High Court Of Gauhati
CIT vs. Ranjit Kumar Choudhury
Section 250(4), RULE 46A
Asst. Year 1998-99
A.H. Saikia & B.D. Agarwal, JJ.
IT Appeal No. 54 of 2004
9th November, 2006
Counsel appeared
U. Bhuyan, for the Appellant : G.K. Joshi, R.K. Joshi & Mrs. U. Chakravorty, for the Respondent
JUDGMENT
A.H. Saikia, J. :
Heard Mr. U. Bhuyan, learned counsel appearing for the Department/appellant as well as Mr. G.K. Joshi, learned senior counsel assisted by Mr. R.K. Joshi, and Mrs. U. Chakravorty, learned counsel appearing for the assessee/respondent.
2. At the time of admission of this appeal on 16th May, 2005, the following substantial question of law wasframed
: “Whether, on the facts and in the circumstances of the case, the order of the CIT(A) as upheld by the Tribunal is legally tenable, the same being in violation of r. 46A of the IT Rules, 1962 ?”
3. In the backdrop of the above formulated substantial question of law, Mr. Bhuyan, learned counsel for the appellant has submitted that the impugned order dt. 8th March, 2004, passed by the Income-tax Appellate Tribunal, Gauhati Bench (for short, “the Tribunal”), in ITA No. 4/Gau/2004, for the asst. yr. 1998-99 is hit by the provision of law laid down under r. 46A of the IT Rules, 1962 (for short, “the Rules”). It is submitted on behalf of the Revenue that the Tribunal while dismissing the appeal preferred by the Revenue and thereby confirming the order dt. 12th Nov., 2003, passed by the CIT(A) (for short, “the CIT”), failed to construe and interpret the provisions of r. 46A in its true perspective and resultantly arrived at an erroneous decision and that too on the basis of irrelevant considerations. According to him, the xerox copies of the sale bills and the receipts of an amount of Rs. 6,38,000, which was initially added by the assessing authority to the capital account under the cover of sale proceeds of utensils, being remained unexplained, was allowed to be adduced as an additional evidence by the appellate authority, i.e., CIT without following the procedural law prescribed under sub-rr. (1), (2) and (3) of r. 46A.
4. For ready reference and also for the sake of convenience, it would be proper and relevant to refer to those provisions of law under the IT Act, 1961 (for short, “the Act”), and the rules that would be necessary for proper adjudication of the appeal at hand. Sec. 250 of the Act reads as under : “250. (1) The CIT(A) shall fix a day and place for the hearing of the appeal, and shall give notice of the same to the appellant and to the AO against whose order the appeal is preferred. (2) The following shall have the right to be heard at the hearing of the appeal— (a) the appellant either in person or by an Authorised Representative; (b) the AO, either in person or by a representative. (3) The CIT(A) shall have the power to adjourn the hearing of the appeal from time to time. (4)
The CIT(A) may, before disposing of any appeal, make such further enquiry as he thinks fit, or may direct the AO to make further inquiry and report the result of the same to the CIT(A).” Rule 46A of the Rules is quoted as under
:”46A. (1) The appellant shall not be entitled to produce before the Dy. CIT(A) or, as the case may be, the CIT(A) any evidence, whether oral or documentary, other than the evidence produced by him during the course of proceedings before the AO, except in the following circumstances, namely : (a) where the AO 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 AO; or (c) where the appellant was prevented by sufficient cause from producing before the AO any evidence which is relevant to any ground of appeal; or (d) where the AO 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-r. (1) unless the Dy. CIT(A) or, as the case may be, the CIT(A) records in writing the reasons for its admission. (3) The Dy. CIT(A) or, as the case may be, the CIT(A) shall not take into account any evidence produced under sub-r. (1) unless the AO 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. (4) Nothing contained in this rule shall affect the power of the Dy. CIT(A) or, as the case may be, the CIT(A) 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 AO) under cl. (a) of sub-s. (1) of s. 251 or the imposition of penalty under s. 271.” A common reading of the provisions of law aforesaid would go to show that the CIT(A) may exercise two options in disposing of the appeal under s. 250 of the Act; firstly, he may himself dispose of the appeal so preferred before him under the aforesaid provisions by making such inquiry as he thinks fit, when by the second option he may direct the AO to make further inquiry and report the result of such inquiry to him.
On the other hand, the provision of r. 46A(1) abovenoted clearly bars the production of any additional evidence. It would go to show that the production of additional evidence is not a matter of right. However, in exceptional cases, on the basis of any one of the grounds which have been manifestly and apparently set out in r. 46A(1) itself, the appellant is permitted to produce additional evidence subject to approval/admission of the same by the appellate authority. This provision enumerates four circumstances allowing the appellant/ assessee to produce additional evidence, namely, (i) if the AO refuses to admit the evidence which ought to have been admitted; (ii) when the appellant was prevented by sufficient cause from producing such evidence which he was called upon to produce by the AO; (iii) in case where the appellant was prevented by sufficient cause from producing before the AO any evidence which is relevant to any ground of appeal; and lastly (iv) when no sufficient/ reasonable opportunity of hearing to the appellant was given to adduce any relevant evidence by the AO at the time of passing the order impugned. Therefore, it is clear and unambiguous that only in case of availability of any one of those four grounds mentioned in sub-r. (1) of r. 46A, the production of additional evidence is permitted. Accordingly, if the production of additional evidence is permitted under sub-r. (1) of r. 46A, it is obligatory on the part of the appellate authority to record the reasons in writing for allowing/admitting the production of such additional evidence and that has been clearly provided under sub-r. (2) of r. 46A when r. 46A(3) provides, as already noted above, for affording the reasonable opportunity to the Revenue to examine the evidence or document and/or to cross-examine the witness so produced by the appellant and also to allow the Revenue to produce any other such evidence or document or witness in rebuttal of such additional evidence so permitted by the authority in terms of r. 46A(1).
In view of the above legal position, there is no doubt that the procedure of r. 46A(1) as regards the production of additional evidence needs to be guided and controlled by sub-rr. (2) and (3) of r. 46A. In other words, if additional evidence is permitted to be produced, then firstly there must be reasons to be recorded in writing and secondly reasonable opportunity has to be given to the assessing authority to refute and reject such production. Now coming to sub-r. (4) of r. 46A, it would go to show that this power can be exercised by the CIT(A) suo motu when there is no such available documents placed before the appellate authority for purposeful and effective adjudication of the appeal. On that occasion only by exercising the power bestowed upon him by sub-r. (4) of r. 46A of the Rules r/w s. 250(4) of the Act which empowers him to make further inquiry as he thinks fit, the CIT(A) shall direct for production of any document or 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.
Nonetheless, relying heavily upon the provision so laid down under sub-r. (4) of r. 46A, Mr. Joshi, learned senior counsel has tried to impress upon this Court that the provision so laid down in r. 46A(4) is to be read harmoniously with sub-rr. (1), (2) and (3) of r. 46A and such reading would clearly reveal that the provision of r. 46A(4) can be exercised by the CIT(A) independently without going through sub-rr. (1), (2) and (3) of r. 46A, if he is satisfied that such provision of additional evidence is necessary. It is contended that those provisions of r. 46A(1), (2) and (3) are coterminous with the provision laid down under sub-r. (4) of r. 46A. According to him, nothing has been laid down in sub-rr. (1), (2) and (3) to preclude the CIT(A) from exercising his power under sub- r. (4) to allow the assessee for production of additional evidence for the purpose of proper adjudication and disposal of the appeal and that is exactly what happened in the instant case.
10. At this stage a brief narration of the factual matrix projected herein may be necessary to be reflected.
Initially by order dt. 30th March, 2001, the assessing authority for the asst. yr. 1998-99 found as follows : “(F) Cash amounting to Rs. 6,38,000 added to the capital account from alleged sales of utensils : In the statement of accounts filed along with the return, the assessee has shown receipts of Rs. 6,38,388 from sales of utensils upto 31st March, 1998. The assessee has not however, furnished any details of the utensils so sold. No sale of receipt memos were produced. The name and address of the persons to whom the utensils were sold, places where sold, what amount was received against which particular utensils nothing was furnished. In the statement filed it is only mentioned that the sale proceeds were received by bank drafts and deposited to UBI savings bank account.
Rs. He has not disclosed the name and full address of the persons from whom the drafts were received nor the name and branch of the bank from which these were purchased. It is seen that the assessee declared, among others, the following utensils under the VDIS vide certificate dt. 22nd Nov., 1997, issued by the CIT, Shillong, under s. 68(2) of the VDIS 1997. Rs.
It needs to be made clear that the genuineness of the declaration is neither questioned nor doubted. The genuineness of the declaration has already been accepted. There is no doubt that the assessee is having the gold and silver utensils as declared under the VDIS. The question is whether the assessee has sold the above utensils and received the sale proceeds in the extent of Rs. 6,38,000. The sale transaction of the utensils are not proved. No evidence or proof of the sale transactions could be furnished by the assessee in spite of opportunities offered. The amount claimed as sale proceeds of the utensils is a big sum of money and the assessee should have proved the genuineness of sale receipts with material evidence. But he failed to do so. In the circumstances, I could not accept the alleged sale transactions of the utensils as genuine. The cash brought in and added to the capital account under the cover of sale proceeds of the utensils therefore, remains unexplained and as such, treated as that assessee’s income from other source.”
From the perusal of the above findings, it transpires that the amount mentioned in the order itself according to the AO, was found to be unacceptable and accordingly, the same was added to the capital account for alleged sale of utensils. The assessee/respondent failed to prove such sale transaction by adducing any evidence. Even the sale transactions to the extent of Rs. 6,38,000 remained unproved. It is seen that before the assessing authority, no evidence oral or documentary whatsoever was ever placed explaining the receipt of the sale proceeds of the disputed amount.
11. Being aggrieved, the assessee/respondent moved the appellate authority, i.e., before the CIT (A) through Appeal No. Sil-6/01-02 who by his order dt. 12th Nov., 2003, in dealing with the question of addition of amount of Rs. 6,38,000 being the alleged non-disclosure income, directed for deletion of the said addition. In arriving at such a decision for deletion of addition of amount to the capital account in question, the CIT(A), wholly and solely based on xerox copies of the sale bills and receipts of disputed amount so produced by the assessee/ appellant/respondent though, he failed, as recorded in the initial order dt. 30th March, 2001, to produce those before the assessing authority. It would be necessary and relevant to quote the finding of the appellate authority which reads as under : “Ground No. 3 relates to addition of Rs. 6,38,000 as undisclosed income. In the return of income, the assessee showed receipt of Rs. 6,38,388 for sale of utensils disclosed under the VDIS. The AO stated that the genuineness of the disclosure was not doubted. He, however, held that the sale on transactions of the utensils were not proved and he, therefore, proceeded to treat the said amount as income from other source. It is submitted that all the particulars asked for by the AO were submitted. The utensils were sold to M/s Rara Brothers (P) Ltd., Guwahati, and all the transactions were done through bank accounts of both the parties and there is no justifiable reason from the AO to disbelieve the sale transaction and income arising out of the sale. Xerox copy of the sale bills and receipts of the amount by the party were filed. The fact that the assessee possessed those utensils was not disputed by the AO. The sale bills clearly stated sale of the utensils and the transaction was done through bank accounts of both the party. It is not the case of the AO that the utensils sold were not the ones disclosed under the VDIS by the assessee. In such circumstances, I agree with the learned Authorised Representative that there is no justifiable reason without any materials on the contrary, to disbelieve sale of the utensils. The addition is deleted.” This finding clearly goes to reveal that the said xerox copy of the sale proceeds and receipts was, at no point of time, ever called for by the appellate authority himself. In other words, it would go to show that the said document was produced by the assessee in order to prove the sale proceeds of the amount of Rs. 6,38,000 before the CIT(A). It also appears from the above finding that the assessee/respondent informed the appellate authority for the first time that those utensils were sold to one M/s Rara Brothers and that too all the transactions were done through bank accounts. In such circumstances, admittedly, the xerox copy was filed as additional evidence. Nonetheless, the CIT(A) did not record in writing any such reasons that prompted him to allow such additional evidence. It is manifest and apparent from the order of the assessing authority itself, as already noted above, that before the assessing authority, the assessee failed to adduce any sort of evidence to accept the sale proceeds. That being the position, at the appellate stage, the appellant was allowed to permit to produce the xerox copy of the sale proceeds. The record does not reveal that there was any such compliance with sub-rr. (1), (2) and (3) of r. 46A. It is not a case of the respondent that no additional evidence was produced. It also does not reflect that the principles of natural justice were ever afforded in terms of sub-r. (3) of r. 46A of the Rules mentioned above to the Department.
Mr. Joshi, learned senior counsel has once again made an attempt to highlight that the appellate authority exercised the power under sub-r. (4) of r. 46A and as such it would be optional to follow the procedure under sub- rr. (1), (2) and (3) of r. 46A of the Rules. Hammering the same point home, he has argued that the provision of r.46A(4) can be exercised by the CIT(A) without going through the sub-rr. (1), (2) and (3), if he is satisfied, of his own, that such production of additional evidence is necessary. The learned appellate authority is duty-bound to dispose of the appeal under s. 250 of the Act r/w r. 46A(4) of the Rules and for disposing of such appeal under those provisions of law, he is required to make an inquiry and the same was the situation in this case. In the process of inquiry so made under s. 250 of the Act, the mandate of sub-r. (4) of r. 46A was complied with herein by the CIT(A) and accordingly the appellate authority rightly allowed to examine those documents of sale proceeds. The impugned action is, therefore, not violative of r. 46A of the Rules and there is no scope of raising any substantial question of law so framed.
On pointed asking on the point of veracity of the xerox copy, the learned senior counsel has replied that since it is the admitted position that the entire transaction was effected through bank draft, the same being transparent and open, the transaction did not cast any doubt or suspicion and that being the position, xerox copies were validly accepted. However, this Court, after close reading and careful perusal of sub-r. (4) of r. 46A, is hesitant to be persuaded by the submission of Mr. Joshi. According to us, this sub-r. (4) would operate only when no such additional evidence has been adduced before the appellate authority and this power, given to the appellate authority under sub-r. (4) of r. 46A, can be exercised of his own, if he is of the opinion that it is necessary for disposal of the appeal to direct the production of any document or the examination of any witness. It is to be noted that r. 46A(4) does not permit to do away with the procedural law prescribed under sub-rr. (1), (2) and (3) of r. 46A, once additional evidence is produced. It is pertinent to refer herein to order 41, r. 27, CPC, which is almost in pari materia with r. 46A(1). It also does not allow the appellant to adduce any additional evidence until and unless such exceptional circumstances, as provided therein, are set out before the appellate authority. The language of r. 46A is clear and loud to the effect that no additional evidence is permitted save and except in exceptional cases in terms of r. 46A(1) and that too only after compliance of sub-rr. (2) and (3) thereto. Mr. Joshi has placed reliance upon a decision in a case of Smt. Prabhavati S. Shah vs. CIT (1998) 148 CTR (Bom) 192 : (1998) 231 ITR 1 (Bom), wherein the Bombay High Court, in dealing with sub-r. (4) of r. 46A, at p. 7, held that the restrictions placed on the production of additional evidence by the appellant under r. 46A shall not affect the powers of the appellate authority to call for the production of any document or the examination of any witness to enable him to dispose of the appeal. It was also categorically held that the powers conferred upon the appellate authority under sub-s. (4) of s. 250 of the Act, being a quasi-judicial power, it was incumbent upon him to exercise the same, if the facts and circumstances justify and the purpose of r. 46A of the Rules was to ensure that evidence was primarily led before the ITO.
Having gone through the abovecited case, we find no indication that the power under sub-s. (4) can be exercised by the appellate authority ignoring and bypassing the restrictions imposed under r. 46A(1) and procedure provided in sub-rr. (2) and (3).
18. On the other hand, Mr. Bhuyan, learned counsel for the Revenue, has also relied upon the same judicial pronouncement, i.e., Smt. Prabhavati’s case (supra) as well as another judicial authority reported in Haji Lal Mohd. Biri Works vs. CIT (2005) 199 CTR (All) 170 : (2005) 275 ITR 496 (All).
19. In Haji Lal Mohd. Biri Works’ case (supra), by making an elaborate discussion on r. 46A of the Rules in para 10 at pp. 500 and 501, it was held that under r. 46A the authority is not permitted to act whimsically while exercising the jurisdiction under it and the additional/fresh evidence taken by the CIT(A) de hors r. 46A should be needed to be quashed.
We fully agree with the view taken by Haji Lal Mohd. Biri Works’ case (supra) and on the other hand, in the backdrop of the facts and circumstances placed before us, the view expressed in Smt. Prabhavati’s case (supra), in our considered opinion, would not help the assessee/respondent herein rather it would support the plea of the Revenue/appellant.
20. Given the facts and circumstances of the case at hand and also having carefully considered the aforesaid submissions of learned counsel appearing for the rival parties as well as upon perusal of the impugned appellate judgments and orders, it is found that without recording any valid or plausible reason, the CIT allowed the assessee to produce the additional evidence. More so, no opportunity of hearing was ever given to the Revenue/appellant. It is admitted that the assessee produced the xerox copy of the sale bill and receipt only before the CIT(A) when no such document was placed before the assessing authority as reflected from the order dt. 31st March, 2001. It was categorically held by the assessing authority therein that the sale transactions of the utensils were not proved in spite of opportunities afforded.
21. That being the position, we are constrained to hold that the appellate authority acted in violation of r. 46A and the acceptance of the xerox copy of the sale proceeds as additional evidence de hors r. 46A of the Rules, because the appellant is not entitled to produce oral or documentary evidence afresh before the appellate authority, as a matter of right. Under special and/or certain circumstances only, as mentioned, in cls. (a), (b), (c) and (d) of r. 46A(1) additional evidence can be adduced. Rule 46A itself contains the principles of natural justice. That being so, sub-r. (4) of r. 46A does not permit to accept any additional evidence in contravention of the provisions of sub- rr. (2) and (3) of r. 46A. The appellate authority is not permitted to act whimsically while exercising the jurisdiction under r. 46A of the Rules. Accordingly, it is a fit case for remand for proper adjudication of the case by following the established procedure laid down under r. 46A(1), (2) and (3) of the Rules which we order accordingly.
The impugned judgment and order passed by the Tribunal is hereby quashed and set aside. The substantial question of law so formulated is answered accordingly.
The appeal is remanded to the CIT who shall make an endeavour to dispose of the entire appeal in accordance with law as indicated above as expeditiously as possible and in any case within a period of three months from the date of placement of this order before him. LCR be sent down forthwith.
In the result, the appeal succeeds and stands allowed to the extent indicated above.
[Citation : 288 ITR 179]
