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Against the additions, disallowances
made in the assessment order. the Appellant files appeal to the Commissioner
of Income Tax (CIT)(A)]. So also against the orders of the CIT{A)
appeals are filed before the Income Tax Appellate Tribunal (ITAT).
Many times it so happens that for several reasons like not getting
proper opportunity to submit the details, or AO not informing properly
on what grounds he is not satisfied with the explanation furnished
or he wants additional information and suddenly without informing
or giving opportunity, he makes addition/disallowances on different
points or sometimes, the Appellant is prevented by sufficient cause
for not being able to submit details called for. In all such cases,
when the matters come up for appeal before the first Appellate Authority
or second Appellate Authority, additional evidence is required to
be furnished at the Appellate stage. It also happens that at the Appellate
stage, either in his appeal or the appeal filed by the Dept. (before
the ITAT) , it is felt necessary to file supporting/additional evidence.
The question that arises for consideration is whether the Appellate
Authorities can admit such additional evidence and what are the provisions
concerning furnishing of additional evidence. In this article, attempt
has been made to summarize the important provisions relating to furnishing
of additional evidence .
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Appeal before
the Commissioner of Income Tax (A) (Secs. 250 and 251 of the IT Act)
While disposing of the appeal, the CIT(A) has power to either
confirm, reduce, enhance or annul the assessment and in case of penalty,
he may confirm, cancel or vary the penalty and he has also powers
to pass such order as he thinks fit [(sec. 251(1).
As per the provisions of Sec. 250(4)
and (5), the CIT(A) may before disposing of the appeal make such further
inquiry as he thinks fit or may ask the AO to carry out certain further
inquiry. He can also admit such other additional ground, which is
not specified in the grounds of appeal if he is satisfied, that the
omission of that ground from the form of appeal was not wilful or
unreasonable.
As per Rule 46A of the IT Rules,
the appellant is not entitled to produce any evidence, oral or documentary
other than produced before the AO. The following exceptions have been
provided in the said Rules:
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The AO has refused to admit which
ought to have been admitted.
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The appellant was prevented by
sufficient cause from producing evidence, which he was called
upon to produce by the AO.
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The appellant was prevented by
sufficient cause from producing the evidence before the AO, which
is relevant to the grounds in appeal.
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The AO has made order without
giving sufficient opportunity to the appellant to adduce evidence
relevant to any ground in appeal.
Before admission of additional evidence,
the CIT(A) has to give reasonable opportunity to the AO to either
examine the additional evidence or file rebuttal to the additional
evidence produced by the appellant.
As per rule 46A(4), notwithstanding
anything contained in 46A(1), the CIT(A) has power to direct the appellant
for production of any document or examination of any witness to enable
him to dispose of the appeal or for any other substantial cause including
enhancement or for imposing of penalty etc.
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Appeal before
the Tribunal
The ITAT after hearing both the parties passed such orders as
he thinks fit. The ITAT for discharging its functions, have all the
powers vested in the IT authorities u/s. 131 and proceedings before
the ITAT shall be deemed to be judicial proceedings within the meaning
of secs. 193 and 228 and for the purpose of secs. 196 of the Indian
Penal Code and the ITAT shall be deemed to be civil court for the
purpose of code of criminal procedure.
As per the ITAT Rules 28 to 31, the
Tribunal can admit additional evidence in certain circumstances (similar
to Rule 46 A of the IT Rules), after recording reasons for admission
of such additional evidence, affidavit or examination of witness etc.
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Powers of the CIT(A)
From the above, it would be noticed that the powers conferred
on the CIT(A) by the IT Act are much wider than the powers of an ordinary
Court of Appeal. Once the assessment comes before the CIT(A), his
competence is not restricted to examining those aspects of assessment
which are complained of by the assessee but ranges over the whole
assessment and it is open for him to correct the AO not only with
regard to matter raised by the assessee in appeal but also with regard
to any other matter considered by the AO and determined in the course
of assessment. However, the CIT(A) cannot introduce in the assessment
new source of income and he should confine to the subject matter or
original assessment only. Refer: Narrondas Manordas 31 ITR 909
(Bom), Scindia Steam Navigation Co. Ltd. 80 ITR 589 (Bom), P. N. Balsubramaniam
112 ITR 512 (AP). In other words, the powers of the CIT(A) is
coterminous with that of the AO. He can do whatever the AO can do
and can direct the AO to do what he failed to do. Refer: Kanpur
Coal Syndicate 53 ITR 225 (SC). In view of this, the Courts have
taken a view that there is no reason to justify the curtailment of
powers of the CIT(A) to entertain additional grounds of appeal raised
by the Assessee in seeking modification of the assessment order passed
by the AO. Jute Corp. of India Ltd. 187 ITR 688 (SC) , National
Thermal Power Co. Ltd. 229 ITR 383 (SC), Ahmedabad Electricity Co.
Ltd. 199 ITR 351 (Bom) (FB).
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Right to
admit additional evidence by the CIT(A)
As mentioned above. secs. 250(4) and (5) permits the CIT(A) to
make such further inquiry on his own or direct the AO to do the same,
as he may think fit. Therefore, the CIT(A) is well within his rights
if he asks or allows to produce or file additional evidence or papers
in the manner he thinks fit. Keshav Mills Co. Ltd. 56 ITR 365 (SC).
The Bombay High Court in Prabhavati
S. Shah 231 ITR 1 had occasion to consider whether the rule 46A
is intended to put fetters on the right of the appellant to produce
before the CIT(A) any, additional or supporting evidence. After considering
secs. 250 and 46A, the Bombay High Court held that if certain information
is necessary for deciding the controversy in regard to the genuineness
of loan etc., the CIT(A) should direct the assessee to furnish such
information as per the powers conferred upon him u/s. 250(4). The
Bombay High Court has observed as under:
"On a plain reading of rule 46A of
the Income-tax Rules. 1982, it is clear that the rule is intended
to put fetters on the right of the assessee to produce before the
Appellate Assistant Commissioner any evidence whether oral or documentary,
other than the evidence produced by him during the course of the proceedings
before the Income-tax Officer, except in the circumstances set out
therein. It does not deal with the powers of the Appellate Assistant_
Commissioner to make further enquiry or to direct the Income-tax Officer
to make further enquiry and to report the result of the same to him.
This position has been made clear by sub-rule (4) of rule 46A which
specifically provides that the restrictions placed on the production
of additional evidence by the appellant would not affect the powers
of the Appellate Assistant Commissioner to call for the production
of any document or the examination of any witness to enable him to
dispose of the appeal."
It is clear from sub-sections (4)
and (5) of section 260 of the Income-lax Act, 1961, 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 coterminous
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 Appellate Assistant
Commissioner fails to exercise his discretion judicially, 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.
The Courts have held that if the
CIT(A) does not admit the piece of evidence or admits the piece of
evidence without any explanation at all, it could not be properly
exercising his discretion and in such circumstances, the ITAT would
be competent to interfere in the matter. Refer: Rajkumar Srimal
102 ITR 525 (Cal), Ganpatrai & Sons Ltd. 24 ITR
362 (Bom). However, before admitting the additional evidence,
the CIT(A) has to give opportunity to the Assessing Officer to consideror
cross examine or rebut the additional supporting evidence furnished
by the assessee. In the following cases, the Courts had occasion to
consider under what circumstances, the additional evidence can be
entertained by the Appellate Authorities. Refer: Arjundas 112 ITR
480 (Pun), Shaligram Premnath 179 ITR 239, New Manas Tea Estates Pvt.
Ltd. 73 ITD 157 (Gau) (TM), Dwarika Prasad 63 ITD 1 (Pat) (TM), Ganibhai
Wahabbhai 232 ITR 900, Tara Devi Goenka 112 ITR 14 (Cal). Also
refer Cir. No. 108 dated 28-3-1973 explaining the amendment relating
to additional evidence and rule 46A.
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Right to admit additional
evidence by the Tribunal
The Courts have held that from the perusal of provisions of see.
255 and the ITAT rules, that the Tribunal has full powers of admission
of additional evidence as it thinks fit. It has also power to consider
whether the CIT(A) was justified in admitting or not admitting the
additional evidence produced before him. Refer: Satya Sethia 143
ITR 486 (MP), Abhay Kumar Shroff 63 ITD 144 (Pat) (TM), Rajmoti Industries
(1995) 52 ITD 286. The Courts have however, categorically held
that whenever additional evidence is produced, it is the duty of the
assessee to establish why such evidence could not be produced before
the Lower Authorities. At the same time, as held by the Bombay High
Court in the interest of justice, if the Tribunal feels appropriate
it has to call for the evidence or examine the witness as is necessary
for deciding the appeal before them.
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From the above, it is clear that the power to admit additional evidence,
has been liberally construed by the Tribunal and Courts to decide the
appeal and make the assessment of the income of the assessee fair and
proper. However, it is not the inherent right which Is given to the
appellant to submit the additional evidence, it is fettered with certain
restrictions and therefore, he has to establish why he could not produce
such evidence before the Lower Authority. Therefore, it is always advisable
to furnish all the information called for at the assessment stage and
if sufficient opportunity is not given to submit the details or some
new points are raised by the AO for which no explanation was called
for, immediately on receipt of the order, these facts should be placed
on record of the AO and also mention should be made about the same in
the Statement of Facts. If necessary, to prove the bonafide, the appellant
should call for the copy of the order sheet from the AO’s file to prove
what were the details called and furnish before the AO and if need arises,
suitable affidavit may have to be furnished before the Appellate Authorities.
It also happens that depending upon the availability of information
at a later stage, it can be filed only with the Appellate Authorities.
In such circumstances, it has to be established that such information
was not available earlier. Similarly, while defending the appeals before
the Tribunal, the appellant can file supporting additional evidence
subject to the fact that he has to establish why such
evidence is necessary to be admitted by the ITAT for the first time
The Courts have always been taking a serious view if the opportunity
is not given to the AO by the CIT(A) while admitting the additional
evidence and many times the matters are remanded back to give opportunity
to the AO. Therefore, it is the duty of the assessee to ensure
that whenever additional evidence is filed before the CIT(A) subject
to his approval, copy is filed with the AO or request is made to
the CIT(A) to the AO for his comment. If the comments are
not received within a reasonable time from the AO, the Courts have taken
a view that the CIT (A) can proceed with the appeal on the assumptions
that the AO has nothing to say about the additional evidence.
To summarize, whenever supporting evidence is required to be
submitted to prove his point, the Assessee has to establish the
necessity of admission of such evidence and why it could not
be furnished earlier.
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