I TA N o .1 48 /B LP R/ 2 01 2 As s ess m e nt Ye r: 20 08 - 0 9 Page 1 of 8 IN INCOME TAX APPELLATE TRIBUNAL, RAIPUR BENCH, SMC , RAIPUR [Coram: Pramod Kumar AM] ITA No.148/BLPR/2012 Assessment Year: 2008-09 Asstt. Commissioner of Income Tax-1(2) Raipur (CG). .Appellant Vs. Ankyra Systems Pvt. Ltd., ..... .Respondent 12 th Cross, 2 nd Phase, J.P. Nagar,Bangalore. [PAN: AAGCA 7551D] Appearances by: D.K. Jain, for appellant Sunil Kumar Agrawal, for respondent Date of concluding hearing: 21.06.2016 Date of pronouncing order : 20.09.2016 O R D E R 1. By way of this appeal, Assessing Officer has challenged correctness of order dated 30.05.2012, passed by learned CIT(A), Raipur (C.G.) for assessment year 2008-09, on following grounds :- 1. Whether in law and on facts and circumstances of case, CIT(A) has erred in deleting disallowance made by AO out of expenses claimed in P&L account at Rs.3,86,638/- being unverifiable. 2. Whether in law and on facts and circumstances of case, CIT(A) has erred in deleting disallowance of VAT Tax payable at Rs.65,393/- u/s 43B of Income-tax Act, 1961. 3. Whether in law and on facts and circumstances of case, CIT(A) has erred in deleting disallowance of Rs.36,93,034/- u/s 68 of I. Tax Act, 1961 on account of unexplained cash credit. I TA N o .1 48 /B LP R/ 2 01 2 As s ess m e nt Ye r: 20 08 - 0 9 Page 2 of 8 4. Whether in law and on facts and circumstances of case, CIT(A) was justified in admitting additional evidence in violation of Rule 46A of I. Tax Rule 1962. 5. order of Ld. CIT(A) is erroneous both in law and on facts. 2. So far as first ground of appeal is concerned, relevant material facts are like this. During course of assessment proceedings, Assessing Officer disallowed 50% off expenses incurred by assessee for want of details and as expenses did not seem to be reasonable from any point of view. In appeal, assessee submitted all requisite details, pointed out that books of accounts are duly audited and no adverse comments on expenses find place in audit reports, and pointed out that such disallowance was wholly unwarranted. While CIT(A) upheld disallowance in principle, he restricted quantum of disallowance to 10%. Assessing Officer is aggrieved of relief granted by CIT(A) and is in appeal before me. 3. Having heard rival contentions and perused material on record, I see no reasons to interfere in matter. disallowance @10% is already confirmed and assessee is not in appeal against same. In appellate proceedings before CIIT(A), assessee had given requisite details and in remand report, CIT(A) had nothing to say except to place his reliance on remand report. I have also noted that main director of company had passed away and that was reason of some non compliances before Assessing Officer. All these facts taken together, in my considered view, conclusions arrived at by CIT(A) do not call for any interference. I confirm action of CIT(A) and decline to interfere in matter. I TA N o .1 48 /B LP R/ 2 01 2 As s ess m e nt Ye r: 20 08 - 0 9 Page 3 of 8 4. As regards addition of Rs 65,393, in respect of VAT, having been deleted by CIT(A), disallowance was made on basis that assessee did not file any evidence regarding payment of VAT. In appeal, CIT(A) deleted this addition on ground that VAT has not been claimed as deduction at all. Assessing Officer is aggrieved and is in appeal before me. 5. Having heard rival contentions and having perused material on record, I see no reasons to interfere in this matter either. Once it is undisputed position that deduction has not been claimed, there is obviously no question of disallowance. order of CIT(A) is confirmed on this issue. 6. As regards Assessing Officer s grievance against CIT(A) deleting addition of Rs 36,93,034, in respect of addition for unexplained credits, it is sufficient to note fact that assessee had duly given all details, including identity, means and bonafides of lenders, at first appellate stage, that CIT(A) had duly called for remand report on same and that AO did not have anything to say on same. All that AO stated, vide letter dated 21st May 2012, was that matter, in light of additional evidences, may be decided on basis of merits of facts and law though he is strongly defending assessment order passed observations/findings made therein . Yet, when CIT(A) decided matters on merits by holding that lenders are directors of assesse company and that they had sufficient means to advance these loans, Assessing Officer is in appeal before me. 7. I have heard rival contentions, perused material on record and duly considered facts of case in light of applicable legal position. I TA N o .1 48 /B LP R/ 2 01 2 As s ess m e nt Ye r: 20 08 - 0 9 Page 4 of 8 8. I have noted that unsecured loans were taken by assessee from its own directors, balance sheets and assessment details on these persons were on record and AO, despite having been given specific opportunity to rebut claim of assessee, did not have anything to say. In these circumstances, relief granted by CIT(A) cannot be faulted. In any event, even during proceedings before us, learned DR did not bring on record any material to, or even raised arguments against, controvert relief on merits. only argument of DR is that no such evidence was adduced at assessment stage but then, as is undisputed position, main director of assessee company had passed away and non compliance was due to this tragedy. evidences have not been submitted at first appellate stage, AO has also been given opportunity, which remain unavailed though, in remand proceedings as well. In view of these discussions, as also bearing in mind entirety of case, I approve conclusions arrived at by CIT(A) and decline to interfere in matter on this matter also. 9. As regards grievance against admission of additional evidence under rule 46A, I find that, as discussed above, there are valid reasons for assessee not being able to find evidences at assessment stage and AO has also been given due opportunity of being heard in respect of same. In these circumstances, in my considered view, there is no infirmity in admission of additional evidence particularly in light of decision of division bench of this Tribunal, in case of ITO vs Bajoria Foundation [(2001) 71 TTJ 343 (Kol)], as follows: 4. We have noticed that sole grievance of Revenue is against violation of r. 46A by learned CIT(A) and that learned Departmental Representative has not made any submissions on merits of case. Rule 46A of IT Rules 1962, provides that appellant shall not be entitled to I TA N o .1 48 /B LP R/ 2 01 2 As s ess m e nt Ye r: 20 08 - 0 9 Page 5 of 8 produce before CIT(A) any evidence, whether oral or documentary, other than evidence produced by him during course of proceedings before AO except in following circumstances : (a) where AO has refused to admit evidence which ought to have been admitted; or (b) where appellant was prevented by sufficient cause from producing evidence which was called upon to be produced by AO, or (c) where appellant was prevented by sufficient cause from producing before AO any evidence which is relevant to any ground of appeal; or (d) where AO has made order appealed against without giving sufficient opportunity to appellant to adduce evidence relevant to any ground of appeal. In present case, it is not in dispute that assessment was done under s. 144 of IT Act and additions made by learned AO were based on inferences drawn by him. It, is, therefore, settled fact that sufficient inquiries were not conducted with regard to claims made in return of assessee and that case was fixed for hearing on only two dates i.e. on 29th Sept., 1993 and on 16th March, 1994, on which there was no compliance. We have also noticed that assessee has, in first paragraph of statement of facts filed before first appellate authority, submitted that notices for these two hearings were not received by them. We have also observed that first hearing was fixed on just day before limitation under s. 143(2) was to expire and thereafter next date was fixed shortly before assessment itself was getting time-barred; between these two dates, assessment proceedings did not get any attention from learned AO. When assessment itself was done under s. 144, assessee obviously did not have opportunity of producing evidence before AO. On these facts, we are of view that filing of additional evidence before CIT(A) was clearly covered by cl. (c) above. view may indeed be taken, as taken by Hon ble Gujarat High Court in case of CIT vs. Vali Mohd Ahmed Bhai (1982) 27 CTR (Guj) 97 : (1982) 134 ITR 214 (Guj), that CIT(A) cannot admit any additional evidence placed under r. 46A(1) unless ITO has been allowed reasonable opportunity to examine evidence, but it is not necessary to consider that aspect of matter since in case before us AO not only had opportunity to examine all evidence filed by assessee but, availing this opportunity, he even filed rejoinder on same which was duly considered by learned CIT(A). In this regard, we may however refer to observations of Shri G. Krishnamurty, then Hon ble President and while articulating views on behalf of Jaipur Bench of this Tribunal in case of Electra (Jaipur) (P) Ltd. vs. IAC (1988) 26 ITD 236 (Del), which are reproduced below : "After going through evidence placed before us, considering facts of this and going through orders of authorities below, we are of view that assessee should not be disqualified from producing this evidence I TA N o .1 48 /B LP R/ 2 01 2 As s ess m e nt Ye r: 20 08 - 0 9 Page 6 of 8 merely on ground that evidence was not placed before authorities below. sole purpose of judiciary as of Revenue is to get at truth. If truth is that payment of commission was genuine and was dictated by business needs, such payment should not be disallowed merely on ground that assessee was unable to lead proper evidence or on ground that evidence lead was of such nature as to create very high degree of suspicion. There should be no objection to consider any evidence produced, to test its authenticity and relevance and then act on it. If evidence is genuine, reliable, proves assessee s case, then assessee should not be denied opportunity. But on other hand, if evidence led turns out to be spurious, fabricated or of irrelevant nature, such consequences, as provided under law, will ensure. It is, therefore, incorrect to shut out assessee in process of administration of justice from leading evidence to prove its case. earlier inability to lead evidence should not be held against assessee unless it is known to Court or suggested to Court or there was evidence to suspect that evidence was fabricated. There is no such suggestion in this case. We are therefore, of opinion that request of learned counsel is reasonable and request made by Department for refusal of its admission is not proper......" 5. We also find that Hon ble Orissa High Court in case of B.L. Chowdhury vs. CIT (1976) 105 ITR 371 (Ori) have observed that by virtue of s. 250 wide provision has been made conferring jurisdiction on first appellate authority to make such inquiry as he deem fit and that CIT(A) does not exceed his jurisdiction if he asks or allows appellant to file additional evidence in matter he thinks fit. Hon ble Bombay High Court, in case of Smt. Prabhavati S. Shah vs. CIT (1998) 148 CTR (Bom) 192 : (1998) 231 ITR 1 (Bom), have observed that r. 46A does fetter right of assessee to produce evidence but it does not restrain CIT(A) s powers under s. 250(4) or 250(5) of IT Act and that this rule appears to ensure that evidence is primarily led before AO. In view of this judgment of Hon ble Bombay High Court, if prima facie information is necessary to examine claim of assessee, CIT(A) should consider necessary evidence in exercise of his powers under sub-ss. (4) and (5) of s. 250. It is trite that Rules have to be framed within scope of main, provision and that rule, which travels beyond or is inconsistent with or is repugnant to provisions in statute will be ultra vires and void. Rule 46A was introduced w.e.f. 1st April, 1973 and as result of insertion of s. 295(2)(mm) in IT Act which empowered Board to provide for circumstances in which, condition subject to which and manner in which CIT(A) may permit appellant to produce evidence which appellant did not produce or was not allowed to produce before AO. However, these powers of Board, which have been vested in them for carrying out for purposes of Act, have to be exercised in such judicious manner so as not to make any statutory provision redundant and nugatory. rules made in exercise of these powers should also not be interpreted in such manner as to narrow down, dilute or curtail statutory powers, conferred on CIT(A), by provisions of s. 250(4) or (5) of IT Act, 1961. Therefore, harmonious interpretation of s. 250, even r/w r. 46A, cannot but mean that if facts of case warrant that, before disposal of any appeal, CIT(A) is required to make further inquiries, either on his own or I TA N o .1 48 /B LP R/ 2 01 2 As s ess m e nt Ye r: 20 08 - 0 9 Page 7 of 8 through AO, he is not denuded of powers to do so because of provisions of r.46A. 6. We are conscious to esteemed views of Hon ble jurisdictional High Court that there has to be reasonable explanation for non filing of such additional evidence before AO. Hon ble Calcutta High Court, in case of Raj Kumar Srimal vs. CIT (1976) 102 ITR 525 (Cal), had occasion to examine this aspect of matter wherein Justice Sabyasachi Mukerjee (as he then was) observed : "It is true, as contended by counsel of assessee, that AAC has very vide powers and interest of substantial justice he can make further enquiry and he can admit new ground of appeal. He can also give deductions not claimed by assessee, as was held by this Court in case of Union Coal Co. Ltd. vs. CIT (1968) 70 ITR 45 (Cal). In this case, counsel for Revenue also did not dispute that in certain circumstances AAC had jurisdiction to admit new grounds if it was necessary to admit new evidence. point in this case is not whether AAC is entitled to admit new ground or evidence either suo motu or at invitation of parties. In this case, this is apparent that AAC was not acting suo motu in additional evidence. If AAC was acting on being invited by assessee, there must be some ground for admitting new evidence in sense that there must be some explanation to show that failure to adduce evidence earlier sought to be adduced before AAC was not wilful and not unreasonable.......If without any explanation at all, AAC admits additional evidence at invitation of parties, he would be exercising, in our opinion, discretion not properly. He has undoubtedly discretion vested in him to admit additional evidence in appropriate cases but admission of evidence at instance of appellant without any ground or explanation would not be exercising discretion properly and in such cases appellate authority is competent, in our opinion, to interfere in discretion by AAC." It is, therefore, necessary that appellate authority has to be satisfied on bona fides of reasons of filing evidence-an aspect which has also been referred to in Electra s case, supra. In case before us, assessee s claim before CIT(A) has been that "adequate opportunity has not been given for hearing" and that "order under s. 144 is not justified". It was in background of these facts that assessee submitted some fresh evidence in shape of s. 80G exemption certificate of Anandlok Hospital and papers supporting corpus donations. All other papers like audit report, list of charities and donations and financial statements were already filed before AO, along with income-tax return. It is also not Revenue s case that filing of additional evidence before CIT(A) smacks of any mala fides or deliberate intent to act contrary to scheme of IT Act. We, therefore, support admittance of additional evidence by CIT(A). 7. We have already expressed our view, in para. 4 above, that on given facts, filing of additional evidence before CIT(A) was covered by r. 46A(1)(c) of IT Rules, 1962. In light of subsequent deliberations, we also find that CIT(A) s admission of additional evidence was clearly within I TA N o .1 48 /B LP R/ 2 01 2 As s ess m e nt Ye r: 20 08 - 0 9 Page 8 of 8 scheme of powers vested in him under s. 250(4) of IT Act because, as held by Bombay High Court in case of Prabhavati S. Shah (supra), if prima facie information is necessary to examine claim of assessee, CIT(A) should consider necessary evidence in exercise of his powers under s. 250(4). It is settled in law that when statutory authority has powers to do something, then it has corresponding duty to exercise such powers whenever circumstances warranting exercise of such powers exist. case before us, in our considered view, was fit case where CIT(A) should have exercised his powers to make further inquiries. We, therefore, see no legal infirmity in CIT(A) s proceeding on merits of claim and admitting necessary additional evidence for that purpose. We also find support from view taken by co-ordinate Bench of this Tribunal in case of Electra (Jaipur) (P) Ltd., (supra). 10. In view of above discussions, as also bearing in mind entirety of case, I approve conclusions arrived at by CIT(A) and decline to interfere in matter. 11. In result, appeal is dismissed. Pronounced under rule 34(4) of Appellate Tribunal Rules 1963 today on 20th day of September, 2016. Sd/- Pramod Kumar (Accountant Member) Dated: 20 th day of September, 2016. Copies to: (1) appellant (2) respondent (3) CIT (4) CIT(A) (5) DR (6) Guard File By order Assistant Registrar Income Tax Appellate Tribunal Raipur Bench, Raipur Asstt. Commissioner of Income Tax-1(2) Raipur v. Ankyra Systems Pvt. Ltd