Additional evidence at appellate stage must follow Rule 46A procedure before relief can be granted.

Admission of additional evidence at the first appellate stage must comply with Rule 46A, including the prescribed procedure and an opportunity to the Assessing Officer, even though section 251 empowers the appellate authority to confirm, reduce, enhance or annul an assessment. Where the assessee changes its stand between assessment and appeal and the record does not show due compliance with Rule 46A, appellate relief is vulnerable to interference. The appellate order was set aside and the matter restored for fresh adjudication, with remand directed for proper examination of the assessee's statement, its retraction, the employer relationship, business results, and the genuineness of the additions and claims.

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Issues: Whether the order deleting the additions could be sustained when the assessee had failed to cooperate before the Assessing Officer but produced extensive material before the first appellate authority, and whether the appellate order required interference for non-compliance with the statutory procedure governing appellate powers and additional evidence.

Analysis: The appeal turned on the use of additional evidence at the appellate stage and the scope of the first appellate authority's powers. The record showed a complete shift in the assessee's stand between the assessment proceedings and the appellate proceedings. The statutory scheme under section 251 of the Income-tax Act, 1961 permits the appellate authority to confirm, reduce, enhance or annul an assessment, while Rule 46A of the Income-tax Rules, 1962 restricts admission of additional evidence except in specified circumstances and requires compliance with the prescribed procedure, including opportunity to the Assessing Officer. The material on record did not show that the Rule 46A procedure had been duly followed before the appellate relief was granted.

Conclusion: The order of the first appellate authority was set aside and the matter was restored for fresh adjudication after proper examination of the assessee's statement, its retraction, the relationship with the alleged employer, the business results, and the authenticity of the additions and claims, through remand proceedings.

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