2016 (8) TMI 1461 - AT - Income Tax

Appeal allowed due to procedural lapses in admitting evidence. Remanded for fair hearing and compliance with Rule 46A.

The Tribunal allowed the Revenue's appeal for statistical purposes, setting aside the order due to procedural lapses in admitting additional evidence at ... Admission of additional evidence at first appellate stage - Rule 46A - requirement to afford Assessing Officer a reasonable opportunity under sub rule (3) of Rule 46A - distinction between powers of Commissioner (Appeals) under sub section (4) of section 250 and procedural requirements of Rule 46AAdmission of additional evidence at first appellate stage - Rule 46A - requirement to afford Assessing Officer a reasonable opportunity under sub rule (3) of Rule 46A - distinction between powers of Commissioner (Appeals) under sub section (4) of section 250 and procedural requirements of Rule 46A - Whether the Commissioner (Appeals) erred in admitting additional evidence under Rule 46A without confronting the Assessing Officer and affording him a reasonable opportunity to examine and rebut the evidence - HELD THAT: - The Tribunal held that admission of fresh evidence at the first appellate stage is not an absolute right but permissible where the conditions in Rule 46A(1) and the recording requirement of Rule 46A(2) are satisfied. However, Rule 46A(3) mandates that no evidence produced under sub rule (1) shall be taken into account unless the Assessing Officer has been allowed a reasonable opportunity to examine the evidence or to produce rebuttal. In the present case the CIT(A) remanded the evidence to the AO who objected to admissibility, but thereafter admitted the 'Agreement to Sell', 'Possession letter' and 'Power of Attorney' without communicating the admission to the AO or affording him an opportunity to rebut or verify. While the Tribunal accepted the factual justification for admitting the evidence (the assessee's illness and non receipt of notices), it found the procedural requirement of confronting the AO under Rule 46A(3) to be unfulfilled. Reliance was placed on the Jurisdictional High Court decision in CIT v. Manish Buildwell Pvt. Ltd., which emphasizes that where the assessee invokes Rule 46A the procedural safeguards-including confronting the Assessing Officer-must be scrupulously followed and cannot be displaced by recourse to the CIT(A)'s powers under section 250(4). Failure to comply with sub rule (3) renders the appellate disposal vulnerable and necessitates restoration for compliance and fresh adjudication. [Paras 6]Admission of the additional evidence was justified on facts, but because the CIT(A) did not confront the Assessing Officer or afford him a reasonable opportunity under Rule 46A(3), the impugned order was set aside and the matter restored to the file of the CIT(A) to remedy the procedural lapse and pass a speaking order after giving opportunity for rebuttal and hearing.Final Conclusion: The Revenue's appeal is allowed for statistical purposes; the CIT(A)'s order is set aside and the issue is restored to the CIT(A) to comply with Rule 46A(3) and pass a speaking order after providing the Assessing Officer and the assessee appropriate opportunities. Issues Involved:1. Admission of additional evidences at the appellate stage.2. Procedural compliance under Rule 46A of the Income Tax Rules, 1962.Detailed Analysis:1. Admission of Additional Evidences at the Appellate Stage:The Revenue challenged the CIT(A)'s decision to admit additional evidences at the appellate stage. The assessee had submitted fresh evidences during the appeal, citing health problems that caused her to temporarily relocate, leading to non-compliance with notices. The CIT(A) admitted these evidences, overruling the Assessing Officer's (AO) objections and provided partial relief by reducing the addition from Rs. 33,66,000 to Rs. 2,50,000.2. Procedural Compliance under Rule 46A:The Tribunal examined the procedural compliance under Rule 46A of the Income Tax Rules, 1962. Rule 46A(2) permits the admission of fresh evidence if justified reasons are provided in writing by the CIT(A). However, Rule 46A(3) mandates that the AO must be given a reasonable opportunity to examine and rebut the additional evidence. The Tribunal found that although the CIT(A) remanded the fresh evidences to the AO, the AO's objections were overruled without providing him the opportunity to rebut the evidences, violating Rule 46A(3).The Tribunal referred to the Jurisdictional High Court's decision in CIT vs. Manish Buildwell Pvt. Ltd., emphasizing that the procedural requirements of Rule 46A must be strictly followed. The High Court held that the CIT(A)'s powers under Section 250(4) of the Income Tax Act to conduct further enquiry do not negate the procedural mandates of Rule 46A when additional evidence is introduced by the assessee.The Tribunal concluded that the CIT(A) erred by not confronting the fresh evidences to the AO after overruling his objections. The CIT(A) should have communicated the decision to admit the evidence to the AO and provided him a reasonable opportunity to rebut it. The Tribunal set aside the impugned order and restored the issue to the CIT(A) to address the procedural lapses and pass a speaking order in accordance with law after giving the assessee a reasonable opportunity of being heard.Conclusion:The appeal of the Revenue was allowed for statistical purposes, and the order was pronounced in the open court on 19th August 2016.