2013 (8) TMI 822 - AT - Income Tax

ITAT directs fresh examination of evidence by AO, stresses Rule 46A compliance

The ITAT allowed both the revenue and assessee appeals for statistical purposes, directing the AO to re-examine the evidence and decide the issues afresh. ... Unexplained investment - Capital investment - CIT deleted addition - Held that:- evidences which were made available and explanations offered with supporting material before the CIT(A) were not produced before the Assessing Officer and the CIT(A) did not give an opportunity for the Assessing Officer to peruse the same before passing his order, which is not in line with the provisions of Rule 46A - Matter remitted back to the file of Assessing Officer - Decided in favour of Revenue. Issues Involved:1. Addition towards share capital.2. Addition towards salary.3. Addition towards director's remuneration.4. Disallowance of furniture expenses.5. Disallowance of computer/software purchases.6. Admissibility of additional evidence under Rule 46A of IT Rules, 1962.Issue-wise Detailed Analysis:1. Addition towards Share Capital:The Assessing Officer (AO) added Rs. 28,15,000/- as unexplained investments in the hands of the company due to insufficient evidence regarding the sources of capital investments by the directors, who invested in cash. The CIT(A) allowed partial relief by accepting additional evidence that was not presented before the AO, leading to the reduction of the addition to Rs. 9,35,000/-. The ITAT remitted the matter back to the AO for a fresh examination of the evidence, emphasizing adherence to Rule 46A of IT Rules, 1962.2. Addition towards Salary:The AO disallowed Rs. 1,02,000/- towards salaries paid to employees due to lack of evidence. The CIT(A) deleted the addition after being satisfied with the day book evidencing salary payments. The ITAT remitted this issue back to the AO for re-examination, as the evidence was not initially presented to the AO.3. Addition towards Director's Remuneration:The AO added Rs. 24,000/- towards director's remuneration due to lack of clarity on the payment source. The CIT(A) deleted the addition after considering the resolution passed by the directors and evidence of the payment. The ITAT remitted this issue back to the AO for re-verification, as the evidence was not initially presented to the AO.4. Disallowance of Furniture Expenses:The AO disallowed Rs. 2,69,309/- for furniture expenses due to non-deduction of TDS on the contract payment. The CIT(A) confirmed the disallowance. The ITAT remitted the matter back to the AO, allowing the assessee to produce evidence supporting the payment and compliance with TDS provisions.5. Disallowance of Computer/Software Purchases:The AO disallowed Rs. 1,24,000/- for computer/software purchases due to insufficient evidence. The CIT(A) restricted the disallowance to Rs. 90,600/- after accepting bills for Rs. 33,400/-. The ITAT remitted this issue back to the AO for re-examination, allowing the assessee to produce additional evidence.6. Admissibility of Additional Evidence under Rule 46A of IT Rules, 1962:The ITAT noted that the CIT(A) admitted additional evidence without giving the AO an opportunity to examine it, violating Rule 46A. Therefore, the ITAT remitted all issues back to the AO for a fresh examination of the evidence and a de novo decision in accordance with the law.Conclusion:Both the appeals by the revenue and the assessee were allowed for statistical purposes, with the ITAT directing the AO to re-examine the evidence and decide the issues afresh. The judgment emphasizes the importance of following procedural rules, specifically Rule 46A of IT Rules, 1962, ensuring that all evidence is properly examined by the AO before making a decision.