TaxTMI 
TaxTMI 
TaxTMI 
2019 (9) TMI 1076
X X X X Extracts X X X X
X X X X Extracts X X X X
....hat the order of Ld. CIT (A) is perverse and fit to be set aside as she has completely overlooked the reasons mentioned in the assessment order for making additions. 4. That the Ld. CIT(A) failed to provide any opportunity to the AO to appear personally during hearing despite the fact that a request was made by the Addl. CIT, Range-39, vide letter dated 01.06.2012 while forwarding Remand Report of AO to allow the AO to appear in hearing. 5. That the Ld. CIT (A) erred in deleting the addition of Rs. 1,31,761/- on account of income from house property merely on the submission of the assessee completely ignoring the reason mentioned in the assessment order. 6. That the Ld. CIT(A) erred in deleting the addition of Rs. 1,31,761/- on account of income from house property on the basis of additional evidence submitted by the assessee without providing AO opportunity of rebuttal under rule 46 A. 7. That the Ld. CIT (A) erred in deleting the addition of Rs. 20,69,898/- made on account of bogus purchases merely on the submission of the assessee completely ignoring the fact that assessee failed to furnish neither the complete address nor the confirmations of the persons from whom p....
X X X X Extracts X X X X
X X X X Extracts X X X X
....under rule 46 A. 17. That the Ld. CIT (A) erred in deleting the addition of Rs. 45,29,191/- made on account of deemed dividend u/s. 2(22)(e) merely on the submission of the assessee completely ignoring the reasons mentioned by the AO. 18. That the Ld. CIT(A) erred in deleting the addition of Rs. 44,32,000/- made on account of unexplained addition in capital on the basis of additional evidence submitted by the assessee without providing AO opportunity of rebuttal under rule 46 A. 19. That the Ld. CIT (A) erred in deleting the addition of Rs. 1,20,239/- on account of interest payment on housing loan on the submission of the assessee that this has not been claimed in P&L A/c. despite the fact that the assessee filed to establish above by producing the books of account." (A.1) subsequently, the grounds of appeal were revised. The revised grounds of appeal are as under: "1. The Ld. CIT (A) erred in admitting additional evidences under rule 46A of I.T. Rules, 1962 despite the fact that the repeated opportunities were given to the assessee by the AO and he was not prevented by sufficient cause from producing the evidences before him. 2. That the Ld. CIT (A) erred in delet....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... before us, the Ld. Departmental Representative ("DR", for short) appearing for Revenue, did not press the aforesaid grounds no.- 2, 5 and 9 of the Revised Grounds of appeal. Assessment Order was passed Under Section 144 of the Income Tax Act, 1961 ("I.T. Act", for short) on 28.12.2011 in which total income was determined at Rs. 2,16,95,055/- as against the returned income of Rs. 36,20,086/-; as per following computation: S.No Description Amount 1. INCOME FROM HOUSE PROPERTY 1,31,761 2. INCOME FROM BUSINESS AND PROFESSION i. Net profit from business as show by the assessee : Rs. 37,29,547 ii. Add: bogus purchase : 20,69,898 iii. Add: Claim of depreciation : Rs. 4,83,994 iv. Add: Interest Payment disallowed : Rs. 1,20,213 v. Add: Personal expenses : Rs. 18,482 3. INCOME FROM OTHER SOURCES 1,52,50,621 i. As per the return : NIL ii. Unexplained Sundry Creditor: Rs. 54,29,787 ii. Unexplained in capital : Rs. 44,32,000 iv. Unexplained investment in fixed assets : Rs. 8,59,643 v. Deemed dividend : Rs. 45,29,191 4. GROSS TOTAL INCOME 2,18,04,516 5. LESS DEDUCTION UNCER CHAPTER VIA (under section 80C and 80D) 1,09,461 6. TOT....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ted opportunities. 3) It also appears that you have taken housing loan from the Union Bank of India keeping your property A-313, Shivalik, Malviya Nagar, New Delhi as per the details submitted by the bank. Kindly furnish the complete details regarding the housing loan taken, complete address of the property purchased. Kindly also explain why you have not disclosed this fact in your return of income or in your submissions. Kindly also explain how you have submitted in your submission dated 10.08.2011 that you have no immovable asset. Kindly also explain why the annual rent from the above property should not be estimated as you have failed to furnish your personal balance sheet for the F. Y. 2007-08 and 2008-09. 4) The details regarding the notices issued to the assessee and failure of the assessee to make compliance are given below: Sl.No. Details of notice issued Mode of service Remarks 1. Notice u/s 143(2) issued on 23.08.2010 for compliance on 31.08.2010 Served by registered post No compliance 2. Notice u/s 142(1) issued on 24.03.2011 for compliane on 08.04.2011. Assessee was asked to produce books of account and other details Served by Registered post No compl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he provision of section 44AA of the Income-tax act, 1961, thus, penalty proceedings u/s 271A of the Income-tax Act, 1961 are initiated for non-maintenance of books of account as required by section 44AA of the Income-tax Act, 1961. Now the only option left is to complete the assessment u/s 144 of the Income-tax act, 1961, on the basis of the information available on record. The Hon'ble SC has elaborated about the powers and duty of the Assessing Officer making the best judgement in the following judgement :- CST v. H.M. Esufali, H.M. Abdulai [1973} 32 STC 77 (SC) CST v. H.M. Esufali, H.M. Abdulai [1973} 90 ITR 271 (SC) The relevant portion of the judgment is:- "It is a well settled law that the assessing authority while making the best judgement " assessment, no doubt, should arrive at its conclusion without any bias and on rational basis. That authority should not be vindictive or capricious. If the estimate made by the assessing authority is a bona fide estimate and is based on a rational basis, the fact that there is no good proof in support of that estimate is immaterial. Prima facie, the assessing authority is the best judge of the situation. In the present cas....
X X X X Extracts X X X X
X X X X Extracts X X X X
....O has also included detailed discussion in the Assessment Order in respect of the various additions made by him in the aforesaid order dated 28.12.2011 Under Section 144 of I.T. Act. The relevant portion of the Assessment Order is reproduced as under: "5. EVIDENCE OF MANIPULATION IN ACCOUNTS As mentioned above, the assessee has not submitted the relevant details with an obvious intent ion to avoid deeper scrutiny of his accounts and business affairs. The complete information about his business is in the exclusive knowledge of the assessee which he has deliberately not furnished with malafide motive , hence, I am left with no opt ion other than to reasonably estimate the profit of the assessee on the basis of the information available on record. From the perusal of the Balance Sheet of the assessee for the F.Y. 2007-08 and F.Y. 2008-09, it has been observed that the Sundry Creditors have declined from Rs. 2,54,96,604/- in the F.Y. 2007-08 to Rs. 54,29,787/- i.e. by a whopping 80%. This becomes even more strange if we consider the fact that purchases have increased from Rs. 12,97,13,220/- to Rs. 20,69,89,766/- i.e. by 60%. Under normal circumstances, Sundry Creditors should ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....or and a majority shareholder. The above company was a Sundry Creditor with outstanding credit balance of Rs. 1,24,24,934/- as on 31.03.2008. However, in the balance sheet as on 31.03.2009 the above company appeared as Sundry Debtor with a debit balance of Rs. 45,29,191/-. The case becomes even more fascinating by the fact the above company was not a debtor till 28.02.2009, as per the information furnished by the Union Bank of India. How the above company was transformed from a Sundry Creditor with credit balance of Rs. 1,24,24,934/- to a Sundry Debtor with debit balance of Rs. 45,29,191/- is a mystery which only the assessee can unravel. The case becomes even intriguing if we consider the fact that the assessee has not disclosed any transaction with his own private limited company - M/s Swaran Wood Products (I) Pvt. Ltd. in the earlier assessment years. Thus, the above transactions are certainly not a transaction in the nature of sales and purchases but a loan transaction within the meaning of deemed dividend provision u/s 2(22)(e) of the Income-tax Act, 1961. With these manipulations the assessee managed to improve the Current Ratio (Current Assets/Current Liabilities) from 1.....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... no option to remain selective, elusive, evasive or restrained in disclosure. After such explanation, the AO has to ascertain the correctness of the assessee's submissions on the basis of material available on record, the surrounding circumstances, the conduct of the assessee, the preponderance of probabilities and the nature of incriminating information,' evidence available with him. From the bare perusal of the facts discussed above, any prudent and reasonable person would conclude that the figures mentioned in the balance sheet and profit and loss accounts are not reliable. Penalty proceedings u/s 271(1 )(c) of the Income-tax Act, 1961, are initiated for furnishing of inaccurate particulars of his income by the assessee. 6. BOGUS PURCHASES As discussed above, the assessee has fudged his books of account by manipulating the figures of Sundry Creditors, Sundry Debtors etc. to make them presentable before the bankers. The assessee has cleverly manipulated his books of account in such a manner that only the relevant figures are fudged so that the banker can enhance his drawing limit without affecting his taxability under the Income-tax Act, 1961. If the major turna....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y cheques, it cannot be said that the transactions are genuine. Reliance is placed on the following judgements:- i. M.A. UNNERI KUTTY vs. C.I.T. : S.L.P.(Civil) No.4789 of 199312 - Supreme Court. ii. Precision Finance Pvt. Ltd. v. CIT - (1994) 208 ITR 465 (Cal.) iii. United Commercial & Industrial Co. Pvt. Ltd. v. CIT -(1991) 187 ITR 596 (cal.) iv. Nizam Wool Agency v. CIT - Allahabad High Court (1992) 193 ITR 318 (All.) It is a well established judicial principle that the onus is on the assessee to establish the authenticity of the balances disclosed in the accounts. The burden to prove the creditworthiness of the creditors and the genuineness of the transactions is indisputably on the assessee. The Hon'ble Bombay High Court in the case of VELJI DEORAJ & COMPANY (1968) 68 ITR 708 (Bom.) has held that the assessee's duty to prove that an unexplained entry in his account books does not represent undisclosed income is not discharged by merely showing that the entry appears in the account of third party and that the party in whose name the amount is credited is not a fictitious party but a real party but the assessee also has to prove further that the entry made in ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....RE - 23,348.00 10% T.V. - 5,600.00 15% AIR CONDITIONER 25,312.00 - 15% COMPUTER 68,100.00 - 60% MOBILE PHONE 16,700 - 15% WATER DISPENSER 16,076.00 - 15% CAR 608,500.00 - 15% CAMERA 10,000.00 - 15% DVD PLAYER 8,200.00 - 15% FIRE CYLINDER 23,907.00 15% REFRIGERATOR 17,500.00 15% TOTAL 7,60,388.00 99,255.00 Since, despite repeated opportunities the assessee failed to either produce the copy of their invoices and date of their put to use despite getting repeated opportunities vide various show-cause/notices u/s 142(1) of the Income-tax Act, 1961, as discussed above, hence, the above investments amounting to Rs. 8,59,643/- is treated as unexplained investment u/s 69 of the Income-tax Act, 1961, and added to the total income of the assessee as income from undisclosed sources. Similarly, claim of depreciation amounting to Rs. 4,83,994/- is disallowed and added back to the total income as the assessee failed to furnish the evidence of any business use. Penalty proceedings u/s 271 (1 )(c) of the Income-tax Act, 1961, are initiated for furnishing of inaccurate particulars of his income a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ncome. Penalty proceedings u/s 27l(l)(c) of the Income-tax Act, 1961, are initiated for furnishing of inaccurate particulars of his income and concealment of income by the assessee. 12. INCOME FROM HOUSE PROEPRTY It has been observed that the assessee has taken two housing loans from Union Bank of India, for a residential house at A-313, Shivalik, Malviya Nagar, New Delhi. The details regarding the interest payments on the housing loan are given in the above paragraph. As mentioned above, in all the show-cause notices issued to the assessee , following explanation was specifically asked from the assessee:- "It also appears that you have taken housing loan from the Union Bank of India keeping your property A-313, Shivalik, Malviya Nagar, New Delhi as per the details submitted by the bank. Kindly furnish the complete details regarding the housing loan taken, complete address of the property purchased. Kindly also explain why you have not disclosed this fact in your return of income or in your submissions. Kindly also explain how you have submitted in your submission dated 10.08.2011 that you have no immovable asset. Kindly also explain why the annual rent from the above....
X X X X Extracts X X X X
X X X X Extracts X X X X
....77,460/- on staff welfare, Rs. 5,330/- on vehicle maintenance, Rs. 55,590/- on conveyance and traveling and Rs. 66,195/- on sales promotion expenses. It is a matter of common knowledge that all these expenses have elements of personal nature. Thus, 10% of above expenses i.e. Rs. 12,712/- is disallowed and added back to the total income of estimate basis. The assessee has also debited Rs. 1,84,823/- on telephone for which the assessee has himself added Rs. 18,482/- as personal expenses in the computation of income, hence, no further disallowance is required on account of telephone expenses." (C) The Assessee filed appeal before Ld. CIT(A) against the aforesaid Assessment Order dated 28.12.2011. During appellate proceedings before Ld. CIT(A) the assessee filed Additional Evidences. The Assessing Officer objected to admission of the Additional Evidences vide letter ("remand report") dated 31.05.2012. However, the Ld. CIT(A) admitted the Additional Evidences. The relevant portion of the aforesaid impugned order dated. 29.06.2012 of Ld. CIT(A), pertaining to admission of Additional Evidences, is reproduced below for ease of reference: "Additional evidence That before giving the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... that it was attended and case was adjourned for 08/07/11 and again it was adjourned for 12/07/11, simultaneously with remark that it proves the reluctance on the part of the assessee or A.R. of the assessee. But the A.O. has not given any comments in respect of the proceedings where the written submission was placed on the record vide letter dated 10/08/ 11 where the books of accounts were also produced and it were test- checked by the A.O. That such submission and production evidently proves that the appellant was not in default and was keen to get the assessment completed on merits as held in the immediate two earlier assessment years. This submission is in reference to the "remand report" dated 31/05/12 in respect of the captioned appeal. The AO has absolutely reiterated the facts in her "Remand Report" from page 1 to 7 as it were given in Assessment Order framed u/s 144 of Income Tax Act, 1961. The appellant had placed on the record the submission vide letter /paper book dated 16th May, 2012 along with documentary evidences to prove that each addition / disallowance was not justified. The A.O. has not given any remark to such submission, however, from page 7 to 10 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... proceedings. The assessee's submission appears to be an after-thought to explain the unexplained issues involved in the assessment proceedings. Thus, the additional evidence should not be admitted under rule 46A. The additional evidences in no way fully explain the unexplained issues and hence the assessment framed under section 144 of the IT Act is justified and I stay with the assessment." It is evident from the assessment folder that during the course of assessment proceedings also repeated opportunities were given to the assessee but the assessee failed to furnish any explanation, hence, in my opinion, he is not entitled to submit any additional evidence at this stage. The Hon'ble Delhi High Court had held in the case of CIT v. Manish Build Well Pvt. Ltd. (2012) 204 TAXMAN 106 that additional evidences can be produced at first appellate stage only when conditions stipulated in rule 46A are satisfied and a finding is recorded. The appellant has further contended that without prejudice to the above submission it. is submitted that the observation given by the A.O. for each date giving the remark it proves the tendency of the assessee for the lingering on the matter, totall....
X X X X Extracts X X X X
X X X X Extracts X X X X
....uine and was dictated by the business needs, such a payment should not be disallowed merely on the ground that the assessee as to create a very high degree of suspicion. There should be no objection to consider any evidence produced to test its authenticity relevant and then to act on it. Similarly it has also been held by Madhya Pradesh High Court in the case of C.I.T. Vs. Shiya Dawoodi Bohara Jamat 304 ITR 336 It is submitted that the appellant had placed on the record the necessary documents like confirmation of trade creditors, sales tax / VAT assessment order and other relevant documents relating to each addition to prove the authenticity, genuineness and bonafidity of the declared profit and the A.O. has not given any particular comments on such documents. Those apart from the sufficient cause of time-gap in between date of notice and date of hearing an "affidavit" along with medical certificate are enclosed as an evidence to prove one of the sufficient causes which prevented him from attending the proceedings and its disposal on merits as it were held in the earlier two assessment years. The appellant had also filed an application under rule 46A separately for an....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nt u/s 143(3) and to render justice being the sole purpose of judiciary, the documents placed on the record as additional evidence are admitted. Now I proceed to adjudicate the grounds of appeal on merits." (C.1) The Ld. CIT(A) went on to decide the appeal having admitted the Additional Evidences, and allowed substantial relief to the assessee, vide the aforesaid impugned order dated 31.05.2012. Aggrieved, Revenue has filed this present appeal in ITAT. In the course of appellate proceedings, a Paper Book containing the following particulars was filed from assessee's side: 1. Written submission 2. Photocopies of assessment orders relating to Asstt. year 2007-08 and 2008-09 famed u/s 143(3) of Income Tax Act, 1961. 3. Photocopy of notice dated 11/05/11 u/s 271(1)(b) and its compliance on 20/05/2011 to prove that the appellant was not in default anywhere in attenting the proceedings. 4. Photocopy of letter dated 10/08/2011 which was placed on the record in person. The learned A.O. has not given any reference of such filing. 5. a] Photocopy of an "affidavit" (original is enclosed along with an application under Rule 46A) giving the contents on oath related to sufficien....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ay transactions related to the relevant Asstt. Year under appeal. b] That an "annexure" giving the nature of debit and credit transactions. 11. a] Scheduled of Fixed Assets as on 31.03.09 to prove that the claim of depreciation is Rs. 2,79,854/- and thus its disallowance Rs. 4,83,994/- was not justified. b] Photocopy of the purchase invoice for an addition held amounting to Rs. 8,59,640/- in the relevant Asstt. Year. 12. a] Copy of Profit & Loss Account for the ending 31/03/08 and Balance Sheet as on that of Swaran Wood Products Pvt. Ltd. to prove that Reserve & Surplus were amounting to Rs. 1,41,070/- only, thus, an adverse action u/s 2(22) (e) for an addition of Rs. 45,29,191/- was not justified. b] The entire outstanding balance of Rs. 45,29,291/- is related to "Sale" to M/s Swaran Wood Products Pvt. Ltd. The detail of outstanding Bills is enclosed, thus, an action u/s 2(22)(E) was not justified." (C.1.1) At the time of hearing before us, the Ld. Departmental Representive ("Ld. DR", for short) vehemently protested the admission of Additional Evidences by the Ld. CIT(A) during appellate proceedings before the Ld. CIT(A) despite the assessee having failed to avail....
X X X X Extracts X X X X
X X X X Extracts X X X X
....oner (Appeals) shall not take into account any evidence produced under sub-rule(1) unless the [Assessing Officer] has been allowed a reasonable opportunity- (a) to examine the evidence or document or to cross-examine the witness produced by the appellant, or (b) to produce any evidence or document or any witness in rebuttal of the additional evidence produced by the appellant. (4) Nothing contained in this rule shall affect the power of the [Deputy Commissioner (Appeals)] [or, as the case may be, the Commissioner (Appeals) to direct the production of any document, or the examination of any witness, to enable him to dispose of the appeal, or for any other substantial cause including the enhancement of the assessment of penalty (whether on his own motion or on the request of the [Assessing Officer]) under clause (a) of sub-section (1) of section 251 or the imposition of penalty under section 271.]" (C.2.1) On perusal of the aforesaid impugned appellate order of Ld. CIT(A), we find that the fact, that in earlier years the declared income of the assessee have been accepted by framing assessment U/s 143(3) of I.T. Act, has been considered favourably by Ld. CIT(A). However,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of the case and on a proper interpretation of Rule 46A of the Income Tax Rules, 1962, the Tribunal was right in law in taking a decision on the merits of the addition made under Section 68 without affording an opportunity to the assessing officer of being heard as envisaged in sub-Rule (3) of Rule 46A?" 2. Whether on the facts and in the circumstances of the case the Tribunal was right in law in holding that since the CIT (A) possesses co-terminus powers over the assessment apart from appellate powers, there was no violation of Rule 46A committed by him ?" 22. As we have with the consent of the learned counsel, heard them on merits, we proceed to decide the aforesaid substantial questions of law. Since the CIT (A) himself refers to Rule 46A and has also admitted that the confirmation letters adduced by the assessee before him were technically fresh evidence, it is not possible to accept the plea of the learned counsel for the assessee that the CIT (A), in examining the confirmation letters, was exercising his independent powers of enquiry under sub-Section (4) of Section 250 of the Income tax Act. It is true that the CIT (A) as first appellate authority has conterminous power....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ry and verification. A 7-Judge Bench of the Supreme Court in Keshav Mills Co. Ltd. v. CIT [1965] 56 ITR 365 had observed as under:- "Proceedings taken for the recovery of tax under the provisions of the Act are naturally intended to be over without unnecessary delay, and so, it is the duty of the parties, both the department and the assessee, to lead all their evidence at the stage when the matter is in charge of the Income-tax Officer." 23. It is for the aforesaid reason that Rule 46A starts in a negative manner by saying that an appellant before the CIT (A) shall not be entitled to produce before him any evidence, whether oral or documentary, other than the evidence adduced by him before the assessing officer. After making such a general statement, which is in consonance with the principle stated in the above judgment, exceptions have been carved out that in certain circumstances it would be open to the CIT (A) to admit additional evidence. Therefore, additional evidence can be produced at the first appellate stage when conditions stipulate in the Rule 46A are satisfied and a finding is recorded. Rule 46 A reads:- "Production of additional evidence before the [Deputy Com....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cedural requirement mentioned in the Rule has to be strictly complied with so that the Rule is meaningfully exercised and not exercised in a routine or cursory manner. A distinction should be recognized and maintained between a case where the assessee invokes Rule 46A to adduce additional evidence before the CIT (A) and a case where the CIT (A), without being prompted by the assessee, while dealing with the appeal, considers it fit to cause or make a further enquiry by virtue of the powers vested in him under sub-Section (4) of Section 250. It is only when he exercises his statutory suo moto power under the above sub-section that the requirements of Rule 46A need not be followed. On the other hand, whenever the assessee who is in appeal before him invokes Rule 46A, it is incumbent upon the CIT (A) to comply with the requirements of the Rule strictly. 24. In the present case, the CIT (A) has observed that the additional evidence should be admitted because the assessee was prevented by adducing them before the assessing officer. This observation takes care of clause (c) of sub-rule (1) of Rule 46A. The observation of the CIT (A) also takes care of sub-rule (2) under which he is re....
X X X X Extracts X X X X
X X X X Extracts X X X X
....at all be countenanced." (C.3) In the case of ITO vs. Pardeepa Rani (supra), co-ordinate Bench of ITAT, Delhi has held as under: "6.3 We are of the view that the CIT(A) after over-ruling the objection of the AO on the admissibility of the fresh evidences was required to communicate the decision to admit the evidence to the AO and provide him a reasonable opportunity to rebut the same. In the absence of any such exercises the order is in violation of the Statutory Rules and is open to the challenge of being perverse. Support is drawn from the decision of Jurisdictional High Court in the case of CIT v. Manish Buildwell (P.) Ltd.[2012]204 Taxman106/[2011]16 taxmann.com 27 (Delhi). A perusal of the said decision shows that considering the non-fulfillment of the requirements set out in sub-Rule (3) of Rule 46A the Hon'ble Court was pleased to restore the issue back to the CIT(A) directing the said Authority to address the shortcomings. The Hon'ble Court took into consideration the off repeated argument in such cases by noting that it is true that the powers of CIT(A) as First Appellate Authority are co-terminous with that of the AO by drawing attention to the distinction th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ment that the assessing officer should be allowed a reasonable opportunity of examining the evidence etc. can all be thrown to the winds, a position which the Hon'ble Court held was wholly unacceptable and may result in unacceptable and unjust consequences. The Hon'ble Court held that the procedural requirements mentioned in the Rule must be strictly complied with so that the Rule is meaningfully exercised and not exercised in a routine or cursory manner. The Tribunal in view thereof in the facts before the Court was faulted with for over-looking the requirements of sub-Rule (3) of Rule 46A and confusing it with sub-Rule (4) of Rule 46A. Addressing the rationale for the Rule the Hon'ble Court observed that the fundamental rule which is valid in all branches of law, including Income Tax Law is that the assessee should adduce the entire evidence in his possession at the earliest point of time. This ensures full, fair and detailed enquiry and verification. Referring to the decision in Keshav Mills Co. Ltd. v. CIT [1965] 56 ITR 365 (SC), 7-Judge Bench judgement of the Supreme Court, it was observed that the Court held that "Proceedings taken for the recovery of tax under th....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... The said observation it was held would take care of clause (c) of sub-rule (1) of Rule 46A. The observation of the CIT (A) it was held would also take care of sub-rule (2) under which he is required to record his reasons for admitting the additional evidence. Thus, the requirement of sub-rules (1) and (2) of Rule 46A it was held had been complied with. However, the Hon'ble Court found that sub-rule (3) which interdicts the CIT (A) from taking into account any evidence produced for the first time before him unless the Assessing Officer has had a reasonable opportunity of examining the evidence and rebut the same, had not been complied with. The Court found that there was nothing in the order of the CIT (A) to show that the Assessing Officer was confronted with the confirmation letters received by the assessee from the customers who paid the amounts by cheques and asked for comments. Thus, the end result the Hon'ble Court held was that additional evidence were admitted and accepted as genuine without the Assessing Officer furnishing his comments and without verification. In these circumstances the Court held:- "Since this is an indispensable requirement, we are of the vi....