HIGH COURT OF JUDICATURE AT ALLAHABAD AFR Court No. - 45 Case :- INCOME TAX APPEAL No. - 187 of 2016 Appellant :- Pr. Commissioner Of Income Tax (Central) Kanpur Respondent :- M/S K.M. Sugar Mills Ltd. Kanpur Counsel for Appellant :- Manu Ghildyal Counsel for Respondent :- Ashish Bansal,Rupesh Jain Hon'ble Pankaj Mithal,J.
Hon'ble Vinod Kumar Misra,J.
1. Heard Sri Manu Ghildyal learned counsel for the appellant and Sri Rupesh Jain along with Sri Ashish Bansal for the respondent-assessee.
2. The appeal under Section 260-A of the Income Tax Act has been preferred against the order of the Income Tax Appellate Tribunal (ITAT) dated 15.03.2016, whereby the tribunal has affirmed the order of Commissioner of Income Tax (Appeal).
3. The respondent-assessee filed its return of income for the assessment year 2009-10 showing loss of income. The assessment was completed under Section 143(3) of the Act on 16.08.2012 and the taxable income of the respondent-assessee was computed as 157,33,11,500/-. The assessment order was taken in appeal before the CIT who partly allowed the appeal vide order dated 07.06.2013 and certain additions to the income of the respondent-assessee were deleted.
4. The CIT (Appeals), during the pendency of appeal, had recorded the statement of Sri S.C. Agarwal one of the Directors of respondent-assessee. It is said that the statement so recorded along with the report of the CIT (Appeals) was sent to the Assessing Officer for comments, but as the Assessing Officer failed to respond, the appeal was decided on merits considering the above statement.
5. The Tribunal by the impugned order has affirmed the order of the CIT (Appeals).
6. We have heard learned counsel for the parties and find that proposed questions of law A, B, C, D, gives rise to only one substantial question of law which is as under:
Whether the ITAT is justified in affirming the order of the CIT (A) dated 07.06.2013 which was passed without affording proper opportunity to the Assessing Officer to rebut the statement of one of the directors of the respondent-assessee recorded by him in appeal as required under Rule 46-A of the Rules.
7. The other questions of law which have been proposed in this appeal are all of factual in nature. They have been dealt with by the authorities below in extenso and do not give rise to any other substantial question of law worth consideration by this Court.
8. There is no dispute to the fact that during the pendency of the appeal before the CIT (Appeals), the statement of Sri S.C. Agrawal Executive Director of the respondent-assessee was recorded on 18.03.2003, so as to understand the working of the Co-Gen Unit and also the Milling Unit. A copy of the aforesaid statement along with some other details was forwarded to the Assessing Officer vide letter dated 17.05.2013 for his comments. The brief note prepared by the CIT (Appeals) also formed part of the documents which were sent with the statement. There was no response to the said letter from the Assessing Officer despite fact that the letter clearly specified to submit explanation on or before 22.05.2013.
9. The order records that when no reply was received from the Assessing Officer, a reminder letter was sent on 19.05.2013 to the Assessing Officer but even in response to it, no explanation was submitted by the Assessing Officer till 6th June, 2013. Thus presuming that the Assessing Officer had nothing to comment about so as to rebut the statement so recorded, the CIT (Appeals) proceeded with the hearing and decision on merits.
10. The respondent-assessee before the Tribunal itself stated that the letter of the CIT (Appeals) dated 17.05.2013 was received by the Assessing Officer but as the time was short, he had submitted letter dated 17.05.2013 which was received by the CIT (Appeals) on 21.05.2016 requesting for further time but the CIT (Appeals) without considering it or without allowing any further time proceeded to decide the appeal on merits. Thus, it is suggested that no proper opportunity to rebut the additional evidence was given to the respondent-assessee before passing the order dated 07.06.2013 by the CIT (Appeals).
11. In this regard Section 250 of the Act is relevant. It lays down the procedure to be followed in appeal. It provides that the appellate authority may make such further enquiry as it think fit or may direct the Assessing Officer to make further enquiry to report the result of the same to it for the purposes of decision of the appeal on merits.
12. The aforesaid provision clearly establishes that the Commissioner is not denuded of the power to make further enquiry in the matter as may be considered proper in the interest of justice for deciding the appeal.
13. In conjunction with the above power, Rule 46-A of the Rules provide for the production of the additional evidence and that the appellate authority is authorized to take on record additional evidence not only at the behest of the assessee but also on his own behalf to enable it to dispose of appeal or for any substantial cause.
14. Rule 46-A of the Rules which is relevant and material, for the sake of convenience is reproduced herein below:
"Rule 46A.-- (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 :--
(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 Commissioner (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 under sub-rule (1) unless the [Assessing 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.
(4) Nothing contained in this rule shall affect the power of the [Deputy Commissioner (Appeals)] [or, as the case may be, the Commissioner (Appeals)] 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.]"
15. A bare reading of Rule 46-A(1) would show that it is a provision for adducing additional evidence on behalf of appellant that is the assessee. It is not a provision which authorizes the department to adduce additional evidence or the appellate authority to take suo-moto action for additional evidence. The power to adduce additional evidence by the assessee is limited to the four grounds enumerated under Clauses (a), (b), (c) & (d) of sub Rule 1 of Rule 46-A of the Rules.
16. Sub rule 2 of the aforesaid Rules 46-A provides that in taking additional evidence the appellate authority shall record reasons in writing for its admission but this rule is applicable only in respect of the evidence adduced under Sub Rule 1 of Rule 46-A of the Rules and not otherwise.
17. Similarly, sub Rule 3 of Rule 46-A of the Rules which allows the appellate authority to give reasonable opportunity to the other side to examine the evidence or to cross examine the witness in rebuttal is applicable only in cases where additional evidence is adduced by the appellant or the assessee. The very wording of sub-Rule 3 that the appellate authority shall not take into account any evidence produced under sub Rule 1 unless the other side is given the opportunity to rebut the said evidence clearly demonstrate that the said sub rule is applicable in respect of the evidence adduced under sub Rule 1 which only authorizes the appellant or the assessee to bring on record the additional evidence. In other words, the said sub Rule is not strictly applicable to cases whether additional evidence is produced by the department or is considered necessary by the appellate authority itself.
18. The power of the appellate authority to direct for the production of a document or examination of the witness as a matter of fact is in furtherance of any enquiry contemplated by Section 250(4) of the Act is contained in sub Rule 4 of Rule 46-A of the Rules and it can be exercised to enable the appellate authority to dispose of the appeal or for any other substantial cause necessary for the adjudication of the controversy involved in appeal. This power of the appellate authority is like a inherent power which can be exercised suo-motu without any application from any of the contesting party. It is in exercise of the above power so as to understand the working of the Co-Gen Unit and Milling Unit that the CIT (Appeals) had recorded the statement of one of the directors of the respondent-assessee.
19. It is therefore important to make a distinction between a case where the assessee invokes Rule 46-A to adduce additional evidence before the CIT (Appeals) and a case where the appellate authority itself consider it fit to cause or make a further enquiry in the matter by virtue of the powers vested in it under Section 250(4) of the Act and thus, exercise its suo-motu powers of taking additional evidence under Rule 46-A of the Rules.
20. In view of above, the strict provisions of sub Rule-3 of Rule 46-A of the Rules were not applicable and it was not incumbent upon the CIT (Appeals) to have given any opportunity to the Assessing Officer as contemplated therein.
21. Nonetheless, in order to follow the principles of natural justice and fair play, the CIT (Appeals) had given a notice with full details and the copy of the statement recorded to the Assessing Officer to submit his explanation. The receiving of the said notice is not denied though it is said that the time given was short.
22. The Assessing Officer may have written a letter on 17.05.2013 seeking further time but there is no mention of any such letter having been received by the CIT (Appeals) in his order. The fact however remains that the CIT (Appeals) had passed the final order only on 7th June, 2013 after waiting till 6th June 2013 for the reply of the the Assessing Officer. Even a reminder was sent to him on 29.5.2013 but to no effect. It means that the Assessing Officer was granted sufficient time to rebut the above statement but he failed to avail the same.
23. The order of the CIT (Appeals) was challenged before the tribunal not only by the respondent-assessee but by the revenue also.
24. The revenue in the memo of appeal has not taken any specific ground that the time granted by the CIT (Appeals) was not enough or that the Assessing Officer required much more time than that was ultimately made available to him for filing his reply. The said appeal is completely silent and does not dispute even the receiving of the reminder letter.
25. This apart, the facts stated in the order of the CIT (Appeals) are presumed to be correct inasmuch as at no point of time, the department had filed any application purported to be under Section 154 of the Act or Rule 10 of the Income Tax Appellate Tribunal Rules, 1963 stating that the order is factually incorrect and that the facts relating to the notice/letter given to the Assessing Officer for confronting with the evidence recorded at the appellate stage were in any way incorrect.
26. Thus in the over all facts and circumstances of the case, there is no violation of the principles of nature justice or fair play by the CIT (Appeals) in accepting the additional evidence in the form of the statement of one of the directors of the respondent-assessee. The CIT (Appeals) had given sufficient opportunity to the Assessing Officer confronting him with the said evidence and had given sufficient time to him to respond to the same, but the Assessing Officer failed to avail the opportunity so accorded to him.
27. In view of above discussion we answer the above substantial question of law in favour of the respondent-assessee and against department and hold that the CIT (Appeals) had not committed any error of law, in considering the statement of one of the directors of the respondent-assessee as recorded before him and that there was no violation of Rule 46-A of the Rules or of the principles of natural justice in accepting/relying upon the said statement as part of evidence.
28. It may not be out of context to mention here that the aforesaid evidence or the statement so recorded is not the sole basis of the order of the CIT (Appeals) and the findings recorded in the order on the merits of the assessment are independent of the same. The said statement as such was neither material nor very relevant in so far as the decision of the appeal on the merits is concerned. Even if the said statement is ignored it would not affect the validity of the decision of the CIT (Appeals).
29. In addition to the above Sri Manu Ghildyal has argued that the CIT (Appeals) could not have decided the appeals on merits in the absence of the record.
30. We are afraid that the we cannot accept such a bald proposition with regard to procedure to be followed by the appellate authority in the absence of any statutory provision which mandates for the summoning of the record more particularly when no such ground was taken by the revenue in appeal before the tribunal.
31. It is apparent that the appeal filed before the CIT (Appeals) not only contains the original of the assessment order but was backed up by all relevant material which the respondent-assessee considered it proper to rely upon. The revenue also had an opportunity to place on record the relevant documents which were part of the record of the Assessing Officer for the purposes of getting the appeal decided. Therefore, when both the parties had the opportunity to place before the CIT (Appeals), the relevant documents forming part of the record of the Assessing Officer, the department cannot have any valid grievance with regard to absence of the recorded.
32. In view of the aforesaid facts and circumstances and the answer to the question aforesaid, we find no merit in this appeal. Consequently, the appeal is dismissed.
Order Date :- 25.5.2017 Sanjeet