Shamim Yahya, AM

1. This appeal by the Revenue is directed against the order of the Ld. Commissioner of Income Tax (Appeals)-Faridabad dated 02.3.2011 pertaining to assessment year 2007-08. The grounds raised read as under:-

1. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in facts and in law in deleting the addition of ` 7,88,784/- made by the Assessing Officer on account of bogus/non-genuine liability shown in the name of M/s Sandeep Industrial Corporation ignoring the fact that the genuineness of the sundry creditor remains unverified.

2. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in facts and in law in deleting the addition of ` 3,71,028/ - made by the Assessing Officer on account of bogus/non-genuine liability shown in the name of M/s Mahesh Trading Corporation ignoring the fact that the genuineness of the sundry creditor remains unverified.

3. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in facts and in law in deleting the addition of ` 11,38,219/ - made by the Assessing Officer on account of bogus/non-genuine liability shown in the name of M/s Faridabad Steel Traders ignoring the fact that the genuineness of the sundry creditor remains unverified.

4. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in facts and in law in deleting the addition of ` 3,70,188/- made by the Assessing Officer on account of bogus/non-genuine liability shown in the name of M/s Parashar Steel Traders ignoring the fact that the genuineness of the sundry creditor remains unverified.

5. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in facts and in law in deleting the addition of ` 3,54,095/- made by the Assessing Officer on account of bogus/non-genuine liability shown in the name of M/s Ultron Engineers ignoring the fact that the genuineness of the sundry creditor remains unverified.

6. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in facts and in law in deleting the addition of ` 9,87,394/- made by the Assessing Officer on account of bogus/non-genuine liability shown in the name of M/s Bhagwati Trading Company ignoring the fact that the genuineness of the sundry creditor remains unverified.

7. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in facts and in law in deleting the addition of ` 2,07,629/- made by the Assessing Officer on account of bogus/non-genuine liability shown in the name of M/s Kay Kay Enterprises ignoring the fact that the genuineness of the sundry creditor remains unverified.

8. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in facts and in law in deleting the addition of ` 1,28,983/- made by the Assessing Officer on account of bogus/non-genuine liability shown in the name of M/s Radhika Sales Corporation ignoring the fact that the genuineness of the sundry creditor remains unverified.

9. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in facts and in law in deleting the addition of ` 2,72,146/- made by the Assessing Officer on account of bogus/non-genuine liability shown in the name of M/ s Fabric India ignoring the fact that the genuineness of the sundry creditor remains unverified.

10. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in facts and in law in deleting the addition of ` 1,86,216/- made by the Assessing Officer on account of bogus/non-genuine liability shown in the name of M/s Royal Industries (India) ignoring the fact that the genuineness of the sundry creditor remains unverified.

11.On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in facts and in law in deleting the additions made by the Assessing Officer on account of bogus/non genuine liability shown in the various names of bogus sundry creditors and when the issue of genuineness of sundry creditors remains undisputed in view of the facts;

a) that the enquiry letters were issued to the sundry creditors at the addresses given by the assessee but the letters were received back unserved.

b) that the AO had also carried out enquiries through Inspector of his office who reported that creditors were not available at the given addresses.

c) that the assessee was asked to produce the creditors in whose cases, the enquiry letters could not be served, but the assessee has failed to produce the creditors before the AO despite ample opportunity afforded to her.

d) that nothing has been brought on record by the Ld. CIT(A) to show the genuineness of the above sundry creditor.

That the appellant craves for the permission to add, delete or amend the grounds of appeal before or at the time of hearing of appeal.

2. The brief facts of the case are that the return of income declaring income of Rs. 1,99,430/- was filed by the assessee on 31.10.2007, which was processed u/s 143(1) of the Act. Later on, the case was selected for compulsory scrutiny as per CBDT guidelines for the F.Y. 2008-09 and a notice u/s. 143(2) was issued on 28.08.2008 and served upon the assessee 31.08.2008. The assessee is engaged in business of manufacturing of centralized Lubrication Systems. During the course of assessment proceedings, the assessee produced the books of accounts, which were test checked. The AO asked the counsel of the assessee on 15.06.2009 to produce the sundry creditors exceeding RS. 1.00 lakh in whose cases the inquiry letters were received back unserved. The AO also asked the information regarding complete latest addresses with telephone & mobile Nos. of the sundry creditors along with confirmation, PAN, proof of filing of their income tax returns and their respective AOs. Observing the non compliance on the part of assessee, the AO issued a show cause notice providing final opportunity on 23.12.2009 to produce the complete books of accounts and sundry creditors as already asked for in last hearings. Prior to this, the assessee submitted that the present whereabouts of the creditors were not known and the liabilities to pay up the creditors still stood and required to be cleared. However, on account of failure of the assessee to produce the sundry creditors and after observing certain shortcomings, the AO made addition of Rs.46,60,403/- in respect of 11 creditors on account of being bogus, as discussed in para 2.1 to 2.11 of the order.

3. Before the Ld. Commissioner of Income Tax (Appeals) assessee submitted fresh additional evidence and the written submissions. Ld. Commissioner of Income Tax (Appeals) in para 5.1 of his order observed that vide letter dated 29.04.2010, the AO was required to offer his comments on the written submissions of the assessee as well as on the admissibility of additional evidences produced during the course of appellate proceedings. The AO vide his report submitted that "the evidences were available with the assessee even at the time of assessment after giving so many opportunities to the assessee could have well filed the same before the AO at the time of assessment itself. Assessing Officer has further referred that Clause (a) and (d) of Rule 46A do not apply and the assessee had not made out any sufficient cause as to what prevented her from furnishing the evidences available with her in assessment proceedings after giving so many opportunities. Ld. Commissioner of Income Tax (Appeals) vide para no. 5.3 in his order noted that as per the order dated 07.06.2010 passed by my learned predecessor, the additional evidences in the shape of affidavits of various creditors have been admitted on the ground that the assessee was prevented by sufficient cause to submit necessary evidences as received by the AO and hence, the case is covered by clause (b) and (c) Rule 46A(1) and such evidences are indispensable for the equitable disposal of appeal. Ld. Commissioner of Income Tax (Appeals) further noted that Assessing Officer AO was accordingly directed to examine these evidences under Rule 46A(3) and submit his further report. The Assessing Officer vide his report dated 30.06.2010 submitted that the letter was written to the assessee to produce necessary evidences/documents on 11.06.2010. On 11.06.2010, Shri S. C. Jain, AR of the assessee attended and sought adjournment. The case was adjourned to 21.06.2010 but neither any person attended nor filed necessary evidences on the adjourned date. Hence, the additional evidences submitted by the assessee cannot be verified. Thereafter, Ld. Commissioner of Income Tax (Appeals) elaborately analysed the submissions and additional evidences and proceeded to grant substantial relief to the assessee.

4. Against the above order the Revenue is in appeal before us.

5. We have heard the rival contentions in light of the material produced and precedent relied upon. Ld. Departmental Representative has claimed that there is violation of Rule 46A in as much as Assessing Officer has not given the opportunity to go through the additional evidences and give his comments thereon. We have carefully considered the submissions and perused the records. In our considered opinion, interest of justice will be served, if the matter is remitted to the file of the Assessing Officer to consider the additional evidences and submissions before the Ld. Commissioner of Income Tax (Appeals) given by the assessee. Assessing Officer shall go through the additional evidences and materials and decided the case afresh, after giving the assessee adequate opportunity of being heard. While remitting the mater to the Assessing Officer, we place reliance upon the decision of the Honble Jurisdictional High Court in the case of C.I.T. vs. Manish Build Well Pvt. Ltd. in ITA No. 928/2011. Vide order dated 15.11.2011 the Honble Jurisdictional High Court in para 24 has expounded as under:-

24. In the present case, the CIT(A) has observed that the additional evidence should be admitted because the assessee was prevented by adducing them before the assessing officer This observation takes care of clause (c) of sub-rule (1) of Rule 46A. The observation of the CIT(A) also takes care of sub rule (2) under which he is required to record his reasons for admitting the additional evidence. Thus, the requirement of sub- rules (1) and (2) of Rule 46A have been complied with. However, sub-rule (3) which interdicts the CIT (A) from taking into account any evidence produced for the first time before him unless the Assessing Officer has had a reasonable opportunity of examining the evidence and rebut the same, has not been complied with. There is nothing in the order of the CIT(A) to show that the Assessing Officer was confronted with the confirmation letters received by the assessee from the customers who paid the amounts by cheques and asked for comments. Thus, the end result has been that additional evidence was admitted and accepted as genuine without the Assessing Officer furnishing his comments and without verification. Since this is an indispensable requirement, we are of the view that the Tribunal, ought to have restored the matter to the CIT (A) with the direction to him to comply with sub-rule (3) of Rule 46A. In our opinion and with respect, the error committed by the Tribunal is that it proceeded to mix up the powers of the CIT (A) under sub-section (4) of Section 250 with the powers vested in him under Rule 46A. The Tribunal seems to have overlooked sub- rule(4) of Rule 46A which itself takes note of the distinction between the powers conferred by the CIT (A) under the statute while disposing of the assessees appeal and the powers conferred upon him under Rule 46A. The Tribunal erred in its interpretation of the provisions of Rule 46A vis-a-vis Section 250 (4). Its view that since in any case the CIT(A), by virtue of his conterminous powers over the assessment order, was empowered to call for any document or make any further enquiry as he thinks fit, there was no violation of Rule 46A is erroneous. The Tribunal appears to have not appreciated the distinction between the two provisions. If the view of the Tribunal is accepted, it would make Rule 46A otiose and it would open up the possibility of the assessees contending that any additional evidence sought to be introduced by them before the CIT (1) cannot be subjected to the conditions prescribed in Rule 46A because in any case the CIT (A) is vested with conterminous powers over the assessment orders or powers of independent enquiry under sub section (4) of Section 250. That is a consequence which cannot at all be countenanced.

6. The above exposition of the Honble Jurisdictional High Court supports our action of remitting the matter to the file of the Assessing Officer. Accordingly, the matter stands remitted to the file of the Assessing Officer. In the result, the appeal filed by the Revenue stands allowed for statistical purposes.

Order pronounced in the open court on 13/4/2012.