The Income Tax Appellate Tribunal (ITAT), Hyderabad Bench, has recently, in an appeal filed before it, held that the failure of the CIT(A) to provide document verification opportunity to the AO, violates the provisions of Rule 46A (3) of the Income Tax Rules.
The aforesaid observation was made by the Hyderabad ITAT, when an appeal was preferred before it by the Revenue, as directed against the order dated 11/08/2022 of the CIT (A), Hyderabad relating to A.Y.2018-19.
The facts of the case, in brief, were that the assessee was an individual, who was employed with Amazon Development Centre (India) Pvt. Ltd, for the impugned A.Y 2018-19. She had filed her return of income declaring total income at Rs.53,72,850/-.
The case was selected for limited scrutiny through CASS to verify “Large Investment in foreign assets-immovable property”. And, the Assessing Officer issued statutory notices under section 143(2) and 142(1) of the Income Tax Act to the assessee, to furnish the details along with supporting documents regarding large investment in foreign immovable property.
The assessee in her response submitted that she jointly owns one house property in US with her spouse, which was let out during the year, and that since the investment towards the property was jointly made by her and her spouse in the ratio of 50:50, 50%, the house property income (after considering the possible deductions) has been accordingly offered for tax in India in the tax return filed for the A.Y. 2018-19. She added that the balance 50% of the house property income has been offered in the hands of her spouse.
However, there was no response from the assessee regarding the source of investment in foreign immovable property, as called for by the Assessing Officer as per the questionnaire. And, in view of the above, the Assessing Officer completed the assessment under section 143(3) r.w.s. 144B of the Income Tax Act, 1961, assessing the income of the assessee at Rs.2,03,22,600/.
In appeal, the CIT (A) on the basis of certain documents filed by the assessee evidencing the purchase of foreign asset in 2006, deleted the addition made by the Assessing Officer. And, it is being aggrieved by such order of the CIT (A), that the Revenue is presently in appeal before the Tribunal.
The grounds of the Revenue’s appeal being that the order of the CIT(Appeals), is erroneous in law and on the facts of the case, as he has erred in accepting the self-serving documents not corroborated by evidence and which had not stood the test of enquiries in assessment proceedings, and further that the CIT(Appeals) erred in not allowing the AO to examine the additional evidence admitted by him as per the provisions under Rule 46A(3) of the Income Tax Rules ,1962.
Shri KPRR Murthy, the CIT DR, referring to the order of the CIT (A) submitted that the CIT (A) without affording any opportunity to the Assessing Officer accepted certain evidences filed by the assessee and deleted the addition in violation of provisions of Rule 46A(3) of the Income Tax Rules.
He further contented that without providing an opportunity to the Assessing Officer, the CIT (A) could not have accepted the additional evidences and deleted the addition, and accordingly, submitted that the order of the CIT (A) be reversed and that of the Assessing Officer be restored.
On the other hand, Shri S. Vijay Aditya, the Counsel for the assessee, strongly supported the order of the CIT (A), and submitted that the assessee filed the necessary documentary evidence for purchase of the foreign asset as directed by the CIT (A) and therefore that, there is no violation of provisions of Rule 46A (3) of the Income Tax Rules. He also added that the CIT (A), after verifying the details, has passed the order which is justified and therefore that, the same should be upheld and the grounds raised by the Revenue be dismissed.
Hearing the opposing contentions of both the sides and thereby perusing the materials available on record, the ITAT observed:
“We have heard the rival arguments made by both the sides, perused the orders of the AO and the learned CIT (A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us by both sides. We find the AO in the instant case made addition of Rs.1,49,49,750/- on the ground that the assessee did not file any explanation regarding the investment in the foreign immovable property being 50% of her share of the total investment of Rs.2,98,99,500/-. We find the learned CIT (A) on the basis of certain documents filed by the assessee deleted the addition without calling for any remand report from the Assessing Officer or without giving any opportunity to the Assessing Officer to verify the documents.”
“In our opinion, since the assessee had not filed the documentary evidence before the Assessing Officer to explain the source of the investment in foreign immovable property as called for by the Assessing Officer, therefore, the learned CIT (A) was duty bound to give an opportunity to the Assessing Officer to verify the documents filed by the assessee during the course of appeal proceedings. Therefore, there is clear violation of provisions of Rule 46A (3) of the I.T. Rules.”, the ITAT Panel of Laliet Kumar, the Judicial Member and R.K Panda, the Accountant Member, added.
Thus, allowing the Revenue’s appeal, the ITAT held
“Considering the totality of the facts of the case and in the interest of justice, we deem it proper to restore the issue to the file of the Assessing Officer with a direction to grant one opportunity to the assessee to substantiate her case by filing the requisite details and decide the issue as per fact and law. We hold and direct accordingly. The grounds raised by the Revenue are accordingly allowed for statistical purposes. In the result, the appeal filed by the Revenue is allowed.”
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