2024 (8) TMI 1238 - AT - Income Tax

ITAT allows AO's appeal after CIT(A) improperly admits additional evidence without following Rule 46A procedures

ITO 13 (1) (1), Mumbai Versus Nirmit Mercantile Private Limited

The ITAT Mumbai allowed the AO's appeal against CIT(A)'s deletion of addition for unexplained creditor. The CIT(A) had admitted additional evidence and ... Unexplained creditor - CIT(A) deleted addition admitting additional evidences - HELD THAT:- CIT(A) has considered the additional evidence filed before it by the assessee which was not available before the ld. AO. No doubt, according to the provisions of Rule 46A, the ld. CIT(A) is empowered to admit the additional evidence, provided it falls into conditions as mentioned in clause (a) to (d). For admitting such evidence a specific order under Rule 46A also to be passed under the appellate order. Accordingly, to sub-rule (iii), he has to give an opportunity to the AO to verify the same. In the appellate order, we do not find any (1) reference to any application made by the Assessee for admission of additional evidence, (2) Correspondence with the AO for comments on admission of such evidence, (3) any order admitting such additional evidence. Thus, there is no reference of any power exercised by him u/r 46A of The IT Rules, 1962. Therefore, it is apparent that ld. CIT(A) has admitted the additional evidence without any application made by the assessee, without making any order and without providing any opportunity to the AO. Thus, there is clear violation of rule 46A of the IT Rules. We restore the whole issue back to the file of the ld. CIT(A) to comply with the provisions of Rule 46A and decide the issue afresh. The solitary ground raised by the ld. AO is allowed. Issues:- Appeal against deletion of addition of Rs. 5,63,40,148 by CIT(A) based on identity and genuineness of creditor and transaction.- Discrepancy in information provided by assessee regarding creditor M/s. B.S. Hydrocarbons Pvt. Ltd.- Admissibility of additional evidence by CIT(A) without opportunity to Assessing Officer.Analysis:Issue 1: Appeal against deletion of addition by CIT(A)The Assessing Officer (AO) filed an appeal against the deletion of an addition of Rs. 5,63,40,148 by the CIT(A). The AO contended that the identity of the creditor and genuineness of the transaction were not satisfactorily explained by the assessee. The AO argued that since M/s. B.S. Hydrocarbons Pvt. Ltd. did not file a return of income and the assessee failed to provide necessary documents during assessment proceedings, the addition was justified. The AO sought to set aside the CIT(A)'s order and confirm the original assessment. The CIT(A) based the deletion of the addition on the balance sheet of the creditor, where the trade receivable from the assessee was clearly shown. The CIT(A) relied on judicial precedents and held that when purchases are accepted as genuine, the resultant creditor cannot be added to the total income of the assessee.Issue 2: Discrepancy in information provided by assesseeThe AO raised concerns regarding the lack of information provided by the assessee regarding M/s. B.S. Hydrocarbons Pvt. Ltd. The AO highlighted that despite multiple notices and requests for verification, the assessee did not provide sufficient details or documents related to the creditor. The AO emphasized that the lack of response from the creditor and the failure to produce necessary evidence led to the addition in the assessment. The CIT(A) considered additional evidence submitted by the assessee, including confirmation and audited books of account of the creditor, to support the genuineness of the transaction. However, the AO argued that the CIT(A) admitted this additional evidence without following the proper procedures under Rule 46A of the Income Tax Rules, leading to a violation of the rules.Issue 3: Admissibility of additional evidence by CIT(A)The AO contended that the CIT(A) admitted additional evidence without providing an opportunity to the Assessing Officer and without following the prescribed procedures under Rule 46A. The AO highlighted that the CIT(A) did not reference any application for admission of additional evidence, did not correspond with the AO for comments on the evidence, and did not issue any order admitting such evidence. As a result, the AO argued that the CIT(A) violated Rule 46A of the Income Tax Rules. The Tribunal concluded that the issue should be remanded back to the CIT(A) to comply with the provisions of Rule 46A and decide the matter afresh.In conclusion, the Tribunal allowed the solitary ground raised by the Assessing Officer, and the appeal of the revenue was allowed, with the issue being remanded back to the CIT(A) for proper compliance with Rule 46A.