JUDGMENT Prakash Krishna, J.
1. The Income-tax Appellate Tribunal, Allahabad, has referred the following question of law under Section 256(1) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), for the opinions of this court :
"Whether upon the facts and circumstances of the case, the Income-tax Appellate Tribunal was legally right in setting aside the order of the Commissioner of Income-tax (Appeals) in respect of (i) Rs. 1,93,183 in biri account (ii) Rs. 5,16,279 in wrapper, label and labelling account, Rs. 2,00,850 in tobacco account and Rs. 1,50,000 cash credit in the name of Vishwanath Singh on the ground that the Commissioner of Income-tax (Appeals) failed to follow the mandatory provision regarding recording of reasons before admitting new evidence at the appellate stage and also on the ground that no opportunity was afforded to the Income-tax Officer to rebut the evidence ?"
2. Briefly stated the facts in the present case are as follows :
3. The matter relates to the assessment year 1974-75. The assessee is individual and disclosed income from the salary, house property, business and from the beneficial interest in the waqf, M/s. Haji Lal Mohd. Biri Works, Allahabad.
4. The Inspecting Assistant Commissioner of Income-tax, Range-II, Allahabad, made the following additions in the income of the assessee :
(i) Rs. 1,93,183 in bin account for alleged sale of biri in excess of the biri available in the books out of opening stock and purchases ;
(ii) Rs. 5,16,279 for excessive expenses incurred in wrapper label and labelling accounts ;
(iii) Rs. 2,00,850 for alleged excessive claim for tobacco consumption ;
(iv) Rs. 1,50,000 alleged unexplained credit in the name of one Sri Vishwanath Singh.
5. The said order was challenged in appeal before the Commissioner of Income-tax (Appeals). During the course of argument of the appeal the assessee produced certain evidence by way of additional evidence. Taking into consideration the additional evidence produced by the assessee before the Commissioner of Income-tax (Appeals), he deleted the additions made in the biri account, in wrapper label and labelling accounts, in tobacco account and cash credit in the name of Sri Vishwanath Singh. The Department challenged the order before the Appellate Tribunal. The appellate authority found that the additional evidence in the shape of certificate from Hind Tobacco Company was admitted in evidence by the Commissioner of Income-tax (Appeals) without recording reasons in writing. It was found that the Commissioner of Income-tax (Appeals) contravened the provisions of Rule 46A(2) of the Income-tax Rules. The further finding was that no reasonable opportunity to the assessing authority to examine new evidence produced in evidence and rebuttal, was given. On the above issue the order of the Commissioner of Income-tax (Appeals) was set aside and was restored to his file for deciding the same afresh, according to law after observing the provisions of Rule 46A of the Rules.
6. We have heard Sri Shakil Ahmad, learned counsel for the assessee, and Sri A. N. Mahajan, learned counsel for the Revenue.
7. Learned counsel for the assessee submitted that the assessing authority was present before the Commissioner of Income-tax (Appeals) and the said certificate was filed in his presence. He did not raise any objection for admission of the said certificate as additional evidence on record. Rule 46A is only procedural and thus will not vitiate the order, the Department has not suffered, in any manner, and, as such, the order of the Tribunal is liable to be set aside. Strong reliance was placed by him on the judgment of the apex court in the case of K. Venkataramiah v. A. Seetharama Reddy, AIR 1963 SC 1526.
8. In contra, learned counsel for the Revenue, submitted that the mere presence of the assessing authority at the time of hearing of appeal before the Commissioner of Income-tax (Appeals) is not sufficient compliance with Rule 46A of the Rules. Additional evidence/fresh evidence can be admitted in appeal under the circumstances specified under Rule 46A of the Rules and after complying with the procedure laid down therein. In the present case, he submitted that not only no opportunity was afforded to the Department but to file evidence, if any, in rebuttal, no attempt was made by the Commissioner of Income-tax (Appeals) to verify the genuineness, correctness and relevancy of the documents in question. Elaborating his argument it was submitted that the aforesaid ruling of the apex court in the case of K. Venkataramiah, AIR 1963 SC 1526 was given under different circumstances and also under different statute and has no relevancy to the issue in hand.
9. We have given a careful consideration to the respective submissions of learned counsel for the parties. It is relevant to quote here Rule 46A of the Income-tax Rules. The said Rule 46A reads as under :
"46A. (1) The appellant shall not be entitled to produce before the Deputy Commissioner (Appeals) or, as the case may be, the Commissioner (Appeals), any evidence, whether oral or documentary, other than the evidence produced by him during the course of proceedings before the Assessing Officer, except in the following circumstances, namely :--
(a) where the Assessing Officer has refused to admit evidence which ought to have been admitted ; or
(b) where the appellant was prevented by sufficient cause from producing the evidence which he was called upon to produce by the Assessing Officer ; or
(c) where the appellant was prevented by sufficient cause from producing before the Assessing Officer any evidence which is relevant to any ground of appeal ; or
(d) where the Assessing Officer has made the order appealed against without giving sufficient opportunity to the appellant to adduce evidence relevant to any ground of appeal.
(2) No evidence shall be admitted under Sub-rule (1) unless the Deputy Commissioner (Appeals) or, as the case may be, the Commissioner (Appeals) records in writing the reasons for its admission.
(3) The Deputy Commissioner (Appeals) or, as the case may be, the Commissioner (Appeals) shall not take into account any evidence produced under Sub-rule (1) unless the Assessing Officer has been allowed a reasonable opportunity--
(a) to examine the evidence or document or to cross-examine the witness produced by the appellant, or
(b) to produce any evidence or document or any witness in rebuttal of the additional evidence produced by the appellant.
(4) Nothing contained in this rule shall affect the power of the Deputy Commissioner (Appeals) or, as the case may be, the Commissioner (Appeals) to direct the production of any document, or the examination of any witness, to enable him to dispose of the appeal, or for any other substantial cause including the enhancement of the assessment or penalty (whether on his own motion or on the request of the Assessing Officer) under Clause (a) of Sub-section (1) of Section 251 or the imposition of penalty under Section 271."
10. A bare perusal of the aforesaid rule clearly shows that the appellant is not entitled to produce fresh oral or documentary evidence, as a matter of right, in appeal. However, under certain circumstances as mentioned in Clauses (a), (b), (c) and (d) of Sub-rule (1) of Rule 46A, additional evidence can be filed. Sub-rule (2) of Rule 46A provides that no evidence shall be admitted under Sub-rule (1) unless the authority admitting it records in writing the reasons for its admission. The provision for recording reasons has been made to enable the higher forums to examine the issue, if raised by an aggrieved party, before it, in further appeal, etc., and to avoid arbitrariness in the matter. The authority should not act whimsically while exercising the jurisdiction under Rule 46A of the Rules. Sub-rule (2) caste a duty on the authority concerned to record reasons in writing for admission of the additional evidence. Under Sub-rule (3) the further requirement is that the appellate authority shall not take into account any evidence produced under Sub-rule (1) unless the assessing authority has been allowed a reasonable opportunity to examine the evidence or the document or to cross examine witnesses produced by the appellant or to produce any evidence or document or any witness in rebuttal of the additional evidence produced by the appellant. The finding that has been recorded by the Tribunal, in the present case, is that no opportunity to examine new evidence or to produce any evidence in rebuttal was afforded to the assessing authority. This finding of the Tribunal is not under challenge. In view of this finding it is difficult to accept the contention of learned counsel for the assessee that the requirements of Rule 46A have been fulfilled in the present case. Rule 46A contains principles of natural justice. Nobody should be condemned without giving opportunity of hearing. In the case in hand the appellate authority has taken into consideration fresh evidence produced before it without following the principles of natural justice. In view of this we find no legal infirmity in the order of the Tribunal. Apart from the above the Tribunal has restored back the above issue to the file of the first appellate authority. It is still open to admit additional evidence sought to be filed by the assessee after complying with the requirement of Rule 46A. Strong reliance was placed by learned counsel on paragraphs 16 and 21 of the said judgment in the case of K. Venkataramiah, AIR 1963 SC 1526. The apex court took the view that from the order passed by the High Court for admission of additional evidence it is not possible to say that the same was passed by it without applying its mind. In view of this it was further held that when additional evidence was taken with the assent of both sides or without objection it was taken, it was not open to the party to complain of it, later on. The apex court was considering the provisions of Order 41, Rule 27 of the Code of Civil Procedure and made an observation in the light of the aforesaid provision. Rule 46A of the Income-tax Rules was not under consideration before the apex court. The observations made by the apex court should be taken in the context of the facts on that case and in the context interpretation of the statutory provision involved therein. Therefore no help can be drawn from the aforesaid ruling of the Supreme Court. It has not been found as a fact that the additional evidence was taken by the first appellate authority after application of mind and in the absence of any reason on record, it is not possible to come to such conclusion at this stage. Be that as it may there is nothing on record of the present case to show that the additional evidence was taken with the assent of both sides. The argument that the assessing authority was present during the course of hearing of appeal will not absolve the appellate authority not to pass order in writing with the reasons for admission of fresh evidence. Mere presence of the assessing authority will not give presumption that he assented for taking the additional evidence on record.
11. Thus the Commissioner of Income-tax (Appeals) took the additional/ fresh evidence de hors to Rule 46A of the Rules and the Tribunal has rightly set aside that part of the order.
12. In view of the foregoing discussions, we answer the question referred to us in the affirmative, i.e., against the assessee and in favour of the Department. However, there shall be no order as to costs.