High Court Of Madras
CIT vs. Subbu Shashank
Section 250, IT Rules 46A, Asst. Year 2004-05
F.M. Ibrahim Kalifulla & M.M. Sundresh, JJ.
Tax Case (Appeal) No. 762 of 2010
24th August, 2010
Counsel Appeared :
K. Subramaniam, for the Appellant : V.S. Jeyakumar, for the Respondent
JUDGMENT
M.M. Sundresh, J. :
The Revenue has come up on appeal challenging the order of the Tribunal whereby the order of the CIT(A) was set aside and the matter was remitted back to the assessing authority with a direction to the assessee to produce the details of the repayment of loan to substantiate his claim loan by raising the following substantial questions of law :
“(1) Whether on the facts and in the circumstances of the case, the Tribunal was right in not holding that the CIT(A) was not correct, in admitting the additional evidence without recording satisfaction to the effect that the assessee was prevented by sufficient cause from producing the evidence at the assessment stage ?
(2) Without prejudice to the preceding question, whether the Tribunal was right in not observing that the CIT(A) has acted upon the additional evidence without giving an opportunity to the AO to verify such evidence, as mandated by r. 46A of the IT Rules ?
(3) Whether on the facts and in the circumstances of the case, the Tribunal was right in not restoring the entire issue of the genuineness of the loans to the AO for fresh examination, rather than remitting the matter or verification of repayment of loans only ?
The facts in brief are as follows : The assessee is a renowned flute artiste. The assessee filed his return for the year 2004-05 claiming residential status as non-resident. The Dy. CIT noticed that the residential status as a “non- resident” claimed by the assessee was not correct and completed the assessment under s. 144 of the IT Act as best judgment assessment by treating the status of the assessee as resident. The AO also initiated proceedings under s. 147 of the IT Act by issuing notice under s. 148 of the IT Act for the asst. yr. 2004-05. The AO calculated the number of days of stay of the assessee for the asst. yr. 2004-05 as 192 days and held that the assessee is the resident of India as per the provisions of s. 6(1) of the IT Act. Aggrieved by the order of the AO, the assessee filed an appeal before the CIT(A). Before the CIT(A), the assessee filed documentary evidence and produced two witnesses. The assessee also produced the statement obtained from one another person by name M. J. Narasimha. The CIT(A) after considering the evidence of the witnesses by name Ram Sethuraman and Ram Ganesan, who have stated that they have given loan as well as the letter of confirmation given by Mr. M. J. Narasimha, has allowed the appeal.
The Revenue filed a further appeal to the Tribunal contending that the provisions contained in r. 46A of the IT Rules has teen violated inasmuch as the AO has not been given an opportunity to cross-examine the witnesses produced by the assessee. The Tribunal after accepting the contention of the assessee that the witnesses cannot be produced, has remanded the matter to the AO for fresh consideration to consider the materials produced on records to substantiate the case of the assessee for repayment of loan. Challenging the said findings of the Tribunal, which after holding that r. 46A of the IT Rules has been violated none the less, inasmuch as the assessee is not able to produce the witnesses, no cross-examination is necessary, directed the assessee to produce the details of repayment of loan to substantiate his claim of loan, by raising the abovementioned substantial questions of law.
We have heard Mr. K. Subramanian, learned senior standing counsel appearing for the Revenue and Mr. V.S. Jeyakumar appearing for the assessee.
We find substantial force in the arguments of the learned senior standing counsel appearing for the Revenue. r. 46A of the IT Rules clearly stipulates that the CIT(A) for the reasons to be recorded, can admit the evidence produced by the assessee in the appeal. However, a perusal of r. 46A(3) clearly shows that the CIT(A) cannot take into account any evidence produced under sub-r. (1), unless the AO has been allowed a reasonable opportunity to cross-examine the witnesses produced by the assessee. Therefore, the evidence produced by the assessee under r. 46A(1) cannot be considered on the merits unless the AO is given an opportunity to cross-examine the witnesses. Admittedly, in the present case on hand, the AO has not been given an opportunity to cross-examine the witnesses produced by the assessee. That is the reason why the Tribunal has observed that r. 46A of the IT Rules has been violated.
Once the Tribunal has come to the conclusion that r. 46A has been violated inasmuch as the CIT (A) has not given an opportunity to the AO to cross-examine the witnesses produced by the assessee then the directions issued thereafter stating that as the assessee is not in a position to produce the witnesses, the same cannot be insisted so as to enable the AO to cross-examine them cannot be sustained. As observed earlier, r. 46A merely provides an opportunity to the assessee to produce documentary evidence or the witnesses, as the case may be. In other words, a duty is cast upon the assessee to produce all evidence both oral and documentary before the AO. When the assessee was not able to produce the said evidence or the witnesses before the AO, the CIT(A) has to convince himself about the reasonable cause shown by the assessee for not producing them before the AO and for placing them before the appellate authority for the first time.
In a case where the CIT(A) is convinced about the reasonable cause, then he has to follow the procedure contemplated under s. 46A(3) by providing sufficient opportunity to the AO to examine the evidence or document or to cross-examine the witnesses, as the case may be. It is a well settled principle of law that an evidence of a party cannot be relied upon unless an opportunity is given to cross-examine him. Therefore, we are of the opinion that inasmuch as r. 46A(3) of the IT Rules, has not been complied with by the assessee, the order of the Tribunal by dispensing with the cross examination of the witnesses produced by the assessee cannot be sustained and therefore, the same is set aside
The assessee is directed to produce the witnesses before the AO and the AO is permitted to cross-examine the witnesses, who can depose in favour of the assessee. Mr. V. S. Jeyakumar, learned counsel appearing for the assessee submitted that time may be given to the assessee for the production of the witnesses till the end of December, 2010.
Considering the fact that the witnesses are residing abroad, the assessee is given a period of four months from the date of receipt of a copy of this order to produce the witnesses in support of his contention before the AO. The AO is directed to pass appropriate assessment order within a period of two months thereafter. The substantial questions of law raised in this appeal are answered in favour of the Revenue and the appeal is allowed. No costs.
We make it clear that the order passed will not stand in the way of the AO to comply with the other direction of the Tribunal insofar as in consideration of the materials produced by the assessee is concerned.
[Citation : 327 ITR 577]
