Facts of the Case

The assessee, a partnership firm, was subjected to reassessment proceedings for Assessment Year 2018-19. An assessment order dated 13.03.2023 was passed under sections 147 read with sections 144 and 144B of the Income-tax Act, assessing total income at ₹8,57,29,290 by treating cash deposits as unexplained money under section 69A.

The assessee preferred an appeal before the Commissioner of Income Tax (Appeals), who allowed the appeal and deleted the entire addition. Aggrieved, the Revenue filed an appeal before the Income Tax Appellate Tribunal, and the assessee filed a cross-objection.

Issues Involved

Whether the CIT(A) was justified in admitting additional evidence and deleting the addition without recording reasons under Rule 46A and without providing an opportunity to the Assessing Officer to examine such evidence.

Petitioner’s Arguments (Revenue)

The Revenue contended that the CIT(A) admitted additional evidence during appellate proceedings without complying with Rule 46A of the Income-tax Rules, 1962. It was submitted that no opportunity was granted to the Assessing Officer to verify or rebut the additional evidence, thereby violating the principles of natural justice. The Revenue prayed that the matter be restored for proper examination.

Respondent’s Arguments (Assessee)

The assessee argued that the documents furnished during appellate proceedings were merely clarificatory in nature and were submitted in support of evidence already filed during assessment proceedings. Reliance was placed on Rule 46A(4) and the judgment of the Allahabad High Court in Smt. Mohinder Kaur vs Union of India (104 ITR 120) to contend that the CIT(A) was empowered to call for such evidence.

Court Order / Findings

The Tribunal observed that the impugned appellate order did not record any finding that the additional evidence was clarificatory in nature, nor did it state that such evidence was filed on the direction of the CIT(A). The Tribunal further noted that Rule 46A(2) mandates recording of reasons for admission of additional evidence and Rule 46A(3) requires granting reasonable opportunity to the Assessing Officer.

Since these mandatory requirements were not complied with, the Tribunal set aside the appellate order and restored the matter to the file of the CIT(A) for passing a de-novo order after considering all materials on record and after providing due opportunity to both the Assessing Officer and the assessee

Important Clarification

The Tribunal did not express any opinion on the merits of the addition under section 69A. The order is confined to procedural compliance under Rule 46A and reiterates that appellate relief granted without following statutory safeguards and principles of natural justice cannot be sustained.

Link to download the order -  https://www.mytaxexpert.co.in/uploads/1770710254_INCOMETAXOFFICERKANNAUJVS.MSPUMPSETHOUSEKANNAUJ.pdf  

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