2015 (4) TMI 431 - AT - Income Tax

Tribunal sets aside assessment and CIT(A) order, emphasizing procedural fairness and Rule 46A compliance.

DCIT Versus Indian Delco Pvt. Ltd.

The Tribunal allowed the Revenue's appeal, setting aside both the assessment and CIT(A) order due to the violation of Rule 46A of the Income Tax Rules, ... Disallowance of expenses - Whether CIT(A) has erred in deleting the addition made by the A.O. on account of expenses claimed, but no details in support of its contention had been filed during the course of assessment proceedings - Held that:- Assessing Officer completed assessment proceedings ex partie u/s 144 of the Act and the assessee was prevented by this reason in filing necessary and relevant explanation, details and evidence before the AO. Hence, we further, hold that in this situation the assessee was having right to submit additional evidence during First Appellate proceedings under Rule 46A of the Rules. At the same time, we note that the CIT(A) called remand report of the AO on the admissibility of additional evidence and the Assessing Officer objected to the admission of additional evidence without verifying, examining and commenting upon the merits of the additional evidence. From the vigilant reading of the impugned order we note that the CIT(A) rejected the objection of the AO and admitted the additional evidence but the remand report of the AO was not called and AO was not allowed to comment upon the merits of the additional evidence. In this situation, it can safely be presumed that the CIT(A) considered additional evidence in violation of Rule 46A of the Rules and granted relief for the assessee. - Matter remanded back - Decided in favour of Revenue. Issues:1. Deletion of addition of expenses by CIT(A)2. Violation of Rule 46A of the Income Tax Rules, 1962Analysis:Issue 1: Deletion of addition of expenses by CIT(A)The appeal was filed by the Revenue against the order of the Commissioner of Income Tax (Appeals) regarding the deletion of an addition of expenses amounting to Rs. 83,71,53,585 made by the Assessing Officer. The Assessing Officer disallowed the claimed expenses as the assessee did not provide supporting details during the assessment proceedings. The CIT(A) allowed the appeal and deleted the entire addition. The Revenue contended that the CIT(A) erred in law by not considering the lack of supporting evidence and by admitting additional evidence under Rule 46A of the Income Tax Rules, 1962. The Revenue requested the Tribunal to set aside the CIT(A) order and restore that of the Assessing Officer. The assessee argued that they were not given a fair opportunity to present evidence before the Assessing Officer, leading them to submit additional evidence before the CIT(A) as per Rule 46A. The Tribunal noted that the Assessing Officer completed the assessment ex parte, preventing the assessee from providing necessary explanations and evidence. The CIT(A) admitted the additional evidence without allowing the Assessing Officer to comment on its merits, leading to a violation of Rule 46A. Consequently, the Tribunal set aside both the assessment order and the CIT(A) order, instructing a fresh assessment by the Assessing Officer after affording the assessee a fair hearing.Issue 2: Violation of Rule 46A of the Income Tax Rules, 1962The Tribunal found that the CIT(A) admitted additional evidence without proper verification and examination by the Assessing Officer, contravening Rule 46A of the Income Tax Rules, 1962. The CIT(A) did not call for a remand report from the Assessing Officer regarding the admissibility of the additional evidence, which was a procedural irregularity. This lack of due process led to the granting of relief to the assessee based on evidence that was not adequately scrutinized. The Tribunal emphasized the importance of following procedural rules to ensure a fair and thorough assessment process. As a result, the Tribunal deemed the actions of the authorities below as improper and unsustainable, ultimately setting aside the assessment and the CIT(A) order. The case was remanded to the Assessing Officer for a fresh assessment, emphasizing the need for a fair opportunity for the assessee to present their case without prejudice from previous proceedings.In conclusion, the Tribunal allowed the appeal of the Revenue, highlighting the significance of adhering to procedural rules and providing a fair opportunity for all parties involved in the assessment process.