ITO Vs Gurjant Karnail Singh (ITAT Rajkot)
Rule 46A: Departmental Availability of Documents Does Not Replace AO’s Opportunity to Verify Additional Evidence
Background of the Dispute
The Revenue challenged the order dated 29 March 2023 passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, granting relief against an addition of ₹1,97,56,210 relating to receipts reflected in Form 26AS.
The assessee had filed his return on 17 September 2015, declaring total income of ₹4,94,000. The case was selected for limited scrutiny.
During assessment, the Assessing Officer sought a party-wise reconciliation between receipts appearing in Form 26AS and those disclosed in the return. The assessee did not furnish the reconciliation or produce the books of account and supporting documents for verification.
The Assessing Officer consequently completed an ex parte assessment under section 144 on 21 December 2017, treating the Form 26AS receipts of ₹1,97,56,210 as undisclosed receipts and adding the amount to the assessee’s income.
Relief Granted on Additional Evidence
Before the Commissioner (Appeals), the assessee furnished documents which had not been examined during assessment.
These comprised Form 26AS, the transportation income and profit and loss account for the relevant financial year, and a reconciliation statement of receipts.
The Commissioner admitted the additional evidence under Rule 46A of the Income-tax Rules, 1962, and allowed the assessee’s appeal.
The Revenue’s objection before the Tribunal concerned the procedure followed in granting this relief. According to the Department, the Commissioner had admitted and relied upon the additional evidence without calling for a remand report or allowing the Assessing Officer to examine it.
The dispute before the Tribunal therefore centred on verification of the additional evidence, rather than a final determination of the taxability of the receipts.
Revenue’s Objection
The Departmental Representative submitted that the Assessing Officer had not been afforded an opportunity to examine the documents furnished for the first time during appellate proceedings.
This was particularly relevant to the reconciliation of receipts appearing in Form 26AS. The assessment addition had arisen precisely because that reconciliation and the supporting accounts were not furnished earlier.
The Revenue contended that relief based on those documents, without obtaining the Assessing Officer’s comments after verification, did not comply with Rule 46A.
Assessee’s Defence
The assessee supported the Commissioner’s order and argued that the documents furnished during the appeal were available in the Income Tax Department’s records.
On that basis, it was submitted that there was no necessity to call for a remand report.
The assessee thus sought to equate the Department’s possession of information with an opportunity for the Assessing Officer to examine its evidentiary significance.
The Tribunal did not accept that contention.
Tribunal’s Findings
The Tribunal noted that the addition had been made primarily because the assessee failed to reconcile Form 26AS receipts with the receipts disclosed in the return and failed to produce the books for verification.
The documents subsequently furnished before the Commissioner directly addressed those deficiencies. They therefore required proper examination by the Assessing Officer.
Merely because certain information was available in departmental records did not dispense with the need to give the Assessing Officer an opportunity to verify the additional evidence and submit a remand report.
The distinction was material. Availability of Form 26AS does not, by itself, establish whether a reconciliation is correct or whether the corresponding receipts have been appropriately accounted for. The accounts and explanation accompanying that information still require examination.
The Tribunal accordingly held that the issue required fresh consideration in the interests of natural justice.
Matter Restored to the Commissioner
The Tribunal set aside the Commissioner’s order on the disputed issue and restored the matter for fresh adjudication.
The Commissioner was directed to obtain a remand report after allowing the Assessing Officer a due opportunity to examine the additional evidence.
Thereafter, the Commissioner must decide the issue afresh in accordance with law, after providing a reasonable opportunity of hearing to both parties.
The Revenue’s appeal was allowed for statistical purposes.
The Tribunal did not uphold the addition on merits. Equally, the relief previously granted by the Commissioner could not stand without the directed verification.
Author’s Comments
The decision highlights the distinction between admission of additional evidence and reliance upon it after proper examination.
An assessee may produce material during appellate proceedings to explain an assessment addition. However, when that material is admitted under Rule 46A, the Assessing Officer’s opportunity to examine it cannot be bypassed merely because some underlying information is already held by the Department.
A reconciliation statement is an explanation of how transactions fit together. Its correctness requires comparison with the accounts, supporting records and receipts offered to tax.
The ruling is therefore procedural. It neither establishes that all Form 26AS receipts are taxable additions nor accepts the assessee’s reconciliation as correct. It requires the evidentiary exercise to be completed before substantive relief is determined.
For practitioners, the useful lesson is to seek admission of additional evidence with a clear explanation and facilitate verification during the first appeal itself. A complete process can prevent otherwise favourable appellate relief from being set aside for another round of proceedings.
FULL TEXT OF THE ORDER OF ITAT RAJKOT
Captioned appeal filed by the revenue, pertaining to Assessment Year (AY) 2015-16, is directed against the order under section 250 of the Income-tax Act, 1961 [hereinafter referred to as ‘the Act’] passed by the National Faceless Appeal Centre [hereinafter referred to as ‘NFAC’], dated 29.03.2023, which in turn arises out of an order passed by assessing officer u/s. 144 of the Act, dated 21.12.2017.
02. Brief facts of the case are that the assessee filed his return of income for the Assessment Year 2015-16 on 17.09.2015, declaring total income of Rs.4,94,000/- The case was selected for limited scrutiny, and the assessment was completed ex-parte under section 144 of the Income-tax Act, 1961, vide order dated 21.12.2017. During the assessment proceedings, the Assessing Officer observed that the assessee had not furnished the party-wise reconciliation of receipts reflected in Form 26AS with the receipts disclosed in the return of income. The assessee also failed to produce the books of account and supporting documentary evidence for verification. Accordingly, the Assessing Officer treated the receipts reflected in Form 26AS amounting to Rs.1,97,56,210/- as undisclosed receipts and added the same to the total income of the assessee.
03. Aggrieved by the assessment order, the assessee preferred an appeal before the Ld. CIT(A). During the appellate proceedings, the assessee furnished additional evidence, including Form 26AS, the transportation income and profit and loss account for the relevant financial year, and a reconciliation statement of receipts reflected in Form 26AS. After admitting the additional evidence under Rule 46A of the Income-tax Rules, 1962, the Ld. CIT(A) allowed the appeal of the assessee.
04. Aggrieved by the order of the Ld. CIT(A), the Revenue preferred the present appeal before the tribunal.
05. At the time of hearing, the Ld. DR submitted that the order passed by the Ld. CIT(A) was not sustainable in law, as the additional evidence furnished by the assessee had been admitted without calling for a remand report from the Assessing Officer. It was contended that the Assessing Officer had not been afforded an opportunity to examine and verify the additional evidence, including the reconciliation of receipts reflected in Form 26AS, in accordance with Rule 46A of the Income-tax Rules, 1962.
06. On the other hand, the Ld. AR supported the order of the Ld. CIT(A) and submitted that the documents furnished by the assessee were available in the records of the Income-tax Department. Accordingly, it was contended that there was no necessity to call for a remand report from the Assessing Officer.
07. We have heard the rival submissions and perused the material available on record. We find that the Assessing Officer made the addition of Rs.1,97,56,210/- primarily on account of the failure of the assessee to furnish the party-wise reconciliation of receipts reflected in Form 26AS with the receipts disclosed in the return of income and to produce the books of account for verification. Before the Ld. CIT(A), the assessee furnished additional evidence comprising Form 26AS, the transportation income and profit and loss account, and a reconciliation statement of receipts. In our considered view, the aforesaid documents required proper examination and verification by the Assessing Officer. Merely because certain information was available in the departmental records would not, by itself, dispense with the necessity of providing the Assessing Officer an opportunity to verify the additional evidence and submit a remand report. In the interest of natural justice, the issue requires fresh examination. Accordingly, we set aside the impugned order of the Ld. CIT(A) on this issue and restore the matter to the file of the Ld. CIT(A) for fresh adjudication. The Ld. CIT(A) is directed to obtain a remand report from the Assessing Officer after allowing due opportunity to examine the additional evidence furnished by the assessee and thereafter decide the issue afresh in accordance with law, after providing reasonable opportunity of hearing to both parties.
08. In the result, the appeal filed by the Revenue is allowed for statistical purposes.
Order pronounced in the open court on this 13th day of October, 2026.
