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Judgment
PER MANISH AGARWAL, AM :
The present appeal is filed by Revenue against the order dated 27.02.2025 of Ld. Commissioner of Income Tax (A), National Faceless Appeal Centre (“NFAC”), Delhi [“Ld.CIT(A)”] in Appeal No. CIT(A), Delhi-1/10465/2019-20 passed u/s 250 of the Income Tax Act, 1961 [“the Act”] arising out of assessment order dated 30.12.2019 passed u/s 143(3) of the Act pertaining to Assessment Year 2017-18.
Brief facts of the case are that the assessee is a company and filed its return of income on 07.11.2017 declaring income at INR 1,86,710/-. The case was selected for scrutiny under CASS and the AO has observed that the assessee was engaged in the business of Recycling of Ferrous and Non-Ferrous Metals. The reasons for limited scrutiny are (i) Expenses incurred for earning exempt and (ii) investments/advances/loans. The AO observed that assessee has declared Long Term Capital Gain (“LTCG”) of INR 11,68,97,014/-from the sale of shares of some companies held as investments however, the assessee shown different cost of acquisition in the submissions filed. Thus, the AO held that the consideration received from the sale of share of INR 4,39,40,050/- is the unexplained credits and made the addition u/s 68 of the Act for the same and further invoked section 115BBE for charging special rate of tax on this addition. AO further observed that since the assessee is regularly engaged in the business of purchase and sale of shares, therefore, in the event the appellate authorities allowed assessee’s claim of sale of shares as genuine credits, the same should have been treated as business activity since the assessee is regularly doing activity of trading in shares and benefit of indexation should not be allowed. In addition to this, AO made further addition of INR 81,35,290/- by alleging that assessee has shown investment of INR 16,27,05,800/-and must have earned income/profit /commission @ 5% on such investments. AO further made addition of INR 74,67,775/- by holding that the assessee must have earned interest at least @ 5% on the loans and advances of INR 14,93,55,500/-. Accordingly, total income was assessed at INR 5,97,29,830/-.
Against the said order, assessee filed an appeal before Ld. CIT(A) who vide impugned order dated 27.02.2025, deleted all the additions made by the AO and partly allowed the appeal of the assessee.
Aggrieved by the said order, Revenue is in appeal before the Tribunal by raising following Grounds of appeal:
1.“Whether on the facts and circumstances as well as in law, the Ld. CIT(A) is correct in holding that the action of assessing officer treating the unexplained cash credit of Rs. 4,39,40,050/- in books of the assessee company without appreciating the fact that during the assessment proceeding the assessee failed to give any supporting document or corroborative evidence to prove that the cash credits of Rs. 4,39,40,050/- in the books of assessee, were received as sale consideration against the sale of shares.
2.Whether on the facts and circumstances as well as in law the Ld. CIT(A) is correct in deleting the addition of Rs. 4,39,40,050/- made u/s 68 of the Act on account of unexplained cash credit without appreciating the facts that the assessee has failed to furnish a satisfactory explanation and discharge his onus to prove the genuineness the transactions.
3.The appellant craves leave to add, alter or amend any/all of the grounds of appeal before or during the course of the hearing of the appeal.”
During the course of hearing, Ld. Sr. DR for the Revenue vide submission dated 05.02.2026, filed revised order/authorization by Ld. PCIT-7, Delhi according to which the AO was directed to revise the Grounds of appeal taken. As per the said authorization, revenue proposed to take two more Grounds of appeal wherein the revenue has challenged the action of ld. CIT(A) in deleting the additions made by AO on account of commission income of INR 81,35,290/- and further deleting estimation of interest income at INR 74,67,775/-.
Since no separate prayer for admission for additional grounds of appeal alongwith additional Ground of appeal duly signed by the AO was filed before us and only revised order/authorization dated 28.02.2026 by ld. PCIT is placed before us therefore, in absence of separate prayer and additional grounds of appeal, on the basis of authorization we cannot admit any such additional Grounds of appeal. Accordingly, the additional Grounds of appeal so raised through the order of authorization dated 28.01.2026 issued by ld. PCIT are not taken up and not adjudicated.
Coming to the Grounds of appeal taken in the appeal memo which are in respect of the deletion of addition of INR 4,39,40,050/-made u/s 68 of the Act r.w.s. 115BBE of the Act by the AO.
Before us, Ld. Sr. DR for the Revenue submits that while deleting the additions, Ld. CIT(A) has admitted certain additional evidences filed by the assessee without providing an opportunity to the AO for verification/examination/inquiry in accordance with law. It is submitted by Ld. Sr. DR that Ld. CIT(A) has violated the provision of Rule 46A(3) of the Income Tax Rules, 1962 (‘the Rules’) and placed reliance on the judgment of Hon’ble Delhi High Court in the case of CIT vs Manish Buildwell [2011] 16 taxmann.com 27 (Delhi) wherein vide para 24 of the order, the Hon’ble Delhi High Court has held that “…. sub-rule (3) which interdicts the CIT (A) from taking into account any evidence produced for the first time before him unless the Assessing Officer has had a reasonable opportunity of examining the evidence and rebut the same, has not been complied with.”
Ld. Sr. DR thus submits that it is the duty of Ld. CIT(A) to comply with the requirements of Rule 46A of the Rules. Ld. Sr. DR therefore, prayed that the matter may be set aside to the file of Ld.CIT(A) with the direction to provide the AO an opportunity to verify/conduct enquiry of the additional evidences filed by the assessee and decide the issue after obtaining the Remand Report from the AO.
On the other hand, Ld. AR for the assessee submits that Ld.CIT(A) has exercised his powers confers u/s 250(4) which is evident from para 4.3.10 of the appellate order wherein while admitting the additional evidences, Ld.CIT(A) has invoked the powers u/s 250(4) of the Act. Ld.AR further submits that Ld. CIT(A) has considered the submissions of the assessee and also after appreciating the facts of the case, has deleted the additions and thus requested for the confirmation of the said order.
Heard the contentions of both the parties at length and perused the material available on records. At the outset, it is observed that during the course of appellate proceedings, assessee had filed following documents as additional evidence u/r 46A of the Rules. The documents so filed are as under:-
Copy of ITR of share buyers;
Shares certificates issued of purchase of shares;
Copy of bank statement of shares buyers reflecting payment made to appellant company;
Balance sheet of earlier years.
It is further observed that Ld.CIT(A) though had admitted all the evidences however, had not discussed in detail about the veracity of these documents and deleted the additions made by AO. The Hon’ble High Court in the case of CIT vs Manish Buildwell (supra) under identical circumstances, where the ld. CIT(A) has admitted the additional evidences by exercising the powers confers upon him u/s 250(4) of the Act, in para 24 of the order has held as under:
24.In the present case, the CIT (A) has observed that the additional evidence should be admitted because the assessee was prevented by adducing them before the assessing officer. This observation takes care of clause (c) of sub-rule (1) of Rule 46A. The observation of the CIT (A) also takes care of sub-rule (2) under which he is required to record his reasons for admitting the additional evidence. Thus, the requirement of sub-rules (1) and (2) of Rule 46A have been complied with. However, sub-rule (3) which interdicts the CIT (A) from taking into account any evidence produced for the first time before him unless the Assessing Officer has had a reasonable opportunity of examining the evidence and rebut the same, has not been complied with. There is nothing in the order of the CIT (A) to show that the Assessing Officer was confronted with the confirmation letters received by the assessee from the customers who paid the amounts by cheques and asked for comments. Thus, the end result has been that additional evidence was admitted and accepted as genuine without the Assessing Officer furnishing his comments and without verification. Since this is an indispensable requirement, we are of the view that the Tribunal ought to have restored the matter to the CIT (A) with the direction to him to comply with sub-rule (3) of Rule 46A. In our opinion and with respect, the error committed by the Tribunal is that it proceeded to mix up the powers of the CIT (A) under sub- section (4) of Section 250 with the powers vested in him under Rule 46A. The Tribunal seems to have overlooked sub-rule(4) of Rule 46A which itself takes note of the distinction between the powers conferred by the CIT (A) under the statute while disposing of the assessee's appeal and the powers conferred upon him under Rule 46A. The Tribunal erred in its interpretation of the provisions of Rule 46A vis-à-vis Section 250(4). Its view that since in any case the CIT (A), by virtue of his conterminous powers over the assessment order, was empowered to call for any document or make any further enquiry as he thinks fit, there was no violation of Rule 46A is erroneous. The Tribunal appears to have not appreciated the distinction between the two provisions. If the view of the Tribunal is accepted, it would make Rule 46A otiose and it would open up the possibility of the assessees' contending that any additional evidence sought to be introduced by them before the CIT (A) cannot be subjected to the conditions prescribed in Rule 46A because in any case the CIT (A) is vested with conterminous powers over the assessment orders or powers of independent enquiry under sub-section (4) of Section 250. That is a consequence which cannot at all be countenanced.
In the present case, from the perusal of the order of ld. CIT(A), it is observed that in para 4.3.10, Ld.CIT(A) has admitted the additional evidences field by the assessee by invoking the powers confers upon him u/s 250(4) of the Act however, as held by the Hon’ble Delhi High Court in the case of Manish Buildwell (supra), Ld. CIT(A) should have followed the procedure as per Rule 46A and must provide/ confront the AO with the additional evidences filed by the assessee and after obtaining the Remand Report from the AO, proceed to admit the additional evidences and decide the appeal as per law.
Under these circumstances, we remand the issue back to the file of Ld. CIT(A) with the directions to obtain the remand report from the AO on the additional evidences filed by the assessee. With these directions, all the Grounds of appeal raised by the Revenue are allowed for statistical purposes.
In the result, appeal of the Revenue is partly allowed.