Dy.CIT, Circle-16(1), Hyderabad V. M/s N E Techlogies India Private Limited, Hyderabad

ITA 1081/HYD/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 74744 (ITAT-HYDERABAD)
• Duration Of Justice: 8 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-03-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 19-07-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P SOMASEKHAR REDDY
• Assessee Lawyers: T CHAITANYA KUMAR
• Keywords: Principle of natural justice; Additional evidence; Assessment record; Revised return
• Section: 139(5); 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 1081/HYD/2013 ASSESSMENT YEAR : 2010-11 THE DEPUTY CIT CIRCLE-16(1) HYDERABAD VS. M/S. NE TECHNOLOGIES INDIA PVT. LTD., HYDERABAD PAN: AABCN2799R [APPELLANT] [RESPONDENT] APPELLANT BY: SRI P. SOMA SEKHAR REDDY RESPONDENT BY: SRI T. CHAITANYA KUMAR DATE OF HEARING: 20.02.2014 DATE OF PRONOUNCEMENT: 21.03.2014 ORDER PER CHANDRA POOJARI, AM : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST ORD ER OF THE CIT(A)-V, HYDERABAD DATED 29.4.2013 FOR ASSESSM ENT YEAR 2010-11. 2. THE REVENUE RAISED THE FOLLOWING GROUNDS: 1. THE CIT(A) ERRED BOTH ON FACTS AND IN CIRCUMSTANCES OF THE CASE IN GRANTING RELIEF TO THE ASSESSEE BY DELETING THE ADDITION MADE ON ACCOUNT OF DISALLOWANCE OF CLAIM O F EXPENDITURE ON AD-HOC BASIS, EVEN WHEN THE ASSESSEE FAILED TO FURNISH THE REQUISITE INFORMATION DURING ASSESSM ENT PROCEEDINGS. 2. THE CIT (A) ERRED BOTH ON FACTS AND IN CIRCUMSTANCE S OF THE CASE IN GRANTING RELIEF TO THE ASSESSEE IN RESPECT OF DISALLOWANCE OF CLAIM OF DEDUCTION UNDER SEC. 10A O F THE IT ACT, 1961, WHEN THE ASSESSEE FAILED TO FURNISH THE REQUISITE INFORMATION DURING ASSESSMENT PROCEEDINGS. 3. THE CIT (A) ERRED BOTH ON FACTS AND IN THE CIRCUMST ANCES OF THE CASE IN GRANTING RELIEF TO THE ASSESSEE IN RESP ECT OF DISALLOWANCE OF CLAIM OF DEDUCTION UNDER SEC. 10(35 ) OF THE ITA NO. 1081/HYD/2013 M/S. NE TECHNOLOGIES INDIA PVT. LTD. ================================= 2 IT ACT, 1961 WHEN THE ASSESSEE FAILED TO FURNISH TH E REQUISITE INFORMATION DURING ASSESSMENT PROCEEDINGS . 4. THE CIT (A) OUGHT TO HAVE CONSIDERED THE FACT THAT AS PER RULE 46A OF IT RULES, 1962, ANY ADDITIONAL INFORMAT ION / EVIDENCE WHICH WAS OMITTED TO BE FURNISHED DURING T HE ASSESSMENT PROCEEDINGS CANNOT BE ACCEPTED IN APPELL ATE PROCEEDINGS WITHOUT SEEKING THE OPINION OF THE ASSE SSING OFFICER. 5. THE CIT (A) ERRED IN LAW IN NOT OBTAINING THE OPINI ON OF THE ASSESSING OFFICER BEFORE ADJUDICATING THE ISSUE. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HAS F ILED THE ORIGINAL RETURN OF INCOME FOR THE A.Y. 2010-11 ON 1 8-09-2010 DISCLOSING THE TOTAL INCOME OF RS. 12,68,065/- AFTE R CLAIMING DEDUCTION U/S 10A OF RS. 80,49,071/- FROM THE PROFIT S AND GAINS OF BUSINESS OF DEVELOPMENT OF SOFTWARE. SUBSE QUENTLY, THE ASSESSEE HAS FILED A REVISED RETURN ON 31-03-20 12 DISCLOSING THE TOTAL INCOME OF RS. 12,68,065/-. TH US, THERE IS NO CHANGE IN THE INCOME RETURNED BY THE ASSESSEE BU T THE ASSESSEE CLAIMED RS. 8,38,14,524/- AS DEDUCTION U/S 10A OF THE INCOME-TAX ACT, 1961. THE AO COMPLETED THE ASSE SSMENT U/S 144 BY DETERMINING THE TOTAL INCOME AT RS. 8,80, 83,834 BY MAKING THE FOLLOWING DISALLOWANCES: A) DISALLOWANCE OF EXPENSES RS. 20,00,000 B) DISALLOWANCE OF DEDUCTION U/S. 10A RS. 8,38,14,524 C) ADDITION OF DIVIDEND INCOME RS. 9,01,245 4. THE ASSESSEE IS IN THE BUSINESS OF DEVELOPMENT OF SOFTWARE REGISTERED WITH STPI IN HYDERABAD AND GOA. THE ASSESSEE COMPANY COMMENCED MANUFACTURE OR PRODUCTIO N OF ITA NO. 1081/HYD/2013 M/S. NE TECHNOLOGIES INDIA PVT. LTD. ================================= 3 COMPUTER SOFTWARE FROM THE YEAR 2005. THE ASSESSEE HAS BEEN REGULARLY FILING THE RETURNS AND CLAIMING DEDU CTION U/S 10A AND THE SAME IS ALLOWED IN THE PREVIOUS YEARS U P TO THE ASSESSMENT YEAR 2009-10. FOR THE ASSESSMENT YEAR 2 010-11, THE ASSESSEE FILED ORIGINAL RETURN ON 18-09-2010 WI THIN THE TIME ALLOWED U/S 139(1) OF THE INCOME-TAX ACT, 1961 AND CLAIMED DEDUCTION TO THE EXTENT OF RS. 80,49,071 U/S 10A AND THE SAME IS REVISED TO RS. 8,38,14,524, VIDE REVISE D RETURN FILED ON 31.03.2012 WITHIN THE TIME ALLOWED U/S 139( 5) OF THE ACT. THE ASSESSEE WHO HAS FILED RETURN U/S 139(1) W ITH IN THE DUE DATE CAN REVISE THE RETURN WITHIN ONE YEAR FROM THE END OF THE ASSESSMENT YEAR OR BEFORE THE COMPLETION OF THE ASSESSMENT UNDER THE PROVISIONS OF SECTION 139(5) O F THE ACT IF THE ASSESSEE FINDS ANY OMISSION OR MISTAKE IN TH E ORIGINAL RETURN. ACCORDINGLY, THE ASSESSEE CAN REVISE THE RE TURN AND THE AO HAS RIGHTLY PROCEEDED ON THE SAID REVISED RE TURN AS ONCE A REVISED RETURN IS FILED, THE ORIGINAL RETURN BECOMES NONEST. 5. IN THE REVISED RETURN, THE ASSESSEE MADE A REVISED CLAIM U/S 10A MODIFYING THE SAME TO RS. 8,38,14,524 AND TH E PRECISE REASON FOR FILING THE REVISED RETURN STATED BY THE ASSESSEE IS THAT THERE IS AN OMISSION ON THE PART O F THE ASSESSEE TO RECOGNIZE REVENUE FOR THE WORK COMPLETE D DURING ITA NO. 1081/HYD/2013 M/S. NE TECHNOLOGIES INDIA PVT. LTD. ================================= 4 THE PREVIOUS PERIOD AND ADJUSTMENT OF AMOUNTS RECEI VED KEPT IN ADVANCE. AS THIS OMISSION GOES TO THE ROOT OF TH E COMPUTATION OF INCOME, THE ASSESSEE EXERCISING THE RIGHT AVAILABLE U/S 139(5) HAS FILED A REVISED RETURN FOR THE REVENUE RECOGNIZED FROM THE TRANSFER OF ADVANCES BY SUPPLEM ENTARY INVOICE. THE ASSESSEE RELIED ON THE DECISION IN TH E CASE OF DHAMPUR SUGAR MILLS VS. CIT (1973) 90 ITR 236 (ALL) AND CHIEF CIT VS MACHINE TOOLS CORPORATION OF INDIA (1993) 20 1 ITR 101 (KAR) ON THE PROPOSITION THAT ONCE A REVISED RETURN IS FILED UNDER SECTION 139(5), THE ORIGINAL RETURN IS SUBSTI TUTED BY THE REVISED RETURN AND ACCORDINGLY THE ORIGINAL RETURN HAS BECOME NON EST AS THE SAME IS FILED WITHIN THE TIME ALLOWE D U/S 139(5) OF THE ACT. 6. IT IS THE CASE OF THE ASSESSEE THAT THE AO WHILE COMPLETING THE ASSESSMENT U/S 144 SHOULD HAVE CONSID ERED THE INFORMATION AVAILABLE ON RECORD AND MADE THE AS SESSMENT TAKING THE SAME INTO CONSIDERATION. AS THE AO RIGH TLY PROCEEDED WITH THE REVISED RETURN AND THE ASSESSEE HAS ALSO FURNISHED THE INFORMATION CALLED FOR VIDE QUESTIONN AIRE ISSUED BY THE AO, THE AO OUGHT NOT TO HAVE IGNORED THE RELEVANT MATERIAL AVAILABLE ON RECORD AND MORE PART ICULARLY WHEN THE SAME AO WHO HAS COMPLETED THE PREVIOUS ASSESSMENT AND ALLOWED DEDUCTION U/S 10A WITH MINOR ITA NO. 1081/HYD/2013 M/S. NE TECHNOLOGIES INDIA PVT. LTD. ================================= 5 ALTERATIONS TO EXPORT TURNOVER, ACCORDING TO THE AS SESSEE IS CONTESTABLE AS TO THE ADJUSTMENT OF THE SAME AGAINS T THE TOTAL TURNOVER ALSO. BEFORE THE CIT(A), THE ASSESSEE SUB MITTED THAT WHEN THE OFFICER MAKES ASSESSMENT TO THE BEST OF HI S JUDGMENT, THOUGH SOME DEGREE OF GUESS WORK IS INVOL VED, THE ASSESSING AUTHORITY WHILE MAKING THE BEST JUDGMENT ASSESSMENT, NO DOUBT, SHOULD ARRIVE AT HIS CONCLUSI ON WITHOUT ANY BIAS AND ON A RATIONAL BASIS. THE AUTHORITY SH OULD NOT BE VINDICTIVE OR CAPRICIOUS AS HELD IN THE CASE OF CST V. ESUFALI (H.M) (1973) 90 ITR 271 (SC). 7. BEFORE THE CIT(A) THE ASSESSEE ALSO EXPLAINED THE REASONS FOR NON-APPEARANCE BEFORE THE AO ON SOME DA TES, THE ENTIRE BUSINESS OF THE COMPANY WAS THROWN INTO A TA ILSPIN AND BY THE END OF 2012, THE COMPANY WAS IN DIRE STR AITS AND HAD TO LET GO OFF 100 OF ITS EMPLOYEES BECAUSE OF T HE NON- RENEWAL OF CONTRACT FOR SERVICES BY ITS MAJOR CUSTO MER. THE COMPANY WAS FORCED TO PAY THREE MONTHS' SEVERANCE P AY TO ALL THE 100 EMPLOYEES AND FACE THIS BURDEN AND BALA NCE THE OPERATIONS TOOK MAJOR ATTENTION OF ALL THE PERSONS INVOLVED AND BECAUSE OF THIS SITUATION THEY COULD NOT RESPON D TO THE NOTICES ISSUED BY THE AO IN TIME. IT WAS ALSO SUBM ITTED THAT SINCE THEY ARE REGULAR INCOME TAX FILERS AND HAD CO MPLIED WITH ALL THE NOTICES ISSUED FOR THE LAST THREE RUNN ING YEARS ITA NO. 1081/HYD/2013 M/S. NE TECHNOLOGIES INDIA PVT. LTD. ================================= 6 WHERE THEIR CASE WAS TAKEN UP SCRUTINY AND COMPLETE D WITHOUT ANY ISSUE. IT WAS FURTHER SUBMITTED THAT CO UPLED WITH THE PROBLEMS BEING FACED BY THE COMPANY, THEIR AUTH ORISED REPRESENTATIVE HAD SOME SERIOUS PERSONAL PROBLEMS A ND THOSE COMPOUNDED THE MATTERS AND RESULTED INTO THE SITUATION THEY ARE PRESENTLY IN. IT WAS SUBMITTED T HAT THIS HAS BEEN A SITUATION NOT WITHIN THE CONTROL OF ASSESSEE AND THE INFORMATION SOUGHT FOR BY THE AO IS FULLY AVAILABLE AND ON THE GROUNDS OF EXCEPTIONAL CIRCUMSTANCES FOR THE FIRST TIME IN FOUR YEARS THE ASSESSEE PRAYED THAT AN OPPORTUNITY BEING GIVEN TO SUBMIT ALL DETAILS REQUESTED FOR BY THE AO . IN LINE WITH THE ABOVE SUBMISSIONS, THE ASSESSEE FURNISHED ALL THE INFORMATION THAT WAS CALLED FOR BY THE AO AND REQUE STED TO CONSIDER THE SAME AND ALLOW THE RELIEF FROM THE ADDITIONS/DISALLOWANCES MADE BY THE AO. 8. IN THE INSTANT CASE, THE AO HAS MADE AN AD HOC ADDI TION BY DISALLOWING EXPENDITURE OF RS. 20,00,000/- WITHOU T ANY BASIS PURELY ON SURMISE AND CONJECTURE. IT IS SUBM ITTED THAT THE DIVIDENDS DECLARED AND CLAIMED AS EXEMPTION IN THE RETURN INCOME IS THE DIVIDEND RECEIVED FROM MUTUAL FUNDS PAID INTO THE ACCOUNTS WITH HDFC AND HSBC AND THE R ELEVANT DETAILS ARE FURNISHED. REGARDING THE CLAIM IN SUPPO RT OF ITA NO. 1081/HYD/2013 M/S. NE TECHNOLOGIES INDIA PVT. LTD. ================================= 7 DEDUCTION U/S 10A, THE ASSESSEE FILED THE FOLLOWING DOCUMENTS BEFORE THE CIT(A): (I) COMPUTATION OF EXPORT PROFIT. (II) FORM 56F ORIGINAL AND REVISED. (III) FORM 3CEB ORIGINAL AND REVISED. (IV) STATEMENT SHOWING EXPORT TURNOVER SUPPORTED BY INVOICES ISSUED TO PARTIES, FIRCS AND BANK STATEMENTS. 9. REGARDING THE DISALLOWANCE OF DEDUCTION U/S. 10A AMOUNTING TO RS. 8,38,14,524, BEFORE THE AO IN THE COURSE OF SCRUTINY PROCEEDINGS, THE ASSESSEE WAS ASKED TO FUR NISH THE EVIDENCE ON CLAIM OF DEDUCTION U/S 10A, ITS ADMISSIB ILITY ALONG WITH PROOF, SOFTEX FORMS, INVOICES, BOOKS OF ACCOUNTS AND BANK ACCOUNTS. IN THE ASSESSMENT ORDER, IT WAS MENTIONED THAT AS NO SUPPORTING INFORMATION WAS FIL ED BY THE ASSESSEE REGARDING THE CLAIM OF DEDUCTION U/S 10A, T HE SAME WAS DISALLOWED. DURING THE COURSE OF FIRST APPELLAT E PROCEEDINGS, THE ASSESSEE SUBMITTED THAT BEFORE THE AO THEY HAVE FILED ORIGINAL AND REVISED RETURNS, ANNUAL REP ORT ALONG WITH AUDIT REPORT, ORIGINAL TAX AUDIT REPORT IN 3CA AND 3CD, ORIGINAL AND REVISED, REPORT IN FORM 3CEB, ORIGINAL REPORT IN FORM 56F AND FORM 29B. THE ASSESSEE IN SUPPORT OF THE CLAIM OF EXEMPTION U/S 10A , ALSO FILED COPIES OF CERTIFIC ATE OF REGISTRATION WITH STPI, HYDERABAD AND GOA, SOFTEX F ORMS SUBMITTED TO STPI, RECONCILIATION OF EXPORT PROCEED S WITH INVOICES RAISED, FIRCS AND BANK STATEMENTS. THE ASS ESSEE ITA NO. 1081/HYD/2013 M/S. NE TECHNOLOGIES INDIA PVT. LTD. ================================= 8 SUBMITTED BEFORE THE CIT(A) THAT SINCE MOST OF THE INFORMATION CALLED FOR WAS MADE AVAILABLE BEFORE TH E AO, HE COULD HAVE CONSIDERED THEIR CLAIM. 10. IT WAS ALSO SUBMITTED BEFORE THE CIT(A) THAT IN THE REVISED RETURN OF INCOME, THEY HAVE INCREASED THEIR SALES BASED ON INCREASED INVOICES TO ONE OF THEIR CUSTOME R, AND ACCORDINGLY FURNISHED REVISED 56F. IT WAS ALSO THE CLAIM OF THE ASSESSEE THAT SINCE THE INCREASED VALUE OF INVO ICES WAS ACCEPTED BY THEIR CLIENT, AND THE SAME WERE DULY SU BMITTED AND APPROVED BY STPI, THEIR CLAIM OF DEDUCTION BE A LLOWED. AS REGARDS THE ISSUE OF FOREIGN REMITTANCES BY THE INC REASED VALUE OF INVOICES WITHIN THE PRESCRIBED TIME, IT WA S SUBMITTED BY THE ASSESSEE THAT THEY HAVE RECEIVED ADVANCES FR OM CUSTOMERS AT RS. 15,22,62,223/- WHICH WAS EVIDENCED BY BALANCE SHEET FILED ORIGINALLY AND FROM THIS AMOUNT , THEY HAVE ADJUSTED THE INCREASED VALUE AND SINCE MORE FO REIGN REMITTANCES WERE EARNED BY THEM AS EVIDENCED BY THE FIRCS, THEIR CLAIM U/S 10A BE ALLOWED. 11. THE CIT(A) OBSERVED THAT AS VERIFIED FROM THE ASSESSMENT RECORD, THE ASSESSEE HAD FURNISHED SOME DETAILS, INCLUDING THE ORIGINAL AND REVISED FORM NO: 3CEB AN D ORIGINAL 56F. FROM THE DETAILS FILED NOW, IT IS SEEN THAT T HE ASSESSEE HAD RAISED INVOICES TO THE TUNE OF RS. 14,40,60,009 AND THE ITA NO. 1081/HYD/2013 M/S. NE TECHNOLOGIES INDIA PVT. LTD. ================================= 9 SAME WERE SUBMITTED TO STPI AND APPROVED BY THEM. T HE OTHER BASIC CONDITIONS STIPULATED FOR ALLOWING 10A DEDUCTION WERE ALSO MET BY THE ASSESSEE. THE ASSESSEE WAS REG ISTERED WITH STPI, HYDERABAD AND GOA FOR THE RELEVANT PERIO D AND THE EXPORTS MADE BY THEM ARE APPROVED BY THE STPI. THE FOREIGN REMITTANCES RECEIVED, INCLUDING THE AMOUNTS RELATIN G TO THE ENHANCED INVOICES WERE RECEIVED BY THEM IN TIME AS EVIDENCED BY FIRCS AND BANK ACCOUNT COPIES FILED. SINCE THE ASSESSEE SATISFIES ALL THE CONDITIONS STIPULATED FO R DEDUCTION U/S 10A, THE CIT(A) HELD THAT THERE IS NO REASON TO DISALLOW THE CLAIM OF THE ASSESSEE UNDER THIS HEAD AND ACCOR DINGLY DELETED THE ADDITION MADE U/S 10A OF THE ACT. 12. REGARDING THE DISALLOWANCE OF EXPENSES AMOUNTING TO RS. 20,00,000, THE ASSESSEE CONTENDED BEFORE THE CI T(A) THAT THE SAME IS WITHOUT ANY BASIS. THE AO EVEN UNDER BE ST OF HIS JUDGMENT ALSO SHOULD NOT HAVE RESORTED TO SUCH AN A DDITION WHICH IS ARBITRARY AND CAPRICIOUS. DURING THE COURS E OF APPEAL PROCEEDINGS, THE ASSESSEE CLAIMED THAT SINCE THE PR OFITS FROM BUSINESS ARE ELIGIBLE FOR EXEMPTION U/S 10A, THERE W AS NO NEED FOR THEM TO INFLATE ANY EXPENDITURE OR CLAIM B OGUS EXPENSES AND ACCORDINGLY, THE ASSESSEE FURNISHED CO PIES OF LEDGER EXTRACTS FOR ALL THE EXPENSES. THE ASSESSEE ALSO SUBMITTED THAT THEIR BOOKS OF ACCOUNTS ARE AUDITED AND THE ITA NO. 1081/HYD/2013 M/S. NE TECHNOLOGIES INDIA PVT. LTD. ================================= 10 AUDIT REPORT WAS FURNISHED TO THE AO DURING THE COU RSE OF ASSESSMENT PROCEEDINGS. SINCE THE AUDIT REPORT CAN NOT BE PREPARED WITHOUT MAINTENANCE OF PROPER BOOKS OF ACC OUNTS AND ALSO NO ADVERSE FINDING WAS MADE BY THE STATUTO RY AUDITOR, NO DISALLOWANCE OF EXPENDITURE IS CALLED F OR. 13. THE CIT(A) OBSERVED THAT SINCE THE STATUTORY AUDIT REPORT WAS FILED, MAINTENANCE OF BOOKS OF ACCOUNTS BY THE ASSESSEE CANNOT BE DOUBTED. AS THE INCOME/PROFITS EA RNED OUT OF BUSINESS BY THE ASSESSEE IS PRIMA-FACIE ELIG IBLE FOR DEDUCTION U/S 10A, THERE WAS NO NEED FOR THE ASSESS EE TO CLAIM EXPENSES OTHER THAN THAT WERE REALLY INCURRED . THEREFORE, GOING BY THE ABOVE POSITION, NO DISALLOW ANCE OF EXPENDITURE IS CALLED FOR IN THE CASE OF THE ASSESS EE. ACCORDINGLY, HE DIRECTED THE ASSESSING OFFICER TO D ELETE THE DISALLOWANCE OF RS. 20,00,000/-. 14. REGARDING THE ADDITION OF DIVIDEND INCOME OF RS. 9,01,245/-, DURING THE COURSE OF FIRST APPELLATE PRO CEEDINGS, THE ASSESSEE SUBMITTED THAT THE DIVIDEND INCOME WAS RECEIVED BY THE ASSESSEE FROM MUTUAL FUND INVESTMEN TS INTO BANK ACCOUNTS WITH HDFC AND HSBC, AND ACCORDINGLY SUBMITTED THE RELEVANT EVIDENCE. THE ASSESSEE ALSO SUBMITTED BEFORE THE CIT(A) THAT THE SAME IS A DIVIDEND FROM THE UNITS OF THE MUTUAL FUND AND THE SAME IS NOT TO BE INCLUD ED IN THE ITA NO. 1081/HYD/2013 M/S. NE TECHNOLOGIES INDIA PVT. LTD. ================================= 11 GROSS TOTAL INCOME U/S 10(3G) OF THE ACT. THE CIT(A) HELD THAT THE ADDITION MADE BY THE AO ON ACCOUNT OF DIVIDEND EXEMPTION IS UNWARRANTED. 15. AGAINST THIS THE MAIN CONTENTION OF THE REVENUE IS THAT THE CIT(A) ADMITTED FRESH EVIDENCE. BEING SO, THE CIT(A) COMMITTED A GRAVE ERROR IN ADJUDICATING THE ISSUE I N FAVOUR OF THE ASSESSEE. 16. ON THE OTHER HAND, THE LEARNED AR SUBMITTED THAT WHATEVER RECORDS WHICH ARE AVAILABLE WITH THE AO WE RE NOT PROPERLY APPRECIATED BY HIM. BEING SO, THE CIT(A) LOOKED INTO THE RECORDS AND DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. 17. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS. IN OUR OPINION, HAVING REGARD TO THE PROVISIONS RELATI NG TO THE APPEALS BEFORE THE FIRST APPELLATE AUTHORITY, A DIS TINCTION HAS TO BE MADE BETWEEN THE EVIDENCE AND MATERIAL VOLUNT ARILY FURNISHED BY AN ASSESSEE IN SUPPORT OF HIS APPEAL A ND THE EVIDENCE / MATERIAL REQUISITIONED FROM AN ASSESSEE B Y THE FIRST APPELLATE AUTHORITY WITH A VIEW TO PROPER DIS POSAL OF PROCEEDINGS BEFORE HIM. IN OUR OPINION WHILE THE PR OVISIONS OF RULE 46A APPLY TO THE FORMER, THE SAME HAVE NO A PPLICATION TO THE LATTER. ITA NO. 1081/HYD/2013 M/S. NE TECHNOLOGIES INDIA PVT. LTD. ================================= 12 18. RULE 46A OF I.T. RULES HAS BEEN INSERTED BY THE INC OME- TAX (SECOND AMENDMENT) RULES, 1973 WITH EFFECT FROM 01-04- 1973. THIS RULE PROVIDES THAT AN ASSESSEE SHALL NOT BE ENTITLED TO PRODUCE BEFORE THE FIRST APPELLATE AUTHORITY EVI DENCE, WHETHER ORAL OR DOCUMENTARY, OTHER THAN THE EVIDENC E PRODUCED BY HIM DURING THE COURSE OF PROCEEDINGS BE FORE THE ASSESSING OFFICER. RULE HOWEVER ENUMERATE CERTAIN EXCEPTIONAL CIRCUMSTANCES SUCH AS WHERE THE ASSESSI NG OFFICER HAS REFUSED TO ADMIT EVIDENCE WHICH OUGHT T O HAVE BEEN ADMITTED OR WHERE THE ASSESSEE WAS PREVENTED B Y SUFFICIENT CAUSE FROM PRODUCING THE EVIDENCE HE WAS CALLED UPON TO PRODUCE BY THE ASSESSING OFFICER OR WHICH I S OTHERWISE RELEVANT TO ANY GROUND OF APPEAL TAKEN BY THE ASSESSEE OR WHERE THE ASSESSMENT ORDER ITSELF IS MA DE WITHOUT GIVING SUFFICIENT OPPORTUNITY TO THE ASSESS EE TO ADDUCE EVIDENCE RELEVANT TO ANY GROUND OF APPEAL. P ROVISION OF RULE 46A ENJOINS UPON THE FIRST APPELLATE AUTHOR ITY NOT TO ADMIT ANY FRESH EVIDENCE UNLESS HE RECORDS IN WRITI NG HIS REASONS FOR ITS ADMISSION. FURTHER RULE 46A ENJOINS UPON HIM TO PROVIDE THE ASSESSING OFFICER A REASONABLE OPPOR TUNITY TO EXAMINE THE FRESH EVIDENCE OR TO CROSS EXAMINE THE WITNESS PRODUCED BY THE ASSESSEE OR TO PRODUCE ANY EVIDENCE OR DOCUMENT OR ANY WITNESS IN REBUTTAL OF THE ADDITION AL EVIDENCE PRODUCED BY THE ASSESSEE. ITA NO. 1081/HYD/2013 M/S. NE TECHNOLOGIES INDIA PVT. LTD. ================================= 13 19. THE PROVISIONS OF SECTION 250(4), ON THE OTHER HAND , EMPOWER THE FIRST APPELLATE AUTHORITY TO MAKE SUCH FURTHER ENQUIRY AS HE THINKS FIT OR TO DIRECT THE ASSESSING OFFICER TO MAKE FURTHER ENQUIRY AND REPORT THE RESULT OF THE S AME. THE PROVISIONS OF SECTION 250(4) ARE THE PROVISIONS OF LONG STANDING THAT EXISTED UNDER 1922 ACT ALSO IN SECTIO N 31 OF THAT ACT. IN THE CASE OF CIT V. KANPUR COAL SYNDICA TE 53 ITR 225 (SC) THE HON'BLE SUPREME COURT HAVE HELD THAT T HE FIRST APPELLATE AUTHORITY CAN DO WHAT THE ASSESSING OFFIC ER COULD DO AND CAN ALSO DIRECT THE LATTER TO DO WHAT THE LA TTER HAS FAILED TO DO. IN THE CASE OF JUTE CORPORATION OF IN DIA LTD V. CIT 187 ITR 688 (SC) AND IN THE CASE OF CIT V. NIRBHERA M DALURAM 224 ITR 610 (SC) THE HON'BLE SUPREME COURT HAVE HEL D THAT THE POWERS OF THE FIRST APPELLATE AUTHORITY OVER AN ASSESSMENT ARE ALL PERVASIVE AND THEY ARE NOT CONFINED TO THE MATTERS CONSIDERED BY THE ASSESSING OFFICER. THERE ARE MANY JUDGMENTS TO THE EFFECT THAT IN VIEW OF THE PROVISI ONS OF SECTION 250(4) THE FIRST APPELLATE AUTHORITY IS DUT Y BOUND TO MAKE AN ENQUIRY EVEN IF SUCH ENQUIRY WAS NOT MADE B Y THE ASSESSING OFFICER IF THE FACTS AND CIRCUMSTANCES OF THE CASE WARRANT SUCH AN ENQUIRY TO BE MADE. REFERENCE IN TH IS REGARD MAY BE MADE TO THE JUDGMENTS REPORTED IN 107 ITR 80 8 (KER); 204 ITR 580 (CAL); 231 ITR 1 (BOM) AND 36 TAXMAN 35 3 (DEL). IT THEREFORE FOLLOWS THAT THE MATTERS TO BE CONSIDE RED BY THE ITA NO. 1081/HYD/2013 M/S. NE TECHNOLOGIES INDIA PVT. LTD. ================================= 14 FIRST APPELLATE AUTHORITY NEED NOT BE CONFINED TO W HAT WAS CONSIDERED BY THE ASSESSING OFFICER WHILE MAKING TH E ORDER APPEALED AGAINST. 20. THE PROVISIONS OF RULE 46A PROMULGATED WITH EFFECT FROM 01-04-1973 WERE CHALLENGED AS BEING ULTRA VIRE S TO THE PROVISIONS OF SECTIONS 250 AND 251 OF THE ACT IN TH E CASE OF SMT. MOHINDER KAUR V. CENTRAL GOVERNMENT 104 ITR 12 0 (ALL). AFTER CONSIDERATION OF THE PROVISIONS OF SECTIONS 2 50 AND 251 OF THE ACT AS WELL AS RULE 46A OF I.T. RULES THE HO N'BLE HIGH COURT ARRIVED AT THE CONCLUSION IN THE FOLLOWING WO RDS: SUB-RULE (1) OF THE SAID RULE LAYS DOWN THE CIRCUMS TANCES IN WHICH ALONE THE APPELLANT IS ENTITLED TO PRODUCE AD DITIONAL EVIDENCE. SUB-SECTION (4) PRESERVES THE POWER OF TH E APPELLATE ASSISTANT COMMISSIONER TO MAKE FURTHER INQUIRY AS CONTEMPLATED BY SECTION 250 OF THE ACT. THUS, IT IS CLEAR THAT NO PART OF RULE 46A WHITTLES DOWN OR IMPAIRS THE POWER TO MAKE FURTHER INQUIRY CONFERRED UPON THE APPELLATE ASSIST ANT COMMISSIONER BY SECTION 250 OF THE ACT. SIMILARLY, SUB-SECTION (5) OF THE SAID SECTION CONFERS A POWER ON THE APPE LLATE ASSISTANT COMMISSIONER TO PERMIT THE APPELLANT TO R AISE A FRESH POINT. THIS POWER HAS NOT BEEN EVEN TOUCHED BY RULE 46A. PREVIOUSLY, THE APPELLANT HAD NO RIGHT TO ADDUCE AD DITIONAL EVIDENCE. THE APPELLATE ASSISTANT COMMISSIONER COUL D PERMIT THE PRODUCTION OF ADDITIONAL EVIDENCE IF HE THOUGHT IT WAS NECESSARY TO ENABLE HIM TO DISPOSE OF THE APPEAL, O R IF HE THOUGHT IT FIT TO MAKE FURTHER INQUIRY; BUT UNDER S UB-RULE (1) OF RULE 46A THE APPELLANT HAD A RIGHT TO PRODUCE ADDIT IONAL EVIDENCE IN THE CIRCUMSTANCES MENTIONED IN ITS VARI OUS CLAUSES. WE ARE UNABLE TO AGREE WITH THE SUBMISSION THAT RUL E 46A OR ITS SUB CLAUSES IS ULTRA VIRES SECTION 250 OR 251 OF TH E ACT. THE RULE DOES NOT AFFECT THE POWER OF THE APPELLATE ASS ISTANT COMMISSIONER CONFERRED UPON HIM BY THAT RULE. IT IN ADDITION GIVES A RIGHT TO THE APPELLANT IN THE MATTER OF PRO DUCTION OF ADDITIONAL EVIDENCE.' ITA NO. 1081/HYD/2013 M/S. NE TECHNOLOGIES INDIA PVT. LTD. ================================= 15 21. SIMILAR ISSUE CAME FOR CONSIDERATION BY HON'BLE KER ALA HIGH COURT IN THE CASE OF CIT V. K RAVINDRANATHAN N AIR 265 ITR 217 (KER). HON'BLE HIGH COURT HELD THAT THE PRO VISIONS OF SUB-RULE (4) OF RULE 46A LAID DOWN THAT THE POWERS OF THE APPELLATE AUTHORITY UNDER SECTION 250 WAS NOT AFFEC TED. THE HON'BLE KERALA HIGH COURT FURTHER OBSERVED ' ON A CONSIDERATION OF THE PROVISIONS OF RULE 46A PARTICU LARLY SUB- RULE (4) THEREOF AND THE PROVISIONS OF SECTION 250( 1) OF THE INCOME-TAX ACT CONFERRING POWER ON THE COMMISSIONER OF INCOME-TAX (APPEALS), WE ARE ALSO OF THE VIEW THAT IN SPITE OF THE PROVISIONS OF RULE 46A(1), THE PROVISIONS OF SE CTION 250 ENABLE THE COMMISSIONER OF INCOME-TAX (APPEALS) TO ACCEPT ADDITIONAL EVIDENCE IN APPROPRIATE CASES WHICH POWE R HAS BEEN PRESERVED BY SUB-RULE (4) OF RULE 46A ALSO. IF THE PROVISIONS OF RULE 46A, SUB-RULE (4) THEREOF, ARE H ELD TO BE MANDATORY THAT WILL GO AGAINST THE PROVISIONS OF SE CTION 250 OF THE ACT CONFERRING POWER ON THE FIRST APPELLATE AUTHORITY TO ENQUIRE INTO THE MATTER AND PASS APPROPRIATE ORDERS . IN OTHER WORDS, RULE 46A WITHOUT SUB-RULE (4) WILL BE OPEN T O CHALLENGE AS ULTRA VIRES SECTION 250 OF THE ACT.' 22. THERE ARE OF COURSE SEVERAL JUDGMENTS WHERE IT HAS CLEARLY BEEN LAID DOWN THAT THE ASSESSEE ON HIS OWN CANNOT PRODUCE ANY ADDITIONAL EVIDENCE NOT FURNISHED BEFOR E THE ITA NO. 1081/HYD/2013 M/S. NE TECHNOLOGIES INDIA PVT. LTD. ================================= 16 ASSESSING OFFICER WITHOUT MEETING HE VARIOUS CONDIT IONS PROVIDED UNDER RULE 46A FOR WHICH SATISFACTION IS T O BE RECORDED BY THE APPELLATE AUTHORITY IN WRITING AND WITH WHICH THE APPELLATE AUTHORITY IS FURTHER REQUIRED TO CONF RONT THE ASSESSING OFFICER AND ALLOW HIM REASONABLE OPPORTUN ITY TO HAVE HIS SAY IN THE MATTER. IN THE CASE OF RAJKUMAR SRIMAL V. CIT 102 ITR 525 (CAL) THE HON'BLE CALCUTTA HIGH COU RT HAVE CLEARLY HELD THAT WHERE THE CIT IS NOT ACTING SUO M OTU IN ADMITTING ADDITIONAL EVIDENCE, THERE MUST BE SOME G ROUND FOR ADMITTING NEW EVIDENCE. THE HON'BLE CALCUTTA HI GH COURT HAVE FURTHER OBSERVED THAT IN SUCH A CASE THE TRIBU NAL CAN INTERFERE WITH THE DISCRETION EXERCISED BY THE FIRS T APPELLATE AUTHORITY IN ADMITTING THE ADDITIONAL EVIDENCE. IN THE WORDS OF HON'BLE HIGH COURT 'IT IS TRUE, AS WAS CONTENDED BY COUNSEL FOR THE AS SESSEE, THAT THE APPELLATE ASSISTANT COMMISSIONER HAS VERY WIDE POWERS AND IN THE INTERESTS OF JUSTICE HE CAN MAKE FURTHER ENQUIRY AND HE CAN ADMIT NEW GROUND OF APPEAL. HE CAN ALSO GIVE DEDUCTIONS NOT CLAIMED BY THE ASSESSEE, AS WAS HELD BY THIS COURT IN THE CASE OF UNION COAL CO. LTD. V. COMMISS IONER OF INCOME TAX. IN THIS CASE COUNSEL FOR THE REVENUE AL SO DID NOT DISPUTE THAT IN CERTAIN CIRCUMSTANCES THE APPELLATE ASSISTANT COMMISSIONER HAD JURISDICTION TO ADMIT NEW GROUNDS IF IT WAS NECESSARY TO ADMIT NEW EVIDENCE. THE POINT IN THIS CASE IS NOT WHETHER THE APPELLATE ASSISTANT COMMISSIONER IS ENT ITLED TO ADMIT NEW GROUND OR EVIDENCE EITHER SUO MOTU OR AT THE INVITATION OF THE PARTIES. IN THIS CASE IT IS APPAR ENT THAT THE APPELLATE ASSISTANT COMMISSIONER WAS NOT ACTING SUO MOTO IN ADMITTING ADDITIONAL EVIDENCE. IF THE APPELLATE ASS ISTANT COMMISSIONER WAS ACTING ON BEING INVITED BY THE ASS ESSEE, THEN THERE MUST BE SOME GROUND FOR ADMITTING NEW EVIDENC E IN THE SENSE THAT THERE MUST BE SOME EXPLANATION TO SHOW T HAT THE FAILURE TO ADDUCE EVIDENCE EARLIER SOUGHT TO BE ADD UCED BEFORE THE APPELLATE ASSISTANT COMMISSIONER WAS NOT WILLFU L AND NOT ITA NO. 1081/HYD/2013 M/S. NE TECHNOLOGIES INDIA PVT. LTD. ================================= 17 UNREASONABLE. WE FIND FROM THE RECORD THAT NO SUCH EXPLANATION WAS EVER OFFERED OR REFERRED TO. IF WIT HOUT ANY EXPLANATION AT ALL THE APPELLATE ASSISTANT COMMISSI ONER ADMITS EVIDENCE AT THE INVITATION OF THE PARTIES, HE WOULD BE EXERCISING, IN OUR OPINION, DISCRETION NOT PROPERLY. HE HAS UND OUBTEDLY A DISCRETION VESTED IN HIM TO ADMIT ADDITIONAL EVIDEN CE IN APPROPRIATE CASES BUT ADMISSION OF EVIDENCE AT THE INSTANCE OF AN APPELLANT WITHOUT ANY GROUND OR EXPLANATION WOUL D NOT BE EXERCISING DISCRETION PROPERLY AND IN SUCH A CASE T HE APPELLATE AUTHORITY IS COMPETENT, IN OUR OPINION, TO INTERFER E WITH THE DISCRETION EXERCISED BY THE APPELLATE ASSISTANT COM MISSIONER. RELIANCE IN THIS CONNECTION MAY BE PLACED ON THE OB SERVATIONS IN THE CASE OF RAMGOPAL GANPATRAI SONS LTD. V. COMM ISSIONER OF EXCESS PROFITS TAX, IN THE CASE OF BYRAMJI CO. V . COMMISSIONER OF INCOME TAX AND IN THE CASE OF KARAM CHAND V. COMMISSIONER OF INCOME TAX.' 23. IN THE CASE OF CIT V. VALI MOHAMED AHMEDBHAI 134 IT R 214 (GUJ) HON'BLE GUJARAT HIGH COURT HAVE HELD THAT IF ANY ADDITIONAL EVIDENCE SUBMITTED BY AN ASSESSEE IS ACC EPTED BEHIND THE BACK OF THE ASSESSING OFFICER AND THE AS SESSING OFFICER IS NOT GIVEN PROPER OPPORTUNITY TO REBUT TH E SAME, IT WOULD AMOUNT TO THE VIOLATION OF THE PRINCIPLES OF NATURAL JUSTICE. HON'BLE GUJARAT HIGH COURT OBSERVED: IT IS CLEAR FROM THE ABOVE QUOTED PROVISION THAT TH E AAC SHOULD NOT HAVE TAKEN INTO ACCOUNT ANY EVIDENCE PRODUCED U NDER SUB- RULE (1) UNLESS THE ITO HAD BEEN ALLOWED A REASONAB LE OPPORTUNITY TO EXAMINE THE EVIDENCE OR TO CROSS EXA MINE THE WITNESS WHOSE EVIDENCE WAS TAKEN ON RECORD OR TO PR ODUCE ANY EVIDENCE IN REBUTTAL OF THE ADDITIONAL EVIDENCE PRO DUCED BY THE ASSESSEE. IT IS, THEREFORE, OBVIOUS THAT THE AAC CO ULD NOT HAVE RELIED ON THE ADDITIONAL EVIDENCE WITHOUT GIVING SU CH OPPORTUNITY TO THE ITO. THE MERE FACT THAT NOTICE O F HEARING OF THE APPEAL WAS GIVEN TO THE ITO WOULD NOT MEET THE REQUIREMENTS OF THE ABOVE RULE. EVEN IF NO SUCH RUL E WAS IN EXISTENCE, ENDS OF JUSTICE AND FAIR PLAY DEMAND THA T WHEN AN ASSESSEE PRODUCES ADDITIONAL EVIDENCE IN HIS APPEAL AN OPPORTUNITY IS GIVEN TO THE ITO TO TEST THE EVIDENC E OR TO COUNTER THE EFFECT OF THE EVIDENCE BY PRODUCING EVI DENCE IN REBUTTAL OR OTHERWISE. THE REASON IS SELF EVIDENT. IT STANDS TO REASON TO PRESUME THAT THE ITO TOOK HIS DECISION NO T TO REMAIN ITA NO. 1081/HYD/2013 M/S. NE TECHNOLOGIES INDIA PVT. LTD. ================================= 18 PRESENT BECAUSE HE CONSIDERED IT UNNECESSARY TO DO SO IN THE CONTEXT OF THE EXISTING RECORD. HE COULD NOT HAVE A NTICIPATED OR REASONABLY FORESEEN THAT THE RECORD WAS GOING TO BE AUGMENTED BY ADDUCING FRESH EVIDENCE. BESIDES, HE HAD A RIGHT TO OBJECT TO THE PRODUCTION OF ADDITIONAL EVIDENCE. SINCE SOMETH ING ADVERSE TO THE ITO WAS SOUGHT TO BE DONE IN THE COURSE OF T HE APPEAL BY WAY OF AUGMENTING THE RECORD, THE ITO OUGHT TO HAVE BEEN HEARD AND GIVEN AN OPPORTUNITY TO MEET WITH THE ADD ITIONAL MATERIAL BY WAY OF CROSS EXAMINATION, COUNTER EVIDE NCE AND URGING SUBMISSIONS IN THE CONTEXT OF THE AUGMENTED RECORD. OF COURSE, IF THE APPEAL WAS GOING TO BE DECIDED ON TH E BASIS OF THE EXISTING RECORD OF WHICH HE HAD NOTICE, NO SUCH QUE STION COULD ARISE AND NO GRIEVANCE COULD BE MADE AS THE ITO HAD FAILED TO EXERCISE HIS OPTION TO REMAIN PRESENT. HE A NO NOTI CE OF THE APPLICATION FOR ADDITIONAL EVIDENCE AS NO NOTICE WA S ISSUED. WHEN A PRAYER FOR ADDITIONAL EVIDENCE WAS MADE, IT WAS AN INDEPENDENT AND SUBSTANTIVE APPLICATION SEEKING A N EW RIGHT. NOTICE OF SUCH APPLICATION WAS NECESSARY TO THE !TO AND HE OUGHT TO HAVE BEEN AFFORDED BOTH AN OPPORTUNITY TO OPPOSE IT AND TO TEST THE ADDITIONAL EVIDENCE OR COUNTER THE EFFECT THEREOF OR PRODUCE EVIDENCE IN REBUTTAL. NO SUCH ORDER GRAN TING THE REQUEST COULD HAVE BEEN PASSED BEHIND THE BACK OF T HE ITO IN VIOLATION OF THE PRINCIPLES OF NATURAL JUSTICE. AT THE COST OF REPETITION, IT BE STATED THAT NOTICE OF APPEAL CANN OT BE EQUATED WITH NOTICE OF A FUTURE APPLICATION TO LEAD ADDITIO NAL EVIDENCE WHICH NO ONE COULD HAVE ANTICIPATED OR REASONABLY F ORESEEN. ORDINARILY, THE APPEAL WOULD BE DECIDED ON THE EVID ENCE RECORDED IN THE COURSE OF ASSESSMENT PROCEEDINGS. T HE ITO, THEREFORE, MAY NOT, IN A GIVEN CASE, THINK IT NECES SARY TO REMAIN PRESENT AT THE HEARING OF THE APPEAL. HE, HOWEVER, CANNOT BE EXPECTED TO ANTICIPATE THAT ADDITIONAL EVIDENCE MIG HT BE PRODUCED BY THE ASSESSEE IN HIS APPEAL. IT IS FOR T HIS REASON THAT IT IS NECESSARY TO GIVE HIM AN OPPORTUNITY TO MEET THE ADDITIONAL EVIDENCE. THE TRIBUNAL HAS, THEREFORE, FALLEN INTO AN ERROR IN REJECTING THE PLEA OF THE REVENUE THAT THE AAC OUGH T TO HAVE GIVEN AN OPPORTUNITY TO THE ITO TO EXAMINE THE ADDI TIONAL EVIDENCE OR TO CROSS EXAMINE THE WITNESSES WHOSE EV IDENCE WAS TAKEN ON RECORD OR TO REBUT THE ADDITIONAL EVIDENCE . WE, THEREFORE, ANSWER THE QUESTION REFERRED TO US IN TH E NEGATIVE AND AGAINST THE ASSESSEE. 24. THE PROPOSITION THAT THE FIRST APPELLATE AUTHORITY CAN ADMIT ADDITIONAL EVIDENCE SOUGHT TO BE FILED BY AN ASSESSEE ONLY FOR GOOD REASONS AND AFTER ALLOWING THE ASSESS ING OFFICER REASONABLE OPPORTUNITY TO HAVE HIS SAY IN THE MATTE R IS ITA NO. 1081/HYD/2013 M/S. NE TECHNOLOGIES INDIA PVT. LTD. ================================= 19 SUPPORTED BY SOME MORE JUDGMENTS SUCH AS CIT V. BAB ULAL JAIN 176 ITR 411 (MP); C. UNNIKRISHNAN V. CIT 233 I TR 485 (KER); AND RAMPRASAD SHARMA V. CIT 119 ITR 867 (ALL ). 25. IN THE CASE OF SMT. PRABHAVATI SHAH V. CIT 231 ITR 1 (BOM) HON'BLE JURISDICTIONAL HIGH COURT DEALT WITH A CASE WHERE THE ASSESSEE SOUGHT TO PRODUCE FRESH EVIDENCE BEFORE THE FIRST APPELLATE AUTHORITY FOR NO GOOD REASONS F OR NOT HAVING PRODUCED THE SAME BEFORE THE ASSESSING OFFIC ER. REFERRING TO THE PROVISIONS OF RULE 46A THE HON'BLE BOMBAY HIGH COURT HELD THAT THE FIRST APPELLATE AUTHORITY WAS JUSTIFIED IN NOT TAKING ON RECORD THE FRESH EVIDENC E SOUGHT TO BE PRODUCED BEFORE HIM BY THE ASSESSEE. IN THE COUR SE OF THE JUDGMENT HON'BLE HIGH COURT CLOSELY EXAMINED THE PR OVISIONS OF SECTION 250(4) OF THE ACT AND THE PROVISIONS OF RULE 46A AND OBSERVED AS UNDER: 'ON A PLAIN READING OF RULE 46A, IT IS CLEAR THAT T HIS RULE IS INTENDED TO PUT FETTERS ON THE RIGHT OF THE APPELLA NT TO PRODUCE BEFORE THE APPELLATE ASSISTANT COMMISSIONER ANY EVI DENCE, WHETHER ORAL OR DOCUMENTARY, OTHER THAN THE EVIDENC E PRODUCED BY HIM DURING THE COURSE OF THE PROCEEDING S BEFORE THE INCOME-TAX OFFICER, EXCEPT IN THE CIRCUMSTANCES SET OUT THEREIN. IT DOES NOT DEAL WITH THE POWERS OF THE AP PELLATE ASSISTANT COMMISSIONER TO MAKE FURTHER ENQUIRY OR T O DIRECT THE INCOME-TAX OFFICER TO MAKE FURTHER ENQUIRY AND TO R EPORT THE RESULT OF THE SAME TO HIM. THIS POSITION HAS BEEN M ADE CLEAR BY SUB-RULE (4) WHICH SPECIFICALLY PROVIDES THAT THE R ESTRICTIONS PLACED ON THE PRODUCTION OF ADDITIONAL EVIDENCE BY THE APPELLANT WOULD NOT AFFECT THE POWERS OF THE APPELL ATE ASSISTANT COMMISSIONER TO CALL FOR THE PRODUCTION OF ANY DOCU MENT OR THE EXAMINATION OF ANY WITNESS TO ENABLE HIM TO DISPOSE OF THE APPEAL. UNDER SUB-SECTION (4) OF SECTION 250 OF THE ACT, THE APPELLATE ASSISTANT COMMISSIONER IS EMPOWERED TO MA KE SUCH ITA NO. 1081/HYD/2013 M/S. NE TECHNOLOGIES INDIA PVT. LTD. ================================= 20 FURTHER INQUIRY AS HE THINGS FIT OR TO DIRECT THE I NCOME-TAX OFFICER TO MAKE FURTHER INQUIRY AND TO REPORT THE R ESULT OF THE SAME TO HIM. SUB-SECTION (5) OF SECTION 250 OF THE ACT EMPOWERS THE APPELLATE ASSISTANT COMMISSIONER TO AL LOW THE APPELLANT, AT THE HEARING OF THE APPEAL, TO GO INTO ANY GROUND OF APPEAL NOT SPECIFIED IN THE GROUNDS OF APPEAL, ON H IS BEING SATISFIED THAT THE OMISSION OF HE GROUND FROM THE F ORM OF APPEAL WAS NOT WILFUL. IT IS CLEAR FROM THE ABOVE PROVISIO NS THAT THE POWERS OF THE APPELLATE ASSISTANT COMMISSIONER ARE MUCH WIDER THAN THE POWERS OF AN ORDINARY COURT OF APPEA L. THE SCOPE OF HIS POWERS IS COTERMINUS WITH THAT OF THE INCOME-TAX OFFICER. HE CAN DO WHAT THE INCOME-TAX OFFICER CAN DO. HE CAN ALSO DIRECT THE INCOME-TAX OFFICER TO DO WHAT HE FA ILED TO DO. THE POWER CONFERRED ON THE APPELLATE ASSISTANT COMM ISSIONER UNDER SUB-SECTION (4) OF SECTION 250 BEING A QUASI- JUDICIAL POWER, IT IS INCUMBENT ON HIM TO EXERCISE THE SAME IF THE FACTS AND CIRCUMSTANCES JUSTIFY. IF THE APPELLATE ASSISTA NT COMMISSIONER FAILS TO EXERCISE HIS DISCRETION JUDIC IALLY, AND ARBITRARILY REFUSES TO MAKE ENQUIRY IN A CASE WHERE THE FACTS AND CIRCUMSTANCES SO DEMAND, HIS ACTION WOULD BE OP EN FOR CORRECTION BY A HIGHER AUTHORITY'. THEREAFTER THE HON'BLE HIGH COURT AGAIN OBSERVED AT PAGE 8 IN THE FOLLOWING WORDS: 'ON A CONJOINT READING OF SECTION 250 OF THE ACT AN D RULE 46A OF THE RULES, IT IS CLEAR THAT THE RESTRICTIONS PLA CED ON THE APPELLANT TO PRODUCE EVIDENCE DO NOT AFFECT THE POW ERS OF THE APPELLATE ASSISTANT COMMISSIONER UNDER SUB-SECTION (4) OF SECTION 250 OF THE ACT. THE PURPOSE OF RULE 46A APP EARS TO BE TO ENSURE THAT EVIDENCE IS PRIMARILY LED BEFORE THE INCOME-TAX OFFICER.' 26. FROM THE VARIOUS AUTHORITIES CITED BY US (SUPRA) IN THIS ORDER WE FIND THAT THE LEGAL POSITION IS THAT THE F IRST APPELLATE AUTHORITY HAS WIDE POWERS OVER THE ORDER OF ASSESSM ENT APPEALED AGAINST BEFORE HIM. IN THE COURSE OF EXERC ISE OF SUCH POWER THE FIRST APPELLATE AUTHORITY CAN DIRECT THE ASSESSEE TO PRODUCE ANY EVIDENCE, INFORMATION OR MATERIAL THAT WAS NOT PRODUCED BEFORE OR CONSIDERED BY THE ASSESSING OFFI CER. THE ITA NO. 1081/HYD/2013 M/S. NE TECHNOLOGIES INDIA PVT. LTD. ================================= 21 PURPOSE OF RULE 46A IS TO PLACE FETTERS ON THE RIGH TS OF AN APPELLANT TO PRODUCE ADDITIONAL EVIDENCE BEFORE THE FIRST APPELLATE AUTHORITY AND NOT THE RIGHTS OF THE FIRST APPELLATE AUTHORITY TO CALL FOR PRODUCTION OF ANY FRESH EVIDE NCE OR INFORMATION. THIS ASPECT OF THE PROVISIONS OF RULE 46A IS CLEAR FROM THE PROVISIONS OF SUB-RULE (4) OF RULE 46A ITS ELF THAT NOTHING CONTAINED IN RULE 46A SHALL AFFECT THE POWE R OF FIRST APPELLATE AUTHORITY TO DIRECT THE PRODUCTION OF ANY DOCUMENT OR EXAMINATION OF ANY WITNESS TO ENABLE HIM TO DISP OSE OF THE APPEAL OR FOR ANY OTHER SUBSTANTIAL CAUSE INCLUDING THE ENHANCEMENT OF THE ASSESSMENT OR PENALTY (WHETHER O N HIS OWN MOTION OR ON THE REQUEST OF THE ASSESSING OFFIC ER). 27. IN THE INSTANT CASE THE ENTIRE ADDITIONAL EVIDENCE HAS COME ON THE RECORD OF THE FIRST APPELLATE AUTHORITY BECAUSE THE FIRST APPELLATE AUTHORITY DECIDED TO EXAMINE TH E FACTS OF THE CASE IN DEPTH AND ADJUDICATE UPON THE MATTER ON THE BASIS OF EVIDENCE AND MATERIAL THUS GATHERED. THE LEARNED CIT(A) WAS EMPOWERED TO DO SO UNDER THE PROVISIONS OF SECT ION 250(4). THE RESULTS OF ENQUIRY CONDUCTED BY HIM COU LD EITHER GO TO FURTHER CEMENT THE CASE MADE OUT BY THE ASSES SING OFFICER OR TO HELP OUT THE ASSESSEE AGAINST THE FIN DINGS OF THE ASSESSING OFFICER. THE MERE FACT THAT THE RESULTS O F THE ENQUIRIES THUS CONDUCTED SUPPORTED THE CASE OF THE ASSESSEE ITA NO. 1081/HYD/2013 M/S. NE TECHNOLOGIES INDIA PVT. LTD. ================================= 22 AND NOT THAT OF REVENUE HAS NO BEARING ON THE JURIS DICTION AND POWERS OF THE LEARNED CIT(A). THE LEARNED CIT(A ) COULD HAVE CONFRONTED THE ASSESSING OFFICER WITH THE EVID ENCE THUS RECEIVED AND THE MATERIAL THUS GATHERED AND ALLOW T HE ASSESSING OFFICER TO HAVE HIS SAY IN THE MATTER AND PERHAPS HAD HE DONE SO THIS DISPUTE WOULD NOT HAVE ARISEN. BUT WE DO NOT SEE ANY REQUIREMENT IN LAW THAT THE FIRST APPEL LATE AUTHORITY SHOULD INVARIABLY CONSULT OR CONFRONT THE ASSESSING OFFICER EVERY TIME AN ADDITIONAL EVIDENCE THAT WAS NOT BEFORE THE ASSESSING OFFICER COMES ON THE RECORD OF THE FI RST APPELLATE AUTHORITY. WHERE THE ADDITIONAL EVIDENCE IS OBTAINED BY THE FIRST APPELLATE AUTHORITY ON ITS OW N MOTION, THERE IS NO REQUIREMENT IN LAW TO CONSULT / CONFRONT THE ASSESSING OFFICER WITH SUCH ADDITIONAL EVIDENCE. TH ERE MAY BE CASES WHERE ADDITIONAL EVIDENCE IS ADMITTED BY THE FIRST APPELLATE AUTHORITY ON A REQUEST OR APPLICATION BEI NG MADE BY THE ASSESSEE. IN SUCH CASES SUB-RULE (2) OF RULE 46 A REQUIRES THE FIRST APPELLATE AUTHORITY TO ALLOW THE ASSESSIN G OFFICER A FURTHER OPPORTUNITY TO REBUT THE FRESH EVIDENCE FIL ED BY THE ASSESSEE. EVEN THAT REQUIREMENT CANNOT BE SAID TO B E A RULE OF UNIVERSAL APPLICATION. IF THE ADDITIONAL EVIDENCE F URNISHED BY THE ASSESSEE BEFORE THE APPELLATE AUTHORITY IS IN T HE NATURE OF CLINCHING EVIDENCE LEAVING NO FURTHER ROOM FOR ANY DOUBT OR CONTROVERSY IN SUCH A CASE NO USEFUL PURPOSE WOULD BE ITA NO. 1081/HYD/2013 M/S. NE TECHNOLOGIES INDIA PVT. LTD. ================================= 23 SERVED ON PERFORMING THE RITUAL OF FORWARDING THE E VIDENCE / MATERIAL TO THE ASSESSING OFFICER AND OBTAIN HIS RE PORT. IN SUCH EXCEPTIONAL CIRCUMSTANCES THE REQUIREMENT OF S UB-RULE (3) MAY BE DISPENSED WITH. 28. IN VIEW OF THE ABOVE DISCUSSION, WE FIND NO MERIT I N THE GROUNDS RAISED BY THE REVENUE AND ACCORDINGLY, THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 29. IN THE RESULT, REVENUE APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST MARCH, 2014. SD/- (SAKTIJIT DEY) JUDICIAL MEMBER SD/- (CHANDRA POOJARI) ACCOUNTANT MEMBER HYDERABAD, DATED THE 21 ST MARCH, 2014 TPRAO COPY FORWARDED TO: 1. THE DEPUTY CIT, CIRCLE-16(1), ROOM NO. 612, 6 TH FLOOR, AAYAKAR BHAVAN, BASHEERBAGH, HYDERABAD. 2. M/S. NE TECHNOLOGIES INDIA PVT. LTD., BLOCK-1 (COMMERCIAL), 2 ND FLOOR, UMA ENCLAVE, ROAD NO. 9, BANJARA HILLS, HYDERABAD. 3. THE CIT(A)-V, HYDERABAD. 4. THE CIT-IV, HYDERABAD. 5. THE DR BENCH 'A', ITAT, HYDERABAD