition was also remitted to the Assessing Officer for fresh consideration.

Final Conclusion: The appellate relief granted by the first appellate authority was set aside procedurally, and both disputed additions were returned for a de novo examination by the Assessing Officer with opportunity of hearing to the assessee.

Ratio Decidendi: Where the first appellate authority relies on additional material without following Rule 46A and without affording the Assessing Officer an opportunity to examine it, the resultant deletion of additions cannot be sustained and the matter is liable to be remitted for fresh consideration.

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