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Income Tax Officer,Ward 33(4),C.R. Building,I.P. Estate,New Delhi. Vs Tara Devi,A-65, Sector-31,Noida.
June, 04th 2012
                   DELHI BENCH `H' NEW DELHI


                         Assessment Year : 2006-07

Income Tax Officer,       Vs      Tara Devi,
Ward 33(4),                       A-65, Sector-31,
C.R. Building,                    Noida.
I.P. Estate,                      (PAN No. AEBPD5766P)
New Delhi.
 (Appellant)                                 (Respondent)

                        Appellant by: Dr. B.R.R. Kumar, Sr.DR
                   Respondent by : Shri S.B. Gupta



      This appeal has been preferred by the Revenue against the order of

Ld. CIT(A)-XXVI, New Delhi dated 14.5.2010 on the following ground:-

             "The ld. CIT(A) has erred in deleting the addition of
           Rs.10 lakh made on account of unexplained
           investment in relief RBI Bond u/s 68 of the I.T.Act,
           1961, relying on the additional evidence in
           contravention of Rule 46-A of I.T. Rule, 1962."

2.    Briefly stated, the facts of the case are that the assessee filed the return

declaring income of Rs.2,64,396 on 25.8.2006. The same was processed u/s

143(1) of the Income Tax Act, 1961 (hereinafter referred to as the Act) and a
                                      2                 ITA No.3583/DEL/2010

notice u/s 143(2) of the Act was issued but neither the assessee nor his

representative attended the hearing. Subsequently, a number of notices were

issued to the assessee and finally, notice u/s 142(1) of the Act was issued on

29.9.2008, fixing the case for hearing on 7.10.2008 but nobody attended the

hearing of the assessment proceedings on behalf of the assessee. Lastly, a

show cause notice on 8.10.2008 was also issued to the assessee giving seven

days time but the same remained unattended. In these circumstances, the

AO proceeded to complete the assessment ex parte u/s 144 of the Act on the

basis of best judgement principle. The AO noted that the assessee has no

explanation to offer with regard to the investment of Rs.10 lakh invested in

RBI bonds on 31.3.2006 and he made an addition of the same amount u/s 69

of the Act to the income as declared by the assessee in the return of relevant


3.      Being aggrieved by the above assessment order, the assessee invoked

the ld. CIT(A)-XXVI, New Delhi and the appeal was allowed by admitting

and considering additional evidence submitted by the assessee. Ld. CIT(A)

observed that due to non-service of any of the notices, the assessee was

prevented by sufficient cause from furnishing the evidence before the AO

and the First Appellate Authority admitted the additional evidence under
                                     3                 ITA No.3583/DEL/2010

Rule 46A of the I.T. Rules, 1962. Ld. CIT(A) finally passed the impugned

order and deleted the addition made by the AO.

4.    Ld. DR vehemently submitted that the ld. CIT(A) grossly erred in

deleting the addition of Rs. 10 lakh made on account of unexplained

investment in RBI bond u/s 68 of the Act, relying on additional evidence,

which was admitted by him in contravention of Rule 46A of the Rules. He

also submitted that the assessee avoided to attend the proceedings before the

AO and the assessee bypassed the authority of AO and directly submitted

the additional evidence before the ld. CIT(A). The additional evidence was

admitted by the CIT(A) after calling a report from the AO but the same was

not confronted to the AO for examination and rebuttal. Therefore, the action

of ld. CIT(A) was not justified.

5.    The assessee's representative supported the impugned order and

replied that the notices were issued by the AO but these were not duly

served on the assessee. Therefore, the assessee prevented by submitting

relevant evidence before the AO and addition was made on erroneous and

baseless grounds. He also submitted that the ld. CIT(A) rightly admitted the

additional evidence and the deletion made by him was on reasonable and

justified grounds.
                                         4                   ITA No.3583/DEL/2010

6.     We have considered the rival arguments of both the parties and

carefully perused the entire record before us.           On bare reading of the

impugned order, we observe that the ld. CIT(A) sought the comments of the

ld. AO for the admissibility of the additional evidence and in response to

that, the AO submitted, vide the remand report dated 10.3.2010, with an

objection by the AO that the assessee did not participate in the assessment

proceedings despite several notices issued to him,           therefore, additional

evidences should not be admitted. We also observe that the ld. CIT(A) also

noted that the AO has not commented on the merits of redemption proceeds

and loan of Rs. 2 lakh from Ms Dimple Gupta as sources of investment

made by the assessee. Ld. CIT(A) asked the assessee to furnish rejoinder to

the remand report and the same was submitted.

7.     Ld. CIT(A) further noted that the AO has not made any adverse

remarks in respect of remand proceeds of 9% relief bonds amounting to

Rs.7.765 lakhs, thus, the source has been accepted by the AO. The Ld.

CIT(A) has also drawn a finding that the copy of the income tax return of Ms

Dimple Gupta in support of her creditworthiness was also not adversely commented by

the AO in the remand report. Therefore, the ld. CIT(A) concluded with a finding that

loan transaction from Ms Dimple Gupta was             reliable as her identity and

creditworthiness, coupled with genuineness of the transaction, was established by the

                                     5                 ITA No.3583/DEL/2010

8.    In view of above, we finally observe that the ld. CIT(A) admitted the

additional evidence after considering the remand report from AO on just and

reasonable grounds as the notices issued by the AO were not duly served on

the assessee and due to this reason, the assessee was prevented from filing

relevant evidence before the AO but the ld. CIT(A) did not comply with the

mandatory procedure as per Rule 46A (3) of the Rules as the AO has not

been allowed reasonable opportunity to examine the evidence and to

produce any evidence or documents in rebuttal of the additional evidence

produced by the assessee.

9.    In view of above, we finally observe that the ld. CIT(A) considered

additional evidence without allowing reasonable opportunity to the AO to

examine the evidence and to rebut the same and we also observe that he did

not follow the required procedure as per Rule 46A of the Rules. Therefore,

we find it appropriate to remit the matter back to the file of ld. CIT(A) for

fresh adjudication after following the required procedure and providing an

opportunity to be heard to the assessee. The assessee shall cooperate in the

fresh proceedings before the ld. CIT(A).

10.   In the result, the appeal of the Revenue is treated as allowed for

statistical purposes.
                                   6                ITA No.3583/DEL/2010

           Order pronounced in the open court on 31st May, 2012.

     Sd/-                                         Sd/-
( A.N. PAHUJA )                          (CHANDRA MOHAN GARG)
ACCOUNTANT MEMBER                            JUDICIAL MEMBER

DT. 31st May, 2012

Copy forwarded to:-

  1.    Appellant
  2.    Respondent
  3.    CIT(A)
  4.    CIT 5. DR

                                                      By Order

                                                      Deputy Registrar
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