ITO, Mandi Gobindgarh V. M/s A.S. Mechanical Works, Mandi Gobindgarh

ITA 1037/CHANDI/2010

• Counselvise Citation: 103721514 RSA 2010
• Duration Of Justice: 1 year(s) 3 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 25-10-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 27-07-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: N K SAINI
• Keywords: Opportunity of being heard; Principle of natural justice; Additional evidence

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A CHANDIGARH BEFORE SHRI H.L.KARWA, VICE PRESIDENT AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER ITA NO. 1037/CHD/2010 ASSESSMENT YEAR: 2007-08 ITO, WARD-1, V M/S A.S.MECHANICAL WORKS, MANDI GOBINDGARH. G.T.ROAD, MANDI GOBINDGARH. PAN: AAEFA-4305J (APPELLANT) (RESPONDENT) DEPARTMENT BY: SHRI N.K.SAINI ASSESSEE BY : SHRI DEEPAK AGGARWAL DATE OF HEARING : 25.10.2011 DATE OF PRONOUNCEMENT : 31.10.2011 ORDER PER MEHAR SINGH, AM THE PRESENT APPEAL FILED BY THE REVENUE IS AGAINST THE ORDER DATED 26.05.2010 PASSED BY THE LD. CIT(A) U/S 250(6) OF THE INCOME-TAX ACT,1961 (IN SHORT 'THE ACT'). 2. IN THIS APPEAL, THE REVENUE HAS RAISED THE FOLLO WING GROUNDS OF APPEAL: 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.53,04,220/-, MADE BY THE AO ON ACCOUNT OF CESSATION OF LIABILITY U/S 41(1) WITHOUT APPRECIATI NG THE FACTS OF THE CASE. 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.53,04,220/- BY OBSERVING THAT A LIABILITY IS NOT CEASED MERELY BY TRANSFER OF ENTRIES, WITHOUT APPRECIATING THE FACT THAT THE AO HAD MADE THE ADDITION BECAUSE THE ASSESSEE HAD FAILED TO FURNISH THE CONSENT/CONFIRMATION IN RESPECT OF THE TRANSFER 2 ENTRIES DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS AND HAVING FAILED TO DO SO, THE AO WAS JUSTIFIED IN TAKING AN ADVERSE VIEW AS PER SECTION 114 OF THE INDIAN EVIDENCE ACT. 3. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.53,04,220/- BY ADMITTING ADDITIONAL EVIDENCE IN VIOLATION OF RULE 46A BECAUSE SUFFICIENT OPPORTUNIT Y HAD NOT BEEN ALLOWED TO THE AO TO VERIFY THE SAME. 3. AT THE OUTSET OF APPELLATE PROCEEDINGS BEFORE US , THE LD. 'DR' CONTENDED THAT THE FINDINGS OF THE CIT(A) ARE VITIATED IN VIEW OF NON-AFFORDING OF OPPORTUNITY TO THE AO, BEF ORE ADMISSION OF NEW EVIDENCE. IT WAS ARGUED THAT THE CIT(A) VIOL ATED THE MANDATORY REQUIREMENT OF RULE 46A IN ADMITTING THE NEW EVIDENCE, NOT FILED BEFORE THE AO WITHOUT PROVIDING PROPER AND REASONABLE OPPORTUNITY OF BEING HEARD TO THE AO. I T WAS ARGUED THAT SUCH ARBITRARY ACTION OF THE CIT(A), GOES TO T HE ROOT OF THE MATER. THEREFORE, THE CASE BE RESTORED TO THE FILE OF AO, HAVING REGARD TO THE NON-OBSERVANCE OF THE PRE-CONDITIONS BY THE CIT(A), AS LAID DOWN UNDER RULE 46A. 4. THE LD. 'AR' ON THE OTHER HAND, CONTENDED THAT T HE AO, CALLED FOR CONFIRMATIONS FROM VARIOUS PARTIES. ACC ORDINGLY, THE SAME COULD NOT BE FILED BEFORE THE AO BEFORE COMPLE TION OF ASSESSMENT. THE CIT(A) DULY APPRECIATED SUCH CONFI RMATION AND THE AO ATTENDED THE PROCEEDINGS BEFORE THE CIT(A). CONSEQUENTLY, IT CANNOT BE SAID THAT NO OPPORTUNITY WAS GIVEN TO THE AO BEFORE ADMISSION OF NEW EVIDENCE. 5. WE HAVE CAREFULLY PERUSED THE FACTS OF THE CASE, RIVAL SUBMISSIONS AND THE RELEVANT RECORDS. A BARE READI NG OF THE APPELLATE ORDER PASSED BY THE CIT(A) REVEALS THAT T HE CIT(A) ADMITTED THE NEW EVIDENCE BEFORE PROVIDING OPPORTUN ITY TO THE 3 AO AS CONTEMPLATED UNDER RULE 46A. THE ISSUES, AS RAISED IN THE GROUNDS OF APPEAL, ARE INTER-CONNECTED. THE NE W EVIDENCE ADMITTED BY THE CIT(A) AND FINDINGS RECORDED THEREO N, SHOULD HAVE BEEN CONFRONTED TO THE AO, TO ENABLE HIM TO AP PRECIATE THE SAME AND PRESENT HIS CASE ACCORDINGLY, HAVING REGAR D TO RULE 46A. 6. THE CIT(A), BEING QUASI-JUDICIAL AUTHORITY, PERF ORMS QUASI- JUDICIAL FUNCTIONS, IN THE DISCHARGE OF STATUTORY A PPELLATE OBLIGATIONS. THE APPELLATE PROCEEDINGS BEFORE CIT( A) BEING QUASI-JUDICIAL PROCEEDINGS, MUST CONFORM TO THE RUL ES OF NATURAL JUSTICE. IT IS SETTLED POSITION OF LAW THAT ONE OF THE CARDINAL AND FIRST PRINCIPLES OF NATURAL JUSTICE IS THAT A PARTY MUST HAVE EFFECTIVE, REASONABLE AND PROPER OPPORTUNITY OF BEI NG HEARD, WITH A VIEW TO SUPPORT AND PRESENT HIS CASE. THE P RINCIPLE OF NATURAL JUSTICE HAS MANY FACETS SUCH AS FAIR PLAY I N ACTION, NO IDEOLOGICAL BIAS OR NO INTEREST IN THE SUBJECT MATT ER, IN DISPUTE BY OF THE QUASI-JUDICIAL AUTHORITY. SIMILARLY, NO ONE CAN BE A JUDGE IN HIS OWN CASE. THE PRINCIPLE OF NATURAL JU STICE WAS PLANTED IN THE EDEN GARDEN AND UNIVERSALLY ACKNOWLE DGED IN ALL THE CIVILIZED JURISPRUDENCE. 7. THE CIT(A) U/S 250 OF THE ACT HAS POWER TO MAKE FURTHER ENQUIRY AND SUCH POWER INCLUDES TO ADMIT FRESH AND ADDITIONAL EVIDENCE. IT IS WITHIN THE JURISDICTION OF CIT(A), TO ADMIT OR NOT TO ADMIT NEW EVIDENCE, SUBJECT TO RULE 46A. THE CI T(A), CANNOT ADMIT NEW EVIDENCE DISREGARDING THE REQUIREMENTS OF RULE 46A AND HE IS BOUND TO FOLLOW THE DOCTRINE OF NATURAL J USTICE EXPRESSLY EMBEDDED IN RULE 46 OF INCOME-TAX RULES,1 962. 4 CONSEQUENTLY, IT IS INCUMBENT UPON THE CIT(A), TO S TRICTLY ADHERE TO THE RULE OF NATURAL JUSTICE, AS ENVISAGED IN RULE 46A IN ITS LETTER AND SPIRIT WHILE EXERCISING APPELLATE JURISDICTION. 8. A BARE PERUSAL OF RULE 46A REVEALS THAT CERTAIN SITUATIONS ARE PRESCRIBED THEREUNDER FOR THE PURPOSE OF ADMISS ION OF NEW EVIDENCE, NOT PRODUCED BEFORE THE AO. IT ALSO PLACE S CERTAIN LIMITATIONS, ON THE EXERCISE OF APPELLATE JURISDICT ION AND ONE SUCH RESTRICTION IS NOT TO ADMIT NEW EVIDENCE, WITH OUT FIRST AFFORDING OPPORTUNITY OF BEING HEARD TO THE AO. NE EDLESS TO SAY THAT PRIOR AFFORDING OF SUCH OPPORTUNITY TO THE AO BEFORE ADMISSION OF NEW EVIDENCE IS NOT AN IDLE RITUAL, BU T MANDATORY REQUIREMENT OF RULE 46A. NON-OBSERVANCE OF SUCH MA NDATORY CONDITION PATENTLY VITIATE THE APPELLATE PROCEEDING S. THE RULE PROVIDES THAT CIT(A) SHALL NOT ADMIT ADDITIONAL EVI DENCE UNLESS HE HAS RECORDED HIS REASON FOR ADMITTING IT AND SHA LL NOT TAKE INTO ACCOUNT SUCH EVIDENCE, UNLESS THE AO HAS BEEN ALLOWED A REASONABLE OPPORTUNITY TO EXAMINE IT AND PRODUCE EV IDENCE IN REBUTTAL THEREOF. THE CIT(A) MUST EXERCISE THIS PO WER JUDICIALLY AND IN A FAIR MANNER. 9. IN THE PRESENT CASE, THE CIT(A), ADMITTED NEW EV IDENCES, WHICH WERE NOT PRODUCED BEFORE THE AO, WITHOUT AFFO RDING OPPORTUNITY OF BEING HEARD TO THE AO, AS CONTEMPLAT ED UNDER RULE 46A. THUS, THE CIT(A), ACTED CONTRARY TO THE MANDATORY REQUIREMENTS, AS ENVISAGED UNDER RULE 46A, IN ADMIT TING NEW EVIDENCE, WITHOUT GRANTING OPPORTUNITY OF BEING HEA RD TO THE AO TO ENABLE HIM, TO REBUT SUCH EVIDENCE OR TO TEST TH E VERACITY THEREOF. NO EVIDENCE WAS BROUGHT ON RECORD BY THE ASSESSEE TO 5 ESTABLISH THAT CIT(A) AFFORDED OPPORTUNITY OF BEING HEARD TO THE AO BEFORE ADMITTING NEW EVIDENCE. MERE PRESENCE OF THE AO BEFORE THE CIT(A) IN ITSELF IS NOT SUFFICIENT IN TH E ABSENCE OF CREDIBLE EVIDENCE ON RECORD, TO ESTABLISH THE FACTU M OF AFFORDING OF OPPORTUNITY BY THE CIT(A), WITHIN THE MEANING OF RULE 46A. IN VIEW OF THIS, NON-OBSERVANCE OF THE MANDATORY RE QUIREMENT OF RULE 46A, VITIATED THE APPELLATE PROCEEDINGS AND CO NSEQUENT FINDINGS. THEREFORE, THE CASE IS RESTORED TO THE F ILE OF AO, FOR FRESH ADJUDICATION IN ACCORDANCE WITH LAW, AFTER TA KING INTO ACCOUNT SUCH EVIDENCE AND AFTER AFFORDING PROPER AN D REASONABLE OPPORTUNITY TO THE AO. 10. IN THE RESULT, APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES ONLY. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST OCT., 2011. SD/- SD/- (H.L.KARWA) (MEHAR SINGH) VICE PRESIDENT ACCOUNTANT MEMBER DATED: 31 ST OCT.,2011. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT ,DR ASSISTANT REGISTRAR, ITAT CHANDIGARH