INCOME TAX OFFICER v. H.M. TRADERS
[Citation -1986-LL-0429-2]

Citation 1986-LL-0429-2
Appellant Name INCOME TAX OFFICER
Respondent Name H.M. TRADERS
Court ITAT
Relevant Act Income-tax
Date of Order 29/04/1986
Assessment Year 1983-84
Judgment View Judgment
Keyword Tags mercantile system of accounting • disallowance of depreciation • reasonable opportunity • sales tax liability • additional evidence • central sales tax • advance payment • fresh evidence • lease money • lease deed • sales-tax
Bot Summary: CIT(A) has erred in admitting fresh evidence in the form of an affidavit of one Sh. Ujjagar Singh s/o SH. Badan Singh of Village Randhawa, without allowing any opportunity to the ITO, as required under r. 46A(3) of the IT Rules, 1962 to examine and rebut the same. CIT(A) has further erred in setting aside, the addition of Rs. 28,055 on account of disallowance of depreciation claimed on a tractor, after considering the new evidence mentioned at above. In the fourth ground the contention is that after having admitted the fresh evidence, the CIT should not have set aside the addition which was covered by the fresh evidence and directed the ITO to consider the new evidence for purposes of claim of depreciation on the tractor. Rule 46A of the IT Rules lays down the procedure for production of additional evidence before the AAC and CIT, Sub-r. or r. 46A prescribes the circumstances under which the AAC or the CIT can admit additional evidence. Sub-r. of r. 46A provides that the AAC or as the case may be the CIT(A) shall not take into account any evidence produced under sub-s. unless the ITO has been allowed a reasonable opportunity to examine the evidence or document or to cross-examine the witness produced by the appellant or to produce any evidence or document or any witness in rebuttal of the additional evidence produced by the appellant. The only requirement of sub-r. is that once the evidence is admitted it shall be confronted to the ITO in the manner referred to above before taking the same into account. In our opinion, this can by done by the AAC/CIT one way by summoning ITO to visit his office to examine the evidence or document or to cross-examine the witness produced any evidence or document or any evidence in rebuttal of the additional evidence produced by the appellant.


This appeal by Revenue is directed against order of CIT (Appeals) relating to asst. yr. 1983-84. first ground is that CIT(Appeals) has erred in deleting addition of Rs. 5,300 made by ITO on account of Central sales tax. assessee claimed Central Sales tax liability of Rs. 5,300. This was shown in balance sheet as liability. ITO asked assessee to prove payment of Central Sales-tax and also basis for liability. According to ITO no proof was furnished. He, therefore, disallowed claim. CIT (A) has, however, allowed claim. ld. Departmental Representative has submitted that CIT (A) has allowed deduction without any basis. He therefore, urged that his order should be reversed and that of ITO restored. ld. Counsel for assessee has produced before us copy of assessment order passed by Excise and Taxation Officer cum-Assessing Officer, Ward No. 8, Sirhind for period 13th Sept., 1982 to 31st March,, 1983 relevant to asst. yr. 1983--84 under appeal. As per this order there were interstate trade and commerce sales amounting to Rs. 11,30,146 on which Central Sales tax payable after allowing rebate under s. 15(C) off Central ST Act, 1956 has been determined at Rs. 5,732 against which assessee had made claim of Rs. 5,300 only. He, therefore, urged that deduction has rightly been allowed by CIT (A). In view of order of Sales tax authorities noted above we do not find any justification to interfere with order of CIT(A). This ground by Revenue is, therefore, rejected. second ground is that CIT(A) has erred in deleting addition of Rs. 12,500 on account of advance payment of lease money made by assessee. assessee debited sum of Rs. 30,000 in profit and loss account under head "Contract Shelling Unit No. 1." This was lease money paid for above unit in terms of lease deed dt. 8th Oct., 1982. ITO has observed that according to cl. 1 of lease deed assessee firm had taken on lease rice sheller for period of one year w.e.f. 8th Sept., 1982 on rent of Rs. 30,000 per annum. accounting period of assessee ended on 31st March, 1983. Therefore, rice sheller had worked for period of 7 month only during accounting period relevant to assessment year under appeal. He therefore allowed lease amount proportionately at Rs. 17,500 and balance amount of Rs. 12,500 was disallowed. On appeal, CIT(A) has allowed same. It has been contended before us by ld. Departmental Representative that assessee was following mercantile system for accounting and, therefore, CIT(A) was not justified in allowing deduction of lease amount of period beyond 31st March, 1983. It was, therefore, urged that order of CIT(A) should be reversed and that of ITO restored. ld. Counsel for assessee on other hand has referred to cl. 2 of lease deed according to which rent shall be paid on or before 31st March,. He, therefore, urged that even on mercantile system of accounting payment had become due before 31st March, and therefore, same has rightly been allowed by CIT(A). We have carefully considered rival submissions. In view of cl. 2 in lease deed referred to above, we hold that CIT(A) has rightly allowed deduction for whole year. Under contract assessee was obliged to make payment for entire lease money before 31 March, i.e. before close of year. Even on mercantile system of accounting liability had become due before close of accounting period and, therefore, full deduction has rightly been allowed by CIT(A). No interference with his order on this account is, therefore, called for. third and fourth grounds are interconnected and same are reproduced below: "3. ld. CIT(A) has erred in admitting fresh evidence in form of affidavit of one Sh. Ujjagar Singh s/o SH. Badan Singh of Village Randhawa, without allowing any opportunity to ITO, as required under r. 46A(3) of IT Rules, 1962 to examine and rebut same. On facts and in circumstances of case ld. CIT(A) has further erred in setting aside, addition of Rs. 28,055 on account of disallowance of depreciation claimed on tractor, after considering new evidence mentioned at (3) above". In third ground grievance is that CIT(A) has erred in admitting fresh evidence without allowing any opportunity to ITO as required under s. 46A(3) of IT Rules, 1962. In fourth ground contention is that after having admitted fresh evidence, CIT (A) should not have set aside addition which was covered by fresh evidence and directed ITO to consider new evidence for purposes of claim of depreciation on tractor. ld. Departmental Representative supported above grounds of appeal and stated that there was violation of r. 46A(3) of IT Rules, 1962 in not allowing ITO opportunity before admitting fresh evidence and also in setting aside his order on this point and restoring same to his file. ld. Counsel for assessee, on other hand, has supported order of CIT(A). Rule 46A of IT Rules lays down procedure for production of additional evidence before AAC and CIT (A), Sub-r. (1) or r. 46A prescribes circumstances under which AAC or CIT (A) can admit additional evidence. Sub-r. (2) provides that AAC or CIT(A) shall not admit any evidence unless he records in writing his reasons for its admission. applicability of sub-r. (1) and (2) aforesaid has not been disputed before us by Revenue. Sub-r. (3) of r. 46A provides that AAC or as case may be CIT(A) shall not take into account any evidence produced under sub-s. (1) unless ITO has been allowed reasonable opportunity to examine evidence or document or to cross-examine witness produced by appellant or to produce any evidence or document or any witness in rebuttal of additional evidence produced by appellant. only requirement of sub-r. (3) is that once evidence is admitted it shall be confronted to ITO in manner referred to above before taking same into account. In our opinion, this can by done by AAC/CIT (A) one way by summoning ITO to visit his office to examine evidence or document or to cross-examine witness produced any evidence or document or any evidence in rebuttal of additional evidence produced by appellant. other way of meeting above requirement is to restore issue to file of ITO who may then examine evidence or documents or cross examine witness produced by appellant and also bring his own evidence or documents on record, in rebuttal of additional evidence produced. In second alternative ITO is given free hand to take full benefit of requirements of sub. (3). scope of first alternative on contrary is not that wide as in second case. setting aside of order of ITO and restoring issue to his file for predetermining issue afresh after taking all material into account, in our opinion, is in full compliance of sub-r. (3) of r. 46A. issue has been restored to file of ITO by CIT(A) to give ITO as reasonable opportunity as envisaged in sub-r. (3). We, therefore, do not find any merit in these grounds of appeal as well and same are rejected as such. In result, appeal is dismissed. *** INCOME TAX OFFICER v. H.M. TRADERS
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