Additional Evidence – Sub-rule (3) of Rule 46AOpportunity of hearing should be provided, to the Assessing Officer to examine the additional documents – SLP Dismissed

The Assessing Officer completed the assessment u/s. 147/143(3) of the Act, principally, on the basis of information received about cash deposit. The AO had issued notice u/s. 133(6) of the Act to various parties however the same were returned with postal remark “ Not known”.

The assessee challenged the aforesaid orders, and preferred an appeal. The assessee contented that all the parties to whom notices u/s 133(6) were issued complied to the same and confirmed the transactions with the appellant company. The inspector also verified the transactions with their books of accounts. Thereafter, again the ITO issued notices u/s. 131 asking for the same details as were asked for in the notices issued u/s. 133(6) of the Act. Once again all the companies furnished replies giving full details of the transactions with the Assessee company.

The assessee in support of his aforesaid contention raised before the CIT (A) and the learned Tribunal filed various documents in order to show that each of the parties to whom notices under section 133(6) of the Act were issued by the Assessing Officer had duly replied to his queries and had also confirmed that they had purchased shares from the assessee and paid for the same in cash and also contended that these documents were also before the Assessing Officer.

The Revenue submitted before High Court that these documents were not before the Assessing Officer. They were documents relied upon and adduced by way of additional evidence by the assessee before the CIT (A) which he allowed to be taken on record without affording any opportunity, far less a reasonable opportunity, to the Assessing Officer to examine them and thereby violated sub-rule (3) of Rule 46A of the Income Tax Rules.

The assessee submitted that there is no question of any violation of sub-rule (3) because his client did not adduce any additional evidence. He added that, in any event, alleged violation of sub-rule (3) can only be made provided any additional evidence has been adduced. Additional evidence, according to him, cannot be adduced unless subrule (1) of Rule 46A of the Income Tax Rules is complied.

The High Court observed that the documents relied upon by the assessee before the appellate authority are not documents of the assessee. The findings recorded by the Assessing Officer could not have been upset by the CIT (A) without giving an opportunity to the former to explain, merely because the assessee took the stand that “all the parties to whom notices under section 133 (6) were issued complied to the same and confirmed the transaction”. The submission that there could be no violation of sub-rule (3) except in a case covered by sub-rule (1) of Rule 46A would make the situation worse. Sub-rule (1) of Rule 46A contemplates a case where the assessee himself wants to adduce evidence at the appellate stage. The assessee in the case before us wanted to rely, at the appellate stage, upon documents allegedly submitted by the noticees under sections 133(6) and 131 of the Act. All these noticees were third parties who according to the Assessing Officer did not respond and could not also be served. The alleged replies allegedly made by the third parties are not and could not have been in the possession or control of the assessee.

The High court held that the finding of the Tribunal was based on the inadmissible additional evidence adduced by the assessee before the CIT (A) and was perverse .

The appeal was thus allowed by the High Court. The Assessee filed SLP before Supreme Court which was dismissed.