2014 (11) TMI 726 - AT - Income Tax

Tribunal sets aside issues for fresh consideration, Revenue appeal allowed, CIT(A) faulted for admitting evidence.

The Tribunal set aside the issues to the AO for fresh consideration, allowing the Revenue's appeal for statistical purposes and dismissing the assessee's ... Validity of notice for reassessment u/s 148 - Discrepancies in the transportation receipts and TDS certificates - Held that:- The AO made additions which were deleted by the CIT(A) – revenue relied on the CIT(A)’s order to hold that the proceedings u/s 148 of the Act are valid in law - there is no merit in the objections raised by the assessee inasmuch as the issue on which notice u/s 148 of the Act was issued and the additions in that respect have been made by the AO – Decided against assessee. Admission of additional evidence under Rule 46A – Held that:- The admission of additional evidence by the ld. CIT(A) is not in conformity of Rule 46A of Income Tax Rules - There is neither any finding that the assessee was prevented by sufficient cause in not producing the additional evidence before the AO – revenue rightly contended that if the assessee's books mysteriously vanished a couple of days before assessment and the computer back up was ready regarding storage of data then a request to that effect should have been made by the assessee before the AO so as to submit the books of account - Such computer record ought to have been produced before the AO but it was no so - there is some doubt in assessee's activities - CIT(A) has not considered this relevant aspect and total relief has been granted to the assessee without appreciating the remand report properly – thus, the order of the CIT(A) is set aside and the matter is remitted back to the AO for fresh adjudication – Decided in favour of revenue. Issues Involved:1. Deletion of trading addition in kerosene business.2. Deletion of addition on account of less income shown in transportation.3. Deletion of trading addition in hotel business.4. Deletion of unexplained investment in construction of hotel building.5. Deletion of addition on account of furniture and fixture.6. Deletion of addition made on account of unexplained cash credit.7. Validity of issuance of notice under section 148 of the Income Tax Act.Issue-wise Detailed Analysis:1. Deletion of Trading Addition in Kerosene Business:The Revenue challenged the deletion of Rs. 1,69,845/- in the kerosene business. The CIT(A) found that kerosene is a controlled item with sales supervised by the District Administration. The accounts were audited without adverse comments, and the loss of books was reported to the police. The CIT(A) held that the AO did not conduct an independent inquiry to prove discrepancies in sales and purchases. Hence, the addition was deleted.2. Deletion of Addition on Account of Less Income Shown in Transportation:The Revenue contested the deletion of Rs. 1,79,666/- for less income shown in transportation. The CIT(A) observed that the amount was included in the income of the preceding year (A.Y. 2003-04) and the AO should have examined this before making the addition. The addition was deemed without basis and was deleted.3. Deletion of Trading Addition in Hotel Business:The Revenue appealed against the deletion of Rs. 1,46,401/- in the hotel business. The CIT(A) found that the AO made the addition without inquiry or specific material. Consequently, the addition was deleted.4. Deletion of Unexplained Investment in Construction of Hotel Building:The Revenue disputed the deletion of Rs. 7,34,180/- for unexplained investment in hotel construction. The CIT(A) held that CPWD rates should be scaled down by 20% and further deductions allowed for self-supervision. The DVO's report was rejected for not pointing out specific defects. Thus, the addition was deleted.5. Deletion of Addition on Account of Furniture and Fixture:The Revenue challenged the deletion of Rs. 5,19,097/- for furniture and fixture. The CIT(A) noted that the AO made the addition without inquiry or specific material. The difference in valuation was attributed to CPWD and local PWD rates and self-supervision deductions. The addition was deleted.6. Deletion of Addition Made on Account of Unexplained Cash Credit:The Revenue contested the deletion of Rs. 1,00,000/- for unexplained cash credit. The CIT(A) found that the balances were opening balances with no transactions during the year. Hence, no addition under section 68 was justified, and the addition was deleted.7. Validity of Issuance of Notice Under Section 148 of the Income Tax Act:The assessee challenged the validity of the notice under section 148, citing the case of CIT vs. Shri Ram Singh. The CIT(A) upheld the proceedings under section 148, citing the Supreme Court decision in Rajesh Jhaveri Stock Brokers (P) Ltd., which required only a prima facie reason to believe that income had escaped assessment. The Tribunal found no merit in the assessee's objections and dismissed the cross-objection.Conclusion:The Tribunal found that the CIT(A) admitted additional evidence without complying with Rule 46A of the Income Tax Rules, which requires a finding that the assessee was prevented by sufficient cause from producing the evidence before the AO. The Tribunal set aside the entire issue to the AO for fresh consideration, providing reasonable opportunity to the assessee. The Revenue's appeal was allowed for statistical purposes, and the assessee's cross-objection was dismissed.