ACIT, New Delhi v. M/s R & R Arts, New Delhi

ITA 3113/DEL/2011 | 2007-2008
Pronouncement Date: 06-10-2016 | Result: Dismissed

Appeal Details

RSA Number 311320114 RSA 2011
Assessee PAN AAFFR3054C
Bench Delhi
Appeal Number ITA 3113/DEL/2011
Duration Of Justice 5 year(s) 3 month(s) 26 day(s)
Appellant ACIT, New Delhi
Respondent M/s R & R Arts, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 06-10-2016
Appeal Filed By Department
Order Result Dismissed
Bench Allotted F
Tribunal Order Date 06-10-2016
Date Of Final Hearing 08-08-2016
Next Hearing Date 08-08-2016
Assessment Year 2007-2008
Appeal Filed On 10-06-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : F NEW DELHI BEFORE SH. H.S. SIDHU JUDICIAL M EMBER AND SH. O.P. KANT ACCOUNTANT MEMBER ITA NO S . 3114 & 3113 /DEL/ 2011 ASSESSMENT YEAR S : 2006 - 07 & 2007 - 08 ACIT CENTRAL CIRCLE - 7 ROOM NO. 363 E - 2 ARA CENTRE JHANDEWALAN EXTN. NEW DELHI VS. M/S. R & R ARTS 14 GOLF LINKS NEW DELHI. PAN : AAFFR3054C (APPELLANT) (RESPONDENT) APPELLANT BY SH. KARTAR SINGH CIT(DR) RESPONDENT BY SH. ADESH KR. JAIN FCA DATE OF HEARING 08.08.2016 DATE OF PRONOUNCEMENT 05.10.2016 ORDER PER O.P. KANT A. M. : THESE TWO APPEALS BY THE REVENUE ARE DIRECTED AGAINST TWO SEPARATE ORDERS DATED 30 TH OF MARCH 2011 PASSED BY THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) - I NEW DELHI FOR ASSESSMENT YEARS 2006 - 07 AND 2007 - 08. THE FACTS AND CIRCUMSTANCES IN BOTH THE APPEALS BEING IDENTICAL ARE HEARD TOGETHER AND DISPOSED OF BY THIS CONSOLI DATED ORDER FOR THE SAKE OF CONVENIENCE AND BREVITY . 2 ITA NOS. 3114 & 3113/DEL/2011 AYS: 2006 - 07 & 2007 - 08 2. THE GROUNDS OF A PPEAL RAISED IN ITA NO. 3114/DEL/2011 ARE REPRODUCED AS UNDER: I. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS NOT CORRECT IN LAW AND FACTS. II. WHETHER THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN DELETING THE ADDITION OF RS. 44 23 951/ - MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNACCOUNTED SALES. III. THE APPELLANT CRAVES LEAVE TO ADD ALTER OR AMEND ANY/ALL OF THE GROUNDS OF APPEAL BEFORE OR DURING THE COURSE OF THE HEARING OF THE APPEAL. 3. GROUNDS OF APPEAL RAISED IN ITA NO. 3113/DEL/2011 ARE AS UNDER: I. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS NOT CORRECT IN LAW AND FACTS. II. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS DELETED THE ADDITION OF RS. 2 27 57 026/ - MADE ON ACCOUNT OF UNACCOUNTED SAL ES ON THE BASS OF PAGES 1 TO 8 OF ANNEXURE A - 6 SEIZED DURING THE COURSE OF SEARCH. III. THE COMMISSIONER OF INCOME TAX (APPEALS) HAS ALLOWED RELIEF TO THE TUNE OF RS.60 87 699/ - AS AGAINST G.P. ADDITION OF RS.66 12 501/ - MADE ON ACCOUNT OF UNACCOUNTED SALE OF RS.1 98 37 503/ - . IV. THE APPELLANT CRAVES LEAVE TO ADD ALTER OR AMEND ANY/ALL OF THE GROUNDS OF APPEAL BEFORE OR DURING THE COURSE OF THE HEARING OF THE APPEAL. 4 . THE R EVENUE FILED ADDITIONAL GROUND THROUGH APPLICATION UNDER RULE 11 OF INCOME - TAX( APPELLATE TRIBUNAL) RULES 1962 DATED 22/09/2013 AND 20/03/2014 IN RESPECT ITA NO. 3114/DEL/2011 AND ITA NO. 3113/DEL/2011 RESPECTIVELY. THE ADDITIONAL GROUND S RAISED IN BOTH THE APPEALS ARE IDENTICAL WHICH IS REPRODUCED AS UNDER: 3 ITA NOS. 3114 & 3113/DEL/2011 AYS: 2006 - 07 & 2007 - 08 THE COMMISSIONER OF INC OME TAX (APPEALS) HAS ERRED IN LAW BY ACCEPTING ADDITIONAL EVIDENCES DURING THE COURSE OF APPELLATE PROCEEDINGS WITHOUT GIVING ANY OPPORTUNITY TO ASSESSING OFFICER AS PER RULE 46A OF THE INCOME TAX RULE 1962. ITA NO. 3114/DEL/2011 FOR AY: 2006 - 07 5 . FI RST WE TAKE UP THE APPEAL IN ITA NO. 3114/DEL/2011 . FACTS IN BRIEF OF THE CASE ARE THAT A SEARCH AND SEIZURE OPERATION UNDER SECTION 132 OF THE INCOME - TAX ACT 1961 (IN SHORT THE ACT ) WAS CARRIED OUT IN THE CASE OF THE ASSESSEE ON 17/04/2007. NOTICE UNDE R SECTION 153A OF THE ACT WAS ISSUED ON 11/05/2009 REQUIRING THE ASSESSEE TO FILE RETURN OF INCOME. IN RESPONSE THE ASSESSEE FILED RETURN FOR THE YEAR UNDER CONSIDERATION ON 27/07 /2009 DECLARING INCOME OF RS. 26 14 378/ - . IN THE ORIGINAL RETURN FILED UNDER SECTION 139 OF THE ACT ON 31 ST OF OCTOBER 2005 ALSO THE SAME AMOUNT OF INCOME WAS DECLARED BY THE ASSESSEE. IN THE COURSE OF REASSESSME NT PROCEEDING UNDER SECTION 15 3A OF THE ACT THE ASSESSING OFFICER FOUND THAT THE GATE PASSES ISSUED FOR SOME PAINTINGS COULD NOT BE RECONCILED WITH THE BOOKS OF ACCOUNTS AND THE REFORE HE MADE ADDITION OF RS.57 14 271 / - WITH FOLLOWING OBSERVATIONS: 4.2. TOTAL 128 PAINTINGS (FOR THE AY 2006 - 07 TO 2008 - 09) WERE SENT OUT OF THE GALLERY THROUGH GATE PASSES WHICH ARE NOT ENT ERED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE AND FOR WHICH CONFIRMATIONS OR ANY CREDIBLE DOCUMENT HAS NOT BEEN SUBMITTED TO PROVE THAT THE PAINTINGS WERE RETURNED TO THE GALLERY. IN VIEW OF THE ABOVE THE PAINTINGS WHICH WERE SENT OUT OF THE GALLERY THROU GH GATE PASSES FOUND DURING THE SEARCH FOR WHICH THE ASSESSEE HAS FAILED TO SUBMIT THE SALE BILL HAVE BEEN TREATED AS THE UNDISCLOSED SALE OF THE GALLERY 4 ITA NOS. 3114 & 3113/DEL/2011 AYS: 2006 - 07 & 2007 - 08 FOR THE YEAR. THE DETAILED WORKING OF THE UNACCOUNTED SALES HAS BEEN GIVEN BELOW: A.Y. NO. OF PAINT INGS PRICE (RS.) SALES (RS.) GP (RS) REMARK S 2006 - 07 62 2 76 497 1 71 42 814 57 14 271 NOTE 1 2007 - 08 63 3 14 881 1 98 37 503 66 12 501 NOTE 2 2008 - 09 3 4 22 222 12 66 666 4 22 222 NOTE 3 NOTE 1. OUT OF THE 128 PAINTINGS 62 PAINTINGS (ACCORDING TO THE DATE MENTIONED IN THE GATE PASS) ARE TREATED AS SOLD IN THE A. Y. 2006 - 07. THE AVERAGE SALE PRICE OF ONE PAINTING IS CALCULATED BY DIVIDING THE TOTAL SALE CONSIDERATION OF RS.91 48 382/ - BY 80 - TOTAL NUMBER OF PAINTINGS SOLD DURING THE YEAR AS PER THE DETAILS FILED BY THE ASSESSEE/AUDIT REPORT RS.91 48 382/ - / 80 = 2 76 497/ - FOR THE PURPOSE OF DETERMINING THE GROSS PROFIT THE GROSS PROFIT RATIO OF 33% HAS BEEN TAKEN ON THE BASIS OF THE GP RATIO OF TH E LAST SEVEN YEARS AS HAS BEEN SHOWN BY THE ASSESSEE IN ITS OWN RETURNS AND ON THE BASIS OF DOCUMENTS SEIZED DURING THE SEARCH. NOTE 2. OUT OF THE 128 PAINTINGS 63 PAINTINGS (ACCORDING TO THE DATE MENTIONED IN THE GATE PASS) ARE TREATED AS SOLD IN THE A. Y. 2007 - 08. THE AVERAGE SALE PRICE OF ONE PAINTING IS CALCULATED BY DIVIDING THE TOTAL SALE CONSIDERATION OF RS.4 34 53 607/ - BY 138 - TOTAL NUMBER OF PAINTINGS SOLD DURING THE YEAR AS PER THE DETAILS FILED BY THE ASSESSEE/AUDIT REPORT RS.4 34 53 607/ - / 138 = 3 14 88L/ - . FOR THE PURPOSE OF DETERMINING THE GROSS PROFIT THE GROSS PROFIT RATIO OF 33% HAS BEEN TAKEN ON THE BASIS OF THE GP RATIO OF THE LAST SEVEN YEARS AS HAS BEEN SHOWN BY THE ASSESSEE IN ITS OWN RETURNS AND ON THE BASIS OF DOCUMENTS SEIZED DUR ING THE SEARCH. NOTE 3. OUT OF THE 128 PAINTINGS 3 PAINTINGS (ACCORDING TO THE DATE MENTIONED IN THE GATE PASS) ARE TREATED AS SOLD IN THE A.Y. 2008 - 09. THE AVERAGE SALE PRICE OF ONE PAINTING IS CALCULATED BY DIVIDING THE TOTAL SALE CONSIDERATION OF RS.6 03 77 699/ - BY 143 - TOTAL NUMBER OF PAINTINGS SOLD DURING THE YEAR AS PER THE DETAILS FILED BY THE ASSESSEE/AUDIT REPORT. RS.6 03 77 699/ - / 143 = 4 22 222/ - FOR THE PURPOSE 5 ITA NOS. 3114 & 3113/DEL/2011 AYS: 2006 - 07 & 2007 - 08 OF DETERMINING THE GROSS PROFIT THE GROSS PROFIT RATIO OF 33% HAS BEEN TAKEN ON TH E BASIS OF THE GP RATIO OF THE LAST SEVEN YEARS AS HAS BEEN SHOWN BY THE ASSESSEE IN ITS OWN RETURNS AND ON THE BASIS OF DOCUMENTS SEIZED DURING THE SEARCH. AS THE ASSESSEE HAS ALREADY BOOKED ALL THE EXPENSES AGAINST THE ABOVE PAINTINGS IN ITS BOOKS OF ACCOUNT THE ENTIRE GROSS PROFIT IS TREATED AS THE INCOME OF THE ASSESSEE. (ADDITION OF RS. 57 14 271) 5.1 AGGRIEVED THE ASSESSEE FILED APPEAL BEFORE THE LEARNED COMMISSIONER OF INCOME - TAX ( APPEALS) AND FILED CERTAIN ADDITIONAL EVIDENCES. AFTER CONSIDE RING SUBMISSION OF THE ASSESSEE THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) ALLOWED RELIEF OF RS. 44 23 951/ - WITH FOLLOWING FINDINGS: I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT AND FINDING CONTAINED IN THE ORDER OF ASSESSMENT AND THE MATERIAL PLACED ON RECORD. FROM THE PERUSAL OF THE SUBMISSIONS FILED BY THE APPELLANT AND THE MATERIAL PLACED ON RECORD IT IS UNDISPUTED FACT THAT A GATE PASS IS PREPARED WHENEVER A PAINTING IS TAKEN OUT OF THE PREMISES OF THE GALLERY. IT IS EVIDENT THAT THE PAINTINGS ARE USUALLY TAKEN OUT FROM GALLERY PREMISES AGAINST SALE PURCHASE RETURNS SENT FOR APPROVAL RETURNS TO THE ARTISTS IN CASE OF PAINTINGS RECEIVED ON CONSIGNMENT FRAMING FOR TAKING PHOTOGRAPHS FOR PROMOTION AND CATALOGUE RESTORING ETC. H ENCE WHEN A GATE PASS IS PREPARED AND A PAINTING IS TAKEN OUT OF THE GATE THERE MAY BE A SALE OF PAINTING OR THE PAINTING MAY BE TAKEN OUT FOR SOME OTHER PURPOSE. IT IS ALSO UNDISPUTED THAT WHENEVER A PAINTING IS ISSUED ON APPROVAL BY PREPARING GATE PASS THE SAME IS NOT ALWAYS CONVERTED INTO SALES. THE SAID FACTS HAS ALSO BEEN ACCEPTED BY THE AO AS HE HAS GIVEN CREDIT FOR PAINTINGS SENT FOR FRAMING TO SHARMA PRINTERS AND SUIJEET FRAMING. THE APPELLANT HAS SUBMITTED THE RECONCILIATION OF THE SAID 128 GATE PASSES ALONG WITH 6 ITA NOS. 3114 & 3113/DEL/2011 AYS: 2006 - 07 & 2007 - 08 CORROBORATIVE EVIDENCE OF THE SAME AT PAGE 45 TO 113 OF THE PAPER BOOK WHICH HAS BEEN PLACED ON RECORD. THE APPELLANT HAS ALSO SUBMITTED THE PURPOSE - WISE BREAK UP OF 128 PAINTINGS FOR WHICH THE GATE PASSES WERE FOUND AND SEIZED DURING THE COURSE OF SEARCH & SEIZURE OPERATION WHICH IS GIVEN IN PARA - VIII ABOVE. WHENEVER THE SALES HAVE BEEN MADE THE SALE BILLS IN RESPECT OF THE GATE PASSES HAVE BEEN RAISED AND ACCOUNTED FOR. EVEN MOST OF THE SALE BILLS ARE PART OF THE DOCUMENTS SEIZED DURING THE COURSE OF SEARCH & SEIZURE OPERATION. IN VIEW OF THE FACTS STATED ABOVE I AM OF THE OPINION THAT OUT OF 128 PAINTINGS THE APPELLANT HAS EXPLAINED 109 PAINTINGS AND FAILED TO EXPLAIN ABOUT 19 PAINTINGS TO THE SATISFACTION SO ESTIMATION OF SALE OUT OF BOOKS ON THE BASIS OF GATE PASSES SEIZED IN RESPECT OF 109 PAINTINGS IS BAD IN LAW AND I UPHELD ADDITION IN RESPECT OF 19 PAINTINGS MADE BY THE AO. OUT OF THE SAID UNEXPLAINED 19 PAINTINGS 14 PAINTINGS RELATE TO THE ASSESSMENT YEAR 2006 - 07. ACCORD INGLY THE ADDITION AMOUNTING TO RS.12 90 320/ - (RS.57 14 271 X 14/62) IN RESPECT OF 14 PAINTINGS IS SUSTAINED AND BALANCE ADDITION OF RS. 44 23 951/ - IN RESPECT OF 48 PAINTINGS IS HEREBY DELETED. THE APPELLANT GETS RELIEF OF RS44 23 951/ - . 5.2 A GGRIEVED THE R EVENUE IS IN APPEAL BEFORE THE TRIBUNAL RAISING THE GROUNDS AND ADDITIONAL GROUNDS REPRODUCED ABOVE. 6. BEFORE US I N SUPPORT OF THE ADDITIONAL GROUND RAISED THE LEARNED COMMISSIONER OF INCOME TAX (DEPARTMENTAL REPRESENTATIVE) SUBMITTED THAT THE ADDITIONAL GROUND RAISED IS PURELY LEGAL IN NATURE AND NO NEW FACTS ARE REQUIRED TO BE EXAMINED OR INVESTIGATED FOR ADMITTING THE ADDITIONAL GROUND AND ACCORDINGLY REQUESTED THAT FOLLOWING THE JUDGMENT OF TH E HON BLE SUPREME COURT IN THE CASE OF NATIONAL THERMAL POWER CO. LTD. VS. COMMISSIONER OF INCOME TAX (1998) 229 ITR 383 (SC) THE ADDITIONAL GROUND MAY BE ADMITTED. 7 ITA NOS. 3114 & 3113/DEL/2011 AYS: 2006 - 07 & 2007 - 08 6.1 ON THE OTHER H AND THE AUTHORIZED R EPRESENTATIVE OF THE ASSESSEE OPPOSED THE ADMISSI ON OF THE ADDITIONAL GROUND. 6.2 WE HAVE HEARD THE REPRESENTATIVE OF THE BOTH THE PARTIES ON THE ISSUE OF THE ADMISSION OF ADDITIONAL GROUND. WE FIND THAT THE ADDITIONAL GROUND RAISED IS PURELY LEGAL IN NATURE AND NO FRESH FACTS ARE REQUIRED FOR EXAMINATI ON AND THE LEGAL GROUND CAN BE RAISED AT ANY ST AGE OF THE APPELLATE PROCEEDING THEREFORE FOLLOWING THE DECISION IN THE CASE OF NATIONAL THERMAL POWER COMPANY LIMITED VERSUS CIT (1998) 229 ITR 383 (SC) WE ADMIT THE ADDITIONAL GROUND OF THE REVENUE. 7. IN SUPPORT OF THE ADDITIONAL GROUND THE LEARNED COMMISSIONER OF INCOME TAX (DEPARTMENTAL REPRESENTATIVE) REFERRED TO PARA - 5 OF THE IMPUGNED ORDER AND SUBMITTED THAT THE RECONCILIATION OF 128 GATE PASSES ALONGWITH CORROBORATIVE EVIDENCE OF THE SAME WERE FI LE D BY THE ASSESSEE BEFORE THE LEARNED COMMISSIONER OF INCOME - TAX ( APPEALS) WHICH ARE AVAILABLE AT PAGE 45 TO 113 OF THE ASSESSES PAPER BOOK. THE ASSESSEE ALSO SUBMITTED PURPOSE - WISE BREAKUP OF 128 PAINTINGS FOR WHICH THE GATE PASSES ARE FOUND. ACCORDING TO THE LEARNED COMMISSIONER OF I NCOME T AX(DEPARTMENTAL REPRESENTATIVE) THESE BEING THE ADDITIONAL EVIDENCES SHOULD HAVE BEEN FORWARDED BY THE LEARNED COMMISSIONER OF INCOME - TAX ( APPEALS) TO THE A SSESSING OFFICER FOLLOWING THE RULE 46A OF THE INCOME T A X R ULES FOR HIS COMMENTS HOWEVER THE LEARNED COMMISSIONER OF INCOME - TAX ( APPEALS) HAS DECIDED THE APPEAL WITHOUT GIVING AN OPPORTUNITY TO THE ASSESSING OFFICER FOR GIVING 8 ITA NOS. 3114 & 3113/DEL/2011 AYS: 2006 - 07 & 2007 - 08 HIS COMMENT A S REQUIRED UNDER R ULE 4 6A OF THE INCOME TAX R ULES. ACCORDINGLY HE PRAYED THAT THE IMPUGNED ORDER MAY BE RESTORED BACK TO THE TO THE ASSESSING OFFICER FOR CONSIDERING AND VERIFYING THE ADDITIONAL EVIDENCES TAKEN INTO CONSIDERATION BY THE LEARNED COMMISSIONER OF INCOME TAX APPEALS . IN SUPPORT THEREOF THE LEARNED COMMI SSIONER OF INCOME - TAX (DEPARTMENTAL REPRESENTATIVE) RELIED ON THE DECISION OF THE HON BLE J URISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. MANISH BUILDWELL PVT. L IMITED (2012) 204 TAXMANN 106 (DELHI). 8. ON THE OTHER HAND THE LEARNED AUTHORIZED REPRESEN TATIVE OF THE ASSESSEE OPPOSED RESTORING OF ISSUE TO THE ASSESSING OFFICER. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN DISPUTE BEFORE US IS WHETHER THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) HAS FOLLOWED THE RULE 4 6A OF THE INCOME TAX R ULES IN RELYING THE ADDITIONAL EVIDENCES WHILE GIVING HIS DECISION ON THE ISSUES BEFORE HIM . IN THIS RESPECT WE WOULD LIKE TO REPRODUCE THE RELEVANT R ULE 4 6A OF THE INCOME TAX RULES 1962 AS UNDER FOR READY REFERENCE: 46 A. (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 9 ITA NOS. 3114 & 3113/DEL/2011 AYS: 2006 - 07 & 2007 - 08 ( 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 ACC OUNT 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 RE QUEST OF THE [ASSESSING OFFICER]) UNDER CLAUSE ( A ) OF SUB - SECTION (1) OF SECTION 251 OR THE IMPOSITION OF PENALTY UNDER SECTION 271.] 10. I N VIEW OF ABOVE R ULE IT IS EVIDENT THAT THE LEARNED COMMISSIONER OF INCOME - TAX( APPEALS) WAS REQUIRED TO RECORD IN WRITING THE REASON FOR ADMISSION OF THE ADDITIONAL EVIDENCES AND AFTER ADMITTING HE WAS REQUIRED TO ALLOW A REASONABLE OPPORTUNITY TO THE ASSESSING OFFICER TO EXAMINE AND REBUTTAL OF THOSE EVIDENCES. WITH REGARD TO COMPL IANCE OF RULE 4 6A OF THE INCOME TAX RULES 1962 IN THE CASE OF ITO VS. RAJENDRA KUMAR DIWAN IN ITA NO. 4575/DEL/2011 THE TRIBUNAL AFTER TAKING INTO ACCOUNT THE DECISION OF THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF MANISH BUILDWELL PVT . LTD . HAS OBSERVED AS UNDER: 7.1 A PERUSAL OF THE SAID DECISION SHOWS THAT CONSIDERING THE NON - FULFILLMENT OF THE REQUIREMENTS SET OUT IN SUB - RULE (3) OF RULE 46A THE HON BLE COURT WAS PLEASED TO RESTORE THE ISSUE BACK TO THE CIT(A DIRECTING THE SAID AUTHORIT Y TO ADDRESS THE SHORTCOMINGS. HOLDING THAT IT IS TRUE THAT THE 10 ITA NOS. 3114 & 3113/DEL/2011 AYS: 2006 - 07 & 2007 - 08 POWERS OF CIT(A) AS FIRST APPELLATE AUTHORITY ARE CO - TERMINOUS POWER OVER THE SOURCES OF INCOME CONSTITUTING THE SUBJECT MATTER OF THE ASSESSMENT EXCEPT THE POWER TO TACKLE NEW SOURCES OF IN COME NOT CONSIDERED BY THE ASSESSING OFFICER AND THAT THE CIT(A) CAN ALSO DO AND CAN DIRECT THE ASSESSING OFFICER TO DO WHAT HE HAS FAILED TO DO AS HELD BY THE SUPREME COURT IN THE CASE OF COMMISSIONER OF INCOME - TAX U.P. V. KANPUR COAL SYNDICATE (1964) 53 ITR 225. HOWEVER IN THE FACTS BEFORE THE HON BLE COURT THE CIT (A) DID NOT EXERCISE THIS RIGHT. THIS POWER THE COURT OBSERVED IS RECOGNIZED IN SUB - SECTION (4) OF SECTION 250 AND HAS TO BE EXERCISED BY THE CIT (A) AND FOR THIS THERE SHOULD BE MATERI AL ON RECORD TO SHOW THAT HE WHILE DISPOSING OF THE APPEAL HAD DIRECTED FURTHER ENQUIRY AND CALLED FOR THE CONFIRMATION LETTERS FROM THE ASSESSEE EVEN IN RESPECT OF RECEIPT OF MONIES FROM CUSTOMERS BY WAY OF CHEQUES. RULE 46A IT WAS OBSERVED HELD THAT IS A PROVISION IN THE INCOME TAX RULES 1962 WHICH IS INVOKED ON THE OTHER HAND BY THE ASSESSEE WHO IS IN AN APPEAL BEFORE THE CIT (A). ONCE THE ASSESSEE INVOKES RULE 46A AND PRAYS FOR ADMISSION OF ADDITIONAL EVIDENCE BEFORE THE CIT (A) THEN THE PROCED URE PRESCRIBED IN THE SAID RULE IT HAS BEEN HELD HAS TO BE SCRUPULOUSLY FOLLOWED. THE FACT THAT SUB - SECTION (4) OF SECTION 250 CONFERS POWERS ON THE CIT (A) TO CONDUCT AN ENQUIRY AS HE THINKS FIT WHILE DISPOSING OF THE APPEAL THE HON BLE COURT HELD CANNOT BE RELIED UPON TO CONTEND THAT THE PROCEDURAL REQUIREMENTS OF RULE 46A NEED NOT BE COMPLIED WITH. THEIR LORDSHIPS HAVE HELD THAT IF SUCH A PLEA OF THE ASSESSEE IS ACCEPTED THEN IT WOULD REDUCE RULE 46A TO A DEAD LETTER BECAUSE IT WOULD THEN BE OPEN TO EVE RY ASSESSEE TO FURNISH ADDITIONAL EVIDENCE BEFORE THE CIT (A) AND THEREAFTER CONTEND THAT THE EVIDENCE SHOULD BE ACCEPTED AND TAKEN ON RECORD BY THE CIT (A) BY VIRTUE OF HIS POWERS OF ENQUIRY UNDER SUB - SECTION (4) OF SECTION 250. THE COURT HELD THAT THIS W OULD MEAN IN TURN THAT: (A) THE REQUIREMENT OF RECORDING REASONS FOR ADMITTING THE ADDITIONAL EVIDENCE; (B) THE REQUIREMENT OF EXAMINING WHETHER THE CONDITIONS FOR ADMITTING THE ADDITIONAL EVIDENCE ARE SATISFIED; AND (C) THE 11 ITA NOS. 3114 & 3113/DEL/2011 AYS: 2006 - 07 & 2007 - 08 REQUIREMENT THAT THE ASSESSING OFFICER SHOULD BE ALLOWED A REASONABLE OPPORTUNITY OF EXAMINING THE EVIDENCE ETC. CAN ALL BE THROWN TO THE WINDS A POSITION WHICH THE HON BLE COURT HELD WAS WHOLLY UNACCEPTABLE AND MAY RESULT IN UNACCEPTABLE AND UNJUST CONSEQUENCES. THE HON BLE COURT HELD THAT THE PROCEDURAL REQUIREMENTS MENTIONED IN THE RULE MUST BE STRICTLY COMPLIED WITH SO THAT THE RULE IS MEANINGFULLY EXERCISED AND NOT EXERCISED IN A ROUTINE OR CURSORY MANNER. THE TRIBUNAL IN VIEW THEREOF WAS FAULTED WITH FOR OVER - LOOKING THE REQUIRE MENTS OF SUB - RULE (3) OF RULE 46A AND CONFUSING IT WITH SUB - RULE (4) OF RULE 46A. ADDRESSING THE RATIONALE FOR THE RULE THE HON BLE COURT OBSERVED THAT THE FUNDAMENTAL RULE WHICH IS VALID IN ALL BRANCHES OF LAW INCLUDING INCOME TAX LAW IS THAT THE ASSESS EE SHOULD ADDUCE THE ENTIRE EVIDENCE IN HIS POSSESSION AT THE EARLIEST POINT OF TIME. THIS ENSURES FULL FAIR AND DETAILED ENQUIRY AND VERIFICATION. REFERRING TO THE DECISION IN KESHAV MILLS CO. LTD. V. COMMISSIONER OF INCOME - TAX BOMBAY NORTH AHMEDABAD ( 1965) 56 ITR SC 365 7 - JUDGE BENCH JUDGEMENT OF THE SUPREME COURT IT WAS OBSERVED THAT THE COURT HELD THAT 'PROCEEDINGS TAKEN FOR THE RECOVERY OF TAX UNDER THE PROVISIONS OF THE ACT ARE NATURALLY INTENDED TO BE OVER WITHOUT UNNECESSARY DELAY AND SO IT I S THE DUTY OF THE PARTIES BOTH THE DEPARTMENT AND THE ASSESSEE TO LEAD ALL THEIR EVIDENCE AT THE STAGE WHEN THE MATTER IS IN CHARGE OF THE INCOME - TAX OFFICER.' IT WAS HELD BY THE JURISDICTIONAL HIGH COURT THAT IT IS FOR THE SAID REASON THAT RULE 46A ST ARTS IN A NEGATIVE MANNER BY SAYING THAT AN APPELLANT BEFORE THE CIT (A) SHALL NOT BE ENTITLED TO PRODUCE BEFORE HIM ANY EVIDENCE WHETHER ORAL OR DOCUMENTARY OTHER THAN THE EVIDENCE PLACED BY HIM BEFORE THE ASSESSING OFFICER. THEIR LORDSHIPS HELD THAT AF TER MAKING THE SAID GENERAL STATEMENT WHICH WAS FOUND TO BE IN CONSONANCE WITH THE PRINCIPLE STATED IN THE AFORESAID JUDGMENT OF THE APEX COURT EXCEPTIONS HAVE BEEN CARVED OUT SETTING OUT UNDER WHAT CIRCUMSTANCES IT WOULD BE OPEN TO THE CIT (A) TO ADMIT ADDITIONAL EVIDENCE. THE ADDITIONAL EVIDENCE CAN ONLY THEN BE PRODUCED AT THE FIRST APPELLATE STAGE WHEN 12 ITA NOS. 3114 & 3113/DEL/2011 AYS: 2006 - 07 & 2007 - 08 CONDITIONS STIPULATE IN THE RULE 46A ARE SATISFIED AND A FINDING IS RECORDED TO THAT EXTENT WHICH MAKES IT CLEAR IN UNAMBIGUOUS LANGUAGE THAT FIRSTLY T HE CONDITIONS PRESCRIBED IN RULE 46A MUST BE SHOWN TO EXIST BEFORE ADDITIONAL EVIDENCE CAN BE ADMITTED AND THEREAFTER EVERY PROCEDURAL REQUIREMENT MENTIONED IN THE RULE HAS TO BE STRICTLY COMPLIED WITH SO THAT THE RULE IS MEANINGFULLY EXERCISED AND NOT EXE RCISED IN A ROUTINE OR CURSORY MANNER. THEIR LORDSHIPS HAVE HELD THAT 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) WITH OUT 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 THE CIT(A) EXERCISES HIS STATUTORY POWER SUO MOTO 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 STR ICTLY. 11. WHEN WE ADVERT TO THE FACTS OF THE CASE IN HAND WE FIND THAT FOLLOWING ADDITIONAL EVIDENCES HA VE BEEN PRODUCED BEFORE THE LEARNED COMMISSIONER OF INCOME - TAX ( APPEALS): 1. R ECONCILIATION OF 128 GATE PASSES ALONGWITH CORROBORATIVE EVIDENCE ( IN T HE FORM OF PAGES 45 TO 113 OF THE ASSESSES PAPER BOOK ) 2. P URPOSE WISE BREAKUP OF 128 PAINTINGS FOR WHICH THE GATE PASSES ARE FOUND. 12. FROM PARA - 5 OF THE IMPUGNED ORDER IT IS EVIDENT THAT THE LEARNED COMMISSIONER OF INCOME - TAX ( APPEALS) NEITHER RECORDED IN WRITING THE ADMISSION OF ADDITIONAL EVIDENCES NOR 13 ITA NOS. 3114 & 3113/DEL/2011 AYS: 2006 - 07 & 2007 - 08 THOSE EVIDENCES WERE FORWARDED TO THE ASSESSING OFFICER BY THE LEARNED COMMISSIONER OF INCOME - TAX ( APPEALS) FOR HIS EXAMINATION AND REBUTTAL . THUS THE LEARNED COMMISSIONER OF I NCOME - TAX (APPEALS) HAS VIOLATED R ULE 4 6A(2) AND 46A(3) OF INCOME TAX R ULES. 13. IN OUR CONSIDERED OPINION I T WAS INCUMBENT UPON THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) UNDER R ULE 46A OF THE I NCOME TAX R ULES TO CONFRONT THE EVIDENCES SO AS TO AL LOW AN OPPORTUNITY T O REBUT THE EVIDENCES WHICH ARE PLACED ON RECORD. IN ABSENCE OF ANY SUCH EXERCISE THE IMPUGNED ORDER IS IN VIOLATION OF THE STATED RULES . IN VIEW OF THE FACTS OF T HE PRESENT CASE DISCUSSED ABOVE WE FIND THAT PROCEDURE LAPSE IS EVIDENT ON THE FACE OF THE RECORD AND THEREFORE WE RESTORE THE ISSUE IN DISPUTE BACK TO THE FILE OF THE LEARNED COMMISSIONER OF INCOME - TAX ( APPEALS) TO ADDRESS THE PROCEDURE LAPSES AND PASS A SPEAKING ORDER IN ACCORDANCE WITH LAW AFTER GIVING THE ASSESSEE A REA SONABLE OPPORTUNITY OF BEING HEARD. THE ADDITIONAL GROUND OF APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 14. SINCE T HE IMPUGNED ORDER HAS BEEN RESTORED BACK TO THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) THE OTHER GROUNDS RAISED BY THE ASSESSEE ARE NOT REQUIRED TO ADJUDICATE AND ALL THOSE GROUNDS ARE ALSO RESTORED TO THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FOR FRESH ADJUDICATION AFTER PROVIDING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 14 ITA NOS. 3114 & 3113/DEL/2011 AYS: 2006 - 07 & 2007 - 08 15 . IN THE RESULT THE APPEAL OF THE R EVENUE IS ALLOWED FOR STATISTICAL PURPOSE. ITA NO. 3113/DEL/2011 FOR AY: 2007 - 08 1 6 . THE FACTS AND CIRCUMSTANCES OF APPEAL IN ITA NO. 3113/DEL/2011 AND ADDITIONAL GROUND RAISED THEREIN ARE IDENTICAL TO THE FACTS AND CIRCUMSTANCES AS WELL AS ADDITIONAL GRO UND OF APPEAL IN ITA NO. 3114/DEL/2011 THUS FOLLOWING OUR FINDING S IN ITA NO. 3114/DEL/2011 WE RESTORE THE APPEAL IN ITA NO. 3113/DEL/2011 TO THE FILE OF THE LEARNED COMMISSIONER OF INCOME - TAX ( APPEALS) WITH THE DIRECTIONS TO ADDRESS THE PROCEDURE LAPSE S AND PASS A SPEAKING ORDER IN ACCORDANCE WITH LAW AFTER GIVING THE ASSESSEE A REASONABLE OPPORTUNITY OF BEING HEARD. 16. IN THE RESULT BOTH THE APPEAL S OF THE R EVENUE ARE ALLOWED FOR STATISTICAL PURPOSE. THE DECISION IS PRONOUN CED IN THE OPEN COURT ON 5 T H OCT . 2016 . S D / - S D / - ( H.S. SIDHU ) ( O.P. KANT ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 5 T H OCTOBER 2016 . LAPTOP / - COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR ITAT NEW DELHI