Income-tax---

----Appeal to Appellate Tribunal---Powers of Tribunal---Power to admit additional evidence---Income from milling paddy---Addition on ground of low yield of rice---Tribunal considering Government certificate regarding milling---Revenue not challenging certificate---Tribunal was justified in taking into account Government certificate---Deletion of additions was valid---Indian Income Tax Act, 1961---Indian Income-tax (Appellate Tribunal) Rules, 1963, R. 29.

There is no prohibition on taking additional evidence at the appellate stage, the only condition being that the Department should not be prejudiced and should be given reasonable opportunity to rebut this additional evidence.

The assessee-farm earned income from milling paddy. The Assessing Officer made an addition to its income on the ground of low yield of rice. The assessee explained that the low yield was due to low quality of paddy and that due to bad crop the breakage was higher. However, no evidence was produced for justifying this low yield. Therefore, the Assessing Officer took the yield at 57 per cent. and concluded that the yield shown was less by 657.14 quintals. The Assessing Officer valued this low/short yield at Rs.204.30 per quintal and made an addition of Rs.1,39,260 on this account. An addition of Rs.25,000 was also made on account of unexplained credits. These were upheld by the Commissioner of Income-tax (Appeals). On further appeal, the Tribunal deleted the addition of Rs.1,39,260 on account of low yield. The Tribunal accepted the certificate issued by the Government showing the yield of rice from paddy at 46 per cent. The Tribunal found that Rs.15,000 had been shown in the name of G, Rs.10,000 outstanding in the name of S and hence the credits had been properly explained. Therefore, the Tribunal deleted the addition of Rs.25,000. On a reference:

Held, (i) that so far as the certificate issued by the Government regarding 46 per cent. milled paddy was concerned, that was the only document placed before the Tribunal and the Income-tax Department had not objected to it. The additional evidence had been properly entertained. The Tribunal was justified in deleting the addition of Rs.1,39,260 on account of low yield of rice.

(ii) that with regard to the sum of Rs.25,000 all the material was on record on the basis of which the Tribunal granted the relief to the assessee. The deletion of Rs.25,000 on account of unexplained credit was justified.

Abhay Spare for the Commissioner.

JUDGMENT

A. K. MATHUR, C. J.--This is a reference under section 256(1) of the income Tax Act, 1961, at the instance of the Revenue and the following questions have been referred by the Tribunal for answer by this Court:

"(1) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in entertaining fresh evidence in contravention of the provisions of rule 46A of the Income Tax Rules, 1962, read with rules 29 and 30 of the income-tax (Appellate Tribunal) Rules, 1963, while deleting the addition of Rs.1,39,260 made by the Assessing Officer on account of low yield?

(2) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in entertaining fresh evidence in cont7avention of the provisions of rule 46A of the income-tax Rules, 196'2, read with rules 29 and 30 of the Triconie-tax (Appellate Tribunal) Rules, 1963, while deleting the addition of Rs.25,000 made by the Assessing Officer on account of unexplained credit?"

The brief facts of the case are that the; assessee is' a registered firm. It derived income from the business of manufacture end sale of rice. It filed a return of its income on August 25, 1983, declaring as income of Rs.59,822. The original assessment in this case was completed on March 31, 1986, on an income of Rs.2,33,770 under section 143(3) of the Act. While completing the original assessment, the Assessing Officer found that during the year under consideration, the assessee had milled 61,475.93 quintals of Dhan giving 34,384.18 quintals of rice, 6,124.25 quintals of Kanki and 3,741.40 quintals of Konde. The percentage of yield comes to 56 per cent., 19 per cent. and 6 per cent, respectively, against 57.8 per cent. 9 per cent, and 5-7 per cent. in the assessment year 1982-83. Since the yield was considered to be low, the Assessing Officer asked the assessee to explain the reasons for low yield and to produce relevant records. The assessee explained that the low yield was due to low quality of paddy and due to bad crop the breakage was higher. However, no evidence was produced for justifying this low yield. Therefore, the Assessing Officer took the yield at 57 per cent. and concluded that the yield shown was less by 657.14 quintals. The Assessing Officer valued this low/short yield at Rs.204.30 per quintal and made an addition of Rs.1,34,253 on this account.

It is alleged that the Assessing Officer further required the assessee to produce the creditors for examination to file confirmatory letters as well. Despite adequate opportunity given, the assessee failed to produce Shri Sohanlal Pandya and Gajanan Repairing Works, etc. However, the Assessing Officer made an addition of Rs.25,390 including interest paid to Sohanlal Pandya amounting to Rs.390 while completing the original assessment on March 31, 1986, under section 143(3) of the Act.

The Commissioner of Income-tax, after hearing the parties, set aside the order of the Assessing Officer under section 263 of the Act and passed a fresh order on March 23, 1988. In pursuance of the directions given by the Commissioner, in the order under section 263, the Assessing Officer completed the assessment. While completing the assessment, the Assessing Officer made a further addition of Rs.5,360 in respect of low yield on the ground that addition should have made at the rate of Rs.212.09 per quintal as against Rs.204.30 applied at the time of original assessment. The addition of Rs.25,390 on account of unexplained credit was retained in the fresh assessment as well.

On appeal by the assessee to the Commissioner of Income-tax (Appeals), the Commissioner of Income-tax (Appeals) confirmed the finding of (he Assessing Officer on the above two issues. The appellate authority felt that the assessee had not produced evidence justifying low yield. As regards additions of unexplained credits, no evidence was produced before the Commissioner of Income-tax (Appeals) to explain the credit of Rs.15,000 in the name of Gajanan Repairing Works representing unpaid bills for repairs, whereas in the case of Sohanlal Pandya the confirmation account was complete for Rs.10,000. The Commissioner of Income-tax (Appeals) further confirmed the account of the Assessing Officer on this account as well.

Aggrieved by this order, the assessee preferred an appeal before the Tribunal which deleted the addition of Rs.1,39,260 on account of low yield. The Tribunal accepted the certificate issued by the Government showing the yield of rice from paddy at 46 per cent. The Tribunal further deleted addition of Rs.25,000 on account of unexplained credits. It also observed that Rs.3.000 were shown outstanding in the name of Gajanan Repairing Works. It also observed that Sohanlal Pandya was available with the assessee. The addition of Rs.25,000 was deleted by the Tribunal with the above observation. The submission was made before the Tribunal on behalf of the Revenue that additional evidence could not have been taken by the Tribunal. The Tribunal accordingly, on the basis of material on record, granted relief to the assessee. Thereafter, an application under section 2560) of the act was made before the Tribunal for making a reference before this Court in which it was alleged that certain additional evidence was taken on record which was not in accordance with law.

We have gone through the order of the Tribunal and find that there was no allegation made before the Tribunal at the time of arguments that all this material which was used by the Tribunal ought not to have been taken into consideration for granting relief to the assessee. As per the order of the Tribunal, it appears that all the material was on record on the basis of which the Tribunal granted the relief to the assessee and deleted the various amounts, namely, Rs.15,000 shown outstanding in the name of Gajanan Repairing Works, Rs.10,000 outstanding in the name of Sohanlal Pandya and hence credits have been properly explained. Therefore, the Tribunal deleted the addition of Rs.25,000. The yield was 46 per cent. The Government certified that the paddy milled could be approximately 46 per cent. and this was also available on record and as such, this addition was also deleted.

Form the above facts, the Per of the Tribunal speaks that no new evidence was sought to be used by the assessee before, the Tribunal which has considered the matter on the basis of material

on record and disposed of the matter. It is strange how these two questions have been framed which talk about fresh evidence taken into consideration. So far as the certificate issued by the Government regarding 46 per cent. milled paddy is concerned, that was the only document placed before the Tribunal as per the statement of case and this was never objected to by the Department. There is no prohibition for taking additional evidence at the appellate stage, the condition being that the Department should not be prejudiced and should be given reasonable opportunity to rebut this additional evidence. In this case, no such request was made by the representative of the Department whether they disputed this certificate or not. Therefore, there is no illegality committed by the Tribunal which accepted the certificate of 46 per cent. of the yield. In this view of the matter, we find that the additional evidence entertained by the Tribunal cannot be said to be bad.

Hence, both the questions are answered against the Revenue and in favour of the assessee.

M.B.A./3286/FC???????????????????????????????????????????????????????????????????????????????? Reference answered.