If the decision is made by admitted additional evidence without fulfilling the condition than the decision is not tenable

IN THE INCOME TAX APPELLATE TRIBUNAL

DELHI BENCH “D” NEW DELHI

BEFORE SHRI R.P. TOLANI AND SHRI B.C. MEENA

ITA No. 3982/Del/2009

Asstt.Yr: 2006-07

Income-tax Officer, Ward 24(2),

New Delhi.

 (Appellant)

Vs.

Kuber Chand Sharma,

5 CSC SFS Apartments,

Haus Khas, New Delhi.

PAN/GIR No. AAMPS8620G

(Respondent)

                                                  Appellant by: Ms. A. Khurana DR

Respondent by: Shri R.K. Mehra CA

O R D E R

PER R.P. TOLANI, J.M:

This is Revenue’s appeal against CIT (A)’s order dated 6-7-2009 relating to A.Y. 2006-07. Following grounds are raised:

“1. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in dismissing the additional evidence in spite of the fact that ample opportunities were given to the assessee during the course of assessment proceedings.

2. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs. 66,00,015/- as agricultural receipts whereas the AO treated them as merely book entries.

3. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law and on facts in not appreciating the finding of the AO that as per the lat agreement produced by the assessee he is not in possession of the agricultural land.

4. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law and on facts in deleting the addition Rs. 1,15,06,543/- on account of LTCG claimed exempt u/s 54B of the I.T. act.

5. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law and on facts in not appreciating the fact that the utility of the land in question was changed to residential purposes from agricultural activities, the said fact was admitted by the assessee himself.”

2. Brief facts are:

The assessee claimed to be engaged in the business of agricultural activities in the name of Samak Farms & Nursery and held agricultural fields at various places in the districts of Ghaziabad and Gurgaon. In the return of income, assessee claimed agricultural income of Rs. 65,00,015/- and exemption of long term capital gains on sale of agricultural lands u/s 54B at Rs. 1,15,06,543/-. These aspects were examined and according to AO, during the course of assessment proceedings, assessee submitted contradictory statements while explaining the agricultural income. AO further found that assessee claimed to have made bulk sale of agricultural products to associate concerns viz. M/s Samak Landscape Pvt. Ltd. and M/s Samak Nature Resorts & Spa Pvt. Ltd. on credit basis and in lieu of these credit sales, the assessee acquired shares of SNR and Spa. AO held it to be a planned device to acquire shares by showing inflated agricultural income and made the addition by following observations:

“In the light of the above I hold that the assessee has made bogus credit sales to the company to acquire shares in the company in which the assessee had substantial interest and has entered into a device to evade tax which is not permissible. In view of this the total credit sales made to M/s Samak Nature & Spa amounting to Rs. 65,00,015/- is being treated as income from other sources and not as agricultural income as claimed by the assessee hence the difference of the agricultural income declared and the disallowance comes to Rs. 8,90,541/- will be taxed as agricultural income for rate purposes.”

2.1. In respect of sale of agricultural land claiming exemption of long term capital gains, AO refused the assessee’s claim about exemption on sale of land in Ghaziabad by following observations: “The land of the assessee is within 6 KM with the municipal limit. Moreover the population of the Ghaziabad is more than ten thousand. Hence the plea of the assessee is not tenable that his land is Agricultural land. Moreover the use of land has been challenged from Agricultural to Residential as is evident from the letter of CATP dt. 20-3-2003. In view of the above facts, the assessee is not entitled for exemption u/s 54B even though the assessee has invested capital gains in the purchase of new agricultural land this is because of the fact that the capital gain has not arisen on the transfer of agricultural land for the reasons that the character of the land, which is the subject matter of discussion, stood changed before the sale of the same. Therefore, the exemption claimed by the assessee is denied.

2.2. Aggrieved, assessee preferred first appeal, where assessee filed some additional evidence. AO objected to the admission of additional ground as under:

“The claim of the assessee is unfounded for the reasons that department had provide ample opportunity to the assessee company to explain the case and in particularly with regard to agricultural income. Section 143(2) in itself provides the assessee to produce such books of accounts and documents on  which he has relied in support of income returned by him. The onus to drag the case in furnishing evidence in support or income completely on the assessee. In the end AO had to decide the case as per material available on record. Reasonable opportunities were given to the assessee. If the assessee failed to file the relevant and full evidence in support of his claim then it is the mistake of the assessee. The assessee cannot benefit out of the non-compliance for which it was responsible.”

2.3. CIT(A) admitted the same and called for AO’s remand report. In view of facts and circumstances assessee’s appeal was allowed. Aggrieved, revenue is before us.

3. Learned DR contends that CIT(A) in para 10 of his order has himself expressed the satisfaction that sufficient opportunities were provided by AO to the assessee by following observations:

“10. It is clear from the above, that the powers of the Commissioner of Income Tax (Appeals) is extremely limited in admitting fresh evidence. The Learned Assessing Officer is correct in stating that the onus was on the assessee to produce the evidence. During the course of the assessment proceedings, as would be evident from the paper book, detailed submissions were made by the assessee, with regard to the transaction in question. Copies of the correspondence are available at pages 1, 2-50, 51-61, 66-71, 72-74, 75-85, 86-87, 88-89 etc. of the paper book. Thus, it is evident that the assessee had repeatedly been given opportunity to explain its case and that the assessee has engaged in protracted correspondence with the learned Assessing Officer and had submitted the details. Thus, the contention of the assessee that adequate opportunity was not given is incorrect.”

3.1. Despite these observations, ld. CIT(A) in last of para 10 & 11 of his order admitted the additional evidence, by observing as under:

“….However, inspite of innumerable correspondence with the learned Assessing Officer, where evidences were produced, any query with regard to submission of use of land was not put across by the learned Assessing Officer. In other words, it would be reasonable to believe that the assessee was under the bona fide impression that the learned Assessing Officer was satisfied with the submissions made by him, along with the evidences. It is not a case, where a query had been raised by the learned Assessing Officer to produce the ‘Rasti’ documents and that the same had not been submitted by the assessee.

11. The decision in HLS Asia case, as reproduced above squarely applies to the case in hand. A such, I am admitting the fresh evidence filed before me in the form of ‘Fash’ documents issued by the Tehsildar, for purposes of disposal of this appeal.

3.2. Learned DR pleads that the observations given by CIT(A) about adequate opportunities and conclusion arrived at by the CIT(A) are contrary to each other. Once AO has asked the assessee to submit his explanation it is not incumbent on him to revert back to assessee intimating assessee about inadequacy of its explanation and to provide further evidence. CIT(A) has proceeded on wrong premise to admit additional evidence.

3.3. It is further pleaded that Hon’ble Delhi High Court recently in the case of CIT Vs. Manish Build Well Pvt. Ltd. ( ITA no. 928/2011 judgment dated 4-11-2011), has held that if AO objects to the admission of additional evidence, then the CIT(A) should give categorical finding in terms of Rule 46A for admission thereof. In this case the observations of the CIT(A) and the findings are contrary to each other. Besides, no categorical finding in terms of Rule 46A, as mandated by Hon’ble Delhi High Court, therefore, the order of CIT(A) should be reversed.

4. Learned counsel for the assessee, on the other hand, vehemently argues that CIT(A) forwarded additional evidence filed by the assessee to AO for his report. Apart from objecting to the admission of additional evidence, AO has submitted report on merit also. Once the AO was supplied the evidence, denial of natural justice to him cannot be attributed. Therefore, the principle of natural justice did not stand denied to AO. Therefore, the order of CIT(A) should not be reversed only on the point of admission of additional evidence.

5. Learned DR qua the additional evidence submitted that the question of principle of natural justice to AO come after admission of additional evidence by proper discharge of statutory function envisaged by Rule 46A on the part of the CIT(A) in terms of Hon’ble Delhi High Court judgment in the case of Manish Build Well Pvt. Ltd. (supra), therefore, the order of CIT(A), admitting the evidence is untenable.

6. Learned counsel for the assessee contends that in that case the matter may be set aside and restored back to the file to AO to give fresh opportunity to the assessee of being heard.

7. We have heard rival contentions and gone through the entire material available on record. In our considered view, CIT(A) has admitted the additional evidence without fulfilling the categorical conditions laid down in Rule 46A, as explained by Hon’ble Delhi High Court in the case of Manish Build Well Pvt. Ltd.(supra). Consequently, his order on this issue is not tenable, however, the issue of merits remains. Besides, from the record it emerges that the assessee wanted to file only government records and revenue record about crops. In the entirety of facts and circumstances, the interest of justice will be served if the matter is set aside, restored back to the file of AO to decide the same afresh after affording the assessee sufficient opportunity of being heard. In view of these facts, the revenue’s appeal stands allowed for statistical purposes.

8. In the result, revenue’s appeal stands allowed for statistical purposes.

Order pronounced in open court on 13-02-2012.

                                                      Sd/-                                     Sd/-

                                           (B.C. MEENA)                   (R.P. TOLANI)

                                 ACCOUNTANT MEMBER    JUDICIAL MEMBER

Dated:13-02-2012.

MP

Copy to:

1. Assessee

2. AO

3. CIT

4. CIT(A)

5. DR