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Present Tax Appeal has been preferred by the appellant - revenue challenging the judgement and order dtd. 14/9/2012 passed by the learned Income Tax Appellate Tribunal in Appeal No.2 of 2003 with respect to Block period from 1/4/1988 to 29/7/1998, on the following proposed substantial questions of law :
"(I) Whether on facts and circumstances of the case, appellate tribunal was right in deleting the addition of Rs. 67 lakhs as unexplained capital and peak credits amounting to Rs. 1,25,94,803/- :-
(i) by accepting the claim of the assessee regarding the booking amount received from 24 farmers without examining the fact whether any of the farmers finally brought the flats/plots from Prithvi Builders;
(ii)By holding that there is no need to give any copies of the statement of the 24 farmers to the assessing officer particularly where the statement were recorded by the CIT (A) himself without confirming then to the AORs.
Whether the Appellate Tribunal is right in law and on facts in confirming the order passed by CIT (Appeals), who had deleted the additions relying upon the statements recorded by him, without giving an opportunity to the Assessing Officer as mandated under Rule 46A of the Income Tax Rules, 1962Rs.
4.01. A search and seizure action was carried out by the Income Tax Department at the premises of the assessee and its other group concerns on 29/7/1998. Thereafter, a notice u/s 158BC of the Income Tax Act was served upon the assessee on 18/1/1999. The assessee filed his return of income on 3/3/1999 declaring total income of Rs.Nil for the block period. The assessment was completed u/s 158BE of the Act determining the total income at Rs. 1,93,94,403/-. It appears that during the assessment proceedings and to verify the authenticity of the assessee's claim with respect foreign depositors, the Assessing Officer issued Summons for verification of the depositors through the assessee's authorised representative. However, the Summons could not be served upon the authorised representative and thereafter by passing the assessment order, the AO included the said amount in the income of the assessee treating it as undisclosed income.
4.02. Feeling aggrieved by and dissatisfied with the block assessment order, the assessee preferred an appeal before the CIT(A). During the course of the appellate proceedings, CIT(A) remanded the case to the AO along with the copy of the submissions made by the assessee and the AO sent remand report to the CIT(A). It appears that the learned CIT(A) was not satisfied with the remand report submitted by the AO and the CIT(A) was of the opinion that in the remand report the AO has neither brought any material to substantiate his claim nor brought on record any positive evidence for sustaining addition made by him and in fact, in the reassessment report, AO has merely repeated the reasons given in the assessment order.
4.03. Feeling aggrieved by and dissatisfied with the order passed by the CIT(A) dtd. 18/10/2002 in allowing the appeal preferred by the assessee and deleting the addition made by the AO, the revenue preferred appeal before the ITAT. It appears that there was delay of 2 days in preferring appeal and for that the revenue submitted an application for condonation of delay which came to be allowed and the delay came to be condoned by the learned tribunal. During the appeal before the tribunal, the revenue raised additional ground for violation of Rule 46A of the Income Tax Rules, 1962 by the CIT(A) and the requested to permit to raise the following additional ground :
"The Learned Commissioner of Income-Tax (Appeals) has erred in deleting the additions made by the Assessing Officer on the basis of statements recorded by his office without giving the Assessing Officer an opportunity to examine the statements thereby violating Rule 46A of the Income Tax Rules, 1962."
4.04. It appears that by order dtd. 7/2/2012 and by observing that as per Sub Rule (2) of Rule 46A, the learned CIT(A) is within his powers to examine any witness and therefore, there is no infringement of Rule 46A and by observing so, the learned tribunal did not admit the additional ground and proceeded further with the hearing of the appeal and by the impugned judgement and order, the learned tribunal has dismissed the said appeal preferred by the revenue confirming the order passed by the CIT(A) deleting the addition of Rs. 1,93,94,403/- made by the AO.
5.00. Having heard Mr.Manish Bhatt, learned counsel appearing on behalf of the appellant - revenue and Mr.R.K. Patel, learned counsel appearing on behalf of the assessee and considering the order passed by the CIT(A) as well as the impugned judgement and order passed by the learned tribunal, it appears that there is violation of Rule 46A of Income Tax Rules, 1962. It is not in dispute that during the appellate proceedings, initially CIT(A) remanded the matter to the AO along with the copy of the submission made by the assessee more particularly with respect to case on behalf of the assessee with respect to 24 investors / depositors and the AO submitted remand report. It also appears from the order passed by the CIT(A) that the CIT(A) was not satisfied with the remand report submitted by the AO and therefore, during the appellate proceedings, the CIT(A) decided to hold inquiry u/s 250(4) of the Act and asked the assessee to produce investors at the Income Tax Office at Bhavnagar on 27/9/2002. It appears that the learned CIT(A) personally camp at Bhavnagar on 27/9/2002 and on that day, the assessee produced 24 investors and statements of all those 24 investors came to be recorded by the Inspectors of the Income Tax Department in presence of the CIT(A) and relying upon the statements of all those 24 investors recorded by the inspectors, CIT(A) has deleted addition of Rs. 1,93,94,403/- made by the AO by observing that in the statements of the investors recorded by the Inspectors the investors have confirmed the fact of making investment in the project of M/s.Prithvi Builders through the assessee and the said statements substantiate the submission made by the assessee. It is an admitted position that the CIT(A) has not given any opportunity to the AO to cross-examine those witnesses / investors whose statements came to be recorded during the inquiry ordered by the CIT(A) held during the appellate proceedings and the CIT(A) has relied upon the statements of those 24 investors without giving any opportunity to the AO to cross-examine them.
7.00. In view of the above and for the reasons stated above and without further entering into the merits of the case and solely on the ground that the order passed by the CIT(A) is in breach of violation of Rule 46A of the Income Tax Rules, 1962, the order passed by the CIT(A) as well as the impugned judgement and order passed by the ITAT deserve to be quashed and set aside and are accordingly quashed and set aside on the aforesaid ground alone and the matter is remanded to the CIT(A) to decide and dispose of the appeal afresh in accordance with law and on merits and after giving an opportunity to the AO to cross-examine those investors / witnesses whose statements were recorded on 27/9/2002 in presence of the CIT(A) at the Income Tax Office at Bhavnagar and relied upon by the learned CIT(A) while deleting addition of Rs. 1,93,94,403/- made by the AO. The aforesaid exercise shall be completed by the CIT(A) at the earliest but not later than six months from the date of the present order. However, it is made clear that this Court has not expressed any opinion in favour of either of the parties and the impugned orders are set aside solely on the ground of violation of Rule 46A of the Income Tax Rules, 1962. Present appeal is allowed to the aforesaid extent. In the facts and circumstances of the case, there shall be no order as to costs.
Separate Judgement by Sonia Gokani, J.:8.00. I had a privilege to peruse the order of the learned Brother Judge (Justice Mr.M.R. Shah), although while agreeing on conclusion of remand with the learned Brother Judge, separate reasonings are given hereinafter in this order.
13.08. Even at the cost of reiteration, it is being stated that the opportunity of hearing is to be read as interwoven while exercising powers under sub-rule (4) of Rule 46A of the Rules and, therefore, the Tribunal surely committed an error in not allowing the opportunity of hearing to the Revenue, despite its fervent request for affording opportunity in respect of additional evidence.
14.00. For the foregoing reasons, the present appeal succeeds and the same is, accordingly, partly allowed. The impugned orders are quashed and set aside, remanding the matter to the Commissioner (Appeals), for deciding the Appeal afresh on affording reasonable opportunity to both the sides in respect of the additional evidence collected by it in exercise of powers under sub-rule (4) of Rule 46A. Needless to say that nothing is opined on the merits of the case by this Court and none of the observations made hereinabove shall, in any manner, prejudice the right of either of the parties in deciding the appeal afresh by the revenue authorities.
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