TaxTMI 
TaxTMI 
2014 (3) TMI 764
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....ts and in the circumstances of the case in granting relief to the assessee in respect of disallowance of claim of deduction under sec. 10(35) of the IT Act, 1961 when the assessee failed to furnish the requisite information during assessment proceedings. 4. The CIT (A) ought to have considered the fact that as per Rule 46A of IT Rules, 1962, any additional information / evidence which was omitted to be furnished during the assessment proceedings cannot be accepted in appellate proceedings without seeking the opinion of the Assessing Officer. 5. The CIT (A) erred in law in not obtaining the opinion of the Assessing Officer before adjudicating the issue. 3. Brief facts of the case are that the assessee has filed the original return of income for the A.Y. 2010-11 on 18-09-2010 disclosing the total income of Rs. 12,68,065/- after claiming deduction u/s 10A of Rs. 80,49,071/- from the profits and gains of business of development of software. Subsequently, the assessee has filed a revised return on 31-03-2012 disclosing the total income of Rs. 12,68,065/-. Thus, there is no change in the income returned by the assessee but the assessee claimed Rs. 8,38,14,524/- as deduction u/s 10A of....
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....eturn and accordingly the original return has become non est as the same is filed within the time allowed u/s 139(5) of the Act. 6. It is the case of the assessee that the AO while completing the assessment u/s 144 should have considered the information available on record and made the assessment taking the same into consideration. As the AO rightly proceeded with the revised return and the assessee has also furnished the information called for vide questionnaire issued by the AO, the AO ought not to have ignored the relevant material available on record and more particularly when the same AO who has completed the previous assessment and allowed deduction u/s 10A with minor alterations to export turnover, according to the assessee is contestable as to the adjustment of the same against the total turnover also. Before the CIT(A), the assessee submitted that when the officer makes assessment to the best of his judgment, though some degree of guess work is involved, the assessing authority while making the best judgment assessment, no doubt, should arrive at his conclusion without any bias and on a rational basis. The authority should not be vindictive or capricious as held in the ca....
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....wance of deduction u/s. 10A amounting to Rs. 8,38,14,524, before the AO in the course of scrutiny proceedings, the assessee was asked to furnish the evidence on claim of deduction u/s 10A, its admissibility along with proof, softex forms, invoices, books of accounts and bank accounts. In the assessment order, it was mentioned that as no supporting information was filed by the assessee regarding the claim of deduction u/s 10A, the same was disallowed. During the course of first appellate proceedings, the assessee submitted that before the AO they have filed original and revised returns, annual report along with Audit report, Original Tax Audit report in 3CA and 3CD, original and revised, report in Form 3CEB, original report in Form 56F and Form 29B. The assessee in support of the claim of exemption u/s 10A , also filed copies of certificate of registration with STPI, Hyderabad and Goa, Softex forms submitted to STPI, reconciliation of export proceeds with invoices raised, FIRCs and bank statements. The assessee submitted before the CIT(A) that since most of the information called for was made available before the AO, he could have considered their claim. 10. It was also submitted b....
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....o submitted that their books of accounts are audited and the audit report was furnished to the AO during the course of assessment proceedings. Since the audit report cannot be prepared without maintenance of proper books of accounts and also no adverse finding was made by the statutory auditor, no disallowance of expenditure is called for. 13. The CIT(A) observed that since the statutory audit report was filed, maintenance of books of accounts by the assessee cannot be doubted. As the income/profits earned out of business by the assessee is prima-facie eligible for deduction u/s 10A, there was no need for the assessee to claim expenses other than that were really incurred. Therefore, going by the above position, no disallowance of expenditure is called for in the case of the assessee. Accordingly, he directed the Assessing Officer to delete the disallowance of Rs. 20,00,000/-. 14. Regarding the addition of dividend income of Rs. 9,01,245/-, during the course of first appellate proceedings, the assessee submitted that the dividend income was received by the assessee from Mutual Fund investments into bank accounts with HDFC and HSBC, and accordingly submitted the relevant evidence.....
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....easonable opportunity to examine the fresh evidence or to cross examine the witness produced by the assessee or to produce any evidence or document or any witness in rebuttal of the additional evidence produced by the assessee. 19. The provisions of Section 250(4), on the other hand, empower the first appellate authority to make such further enquiry as he thinks fit or to direct the assessing officer to make further enquiry and report the result of the same. The provisions of Section 250(4) are the provisions of long standing that existed under 1922 Act also in Section 31 of that Act. In the case of CIT v. Kanpur Coal Syndicate 53 ITR 225 (SC) the Hon'ble Supreme Court have held that the first appellate authority can do what the assessing officer could do and can also direct the latter to do what the latter has failed to do. In the case of Jute Corporation of India Ltd v. CIT 187 ITR 688 (SC) and in the case of CIT v. Nirbheram Daluram 224 ITR 610 (SC) the Hon'ble Supreme Court have held that the powers of the first appellate authority over an assessment are all pervasive and they are not confined to the matters considered by the assessing officer. There are many judgments....
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....of production of additional evidence." 21. Similar issue came for consideration by Hon'ble Kerala High Court in the case of CIT v. K Ravindranathan Nair 265 ITR 217 (Ker). Hon'ble High Court held that the provisions of Sub-rule (4) of rule 46A laid down that the powers of the appellate authority Under Section 250 was not affected. The Hon'ble Kerala High Court further observed " On a consideration of the provisions of rule 46A particularly Subrule (4) thereof and the provisions of Section 250(1) of the Income-tax Act conferring power on the Commissioner of Income-tax (Appeals), we are also of the view that in spite of the provisions of rule 46A(1), the provisions of Section 250 enable the Commissioner of Income-tax (Appeals) to accept additional evidence in appropriate cases which power has been preserved by Sub-rule (4) of rule 46A also. If the provisions of rule 46A, Sub-rule (4) thereof, are held to be mandatory that will go against the provisions of Section 250 of the Act conferring power on the first appellate authority to enquire into the matter and pass appropriate orders. In other words, rule 46A without Sub-rule (4) will be open to challenge as ultra vires Sec....
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....nvitation of the parties, he would be exercising, in our opinion, discretion not properly. He has undoubtedly a discretion vested in him to admit additional evidence in appropriate cases but admission of evidence at the instance of an appellant without any ground or explanation would not be exercising discretion properly and in such a case the appellate authority is competent, in our opinion, to interfere with the discretion exercised by the Appellate Assistant Commissioner. Reliance in this connection may be placed on the observations in the case of Ramgopal Ganpatrai Sons Ltd. v. Commissioner of Excess Profits Tax, in the case of Byramji Co. v. Commissioner of Income tax and in the case of Karamchand v. Commissioner of Income tax." 23. In the case of CIT v. Vali Mohamed Ahmedbhai 134 ITR 214 (Guj) Hon'ble Gujarat High Court have held that if any additional evidence submitted by an assessee is accepted behind the back of the assessing officer and the assessing officer is not given proper opportunity to rebut the same, it would amount to the violation of the principles of natural justice. Hon'ble Gujarat High Court observed: It is clear from the above quoted provision that....
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....it be stated that notice of appeal cannot be equated with notice of a future application to lead additional evidence which no one could have anticipated or reasonably foreseen. Ordinarily, the appeal would be decided on the evidence recorded in the course of assessment proceedings. The ITO, therefore, may not, in a given case, think it necessary to remain present at the hearing of the appeal. He, however, cannot be expected to anticipate that additional evidence might be produced by the assessee in his appeal. It is for this reason that it is necessary to give him an opportunity to meet the additional evidence. The Tribunal has, therefore, fallen into an error in rejecting the plea of the revenue that the AAC ought to have given an opportunity to the ITO to examine the additional evidence or to cross examine the witnesses whose evidence was taken on record or to rebut the additional evidence. We, therefore, answer the question referred to us in the negative and against the assessee. 24. The proposition that the first appellate authority can admit additional evidence sought to be filed by an assessee only for good reasons and after allowing the assessing officer reasonable opportun....
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....s that the powers of the Appellate Assistant Commissioner are much wider than the powers of an ordinary court of appeal. The scope of his powers is coterminus with that of the Income-tax Officer. He can do what the Income-tax Officer can do. He can also direct the Income-tax Officer to do what he failed to do. The power conferred on the Appellate Assistant Commissioner under Sub-section (4) of Section 250 being a quasi-judicial power, it is incumbent on him to exercise the same if the facts and circumstances justify. If the Appellate Assistant Commissioner fails to exercise his discretion judicially, and arbitrarily refuses to make enquiry in a case where the facts and circumstances so demand, his action would be open for correction by a higher authority". Thereafter the Hon'ble High Court again observed at page 8 in the following words: "On a conjoint reading of Section 250 of the Act and rule 46A of the rules, it is clear that the restrictions placed on the appellant to produce evidence do not affect the powers of the Appellate Assistant Commissioner under Sub-section (4) of Section 250 of the Act. The purpose of rule 46A appears to be to ensure that evidence is primarily l....