Income Tax Appellate Tribunal - Rajkot
Parekh Automobiles vs Income Tax Officer on 24 February, 2000
Equivalent citations: (2000)68TTJ(RAJKOT)722
ORDER
Behari Lal, A.M. This appeal has been filed by the assessee against the order of the Commissioner (Appeals)-II, Rajkot dated 10-12-1998, for assessment year 1991-92. The main ground of appeal is regarding the addition of Rs. 67,695. It is submitted that the Commissioner (Appeals) has erroneously dismissed the appeal though on the facts and the circumstances of the case, the amount of Rs. 67,695 could have been fully allowed.
2. The assessee M/s Parekh Automobiles, Dhrol, is a registered firm assessed to income-tax since many years. During the year under consideration, the total turnover of the firm exceeded more than Rs. 40 lakhs. Hence it was liable to audit under section 44AB of Income Tax Act. The original order was passed by the assessing officer under section 143(3) of the Act after due verification of the books of accounts. Thereafter the Accountant General, Rajkot, pointed out that there was cash payment to the tune of Rs. 67,695. The assessing officer referred this matter to the Commissioner, Rajkot, and the learned Commissioner, Rajkot, ordered the assessing officer to reopen the case for making fresh assessment vide order passed under section 263 of the Act. The assessing officer made the reassessment under the provisions of section 144 of the Act on the basis that there was no co-operation from the assessee. The learned Commissioner referred the matter back to the assessing officer for verification of cash payment of Rs. 67,695. However, the assessing officer objected the addition of new evidence on the basis that the assessee was given sufficient opportunity to prove his case before him. After receiving reply from the assessing officer the learned Commissioner (Appeals) passed the order by not admitting the fresh evidence produced before him by the assessee and thus he dissmissed the appeal.
3. During the course of hearing, the learned counsel for the assessee contended that no such cash payments were made by the assessee. The assessee in fact received demand draft and cheque from M/s Gujarat Oil Agencies. He further stated that the chartered accountant was in error in considering these transactions as those of cash payments. This fact was pointed out to the learned Commissioner (Appeals) in the written submissions, dated 20-2-1998. In the said submission, it was also stated that "this has happened because of misrepresentation by the C.As in his audit report without proper verification. Here we may point out that after this event the appellant had changed his old practitioner and C.A. looking to the gross negligence of them". The assessee also explained how they could not furnish the explanation in de novo assessment. As contended by the learned counsel "every time when a notice under section 143(2) was issued by the Income Tax Officer Ward-3, Jamnagar the accountant of the firm Mr. Mahendra Bhai B. Bhatt approached the practitioner and handed over the notice of hearing. The income-tax practitioner Mr. Jaysukhbhai Patel informed accountant that there is no necessity to appear before the Income Tax Officer, Ward 3, Jamnagar, as the case is already settled under section 143(3) of Income Tax Act, 1961. "
4. The learned counsel, also pointed out that the transactions in question were not those of cash payment is not disputed and there is clearly a case of negligence by the chartered accountant and the tax practitioner. Therefore, according to him, the learned Commissioner (Appeals) should have admitted this new evidence for deciding the case on merit. It was also argued by the learned counsel that the appeal is a continuation of assessment and it is undisputed that the Commissioner (Appeals) is empowered to admit additional evidence at the time of hearing. The Appellate Assistant Commissioner or Commissioner (Appeals) is not only empowered but is also obliged to allow further enquiry so as to find out true state of affairs. The term "further enquiry" as envisaged in section 250(4) necessarily includes the production of additional evidence. He also stated that rule 46A is only an aid to enable the appellate authority to arrive at the truth of the matter in an appeal. It is not intended for shutting out evidence that is relevant for the purpose of deciding an appeal and it does not affect the powers vested in the first appellate authority by virtue of section 250(4) of the Act. He also contended that the eventual destination of every litigation is justice, and as such technicality should not be permitted to prevail as speed-breaker in the course of dispensation of justice. Regarding the transactions with M/s Joshi Jivandas Gangaram, he pointed out that the assessee purchased oil tins from M/s Joshi Jivandas Gangaram and the supplier was at Jamnagar. The assessee was not having any bank account at Jamnagar and the supplier therefore, insisted on cash payment. Further, a copy of the supplier's letter confirming that he insisted on cash payment was produced before the Commissioner (Appeals). Thus, the case is fully covered by rule 6DD(j) read with the Board's Circular No. 220, dated 31-5-1977.
5. The learned Departmental Representative, on the other hand, contended that the order under section 144 has been passed on its merits after giving sufficient opportunity to the assessee. He also supported the finding of the Commissioner (Appeals). According to him, there was a gross deficiency of law by the assessee. Therefore, the order passed under section 144 of the Act by the assessing officer and the learned Commissioner (Appeals) has confirmed the finding of the assessing officer on its merits. He further contended that the learned Commissioner (Appeals) has not admitted new evidence which was not produced before the assessing officer.
6. We have heard both the parties. According to the learned counsel, there was non-attendance before the assessing officer, in the course of reassessment proceedings because of the gross negligence on the part of the CA. To support his contention, he also filed affidavit of one Sri Mahendra B. Bhatt who was writing the accounts of the assessee-firm. In his affidavit, Shri Mahendra B. Bhatt has mentioned that the CA prevented him for non-attending the assessment proceedings before the assessing officer. The learned counsel the invited our attention to various case laws pertaining to the admission of additional evidence. Some of the cases are mentioned below :
(1) Tara Devi Goenka v. CIT (1980) 222 ITR 14 (Cal);
(2) Suresh Kumar Gupta v. Income Tax Officer (1982) 14 TTJ (Del) 4 70;
(3) Shanker Khandasari Sugar Mills v. CIT (1991) 97 CTR (Kar) 16;
(4) K. Mohammed v. Income Tax Officer (1977) 107 ITR 808 (Ker) (5) P.N. Balasubramaniam v. Income Tax Officer (1978) 112 ITR 512 (AP) ;
(6) Prakash Trading Co. v. Income Tax Officer (1990) 33 ITD 131 (Del);
(7) Smt. Mahinder Kaur v. Central Government (1976) 104 ITR 120 (All); and (8) Steel Ingots (P) Ltd. v. CIT (1996) 86 Taxman 440) (MP) In the above cases relied upon by the learned counsel, it has been laid down by the various High Courts and the Tribunal Benches, that the Commissioner (Appeals) is fully empowered to make further enquiries before disposing of the appeals. Regarding rule 46A, it has been held in the case of Smt. Mahinder Kaur v. Central Government (supra) that no part of rule 46A whittles down or impairs the power to make further enquiry conferred upon the Appellate Assistant Commissioner by section 250. Similar power conferred under sub-section (5) of section 250 on the Appellate Assistant Commissioner to permit the assessee to raise a fresh point has not been even touched by rule 46A. This rule does not affect the power of the Appellate Assistant Commissioner conferred upon him by that rule,. it gives an additional right to the assessee in the matter of production of additional evidence. In the case of Smt. Prabhavati S. Shah v. CIT (1998) 231 ITR 1 (Bom), the Hon'ble High Court has held as follows :
"It is clear from sub-sections (4) and (5) of section 250 of the Income Tax Act, 1991, that the powers of the Appellate Assistant Commissioner are much wider than the powers of an ordinary court of appeal. The scope of his powers is co-terminous with that of the Income Tax Officer. The power conferred on the Appellate Assistant Commissioner under sub-section (4) of section 250 being a quasi-judicial power, it is incumbent on him to exercise the same, if the facts and circumstances justify. If the AAC fails to exercise his discretion judicially, and arbitrarily refuses to make enquiry in a case where the facts and circumstances so demand, his action would be open for correction by a higher authority. The purpose of rule 46A of the rules is to ensure that evidence is primarily led before the Income Tax Officer. "
In the case of Electra (Jaipur) (P) Ltd. v. Inspecting Assistant Commissioner Delhi Bench 'A' of Tribunal has held if evidence produced by the assessee is genuine, reliable and proves assessee's case, then the assessee should not be denied opportunity of it being produced even if he first time produces the same before the appellate authority". The Tribunal further held that the sole purpose of judiciary as well as of the revenue is to get at the truth. In the case of Y. W. C.A. of India v. AC (1989) 34 TTJ (Del) 131, the Tribunal, Delhi Bench held that non-admission of the additional ground/evidence, if it is very relevant to determine the case, would amount to miscarriage of justice, a relevant and decisive evidence should be admitted along with the additional ground which goes to the root of the matter. In the case of Corporation of India Ltd. v. CIT (1990) 187 ITR 688 (SC), the Apex Court has laid down the following :
"There appears to be no good reason to justify curtailment of the power of the Appellate Assistant Commissioner in entertaining an additional ground raised by the assessee in seeking modification of the assessment order passed by the Income Tax Officer. There may be several factors justifying raising of such new plea in appeal and each case has to be considered on its own facts. Of course, while permitting the assessee to raise an additional ground the Appellate Assistant Commissioner should exercise his discretion in accordance with law and reason. He must be satisfied that the ground raised was bona fide and that the same could not have been raised earlier for good reasons. The satisfaction of the Appellate Assistant Commissioner depends upon the facts and circumstances of each case and no rigid principles of any hard and fast rule can be laid down for this purpose. "
7. In the present case, the original assessment was completed by accepting the book results of the assessee. The case was reopened under the provision of section 263 of the Act by the Commissioner. While framing the fresh assessment, the assessee could not appear before the assessing officer because he was prevented by chartered accountant on the basis that the assessment has already been completed by the assessing officer and there is no need of appeal before the assessing officer again. Thus, assessee was misguided by the CA and, therefore, he could not produce the necessary evidence before him. On appeal, he produced the evidence of cash payment before the learned Commissioner (Appeals). Therefore, the intention of the assessee was a bona fide one and the learned Commissioner (Appeals) should have taken into account the fresh evidence produced before him for giving proper justice to the assessee. In view of legal pronouncements by the various High Courts discussed above, we are of the considered opinion that in the interest of justice, the learned Commissioner (Appeals) should have admitted the fresh evidence and should have made further enquiries before passing the order. Therefore, the case is set aside and restored back to the file of the Commissioner (Appeals) with the direction to admit the new evidence regarding the cash payments and pass a speaking order after conducting necessary investigation and after making necessary enquiries in this regard.
8. In the result, the appeal is treated as allowed for statistical purposes.