CIT(A) order accepting Additional Evidence in Violation of Rule 46A of Income Tax Rules not valid: ITAT sets aside Order

CIT(A) order accepting Additional evidence in violation of rule 46A of Income Tax Rules not valid, the Mumbai Bench of the Income Tax Appellate Tribunal (ITAT)set aside the order.

M/s. Allied Offshore Services Pvt. Ltd.,the assessee is in the business of providing offshore services and the assessee being representative in India for various overseas manufacturers/dealers/suppliers who are in the oil and gas sector earns commission income in lieu of the services rendered. 

The assessee company filed a return of income declaring total income at Rs.80,10,250/- after claiming a deduction of Rs.2,62,500/- under section 80G of the Act.  The assessee has declared book profit at Rs.74,11,084/- under section 115JB of the Income Tax Act, 1961 (‘the Act’).

The Assessing Officer (AO) after declining the contentions raised by the assessee company treated thecommission incomeamounting to Rs.4,80,90,000/-, Rs.2,08,50,000/- & Rs.2,75,00,000/- for A.Y 2012-13, 2013-14 & 2014-15 respectively proclaimed to be commission received in advance and reflected as part of current liability in the balance sheet as on 31.03.2012 and taxed under the head “income from business/profession” by framing the assessment under section 143(3) of the Act.   CIT(A) deleted the addition in all three years by allowing the appeals filed by the assessee.  

The assessee has received commission income from the foreign entity for rendering services to them in advance in all the aforesaid three years.  The assessee company has not furnished any working as to the rendering of services by bifurcating as to how much commission was earned for the years under consideration. 

Shri Manoj Sinha appeared for the Revenue challenging the impugned orders passed by the CIT(A) and contended inter alia that while entertaining the additional evidence by the CIT(A) provisions contained under rule 46A of the Act have not been complied with.

Dr K. Shivaram, counsel for the assessee argued that there was no loss of Revenue as the assessee company being a corporate entity is being taxed at the same rate for all the years and the advance commission cannot be treated as income.  

A Coram of Shri Kuldip Singh, judicial member and  Shri Om Prakash Kant, accountant member observed that when additional evidence is entertained by theCIT(A) has not been brought on record in accordance with Rule 46A subsequent findings on the same are vitiated because there is not even a remand report admittedly submitted by the AO. 

The impugned orders passed by the CIT(A) are set aside and the case was remanded back to the AO to decide afresh by providing the opportunity of being heard to the assessee. The appeals filed by the Revenue are allowed for statistical purposes.  

To Read the full text of the Order CLICK HERE

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