ITAT Rejects Revenue’s Objection on Additional Evidence, Finds CIT(A) Acted Within Section 250(4) Powers [Read Order]

The Ahmedabad Bench of Income Tax Appellate Tribunal(ITAT)  rejected the Revenue’s objection regarding the admission of additional evidence by the Commissioner of Income Tax (Appeals) [CIT(A)] and upheld that the CIT(A) acted within its powers under Section 250(4) of the Income Tax Act,1961.

The Revenue-appellant, appealed against the order dated  30.10.2023,passed by CIT(A) for the Assessment  Year 2016-17.In this case, H.V. Infratex Ltd.,respondent-assessee,involved in government civil and construction contracts, filed its return for A.Y. 2016-17 on 17.10.2016, declaring total income of Rs. 49,20,980/- and book profit of Rs. 61,33,174/-.

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The case was selected for limited scrutiny, and the Assessing Officer(AO) issued multiple notices, but the assessee did not fully comply. As a result, the AO passed an ex-parte assessment order on 10.12.2018, adding Rs. 5,92,53,633/- by disallowing 25% of other expenses of Rs. 23,70,14,534/- due to lack of supporting documents.

The assessee appealed to the CIT(A) against the ad-hoc disallowance and submitted additional evidence, including ledgers and invoices. The CIT(A) sent this to the AO for verification. The AO objected but eventually submitted a remand report confirming most expenses were genuine.

The AO accepted some expenses but questioned cash payments and certain expenses like rent and salary. The CIT(A) noted that the AO didn’t reject the books of accounts or find any bogus expenses. Since the accounts had been audited with no issues, the CIT(A) ruled the disallowance was unjustified. The CIT(A) deleted the 25% disallowance and granted relief to the assessee.

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

The Revenue aggrieved by the decision appealed before the tribunal.

The two member bench comprising T.R.Senthil Kumar(Judicial Member) and Makarand V.Mahadeokar(Accountant Member) reviewed the submissions, the assessment order, the CIT(A) order, and the materials on record. The Revenue argued that the CIT(A) violated Rule 46A by admitting additional evidence, claiming the respondent-assessee had enough chances during the assessment to submit documents.

Read More: CIT(A) Refuses to Admit Additional Evidence: ITAT Remands Matter for Fresh Adjudication

However, the appellate tribunal found that the CIT(A) followed the correct process under Section 250(4) of the Act, which allows further inquiry before deciding the appeal. The CIT(A) sent the additional evidence to the AO for verification, and the AO confirmed the genuineness of most expenses in a remand report dated 19.07.2023. Since the AO had the opportunity to verify the documents, the ITAT found no violation of Rule 46A and upheld the CIT(A)’s decision.

In short,the appeal filed by the Revenue was dismissed.

To Read the full text of the Order CLICK HERE

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