DCIT, New Delhi V. M/s. Nirula Handicragts Bazar Pvt. Ltd., New Delhi

ITA 5404/DEL/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 90924 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 5 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-04-2015
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 03-02-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 23-10-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: P DAM KANUNJNA
• Assessee Lawyers: V K GUPTA
• Keywords: Principle of natural justice; Rule of consistency; Additional evidence
• Section: 143(3); 133(6); 68

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E: NEW DELHI BEFORE SHRI N.K.SAINI, ACCOUNTANT MEMBER AND SHRI A. T. VARKEY, JUDICIAL MEMBER ITA NO. 5404/DEL/2012 (ASSESSMENT YEAR: 2009 - 10) DCIT, CIRLE - 13(1), NEW DELHI VS. M/S NIRULA HANDICRAFT BAZAR, PVT LTD. 10&12, DOCTORS LANE, GOLE MARKET NEW DELHI - 110001 AAACNO140M (APPELLANT) (RESPONDENT) APPELLANT BY : P.DAM KANUNJNA, SR. DR. RESPONDENT BY : SH. V. K. GUPTA, CA. DATE OF HEARING 03 .02.2015 DATE OF PRONOUNCEMENT 22 .04 .2015 O R D E R PER A. T. VARKEY, JUDICIAL MEMBER THIS APPEAL FILED BY THE REVENUE ARISES OUT OF THE ORDER PASSED BY THE LD. CIT(A) - XVI, NEW DELHI DATED 08 . 6 .20 1 2 PERTAINING TO ASSESSMENT YEAR 200 9 - 10 . 2. THE GROUNDS RAISED IN THE REVENUES APPEAL READ AS UNDER: - 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 37,02,418/ - ON SUNDRY CREDITORS. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN ACCEPTING THE ADDITIONAL EVIDENCE DURING THE COURSE OF APPELLATE PROCEEDINGS WITHOUT GIVING ANY OPPORTUNITY TO THE AO TO CROSS EXAMINE THE ADDITIONAL EVIDENCE SUBMI TTED BY AOI. ITA NO. 5404/ DEL/ 2012 2 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE TOTAL ADDITION OF THE AO DESPITE THE FACT THAT THE ASSESSEE HAS SUBMITTED THE DOCUMENTS PERTAINING TO ONLY 19 PARTIES OUT OF 53 PARTIES. 4. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 35,680/ - MADE ON HOUSE TAX PAID FOR THE DIRECTIONS PREMISES WITHOUT APPRECIATING THAT HOUSE TAX PAID IS INDIRECT BENEFIT TO THE DIRECTOR. 5. THE APPELLANT CRAVES TO BE ALLOWED TO ADD ANY FRESH GROUNDS OF APPEAL AND / OR DELETE OR AMEND ANY OF THE GROUNDS OF APPEAL. 3. FACTS, IN BRIEF, AS PER THE AO AND LD CIT (A) ARE THAT ASSESSEE FILED E - RETURN DECLARING INCOME OF RS 1,57,77,810 ON 7.3.2011. THE CASE WAS PICK ED UP FOR SCRUTINY UNDER CASS. THE ASSESSEE IS ENGAGED IN TRADING AND EXPORT OF CARPETS, HANDICRAFTS ETC. DURING THE YEAR SALES HAS BEEN DECLARED AT RS. 13,63,89,728/ - (PREVIOUS YEAR : 17,39,06,908/ - ) AFTER DEBITING VARI OUS EXPENSES IN THE PROFIT AND LOSS ACCOUNT, NET PROFIT OF RS. 1,63,73,524/ - (PREVIOUS YEAR : RS. 1,89,14,442/ - ) HAS BEEN DECLARED. THE GP RATE FOR THE YEAR UNDER CONSIDERATION IS 42.11% AS COMPARED TO 40.35% IN THE IMMEDIATELY PRECEDING YEAR. DURING T HE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER ASKED THE ASSESSEE TO PRODUCE DETAILS WITH ADDRESSES OF SUNDRY CREDITORS DECLARED IN THE BALANCE SHEET ALONGWITH CONFIRMATION. THE ASSESSEE PROD UCED NAME, ADDRESS AND AMOUNT DUE TO CREDITO RS OUTST ANDING AS ON 31.3.2009; A ND WAS FURTHER ASKED BY THE AO, TO FURNISH CONFIRMATION IN RESPECT OF SUNDRY CREDITORS EXCEEDING BALANCE OF RS. 80000/ - OUTSTANDING IN THE BOOKS OF THE ASSESSEE. FURTHER, AS A TEST CHECK BASIS, NOTICES U/S. 133(6) OF THE INCOME TAX ACT ITA NO. 5404/ DEL/ 2012 3 1961, ( HEREIN AFTER THE ACT) WERE ISSUED TO 35 PARTIES. IN RESPECT OF 19 PARTIES, NOTICES U/S. 133(6) OF THE ACT WERE RETURNED BACK UNSERVED WITH THE REMARKS INCOMPLETE ADDRESS OR LEFT WITHOUT ADDRESS OR NO SUCH PERSON. ASSESSEE WAS ASKED B Y THE AO TO DIS CHARGE ITS BURDEN AND ASKED TO ESTABLISH THE EXISTENCE OF TRADE CREDITORS AND TO PROVE THE GENUINENESS OF TRANSACTION; AND FOR THAT THE ASSESSEE WAS PROVIDED WITH (A) A LIST OF SUCH PARTIES WHERE NOTICES U/S. 133(6) WERE RECEIVED B ACK, (B) A LIST OF PARTIES WHOSE TRANSACTIONS HAVE BEEN SHOWN DURING THE YEAR WHEREAS THE ASSESSEE HAS SUO MOTU SURREN DERED THE SAME IN THE PREVIOUS YEAR DUE TO NON FILING OF CONFIRMATION IN RESPECT OF SUCH PARTIES; AND (C) A LIST OF SUNDRY CREDITORS WHERE NEITHER THE ASSESSEE COULD FILE CONFIRMATION NOR COULD BE OBTAINED DIRECTLY FROM SUCH PERSONS DUE TO NON AVAILA BILITY OF COM PLETE ADDRESSES. THE ASSESSEES RESPONSE THERETO WAS NOT FOUND TENABLE BY THE AO . ACCORDING TO HIM, D ESPITE S EVERAL OPPORTUNITIES GRANTED TO THE ASSESSEE FOR FURNISHING THE DETAILS OF SUNDRY CREDITORS, ASSESSEE FAILED TO GIVE THE DETAILS. HOWEVER, THE AO NOTES THAT IN THE SUBMISSION DATED 16.12.2011, THE ASSESSEE ITSELF CONTENDED THAT IT WAS NOT ABLE TO CONTACT THE CREDITORS DUE TO BAD WEATHER , BUT IN THE SAME PARAGRAPH IT WAS FURTHER EXPLAINED BY THE ASSESSEE THAT CREDITORS WERE NOT ABLE TO COME DUE TO ILL HEALTH AND IS ENGAGED IN SOME OUTSIDE BUSINESS ETC. ASSESSING OFFICER BY REFERRING VARIOUS JUDGMENTS HAS STATED THAT IT HAS BEEN HELD IN THE CASE OF SUSHILKUMAR JAISWAL VS. ITO (ITAT, DELHI) 59 TTJ 18, BY THE TRIBUNAL THAT SUMMONS SENT TO 4 CREDITORS RETURNED UNSERVED ONE CREDITOR DENIED TRANSACTION, THE N THE ASSESSEE HAS NOT DISCHARGED HIS ONUS OF PROVING THE CREDITORS. THE HONBLE MP HIGH COURT IN THE CASE OF VISP(P) LTD. VS. CIT (MP) 265 ITR 202, HAVE HELD THAT SECTION 68 OF THE I.T. ACT, 1961 DOES NOT CONFINE TO CASH ENTRIES IN BOOKS ONLY AND IT EXT ENDED TO TRADE CREDITORS ALSO. FURTHERMORE, HONBLE CALCUTTA ITA NO. 5404/ DEL/ 2012 4 HIGH COURT HAS HELD THAT CREDITS APPEARING IN THE NAME OF THIRD PARTY ASSESSEE MUST PROVE IDENTITY OF CREDIT OR S, CAPACITY OF CREDITORS TO ADVANCE MONEY AND GENUINENESS OF TRANSACTION AS HELD IN SHANKAR INDUSTRIES VS. CIT (CALCUTTA) 144 ITR 689. IN THE CASE OF S. PUNJABI VS. ACIT (ITAT, MADRAS), 62 TTJ 749, HONBLE TRIBUNAL HAS UPHELD THE ADDITION U/S. 68 EVEN WHERE CONFIRMATION LETTERS WERE FILED IN RESPECT OF FEW CREDITORS BUT NONE WERE PRODUCE D FOR EXAMINATION NEITHER WAS THE AO REQUESTED TO ISSUE NOTICE U/S. 131. ACCORDING TO AO NO EVIDENCE WAS PLACED ON RECORD TO SHOW THAT ANY EFFORT WAS MADE BY THESE PARTIES ( SUNDRY CREDITORS) FOR RECOVERY OF THEIR DUES FROM THE ASSESSEE . AND NEITHER W AS ANY EVIDENCE FURNISHED BY THE ASSESSEE OF ANY BUSINESS TRANSACTION WITH ANY OF THE PARTIES DURING THE YEAR UNDER CONSIDERATION. AND O NLY A FEW SELF DRAWN VOUCHERS WERE PRODUCED WHICH APPEARED TO HAVE BEEN MADE IN A SINGLE SITTING. AND I N THE PREVIOUS ASSESSMENT YEAR I.E. AY 2008 - 09, THE ASSESSEE HAD ITSELF SURRENDERED A SUM OF RS. 45.76 LACS IN VIEW OF THE NON - FILING OF CONFIRMATION FROM SOME CREDITORS. SO THE AO WAS OF THE OPINION THAT S INCE IN THE PRESENT YEAR TOO, THE ASSESSEE HAS NOT BEEN ABLE TO PROVE THE GENUINENESS OF THE TRANSACTION AS ALSO THE IDENTITY AND CREDITWORTHINESS OF THE PERSONS COUPLED WITH THE FACT THAT NO EVIDENCE OF TRADE / BUSINESS TRANSACTION WITH THE SAME CREDITORS HAVING BEEN BROUGHT ON RECORD, IT WAS HELD THAT THE CREDITO RS AND BALANCES THERE OF ARE NOT OPEN TO VERIFICATION AND A CCORDINGLY, THE AO MADE THE DISALLOWANCE OF RS. 37,02,418/ - ON ACCOUNT OF SUNDRY CREDITORS. 3.1 WITH REGARD TO DISALLOWANCE OUT OF HOUSE TAX OF RS. 35,680/ - . THE ASSESSEE HAS PAID HOUSE TAX ON RENT AL PROPERTIES AMOUNTING TO RS. 1,68,138/ - . OUT OF RS. 1,66,138/ - THE ASSESSEE HAS DISALLOWED A SUM OF RS. 1,18,686/ - IN THE COMPUTATION OF INCOME TOWARDS HOUSE TAX FOR SELF OWNED PROPERTIES. AS REGARDS TO BALANCE RS. ITA NO. 5404/ DEL/ 2012 5 47,452/ - (RS. 1,66,138 RS. 1,18,6 86/) THE ASSESSEE HAS SUBMITTED THAT SOME PORTION OF THE HOUSE TAX PERTAINS TO PROPERTIES OWNED AND USED BY THE ASSESSEE AND THE BALANCE HOUSE TAX PAID PERTAINS TO PROPERTIES TAKEN ON RENT FROM DIRECTOR OF THE COMPANY. THE ASSESSEE WAS SHOW CAUSED AS TO W HY THE HOUSE TAX PAID ON RENTAL PROPERTIES SHOULD NOT BE DISALLOWED. IT HAS BEEN SUBMITTED BY THE ASSESSEE THAT THE HOUSE TAX PAYMENT PROVISIONS IS AS PER RENTAL AGREEMENT. THE REPLY OF THE ASSESSEE WAS NOT ACCEPTABLE TO THE AO AS THE HOUSE TAX PAID PE RTAINS TO RENTAL PROPERTIES WHICH ARE OWNED BY T HE DIRECTORS OF THE ASSESSEE. ACCORDING TO THE AO IT IS ON INDIRECT BENEFIT DERIVED BY THE DIRECTOR FROM THE ASSESSEE COMPANY WHICH IS EXCESSIVE AND UNREASONABLE. THEREFORE, THE HOUSE TAX PAID, NOT OWNED BY T HE ASSESSEE WAS DISALLOWED AMOUNTING TO RS. 35,680/ - . 4. AGAINST THE AFORESAID ORDER OF THE ASSESSING OFFICER, ASSESSEE APPEALED BEFORE THE LD. CIT(A), WHO VIDE HIS ORDER DATED 08 . 6 .201 2 HAS ALLOWED THE APPEAL OF THE ASSESSEE BY DELETING THE ADDITIONS. 5. NOW THE REVENUE IS IN APPEAL BEFORE US. 6. LD. DR RELIED UPON THE ORDER OF THE ASSESSING OFFICER. LD. DR FURTHER SUBMITTED THAT THE ITAT, E BENCH, IN ASSESSEES OWN CASE FOR THE ASSTT. YEAR 2008 - 09 VIDE ORDER DATED 12.10.2012 PASSED IN ITA NO. 3886/DEL/2012 HAS DEALT SIMILAR AND IDENTICAL ISSUE S AND REMANDED BACK THE ISSUE TO THE FILE OF TH E LD. CIT(A) TO FOLLOW RULE 46A OF THE INCOME TAX RULE (HEREIN AFTER THE RULE) IN ACCORDANCE WITH DELHI HIGH COURT DECISION IN THE CA SE OF CIT VS. MANISH BUILDWELL 16 TAXMANN.COM 27(DEL) BECAUSE IN THIS CASE ALSO THE LD CIT (A) DID NOT FOLLOW THE PROCEDURE PRESCRIBED U/RULE 46 (A) BEFORE ADMITTING ADDITION AL EVIDENCE BEFORE PASSING THE APPELLATE ORDER . HENCE, HE REQUESTED THAT THE ISSU E IN DISPUTE MAY ALSO BE SENT ITA NO. 5404/ DEL/ 2012 6 BACK TO THE FILE OF THE CIT(A) WITH THE SAME DIRECTIONS AS GIVEN IN THE ASS ESSMENT YEAR 2008 - 09 BY THE CO - ORDINATE BENCH IN ASSESSEES OWN CASE, AS AFORESAID . 7. ON THE CONTRARY, LD. COUNSEL OF THE ASSESSEE OPPOSED THE REQUE ST OF THE LD. DR AND RELIED UPON THE ORDER OF THE LD. CIT(A). 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORDS. WE FIND THAT ACCORDING TO AO NO EVIDENCE WAS PLACED BEFORE HIM TO SHOW THAT ANY EFFORT WAS MADE BY THE SUNDRY CREDITORS FOR RECOVER Y OF THEIR DUES FROM THE ASSESSEE . AND N EITHER WAS ANY EVIDENCE FURNISHED BY THE ASSESSEE OF ANY BUSINESS TRANSACTION WITH ANY OF THE SE PARTIES DURING THE YEAR UNDER CONSIDERATION. ONLY A FEW SELF VOUCHERS WERE PRODUCED BEFORE HIM , THAT TOO APPEARED TO HAVE BEEN MADE IN A SINGLE SITTING. AND I N THE PREVIOUS ASSESSMENT YEAR I.E. AY 2008 - 09, THE ASSESSEE HAD ITSELF SURRENDERED A SUM OF RS. 45.76 LACS IN VIEW OF NON FILING OF CONFIRMATION FROM SOME OF THESE CREDITORS ONLY . SO ACCORDING TO THE AO , THE ASSESSEE HAS NOT BEEN ABLE TO PROVE THE GENUINENESS OF THE TRANSACTION AS ALSO THE IDENTITY AND CREDITWORTHINESS OF THE PERSONS COUPLED WITH THE FACT THAT NO EVIDENCE OF TRADE / BUSINESS TRANSACTION WITH THE SAME HAVING BEEN BROUGHT ON R ECORD, IT WAS HELD BY THE AO THAT THE SUNDRY CREDITORS AND BALANCES THEREOF COULD NOT BE VERIFIED . THEREFORE, THE AO MADE THE ADDITION OF RS. 37, 02,418/ - . WE ALSO FIND T HAT LD. CIT(A) HAS ADMITTED ADDITIONAL EVIDENCES AND DELETED THE ADDITION. WE FIND THAT A C O - ORDINATE BENCH, IN ASSESSEES OWN CASE FOR THE ASSTT. YEAR 2008 - 09 PASSED AN ORDER DATED 12.10.2012 PASSED IN ITA NO. 3886/DEL/2012 HAS DEALT A SIMILAR AND IDENTICAL ISSUE AND REMANDED BACK THE ISSUE TO THE FILE OF THE LD. CIT(A) TO FOLLOW RULE 46A, IN ACCORDANCE WITH DELHI HIGH COURT DECISION IN THE CASE OF CIT VS. MANISH BUILDWELL (SUPRA) . T HE TRIBUNAL IN THE ASSESSMENT EAR 2008 - 09 HAS ADJUDICATED THE ISSUE AS UNDER: - ITA NO. 5404/ DEL/ 2012 7 6. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. INDISPUT ABLY, THE ASSESSEE SURRENDERED AN AMOUNT OF `. 45,76,244/ - IN RELATION TO 23 CREDITORS ,WHEN THE AO ASKED THE ASSESSEE TO FURNISH THE CONFIRMATIONS OF ALL THE CREDITORS EXCEEDING `.80,000/ - EACH. THERE IS NOTHING IN THE LETTER DATED 24.12.2010 OF THE ASSES SEE, AS EXTRACTED IN THE ASSESSMENT ORDER ,THAT IT DESIRED FURTHER TIME TO SUBMIT THE CONFIRMATIONS OF REMAINING 23 CREDITORS AND INSTEAD, THE ASSESSEE SUO MOTU OFFERED THE AMOUNT TO TAX. THOUGH THE LD. AR RELIED UPON A DECISION DATED 22.9.1971 OF THE HON BLE APEX COURT IN PULLANGODE RUBBER PRODUCE CO. LTD. VS. STATE OF KERALA IN CIVIL APPEAL NO.10 OF 1969,WHERE IT WAS OBSERVED THAT AN ADMISSION IS AN EXTREMELY IMPORTANT PIECE OF EVIDENCE BUT IT CANNOT BE SAID THAT IT IS CONCLUSIVE AND THAT IT IS OPEN TO TH E PERSON WHO MADE THE ADMISSION TO SHOW THAT IT IS INCORRECT, THERE IS NO SUCH DISPUTE WITH THIS PROPOSITION OF LAW. IN THE INSTANT CASE, NEITHER BEFORE THE LD. CIT(A) NOR EVEN BEFORE US, THE LD. AR ATTEMPTED TO SHOW AS TO HOW THE SURRENDER WAS INCORRECT A ND WHAT PROMPTED THE ASSESSEE TO FILE APPEAL WITHOUT EVEN RETRACTING THE SURRENDER. EVEN AFTER SURRENDER OF THE AMOUNT, THE ASSESSEE APPROACHED THE LD. CIT(A) AND FURNISHED ADDITIONAL EVIDENCE IN TERMS OF RULE 46A OF THE IT RULES,1962. THERE IS NOTHING IN THE IMPUGNED ORDER AS TO WHY THE ASSESSEE OFFERED THE AMOUNT TO TAX SUO MOTU AND THEN PREFERRED THE APPEAL. THE LD. CIT(A) DID NOT CARE TO ASCERTAIN AS TO HOW THE ASSESSEE IS AGGRIEVED WITH ITA NO. 5404/ DEL/ 2012 8 THE FINDINGS OF THE AO WHEN IT ITSELF OFFERED THE AMOUNT TO TAX. T HE AO IN HIS REMAND REPORT DATED 14.07.2011 SUCCINCTLY POINTED OUT THAT SINCE THE ASSESSEE ITSELF EXPRESSED ITS INABILITY TO FURNISH FURTHER CONFIRMATIONS AND PRODUCE THE PERSONS FOR CROSS - EXAMINATION AND OFFERED THE AMOUNT OF RS. 45,76,244/ - TO TAX. 9 I.T .A .NO. - 3886/DEL./2012 THERE IS NOTHING ON RECORD TO SUGGEST THAT THE AO DID NOT ALLOW SUFFICIENT OPPORTUNITY TO THE ASSESSEE TO SUBMIT CONFIRMATIONS. WHEN THE ASSESSEE EXPRESSED ITS INABILITY TO FURNISH FURTHER CONFIRMATIONS OR TO PRODUCE THE PERSONS, IT OFFERED THE AMOUNT TO TAX; AND THE AO ACCEPTED THE SAID OFFER AND COMPLETED THE ASSESSMENT. IN THESE CIRCUMSTANCES, HOW CONDITIONS STIPULATED IN CLAUSE (B) OF RULE 46A(1) OF THE IT RULES,1962 COULD BE SAID TO HAVE BEEN FULFILLED, IS NOT EVIDENT FROM THE IM PUGNED ORDER. EVEN OTHERWISE THERE IS NOTHING TO SUGGEST AS TO WHETHER OR NOT THE LD. CIT(A) EXAMINED THE GENUINENESS OF ADDITIONAL EVIDENCE SUBMITTED BY THE ASSESSEE NOR THE AO SEEMS TO HAVE BEEN ASKED TO VERIFY ITS GENUINENESS. IN THESE CIRCUMSTANCES, WE ARE OF THE OPINION THAT THE LD. CIT(A) ADMITTED ADDITIONAL EVIDENCE SUBMITTED BY THE ASSESSEE IN ITS APPLICATION UNDER RULE 46A OF THE IT RULES,1962,WITHOUT FOLLOWING THE PROCEDURE PRESCRIBED THEREIN. AS IS APPARENT FROM THE FINDINGS IN THE ASSESSMENT ORD ER, THE ASSESSEE WAS GIVEN SUFFICIENT OPPORTUNITY BY THE AO TO SUBMIT THE CONFIRMATIONS. THE LD. CIT(A) WITHOUT TAKING COGNIZANCE OF THE FACT THAT THE ASSESSEE ITSELF SURRENDERED THE AMOUNT TO TAX, ITA NO. 5404/ DEL/ 2012 9 PROCEEDED TO ADMIT ADDITIONAL EVIDENCE, WITHOUT ALLOWING A NY OPPORTUNITY TO THE AO.. IN THIS SITUATION, HOW THE ASSESSEE COULD BE SAID TO BE AGGRIEVED WITH THE FINDINGS OF THE AO, IS NOT EVIDENT FROM THE IMPUGNED ORDER. THE ASSESSEE IN ITS APPLICATION SUBMITTED THAT THE AO REFUSED TO GRANT TIME TO ENABLE IT TO SU BMIT THE BALANCE CONFIRMATIONS. THE LD. CIT(A) WITHOUT ASCERTAINING THE VERACITY OF THIS STATEMENT ADMITTED ADDITIONAL EVIDENCE. BEFORE ADMITTING THE ADDITIONAL EVIDENCE, THE LD. CIT(A) DID NOT ALLOW ANY OPPORTUNITY TO THE AO OR CONFRONTED HIM WITH THIS ST ATEMENT OF THE ASSESSEE. IN NUTSHELL, THE LD. CIT(A) DELETED THE ADDITION WITHOUT FOLLOWING THE PROCEDURE LAID DOWN UNDER RULE 46A OF THE IT RULES,1962 . THE LD. CIT(A) ARRIVED AT HIS CONCLUSIONS WITHOUT ASCERTAINING AS TO WHETHER OR NOT THE ASSESSEE WAS P REVENTED BY SUFFICIENT CAUSE FROM SUBMITTING THE AFORESAID ADDITIONAL DOCUMENTS/INFORMATION BEFORE THE AO AS PER PROVISIONS OF RULE 46A OF THE IT RULES, 1962 . HERE WE MAY HAVE A LOOK AT THE RELEVANT PROVISIONS OF RULE 46A OF THE IT RULES 1962, WHICH READ AS UNDER: (1) THE APPELLANT SHALL NOT BE ENTITLED TO PRODUCE BEFORE THE DEPUTY COMMISSIONER (APPEALS) OR, AS THE CASE MAY BE, THE COMMISSIONER (APPEALS), ANY EVIDENCE, WHETHER ORAL OR DOCUMENTARY, OTHER THAN THE EVIDENCE PRODUCED BY HIM DURING THE COURSE OF PROCEEDINGS BEFORE THE ASSESSING OFFICER, EXCEPT IN THE FOLLOWING CIRCUMSTANCES, NAMELY: -- ITA NO. 5404/ DEL/ 2012 10 (A) WHERE THE ASSESSING OFFICER HAS REFUSED TO ADMIT EVIDENCE WHICH OUGHT TO HAVE BEEN ADMITTED; OR (B) WHERE THE APPELLANT WAS PREVENTED BY SUFFICIENT CAUSE FROM PRODUCING THE EVIDENCE WHICH HE WAS CALLED UPON TO PRODUCE BY THE ASSESSING OFFICER; OR (C) WHERE THE APPELLANT WAS PREVENTED BY SUFFICIENT CAUSE FROM PRODUCING BEFORE THE ASSESSING OFFICER ANY EVIDENCE WHICH IS RELEVANT TO ANY GROUND OF APPEAL; OR ( D) WHERE THE ASSESSING OFFICER HAS MADE THE ORDER APPEALED AGAINST WITHOUT GIVING SUFFICIENT OPPORTUNITY TO THE APPELLANT TO ADDUCE EVIDENCE RELEVANT TO ANY GROUND OF APPEAL. (2) NO EVIDENCE SHALL BE ADMITTED UNDER SUB - RULE (1) UNLESS THE DEPUTY COMMISSIO NER (APPEALS) OR AS THE CASE MAY BE, THE COMMISSIONER (APPEALS) RECORDS IN WRITING THE REASONS FOR ITS ADMISSION. (3)THE DEPUTY COMMISSIONER(APPEALS) OR, AS THE CASE MAY BE, THE COMMISSIONER (APPEALS) SHALL NOT TAKE INTO ACCOUNT ANY EVIDENCE PRODUCED UNDE R SUB - RULE (1) UNLESS THE INCOME - TAX OFFICER HAS BEEN ALLOWED A REASONABLE OPPORTUNITY (A) TO EXAMINE THE EVIDENCE OR DOCUMENT OR TO CROSS - EXAMINE THE WITNESS PRODUCED BY THE APPELLANT, OR (B) TO PRODUCE ANY EVIDENCE OR DOCUMENT OR ANY WITNESS IN REBUTTAL OF THE ADDITIONAL EVIDENCE PRODUCED BY THE APPELLANT ITA NO. 5404/ DEL/ 2012 11 (4) NOTHING CONTAINED IN THIS RULE SHALL AFFECT THE POWER OF THE DEPUTY COMMISSIONER (APPEALS) OR, AS THE CASE MAY BE, THE COMMISSIONER (APPE ALS) TO DIRECT THE PRODUCTION OF ANY DOCUMENT, OR THE EXAMINATION OF ANY WITNESS, TO ENABLE HIM TO DISPOSE OF THE APPEAL, OR FOR ANY OTHER SUBSTANTIAL CAUSE INCLUDING THE ENHANCEMENT OF THE ASSESSMENT OR PENALTY (WHETHER ON HIS OWN MOTION OR ON THE REQUEST OF THE ASSESSING OFFICER) UNDER CLAUSE (A) OF SUB SECTION (1) OF SECTION 251 OR THE IMPOSITION OF PENALTY UNDER SECTION 271..' 6.1 IT IS EVIDENT FROM THE AFORESAID PROVISIONS THAT THE LD. CIT( A) CAN TAKE INTO ACCOUNT ANY EVIDENCE PRODUCED UNDER SUB - R. (1)(B) & (C) OF RULE 46A OF THE IT RULES, 1962 IF THE ASSESSEE WAS PREVENTED BY SUFFICIENT CAUSE . IN HAJI LAL MOHD. BIRI WORKS' CASE [2005] 275 ITR 496 (ALL), BY MAKING AN ELABORATE DISCUSSION ON RULE 46A OF THE RULES IN PARAGRAPH 10 AT PAGE 500 AND 501, IT WAS HELD THAT UNDER RULE 46A THE AUTHORITY IS NOT PERMITTED TO ACT WHIMSICALLY WHILE EXERCISING THE JURISDICTION UNDER IT .IN THE CASE UNDER CONSIDERATION, THE ASSESSEE PLACED BEFORE THE LD. CI T(A),CERTAIN ADDITIONAL EVIDENCE AND ADMITTEDLY, THE SAID DOCUMENTS WERE NOT SUBMITTED BEFORE THE AO. THE POWERS OF THE CIT(A) IN TERMS OF RULE 46A TO ADMIT FRESH EVIDENCE, ENTAIL AN ELEMENT OF DISCRETION WHICH IS REQUIRED TO BE EXERCISED IN A JUDICIOUS MA NNER. THE POWERS OF THE CIT(A) TO ADMIT ADDITIONAL EVIDENCE ARE NOT ONLY IN SITUATIONS WHERE THE EVIDENCE COULD NOT BE PRODUCED BEFORE LOWER AUTHORITIES OWING ITA NO. 5404/ DEL/ 2012 12 TO LACK OF ADEQUATE OPPORTUNITY BUT ALSO IN SITUATIONS WHERE THE FRESH EVIDENCE WOULD ENABLE THE CIT(A) TO DISPOSE OF THE APPEAL OR FOR ANY OTHER SUBSTANTIAL CAUSE. OF COURSE, THE POWER IS TO BE EXERCISED JUDICIOUSLY AND FOR REASONS TO BE RECORDED. HERE WE MAY POINT OUT THAT THE HONBLE JURISDICTIONAL HIGH COURT IN CIT VS. MANISH BUILD WELL (P.) LTD., 16 TAXMANN.COM27(DELHI) HELD THAT THAT THE CONDITIONS PRESCRIBED IN RULE 46A MUST BE SHOWN TO EXIST BEFORE ADDITIONAL EVIDENCE IS ADMITTED AND EVERY PROCEDURAL REQUIREMENT MENTIONED IN THE RULE HAS TO BE STRICTLY COMPLIED WITH SO THAT THE RULE IS MEANINGFU LLY EXERCISED. ONCE THE ASSESSEE INVOKES RULE 46A AND PRAYS FOR ADMISSION OF ADDITIONAL EVIDENCE BEFORE THE CIT (A), THEN THE PROCEDURE PRESCRIBED IN THE SAID RULE HAS TO BE SCRUPULOUSLY FOLLOWED. A DISTINCTION SHOULD BE RECOGNIZED AND MAINTAINED BETWEEN A CASE WHERE THE ASSESSEE INVOKES RULE 46A TO ADDUCE ADDITIONAL EVIDENCE BEFORE THE CIT (A) AND A CASE WHERE THE CIT (A), WITHOUT BEING PROMPTED BY THE ASSESSEE, WHILE DEALING WITH THE APPEAL, CONSIDERS IT FIT TO CAUSE OR MAKE A FURTHER ENQUIRY BY VIRTUE OF THE POWERS VESTED IN HIM UNDER SUB - SECTION (4) OF SECTION 250. IT IS ONLY WHEN HE EXERCISES HIS STATUTORY POWER SUO MOTU UNDER THE ABOVE SUB - SECTION THAT THE REQUIREMENTS OF RULE 46A NEED NOT BE FOLLOWED. ON THE OTHER HAND, WHENEVER THE ASSESSEE WHO IS IN APPEAL BEFORE HIM INVOKES RULE 46A, IT IS INCUMBENT UPON THE CIT (A) TO COMPLY WITH THE REQUIREMENTS OF THE RULE STRICTLY SO THAT THE RULE IS MEANINGFULLY EXERCISED AND ITA NO. 5404/ DEL/ 2012 13 NOT EXERCISED IN A ROUTINE OR CURSORY MANNER. THE HONBLE HIGH COURT HELD THAT SUB - RUL E (3) OF RULE 46A INTERDICTS THE CIT (A) FROM TAKING INTO ACCOUNT ANY EVIDENCE PRODUCED FOR THE FIRST TIME BEFORE HIM UNLESS THE AO HAS HAD A REASONABLE OPPORTUNITY OF EXAMINING THE EVIDENCE AND REBUT THE SAME. IN THE INSTANT CASE, THERE IS NOTHING IN THE IMPUGNED ORDER OF THE LD. CIT (A) TO SHOW THAT AFTER THE OBJECTIONS WERE RAISED BY THE AO IN HIS REMAND REPORT DATED 14.7.2011 AGAINST ADMISSION OF ADDITIONAL EVIDENCE, THE LD. CIT(A) ASKED THE AO TO EXAMINE THE GENUINENESS OF THE ADDITIONAL EVIDENCE. THUS , THE END RESULT HAS BEEN THAT ADDITIONAL EVIDENCE WAS ADMITTED AND ACCEPTED AS GENUINE WITHOUT THE AO FURNISHING HIS COMMENTS AND WITHOUT VERIFICATION. SINCE IN THE CASE UNDER CONSIDERATION, THE LD. CIT(A) DID NOT FOLLOW THE PROCEDURE LAID DOWN IN RULE 46 A OF THE IT RULES,1962 , WE FIND MERIT IN THE CONTENTIONS OF THE LD. DR AND THEREFORE, IN THE INTEREST OF JUSTICE AND FAIR PLAY, VACATE THE FINDINGS OF THE L D. CIT(A) AND RESTORE THE ISSUES RAISED IN VARIOUS GROUNDS OF APPEAL BEFORE US TO HIS FILE, WITH TH E DIRECTIONS TO FOLLOW THE MANDATE IN TERMS OF RULE 46A OF THE IT RULES, 1962 AS ALSO PRINCIPLES OF NATURAL JUSTICE AND THEREAFTER, DISPOSE OF THE MATTER IN ACCORDANCE WITH LAW AFTER ALLOWING SUFFICIENT OPPORTUNITY TO BOTH THE PARTIES, BRINGING OUT CLEARLY AS TO HOW THE ASSESSEE IS AGGRIEVED WITH THE FINDINGS OF THE AO AFTER SUOMOTU SURRENDER OF THE AMOUNT AND HOW THE CONDITIONS STIPULATED IN RULE 46A OF THE I . T . RULES, 1962 ARE FULFILLED. WITH ITA NO. 5404/ DEL/ 2012 14 THESE DIRECTIONS, GROUND NO. 2 IN THE APPEAL IS DISPOSED OF, AS INDICATED HEREINBEFORE. AS A COROLLARY, GROUND NO.1 RAISED IN THE APPEAL DOES NOT SURVIVE FOR OUR ADJUDICATION AT THIS STAGE. 9. WE CONCUR WITH THE AFORESAID ORDER OF THE CO - ORDINATE BENCH AND RESPECTFULLY , FOLLOWING THE SAME AS AFORESTATED , WE SET ASI DE THE FINDINGS OF THE LD. CIT(A) AND RESTORE THE ISSUES RAISED IN GROUND NO 1 BEFORE US TO THE FILE OF THE LD. CIT(A) , WITH THE DIRECTION TO FOLLOW THE MANDATE IN TERMS OF RULE 46A OF THE I.T. RULES, 1962 AS ALSO KEEP IN MIND THE PRINCIPLES OF NATURAL JUSTICE AND THEREAFTER, DISPOSE OF THE MATTER AFRESH IN ACCORDANCE WITH LAW AFTER ALLOWING SUFFICIENT OPPORTUNITY TO BOTH THE PARTI ES, AND HOW THE C ONDITIONS STIPULATED IN RULE 46 A OF THE I.T. RULES, 1962 ARE FULFILLED. WITH THESE DIRECTIONS, GROUND NO . 2 AND 3 IN THE APPEAL ARE DISPOSED OF. A S A COROLLARY, GROUND NO. 1 RAISED IN THE APPEAL DOES NOT SURVIVE FOR OUR ADJUDICATION AT THIS STAGE. 10. WITH REGARD TO GROUND NO. 4 IS CONCERNED , I.E. REGARDING DELETION OF ADDITION OF RS. 35,680/ - MADE ON H O USE TAX PAID FOR THE DIRECTORS PREMISES . IN THIS REGARD, IT IS SEEN FROM THE RECORDS THAT THE ASSESSEE HAS PAID HOUSE TAX ON RENTAL PROPERTIES AMOUNTING TO RS. 1,68,138/ - . OUT OF RS. 1,66,138/ - THE ASSESSEE HAS ITSELF DISALLOWED A SUM OF RS. 1,18,686/ - I N THE COMPUTATION OF INCOME TOWARDS HOUSE TAX FOR SELF OWNED PROPERTIES. AS REGARDS TO BALANCE RS. 47,452/ - (RS. 1,66,138 RS. 1,18,686/) THE ASSESSEE HAS SUBMITTED THAT SOME PORTION OF THE HOUSE TAX PERTAINS TO PROPERTIES OWNED AND USED BY THE ASSESSE E AND THE BALANCE HOUSE TAX PAID PERTAINS TO PROPERTIES TAKEN ON RENT FROM DIRECTOR OF THE COMPANY. ON A SHOW CAUSE AS TO WHY THE HOUSE TAX PAID ON RENTAL PROP ERTIES SHOULD NOT BE DISALLOWED, I T HAS BEEN SUBMITTED BY THE ASSESSEE THAT THE HOUSE TAX PAYMEN T PROVISIONS IS AS PER RENTAL AGREEMENT. THE REPLY OF THE ASSESSEE WAS NOT ACCEPTABLE TO THE AO AS THE HOUSE ITA NO. 5404/ DEL/ 2012 15 TAX PAID PERTAINS TO RENTAL PROPERTIES WHICH ARE OWNED BY THE DIRECTORS OF THE ASSESSEE. ACCORDING TO AO IT IS AN INDIRECT BENEFIT DERIVED BY THE DIRECTOR FROM THE ASSESSEE COMPANY WHICH IS EXCESSIVE AND UNREASONABLE. THEREFORE, THE HOUSE TAX PAID, NOT OWNED BY THE ASSESSEE WAS DISALLOWED BY THE AO WHICH AMOUNT TO RS. 35,680/ - . WE FIND THAT ON APPEAL BY THE ASSESSEE THE LD. CIT(A) HAS OBSERVE D THAT SIMILAR ISSUE AROSE FOR ADJUDICATION IN THE IMMEDIATELY PRECEDING YEAR IN THE CASE OF THE ASSESSEE. THERE IS NO CHANGE IN THE FACTS OF THE CASE THIS YEAR. NOT ONLY THAT, THE ASSESSMENTS OF THE ASSESSEE COMPANY FOR THE ASSESSMENT YEARS 2005 - 06 AND 2007 - 08 WERE COMPLETED U/S. 143(3) AND NO SUCH DISALLOWANCE WAS MADE BY THE ASSESSING OFFICER. SINCE THE PROPERTIES HAVE BEEN TAKEN ON RENT BY THE COMPANY FOR ITS BUSINESS PURPOSES AND THE RENT AGREEMENTS PROVIDE FOR PAYMENT OF THE HOUSE TAX BY THE ASSE SSEE COMPANY, IT WAS HELD THAT THIS PAYMENT WAS FOR BUSINESS CONSIDERATIONS AND WAS THEREFORE AN ALLOWABLE EXPENDITURE IN THE CASE OF THE ASSESSEE. IT HAS ALSO BEEN SUBMITTED THAT, THERE HAS BEEN NO REVISION OF THE RENT OF THE PREMISES FOR THE LAST SO MAN Y YEARS AND FOR THAT REASON TOO THE PAYMENT OF HOUSE TAX BY THE ASSESSEE WAS JUSTIFIED. IN THESE CIRCUMSTANCES, THE DISALLOWANCE MADE BY THE AO WAS DELETED WE FIND NO INFIRMITY IN THE IMPUGNED ORDER AND THE LD. CIT(A) HAS PASSED A REASONED, ORDER AND ON T HE PRINCIPLE OF CONSISTENCY TOO THE IMPUGNED ORDER D OES NOT NEED ANY INTERFERENCE FROM OUR PART, HENCE, WE UPHOLD THE SAME. THEREFORE, THE GROUND NO. 4 RAISED BY THE REVENUE IS REJECTED. 11. IN THE RESULT, THE APPEAL FILED BY THE REVENUE STANDS IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ITA NO. 5404/ DEL/ 2012 16 ORDER PRONOUNCED IN THE OPEN COURT ON 22 . 04 .2015. - SD/ - - SD/ - (N.K.SAINI ) (A. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 22 / 04 /2015 A K KEOT (DOC) COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI