The Assessing Officer (Ao, For Short), Did Not Accept Thecontention Of The Assessee Based On The Decision Of The High Court Ofhimachal Pradesh In The Case Of "H v. Uoi” Reported In 238 Itr 38. The Ao Determined Thechargeable Expenditure Of Rs.2,64,02,260/- And Levied 10% Tax Unit Atrs.26,40,226/- And Interest Under Section

Andreza IN THE HIGH COURT OF BOMBAY AT GOA TAX APPEAL NOS. 74 & 75 OF 2006 The Commissioner of Income Tax, Havingoffice at Aayakar Bhavan, Patto Plaza, Panaji,... AppellantGoa. V e r s u s Alcon Resort Holding Limited, Velho Building, ... Respondents.Panaji, Goa. Ms. Susan Linhares, Standing Counsel for the Appellant. Mr. D. Pangam, Advocate with Mr. S. Priolkar, Advocate for the Respondents. __________________________________________ CORAM:M. S. KARNIK & VALMIKI SA MENEZES, JJ.17[th] MARCH 2023 DATE: _______________________________ JUDGMENT(Per M. S. Karnik, J) 1. These Appeals are disposed of by a common order as commonissues are involved. Tax Appeal No. 74 of 2006 relate to theAssessment Year 1996-97. Tax Appeal No. 75/2006 relate to theAssessment Year 1995-96. 2.These Appeals were admitted on the following substantialquestion of law : “A. Whether in law and in the facts and in thecircumstances of the case, the CIT(A) and the ITAT,were justified in admitting new evidence being the orderdated 31/7/2001, issued by the Director General(Exemption), though the assessee had not made out acase for admitting new evidence under Rule 46A(1) of theIncome Tax Rules, 1962.” 3. The Appellant is aggrieved by the Judgment and Order dated07.04.2006 passed by the Income Tax Appellate Tribunal, Panaji(ITAT, for short), dismissing the Appeals filed by the Department. 4. It is the case of the Department that the Respondent-Asessee setup a Tourism Resort in the State of Goa w.e.f. 06.12.1990. TheAssessee has filed a return under Section 8(3) of the E.T. Act, in formNo.3 of Expenditure Tax Rules, (E.T. Rules, for short) on 23.03.1998declaring chargeable expenditure at Rs. 'Nil'. The notice under Section9(1) was issued to the Assessee on 16.09.1998. The Assessee initiallyfiled a statement of room charges exceeding Rs.1200/- per day charter-wise and as per that statement, the chargeable expenditure wasRs.2,25,117/- for the period from 12.12.1995 to 15.01.1996. 5. In response to the notice under Section 9(1), the Assessee filed astatement showing chargeable expenditure at Rs.1,35,54,270/- and taxat Rs.13,55,427/-. The statement of chargeable expenditure atRs.1,92,56,720/- was filed on 31.01.2001. The Assessee contested that the E.T. Act is applicable where bed per day charges are exceedingRs.1200/- excluding luxury tax and expenditure tax. 6.The Assessing Officer (AO, for short), did not accept thecontention of the Assessee based on the decision of the High Court ofHimachal Pradesh in the case of "H. P. Tourism DevelopmentCorp. vs. UOI” reported in 238 ITR 38. The AO determined thechargeable expenditure of Rs.2,64,02,260/- and levied 10% tax unit atRs.26,40,226/- and interest under Section 14 at Rs.23,85,031/-. 7. Aggrieved by the AO's Order, the Assessee filed Appeal beforethe Commissioner of Appeal. During the pendency of the Appealchallenging the AO's Order before the Commissioner of Appeal, theAssessee obtained a letter of Exemption from DG (IT) (Exemption),Kolkata vide Order dated 31.07.2001, whereby the Assessee wasexempted under Section 80(IA)(4)(iii) of the IT Act from ExpenditureTax w.e.f. 06.12.1990 relevant to Assessment Year 1991-1992. 8.The CIT(A) by Order dated 23.04.2002, relying on the Orderpassed by the Director General (Exemption) Kolkata, dated 31.07.2001,which was produced before him for the first time, held that theAssessee is out of the mischief of Section 3 in view of the proviso toSection 4(a) of the ET Act. 7. Aggrieved by the AO's Order, the Assessee filed Appeal beforethe Commissioner of Appeal. During the pendency of the Appealchallenging the AO's Order before the Commissioner of Appeal, theAssessee obtained a letter of Exemption from DG (IT) (Exemption),Kolkata vide Order dated 31.07.2001, whereby the Assessee wasexempted under Section 80(IA)(4)(iii) of the IT Act from ExpenditureTax w.e.f. 06.12.1990 relevant to Assessment Year 1991-1992. 8.The CIT(A) by Order dated 23.04.2002, relying on the Orderpassed by the Director General (Exemption) Kolkata, dated 31.07.2001,which was produced before him for the first time, held that theAssessee is out of the mischief of Section 3 in view of the proviso toSection 4(a) of the ET Act. 9.The Department filed Appeal before the ITAT challeging CIT(A)Order on several grounds, inter alia, that the CIT(A) ought not to haveadmitted new evidence being Order dated 31.07.2001 and, secondly,that the approval was for only one Assessment year 1991-1992. TheITAT, by the impugned Order dated 07.04.2006, opined that theCIT(A) has rightly held that the Assesee is not liable to the charge ofExpenditure Tax for the Assessment year in view of the Order dated31.07.2001 issued by the DG (Exemption) read with proviso 4(a) of theE.T. Act. 10.Learned Counsel Ms. Susan Linhares, for the Department invitedour attention to the provisions of Rule 46-A of the Income Tax Rules,1962. It is submitted that none of the conditions entitling the Appellantto produce new evidence before the CIT(A) are satisfied. It is furthersubmitted that the Tribunal ought to have considered that theAppellate Authority has admitted new evidence without recording anyreasons for its admission, which is contrary to the mandate of sub-rule(2) of Rule 46-A of the IT Rules. A faint attempt was made by learnedCounsel to make submissions on questions other than the substantialquestion of law on which this Appeal was admitted. In all fairness,such submissions were not pressed. The attempt was to persuade usthat the exemption order had no bearing on the controversy, whichaccording to the learned Counsel, renders the Orders passed by the CIT(A) and the ITAT erroneous. However, learned Counsel urged thatin the event the CIT(A) was of the opinion that the exemption Orderdated 13.02.2001 has a bearing on the controversy, then the matterought to have been remanded to the AO to deal with the exemptionOrder in the first instance, instead of CIT(A) directly considering thedocument for the first time in Appeal. 11.Learned Counsel Shri Pangam, appearing on behalf of theRespondent-Assessee argued in support of the impugned Order. It issubmitted that there are concurrent orders passed by the CIT(A) & theITAT which are in consonance with the provisions of Rule 46-A of theRules and hence the impugned orders do not warrant any interference.It is further submitted that what is being claimed by the Assessee is thebenefit of exemption order dated 31.07.2001 in terms of the provisionsof Sections 80-IA(5)(ii) and 80-IA(1)(iii) read with Rules 18BBC of theIncome Tax Act, 1962 approved for the purpose of the said Sectionw.e.f. 06.12.1990. The exemption Order came to be passed after theOrder of the AO. The Appellant produced the said exemption Orderbefore CIT(A) who was already seized with the matter. LearnedCounsel submitted that the view taken by the ITAT cannot be said to beperverse so as to warrant interference in the exercise of writjurisdiction. 12.Heard learned Counsel for the parties. Perused the Memo of thePetition, the impugned Order and the documents enclosed along withthe paper-book. 12.Heard learned Counsel for the parties. Perused the Memo of thePetition, the impugned Order and the documents enclosed along withthe paper-book. 13. The Assessment Order for the Assessment Year 1996-97 wasmade on 13.02.2001 by the AO under Section 9(2) of the E.T. Act.During the pendency of the Appeal before the CIT(A) in its challenge tothe Assessment Order, the exemption order dated 31.07.2001 wasmade by the Director General of Income Tax(E) Kolkata on 31.07.2001in terms of the provisions of Section 80-IA(5)(ii) and 80-IA(1)(iii) readwith Rules 18BBC of the Income Tax Act, 1962. CIT(A) admitted theexemption Order in evidence entitling the Assessee the benefit of suchorder. ITAT confirmed the view taken by CIT(A). In the light of thesubstantial question of law as framed by this Court, the only aspect thatneeds to be considered is whether the CIT(A) was justified in admittingnew evidence being the exemption Order dated 31.07.2001 andwhether such admission of new evidence satisfied the requirements ofRule 46-A(1) of the Income Tax Rules, 1962. 14.The exemption Order dated 31.07.2001 was passed after theAssessment Order came to be made by the AO. During the pendency ofthe Appeal before the CIT(A), the Appellant requested that suchexemption Order dated 31.07.2001 be taken into consideration in support of the Appellant's case. The exemption Order was theadditional evidence. At this juncture, it is pertinent to re-produceSection 46-A of the IT Rules. The same reads thus : “[Production of additional evidence before the DeputyCommissioner (Appeals)] [and Commissioner (Appeals)]. 46-A(1) The appellant shall not be entitled to produce before the[Deputy Commissioner (Appeals)][or, as the case may be, theCommissioner (Appeals)], any evidence, whether oral ordocumentary, other than the evidence produced by him duringthe course of proceedings before the Assessing Officer], exceptin the following circumstances, namely :— a) where the[Assessing Officer] has refused to admitevidence which ought to have been admitted ; or b) where the appellant was prevented by sufficient causefrom producing the evidence which he was called upon toproduce by the[Assessing Officer]; or c) where the appellant was prevented by sufficient causefrom producing before the[Assessing Officer] anyevidence which is relevant to any ground of appeal; or d) where the[Assessing Officer] has made the orderappealed against without giving sufficient opportunity tothe appellant to adduce evidence relevant to any groundof appeal. (2) No evidence shall be admitted under sub-rule (1) unless the[Deputy Commissioner (Appeals)][or, as the case may be, theCommissioner (Appeals)] records in writing the reasons for itsadmission. (3) The[Deputy Commissioner (Appeals)][or, as the case maybe, the Commissioner (Appeals)] shall not take into account anyevidence produced under sub-rule (1) unless the [AssessingOfficer] 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 theappellant. (4) Nothing contained in this rule shall affect the power of the[Deputy Commissioner (Appeals)][or, as the case may be, theCommissioner (Appeals)] to direct the production of anydocument, or the examination of any witness, to enable him todispose of the appeal, or for any other substantial causeincluding the enhancement of the assessment or penalty(whether on his own motion or on the request of the[AssessingOfficer]) under clause (a) of sub-section (1) of section 251 or theimposition of penalty under section 271.” 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 theappellant. (4) Nothing contained in this rule shall affect the power of the[Deputy Commissioner (Appeals)][or, as the case may be, theCommissioner (Appeals)] to direct the production of anydocument, or the examination of any witness, to enable him todispose of the appeal, or for any other substantial causeincluding the enhancement of the assessment or penalty(whether on his own motion or on the request of the[AssessingOfficer]) under clause (a) of sub-section (1) of section 251 or theimposition of penalty under section 271.” 15. Reading of Rule 46-A indicates that additional evidence can beadmitted by the CIT(A) subject however to the satisfaction of theconditions mentioned in Rule 46-A(1)(c). The fact that an exemptionOrder dated 31.07.2001 referred to above was issued is not in dispute.The exemption Order enures to the benefit of the Assessee. Thefindings of the CIT(A) reveals that the CIT(A) was conscious of theprovisions of Rule 46-A(1)(c) of the IT Rules. It is observed by him thatthe exemption Order dated 31.07.2001 is admitted under Rule 46-A(1)(c) of the IT Rules as it goes to the very root of the grounds of appeal i.e.the charge of Expenditure Tax in the Assessee's case. CIT(A) held thatas a result of the exemption Order, the Assessee's case is taken out ofthe mischief of Section 3 by first proviso to Section 4(a) of the E.T. Actand hence the Assessee is not liable to be charged of E.T. forAssessment of years under appeal. 16.It is further pertinent to mention that even the Tribunal hasobserved that upon issuance of the exemption Order, what wasexpected by the AO was done by the First Appellate Authority. TheTribunal observed that the validity of the exemption letter is notdisputed. The Tribunal has thus held that the CIT(A) has rightlyimplemented the Order of the Director General (Exemption). 17.We see no reason to interfere with the view taken by theTribunal. After the issuance of the exemption Order, even if the matterwere to be remanded to the AO for giving effect to the exemptionOrder, the same consequence as the order passed by the CIT(A) wouldhave ensued. CIT(A) remitting the matter back to the AO would havebeen an empty formality. In any case, the exemption Order was passedafter the Assessment Order was made by the AO. The AO may bejustified in taking the view in the absence of the exemption Order.Nonetheless, so long as the exemption Order is passed by the DirectorGeneral of Income Tax (E) Kolkata stands, the same has to be giveneffect to. The CIT(A), upon production of the exemption Order, thevalidity of which is not under dispute, proceeded to give effect to thesaid Order and, accordingly allowed the Appeal. Rule 46-A empowersthe CIT(A) to admit new evidence subject to the conditions stipulatedtherein. 18.If in the facts of the present case, the CIT(A) was of the opinionthat the Assessee was prevented from sufficient cause in producing theexemption Order before the AO which is relevant to any ground ofappeal, we do not find error with this approach adopted by the CIT(A).The exemption Order was made only after the Order of the AO. 18.If in the facts of the present case, the CIT(A) was of the opinionthat the Assessee was prevented from sufficient cause in producing theexemption Order before the AO which is relevant to any ground ofappeal, we do not find error with this approach adopted by the CIT(A).The exemption Order was made only after the Order of the AO. 19.We also do not find any merit in the contention of the learnedCounsel for the Appellant that CIT(A) has not recorded reasons inwriting for admission of new evidence. The CIT(A) has recorded that asa result of the exemption Order, the Appellant has been taken out ofthe mischief of Section 3 by the first proviso to Section 4 of the E.T. Actand, therefore, the Appellant is not liable to be charged for E.T. forAssessment years under appeal. In any case, sub-rule(4) of Rule 46-Astarts with an obstante clause empowering the CIT(A) to direct theexamination of any witness and production of any document to enablehim to dispose of the appeal. The exercise of power by the CIT(A) inallowing admission of the exemption Order in support of theAppellant's case, cannot be said to be arbitrary or perverse exercise towarrant interference. The CIT(A) having held that the additionalevidence in the form of order of exemption, goes to the very root of theground of Appeal i.e. the charge of the E.T. in the Assessee's case, theCIT(A) was justified in its approach in admitting such exemption Orderwhile allowing the Appeal. The requirements for admitting additional evidence stands satisfied. The ITAT having confirmed the view takenby the CIT(A), we find no reason to interfere with the concurrentfindings recorded by the CIT(A) and the ITAT. 20.The Appeals are dismissed. No costs. VALMIKI SA MENEZES, J. M. S. KARNIK, J. Digitally signed by ANDREZA ANDREZA PEREIRAPEREIRA Date: 2023.03.30 10:15:37 +05'30'