It is settled law that the first appellate authority has all the powers of the AO and may, therefore, admit evidence which was not made available to the Assessing Officer, except where the assessee had ample opportunity but such evidence was willfully withheld. Where such fresh evidence is offered by either party the other party is bound to given an opportunity for rebuttal of the same evidence. The Tribunal in Rishabh Textiles Vs. CIT [2003] 260 ITR 424 (Raj) reversed the order of the first appellate authority, by ignoring such fresh evidence. The High Court found that the tribunal in ignoring such evidence was committing the same mistake, which the first appellate authority himself had committed. It further found that the Tribunal should have remitted the matter to the first appellate authority for giving such opportunity to the AO and to decide the matter after such. The commissioner of Income Tax (Appeals) without confronting the documents to the Income Tax Officer read those documents for the benefit of the assessee.
Mr. Kothari, appearing for the assessee submits that the tribunal has committed the same error which was committed by the commissioner of Income Tax (Appeals).
Full text of the judgment
Rajasthan H.C : Whether the Hon’ble Tribunal was justified in ignoring the material collected by CIT(A) under s. 250(A) of the Act and reversing the finding of CIT(A) based on such material solely on the ground that material so collected by CIT(A) was inadmissible?
HIGH COURT OF RAJASTHAN
RISHABH TEXTILES VS. CIT
SECTIONS 250(4), 254(1)
19TH APRIL, 2002
Counsel Appeared : Anjay Kothari, for the Assessee : Sandeep Bhandawat, for the Revenue
JUDGMENT
BY THE COURT :
This is a reference application under s. 256(1) of the IT Act seeking opinion of this Court on the following questions :
Whether the Hon’ble Tribunal was justified in ignoring the material collected by CIT(A) under s. 250(A) of the Act and reversing the finding of CIT(A) based on such material solely on the ground that material so collected by CIT(A) was inadmissible?
Whether there is any material to hold that higher commission paid on bulk sales amounts to diversion of profit ?
The assessee is a company manufacturing dyes and sale thereof. It also does job work for standing of cloth. The AO found that assessee had claimed expenses on the discount of Rs. 54,928. The assessee had also paid discount at the rate of 8 per cent to two of its sister concerns as against payment of discount at the rate of 3 per cent to others. The AO disallowed discount payment exceeding at the rate of 3 per cent. In appeal before the Tribunal, it was argued that bills placed at pp. 13 to 48 submitted by the sister concerns of the assessee getting higher discount from other concerns for rendering similar services were not placed before the ITO. The CIT(A) without confronting the documents to the ITO read those documents for the benefit of the assessee. The Tribunal excluded those documents from the consideration and held that assessee had paid a discount at the rate of 8 per cent to its sister concerns while it had paid commission at the rate of 3 per cent only to the other sister concerns which rendered the same services to the assessee. The Tribunal, therefore, held that there was no justification for paying discount to the two sister concerns by the assessee at the rate exceeding 3 per cent. In view of the finding, the Tribunal set aside the order of the CIT(A) and restored the order of the ITO. Mr. Kothari, appearing for the assessee, submits that the Tribunal has committed the same error which was committed by the CIT(A). It is submitted that the assessee was not heard on the question of exclusion of documents placed at pp. 13 to 48. Thus, in our opinion, the Tribunal was not justified in ignoring the matter placed before the CIT(A) without giving an opportunity of hearing to the assessee. The Tribunal ought to have remitted the matter to CIT(A). Consequently, the reference is accepted and it is decided in favour of the assessee and against the Revenue.
[Citation : 260 ITR 424]
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