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DCIT v. Pipal Tree Ventures Pvt. Ltd. (2021) 210 TTJ 258 (Mum.) (Trib.)

S. 251 : Appeal-Commissioner (Appeals)-Powers-Additional evidence-Where the AO has not been provided adequate opportunity to go through the additional evidence, the admission and examination of the additional evidence by Ld. CIT(A) is completely inadequate. [S. 254(1), Rule 46A of Income-Tax Rules, 1962]

During the year under consideration, the assessee issued shares at a premium by way of preferential and equity allotment which the AO held as unjustifiable due to the assessee’s negative earnings per share. Consequently, the AO made additions of the capital raised under section 68 of the Act. On appeal to the Ld. CIT(A), the assessee argued that it was not given a proper opportunity of being heard and submitted certain evidence which he could not before the AO. The Ld. CIT(A) accepted the additional evidence noting that the AO did not provide his comments despite the matter being remanded to him. The appellant proceedings were concluded with the Ld. CIT(A) deleted the additions relying on the additional evidence.

On further appeal, the Hon’ble Tribunal observed that the AO was not provided with adequate time to provide his comments on the additional evidence. Further, the additional evidence provided to the AO for his comments consisted of bank statement along with the annual report and confirmation of the share subscribers but the Ld. CIT(A)’s order also mentioned of a share subscription agreement between the subscribers, the assessee company and its promoters being filed which was not provided to AO. This agreement was one of the basis of the Ld. CIT(A)’s favourable order and it was not provided to the AO for his comments. Accordingly, the Hon’ble Tribunal held that the admission of the share subscription agreement was in violation of Rule 46A of the Income-Tax Rules, 1962. The Hon’ble Tribunal further went on to hold that the rule of natural justice applies equally to Assessees and the Revenue and that the Ld. CIT(A) has committed an error by not affording the AO an opportunity of being heard and provide his comments. Finally, the Hon’ble Tribunal observed that the Ld. CIT(A) has neither effectively assessed the reasonability of the premium charged by the Assessee nor established the genuineness of the transaction. Accordingly, the matter was remanded back to AO for verification of the Assessee’s claim considering the additional evidence.  (AY. 2009-10)