Case Law Details
ITO Vs Durga Saw Mill (ITAT Raipur)
The Income Tax Appellate Tribunal (ITAT), Raipur Bench allowed the Revenue’s appeal for statistical purposes and remanded the matter to the CIT(A)/NFAC after holding that Rule 46A(3) of the Income Tax Rules, 1962 must be complied with when additional evidence is admitted during appellate proceedings.
The dispute arose from the order of the CIT(A)/NFAC dated 20.01.2026 for Assessment Year 2017-18. The Revenue challenged the relief granted to the assessee on the ground that the CIT(A) had considered additional evidence, particularly “C” Forms, without giving the Assessing Officer an opportunity to examine or respond to the same as required under Rule 46A(3).
Before the CIT(A), the assessee had argued that the disputed amount represented genuine sale proceeds from teak wood sold to M/s. Ankit Trading Co. against “C” Forms and that payments were received through banking channels. The assessee submitted bank statements, audited financials, sales invoices, PAN details, and “C” Forms to support the genuineness of the transactions. The CIT(A) accepted the explanation and observed that once the assessee furnished documentary evidence, the burden shifted to the Assessing Officer to prove that the transactions were non-genuine. The CIT(A) also noted that the Assessing Officer had relied only on third-party information alleging bogus entries without independently investigating the transactions concerning the assessee.
Before the Tribunal, the assessee submitted that only the “C” Forms constituted additional evidence and that all other documents had already been filed before the Assessing Officer. The Revenue argued that the “C” Forms were crucial for determining the genuineness of the transactions and should have been forwarded to the Assessing Officer for comments in compliance with Rule 46A(3).
The Tribunal observed that the “C” Forms had been independently relied upon by the CIT(A) without confronting the Assessing Officer or calling for a remand report. Since the “C” Forms related directly to transaction details and VAT payments, factual verification by the Assessing Officer was necessary. The Tribunal held that compliance with Rule 46A(3) is mandatory whenever additional evidence is admitted at the appellate stage.
Accordingly, the ITAT set aside the order of the CIT(A)/NFAC and remanded the matter back for fresh adjudication after obtaining a remand report from the Assessing Officer and following principles of natural justice.
FULL TEXT OF THE ORDER OF ITAT RAIPUR
The present appeal preferred by the Revenue emanates from the order of the Ld.CIT(Appeals)/NFAC, Delhi dated 20.01.2026 for the assessment year 2017-18 as per the grounds of appeal on record.
2. In this Revenue’s appeal in Ground of appeal No.3, they have assailed that the Ld.CIT(Appeals)/NFAC had provided relief to the assessee without adhering to Rule 46A(3) of the I.T Rules, 1962 while admitting certain additional evidences at the time of appeal proceedings. In this regard, relevant findings of the Ld.CIT(Appeals)/NFAC are extracted as follows:
“6.2 During the appellate proceedings, the appellant submitted that the amount represented genuine sales proceeds for teak wood sold to M/s. Ankit Trading Co. against “C” Forms and received via banking channels. The appellant contended that the A.O failed to disprove the genuineness of the sales or the existence of stock and erred by making an addition under Section 68 without rejecting books of account.
6.3 I have considered the assessment order, the appellant’s submissions, and the material placed on record, including the bank statements, “C” Forms, audited financials.
The core issue is the applicability of Section 68 when the appellant claims the credit entry is a sales receipt recorded in regular books of account. The appellant has maintained a consistent stand that it did not had any purchase transaction with M/s. Ankit Trading Co., but rather sold goods to them and received payment.
It is a settled legal principle that the initial burden of proof for a cash credit under Section 68 is on the assessee to prove the identity, creditworthiness and genuineness of the transaction. The appellant has provided the PAN and address of M/s. Ankit Trading Co., furnished bank statements showing the receipt payment, and provided “C” Forms and sales invoices, all of which were recorded in its audited books of account. This prima facie discharges the initial burden.
Once the assessee has offered a plausible explanation and placed documentary evidence on record, the onus shifts to the A.O to conduct further inquiries and bring cogent material on record to demonstrate that the explanation is false or that the transactions are non-genuine. The A.O merely relied on third-party information that M/s.Ankit Trading Co. provided “bogus entries” without independently investigating the specific transactions concerning the appellant or confronting the appellant with adverse material.”
3. At the time of hearing, the Ld. Counsel for the assessee submitted that it is only “C” Forms which is an additional evidence filed during the first appellate proceedings, and rest all other documents were furnished before the A.O. He further submitted that this “C” Forms pertains to sale transactions and corresponding payment of VAT.
4. Per contra, the Ld. Sr. DR referred to Paras 6.2 & 6.3 of the order of the Ld. CIT(Appeals)/NFAC and submitted that this “C” Forms is crucial in determining the genuineness of the transactions with M/s. Ankit Trading Co. and payment received by banking channels which therefore, should have been forwarded to the A.O for his response as per Rule 46A(3) of the I.T. Rules, 1962.
5. Having heard the submissions of the parties herein, I am of the considered view that admittedly, “C” Forms is an additional evidence that had been considered independently by the Ld. CIT(Appeals)/NFAC without confronting the A.O for his response on the same. That as submitted by the Ld. Counsel for the assessee such document provides transactions details and payments of VAT. It has also been submitted by the Ld. Sr. DR simultaneously that such “C” Forms is important to understand the genuineness of sale transactions with M/s. Ankit Trading Co. It is also the fact that the said “C” Forms had been independently considered by the Ld. CIT(Appeals)/NFAC without providing any opportunity to the A.O for his response regarding the same. In other words, there has been no ground verification regarding correctness of such transactions as per “C” Forms which therefore, needs factual verification at the level of A.O and most importantly, Rule 46A(3) of the IT Rules, 1962 has to be complied with by the first appellate authority while admitting the addition evidences.
6. In view thereof, order of the Ld. CIT(Appeals)/NFAC is set aside and the matter is remanded to its file to comply with Rule 46A(3) of the IT Rules, 1962, call for remand report regarding additional evidences admitted and upon receipt of such remand report and submissions of the assessee, the said authority shall denovo adjudicate the matter as per law while complying with the principles of natural justice. The assessee shall mandatorily comply with the hearing notices issued from the office of the Ld. CIT(Appeals)/NFAC. I order accordingly.
7. That as per above terms, the appeal of the Revenue is allowed for statistical purposes.
Order pronounced in open court on 29th day of April, 2026.
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