ORDER
N.R.S. Ganesan, J.M.
1. The Revenue has preferred this appeal against the order of the CIT(A) in respect of asst. yr. 1993-94. The appeal is time-barred by 11 days. The Revenue has filed a petition for condonation of delay. We are satisfied that sufficient cause has been shown in the condonation petition the delay is condoned and admit the appeal for hearing on merit.
2. The only grievance of the Revenue in this appeal is the deletion of Rs. 60,147 which was added by the AO as undisclosed income of the assessee. Mr: B.B. Deb, the learned Departmental Representative, drawn our attention to the order of the first appellate authority at para 3.2 and submitted that the assessee has produced the statement of accounts for the year ended 31st March, 1988. The learned Departmental Representative further submitted that a copy of the petition dt. 30th Dec., 1994, which was filed by the assessee before the Dy. CIT, Dibrugarh Range, Dibrugarh, was also filed before the first appellate authority. The first appellate authority placing his reliance on the statement of accounts and also letter dt. 30th Dec., 1994, deleted the addition. According to the learned Departmental Representative the aforesaid two documents filed by the assessee was in violation of Rule 46A of the IT Rules, 1962. The learned Departmental Representative invited our attention to Rule 46A and submitted that the first appellate authority was empowered to receive additional evidence subject to condition mentioned in Rule 46A(1). However, the first appellate authority has to record his reason in writing before admitting the additional evidence. Apart from that Sub-rule (3) of Rule 46A clearly says that an opportunity must be given to the AO before taking into account any evidence produced by the assessee under Sub-rule (1) of Rule 46A. The learned Departmental
Representative submitted that it is not a case where the first appellate authority directed the assessee by exercising his power under Sub-rule 4 of Rule 46A. In support of his contention the learned Departmental Representative referred to case laws in CIT v. Amritlal Bhogilal & Co. (1958) 34 ITR 130 (SC) and CIT v. Valimohmed Ahmedbhai (1982) 134 ITR 214 (Guj)
3. On the contrary, the learned authorised representative submitted that no opportunity was given to the assessee to file the above documents before the AO. According to the learned authorised representative the AO relied upon a letter dt. 12th March, 1994, said to be received from Oil India Ltd. However, the content of the said letter was not disclosed to the assessee and hence the assessee was not in a position to produce these two documents before the AO during the course of assessment proceedings. The learned authorised representative further submitted that the first appellate authority is well within his power to make further enquiry as he deems fit by exercising his power under Section 250(4) of the IT Act, 1961. According to the learned authorised representative the restriction contained in Rule 46A for receiving additional evidence cannot stand in the way of making further enquiry by the first appellate authority under Section 250(4). The learned authorised representative relied upon the following judgments in support of his contentions :
(i) CIT v. Kanpur Coal Syndicate (1964) 53 ITR 225 (SC);
(ii) Jute Corporation of India Ltd. v. CIT (1991) 187 ITR 688
(SC);
(iii) ITO v. Bajoria Foundation (2001) 117 Taxman 126 (Cal); and
(iv) Smt. Prabhavati S. Shah v. CIT (1998) 231 ITR 1
(Bom).
4. We have considered the rival contentions of both the parties in the light of
the materials available before us. The main dispute in this appeal appears to be
whether the first appellate authority has violated the principles contained in r.
46A while receiving the additional evidence. It is not the case of the assessee
that no additional evidence was produced. The assessee tried to justify the
production of additional evidence by saying that the first appellate authority
has power to receive the additional evidence under Section 250(4) of the IT Act,
1961. It is necessary to keep in mind that in exercise of statutory power under Section 295 of the IT Act, 1961, the Central Board of Revenue made the IT Rules,
1962. In the aforesaid rule a specific provision has been made for receiving additional evidence under Rule 46A. Since this rule has been framed in exercise of statutory power under the IT Act this will also have statutory force for the purpose of receiving additional evidences. While the first appellate authority has all the powers to make further enquiry under Section 250(4) of the Act, however, while receiving additional evidence the authority has to follow the necessary principles incorporated in Rule 46A. In other words, the power of the CIT(A) to make further enquiry will be subject to Rule 46A in the case of receiving additional evidence. An exception was also given to the CIT(A) to direct the production of any document notwithstanding anything contained in Sub-rule (1) of Rule 46A. In this case, it is not the case of both the parties that the CIT(A) himself exercised his powers under Sub-rule (4) of Rule 46A for the purpose of directing the production of any document. In fact, no direction was issued by the first appellate
authority to receive or produce any document. The case law cited by the learned Departmental Representative in the case of Amital Bhogtial & Co. (supra). We have gone through the judgment of the Hon’ble Supreme Court carefully. We are of the considered opinion that the facts of that case are entirely different. In that case the Hon’ble Supreme Court dealt with the revisional power of the CIT and the power of the GIT to receive additional evidence was not the subject-matter before the Hon’ble Supreme Court. Hence, we are of the opinion that this judgment of the Hon’ble Supreme Court is not relevant for the purpose of the present case on our hand. The other case referred by the learned Departmental Representative in the case of Valimohmed Ahmedbhai (supra) the Hon’ble Gujarat High Court has considered the Sub-rule (3) of Rule 46A and held that ends of justice and fairplay demand that when an assessee produces additional evidence in his appeal an opportunity is to be given to the ITO to test the evidence or to counter the effect of the evidence by producing evidence in rebuttal or otherwise. We are of the considered opinion that this case of the Hon’ble Gujarat High Court is squarely applies to the facts of the case on our hand.
5. Now we shall discuss the case laws produced by the learned authorised representative for the assessee. The first case referred by the authorised representative is in the case of CIT v. Kanpur Coal Syndicate (supra). In this case the Hon’ble Supreme Court has held that the AAC has plenary power in disposing of the appeal. The scope of the power is coterminous with that of the ITO. We have carefully gone through the judgment of the Hon’ble Supreme Court. The power of the first appellate authority is coterminous with that of the AO. The first appellate authority can direct the production of any document for the purpose of disposal of appeal. But that is not the case in our hand. Here the additional evidence was produced by the assessee. Moreover, the Hon’ble Supreme Court had no occasion in this case to interpret Rule 46A. Rule 46A was inserted in the IT Rules, 1962, by IT (Second) Amendment Rules, 1973, w.e.f. 1st April, 1973. This judgment of the Hon’ble Supreme Court was delivered in the year 1964. Hence, we are of the opinion that this judgment is not applicable to the facts of this case.
6. The other case referred by the learned authorised representative is in the case of Jute Corporation of India Ltd. (supra). In this case the subject-matter before the Hon’ble Supreme Court was regarding raising of additional grounds before the first appellate authority and question of raising of additional evidence was not the subject-matter before the Hon’ble Supreme Court. Hence, we are of the opinion that this judgment of the Hon’ble Supreme Court is also not relevant for the purpose of the case on our hand. The other case referred by the learned authorised representative is in the case of Smt. Prabhavati S. Shah (supra). In this case the Hon’ble Bombay High Court held that the first appellate authority has wide power than the ordinary Court of appeal under Section 250(4) and Section 250(5) of the IT Act. In this case the Hon’ble Bombay High Court held that on a plain reading of Rule 46A it is clear that this rule is intended to put fetters on the right of the appellant to produce before the AAC any evidence, whether oral or documentary, other than the evidences produced by him during the course of the proceedings before the ITO except in the circumstances set out therein. It was also held that this restriction contained in Sub-rule (1) of Rule 46A does not
prevent the first appellate authority to exercise his power and direct the production of any document under Sub-rule (4) of Rule 46A. Hon’ble Bombay High Court has proceeded on the footing that, that was fit case where the AAC should have exercised his power conferred upon him under Sub-section (4) of Section 250 of the Act. Sub-rule (3) of Rule 46A was not dealt with by the Hon’ble Bombay High Court in this judgment. Wherever the additional evidence is produced by the assessee the Sub-rule (3) of Rule 46A has a significant role to play and the AO must be given an opportunity to examine or to controvert the aforesaid evidence. The Sub-rule (3) of i 46A was not dealt within the judgment of the Hon’ble Bombay High Court. However, this Sub-rule (3) was dealt with by the Hon’ble Gujarat High Court in the case of CIT v. Valimohmed Ahmedbhai (supra). Moreover, admittedly the first appellate authority has not given any direction for production of any document in exercise of his power under Section 250(4) of the Act or Sub-rule (4) of Rule 46A. The order of the first appellate authority clearly shows that no opportunity was given to the assessee to produce those documents before the AO. If that is so, the case may fall under Sub-rule (1) of Rule 46A. In that case the procedure contemplated under Sub-rule (3) of Rule 46A has to be followed before taking into account any evidence produced by the assessee. In view of the judgment of the Hon’ble Gujarat High Court in the case of CIT v. Valimohmed Ahmedbhai (supra) we are unable to place our reliance in the judgment of the Hon’ble Bombay High Court in the case of Smt Prabhavati S. Shah (supra).
7. The learned authorised representative further relied upon the decision of the Tribunal, Calcutta Bench, in the case of ITO v. Bajoria Foundation (supra). In this case also the Calcutta Bench of the Tribunal has not considered the Sub-rule (3) of Rule 46A. By relying on the judgment of the Hon’ble Bombay High Court in the case of Sent. Prabhavati S. Shah v. CIT (supra) the Calcutta Bench of the Tribunal has held that it is a fit case where the CIT should have exercised his power to make further enquiry. Here also Sub-rule (3) of Rule 46A was not discussed. Hence, we are unable to place our reliance in this case also.
8. From the above discussion it emerges that the first appellate authority has all the plenary powers for the purpose of disposal of the appeal before him. The first appellate authority can direct the production of any document or evidence by exercising his power under Section 250(4) r/w Sub-rule (4) of Rule 46A. Whenever this power of the CIT was not exercised and the additional evidence is produced by the assessee before the first appellate authority it has to be decided as per the principles laid down in Sub-rule (1) of Rule 46A and the first appellate authority has to give his reason in writing for admission of the ‘aforesaid documents. Furthermore, the mandatory requirement under Sub-rule (3) of Rule 46A is that an opportunity must be given to the AO either to examine these evidences or to rebut these evidences. In this case admittedly the CIT has not exercised his power under Sub-rule (4) of Rule 46A. The additional evidence produced by the assessee was received and relied upon without giving any reason as contemplated under Sub-rule (2) of Rule 46A. Furthermore no opportunity was given as required under Sub-rule (3) of Rule 46A. As held by the Hon’ble Gujarat High Court in the case of CIT v. Valimohmed Ahmedbhai (supra) the ends of justice and fair-play demand that when an assessee produces additional evidence in his appeal an opportunity is to be given to the AO to test the evidence or to
counter the effort of the evidence by producing evidence in rebuttal or otherwise. Notice of appeal cannot be equated with notice of future application to lead additional evidence which no one could have anticipated or reasonably foreseen. In view of the above discussion, it is very clear that the two documents produced by the assessee is additional evidence and the same was received by the first appellate authority in violation of Rule 46A and also against the principles of natural justice behind the back of the AO. Hence, we have no hesitation to set aside the order of the CIT(A). However, we remand back the matter to the file of the AO to examine the issue and also the evidence produced by the assessee before the first appellate authority and take a decision in accordance with law after giving sufficient opportunity to the assessee.
9. In the result, the order of the CIT(A) is set aside and the appeal is allowed. The matter is remanded back to the file of the AO for fresh disposal.