COMMISSIONER OF INCOME TAX Vs. VALIMOHMED AHMEDBHAI

JUDGEMENT

(1.) The ITO in the course of assessment for the year 1967-68 made an addition under section 69A of the I.T. Act, 1961 (hereinafter referred to as "the Act"). The assessee challenged this addition in his appeal before the AAC. In the course of the hearing of the appeal, the AAC admitted additional evidence which consisted of affidavits of witnesses. The ITO was not given any opportunity to examine the additional evidence or to cross-examine the witnesses whose evidence was taken on record. The AAC on appreciation of the evidence on record deleted the addition made by the ITO. The revenue went in appeal before the Income-tax Appellate Tribunal (hereinafter referred to as "the Tribunal") against the decision of the AAC. It was contended on behalf of the revenue that the AAC ought to have given an opportunity to the ITO to counter the additional evidence and to cross-examine the witnesses whose evidence was taken on record by him. The Tribunal found that the AAC had given a notice of hearing of the appeal to the ITO but the ITO did not choose to remain present at the hearing of the appeal. The Tribunal was, therefore, of the opinion that it was not necessary for the AAC to give any further opportunity to the ITO in the course of the hearing of the appeal. Consequently, the above plea raised on behalf of the revenue was rejected. It is in the background of these facts that the following question has been referred to us for our opinion at the instance of the revenue :

(2.) In order to answer this question, a glance at sub-rule (3) of rule 46A of the I.T. Rules, 1962, which reads as under, is necessary:

(3.) It is clear from the above-quoted provision that the AAC should not have taken into account any evidence produced under sub-rule (1) unless the ITO had been allowed a reasonable opportunity to examine the evidence or to cross-examine the witness whose evidence was taken on record or to produce any evidence in rebuttal of the additional evidence produced by the assessee. It is, therefore, obvious that the AAC could not have relied on the additional evidence without giving such opportunity to the ITO. The mere fact that notice of hearing of the appeal was given to the ITO would not meet the requirements of the above rule. Even if no such rule was in existence, ends of justice and fair play demand that when an assessee produces additional evidence in his appeal an opportunity is given to the ITO to test the evidence or to counter the effect of the evidence by producing evidence in rebuttal or otherwise. The reason is self-evident. It stands to reason to presume that the ITO took his decision not to remain present because he considered it unnecessary to do so in the context of the existing record. He could not have anticipated or reasonably foreseen that the record was going to be augmented by adducing fresh evidence. Besides, he had a right to object to the production of additional evidence. Since something adverse to the ITO was sought to be done in the course of the appeal by way of augmenting the record, the ITO ought to have been heard and given an opportunity to meet with the additional material by way of cross-examination, counter evidence and urging submissions in the context of the augmented record. Of course, if the appeal was going to be decided on the basis of the existing record of which he had notice, no such question could arise and no grievance could be made as the ITO had failed to exercise his option to remain present. He a no notice of the application for additional evidence as no notice was issued. When a prayer for additional evidence was made, it was an independent and substantive application seeking a new right. Notice of such application was necessary to the ITO and he ought to have been afforded both an opportunity to oppose it and to test the additional evidence or counter the effect thereof or produce evidence in rebuttal. No such order granting the request could have been passed behind the back of the ITO in violation of the principles of natural justice. At the cost of repetition, it be stated that notice of appeal cannot be equated with notice of a future application to lead additional evidence which no one could have anticipated or reasonably foreseen. Ordinarily, the appeal would be decided on the evidence recorded in the course of assessment proceedings. The ITO, therefore, may not, in a given case, think it necessary to remain present at the hearing of the appeal. He, however, cannot be expected to anticipate that additional evidence might be produced by the assessee in his appeal. It is for this reason that it is necessary to give him an opportunity to meet the additional evidence. The Tribunal has, therefore, fallen into an error in rejecting the plea of the revenue that the AAC ought to have given an opportunity to the ITO to examine the additional evidence or to cross-examine the witnesses whose evidence was taken on record or to rebut the additional evidence. We, therefore, answer the question referred to us in the negative and against the assessee.