ITAT Criticizes CIT(A) for Rejecting Additional Evidence, Sets Aside Order on Ex Parte Assessment [Read Order]

The appellant Mayank Raghuvanshi, filed this appeal Under Section 253 of the Income Tax Act 1961, challenging the order of the CIT(A) for the Assessment Year (AY) 2017-18 in respect for which the assessee had not filed its return.

The Assessing Officer (AO) made an assessment order under Section 144 of the Act, computing and assessing the assessee’s total income exigible to tax at ₹7,86,000 on a substantive basis and ₹9,00,000 on a protective basis.

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Aggrieved by the assessment order, the assessee preferred a first appeal under Section 246A of the Act before the CIT(A), who dismissed the appeal. The core ground for dismissal was that despite opportunities afforded by the AO, the assessee remained non-compliant during the original assessment proceedings.

Another ground was that in the first appellate proceedings the assessee produced additional evidence under Rule 46A but failed to justify any of the material ingredients of Rule 46A by virtue of which such additional evidence could be taken on record.

The appellant contended that the order of CIT(A) was illegal, bad in law, and contrary to the principles of natural justice. It was argued that the CIT(A) acted without proper application of mind and unjustifiably upheld the ex parte assessment order while also rejecting the application for additional evidence.

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It was further submitted that, although the AO issued notice under Section 142(1) calling for a return of income the appellant only filed submissions and did not file the return. The appellant and his family who were agriculturists maintain several bank accounts and relevant evidence regarding their agricultural activities was produced at the appellate stage.

The appellant asserted that the CIT(A) had wrongly interpreted Rule 46A which had resulted in the additional evidence remaining untested. Accordingly a detailed paper book and an application under Rule 29 of the Income Tax Appellate Tribunal Rules 1963, were filed before the tribunal to seek admission of this evidence for proper adjudication

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The Revenue submitted that the assessment order is under section 144 of the Act and that there is also an application under Rule 29 of the Income Tax Appellate Tribunal Rules. It was further submitted that since a part of the income is on a protective basis, it would be in the fitness of things if the matter is sent back to the AO for a fresh assessment order

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The bench comprising B.M. Biyani (Accountant Member) and Paresh M Joshi (Judicial Member) observed that the CIT(A) acting in quasi-judicial capacity was required to adjudicate the first appeal on meritorious grounds especially as the assessment order was admittedly passed under section 144 of the Act.

The tribunal noted that the application for additional evidence under Rule 46A had been rejected and stated that the first appellate authority must decide the appeal on merits as determination of correct income exigible to tax by due process is essential under the Act and no tax can be levied or collected save and except according to law by following due process.

The tribunal further held that since the assessee had filed an application for additional evidence before the tribunal it would be just fair and in the interest of justice that the matter be examined afresh by the AO. In view of the aforesaid the tribunal set aside the order by way of remand to the file of the Assessing Officer on a de novo basis.

Accordingly, the appeal of the assessee was allowed for statistical purpose.

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