CIT vs. Manish Build Well Pvt Ltd (Delhi High Court)

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DATE: (Date of pronouncement)
DATE: November 20, 2011 (Date of publication)
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Click here to download the judgement (manish_buildwell_46A_additional_evidence_with_itat_order.pdf)


Powers of CIT (A) to admit Additional Evidence u/s 250(4) & Rule 46A

The AO asked the assessee to furnish confirmation letters from customers who had paid advances by cash (& not cheque) which the assessee complied with. In the assessment order, the AO treated the advances received by cheque as “unexplained cash credits” u/s 68. Before the CIT (A), the assessee produced confirmation letters from customers who paid by cheque. The CIT (A) admitted the additional evidence under Rule 46A &, without giving the AO an opportunity, deleted the addition. In appeal by the department, the Tribunal upheld the CIT (A)’s action on the ground that as the AO had not called for the confirmations before making the addition, the CIT (A) was justified in admitting the additional evidence and there was no reason to set-aside the matter to the AO for a second innings. On further appeal to the High Court, HELD allowing the appeal:

U/s 250(4), the CIT (A) has the power to direct enquiry and call for evidence from the assessee. Under Rule 46A, the assessee has the right to ask for the admission of additional evidence. If the CIT (A) exercises his powers u/s 250(4) to call for additional evidence, the AO need not be given an opportunity to show-cause. However, if the CIT (A) acts on an application under Rule 46A, then the requirement of giving the AO an opportunity as per Rule 46A(3) is mandatory. The argument that in all cases where additional evidence is admitted, the CIT (A) should be considered to have exercised his powers u/s 250(4) is not acceptable as it will render Rule 46A redundant. On facts, as the assessee had produced the evidence, the CIT (A) ought to have followed Rule 46A(3) and remanded the evidence to the AO for comments and verification (matter remanded to the CIT(A)).

Note: The judgement is authored by Hon’ble R. V. Easwar, Ex-President of the Tribunal. See also Prabhavati Shah 231 ITR 1 (Bom) & Bajoria Foundation 254 ITR 65 (Cal) (AT) on the inter-play between s. 250(4) & Rule 46A.

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