1. The Department has filed this appeal against the order of the CIT(A), Guwahati, dt. 30th March, 1993, for the asst. yr. 1991-92, by which the additions made by the AO, as mentioned hereinafter have been deleted. The Department has assailed the order of CIT(A) on four grounds and ground No. 4 is general which requires no adjudication.
2. In ground Nos. 1 and 2 the Department has assailed the order of the CIT(A) on the ground that the CIT(A) erred in law and in facts in deleting the disallowance of Rs. 2,66,682 made on account of the green leaves under s. 43B of the IT Act, 1961, and in deleting the addition of Rs. 60,000 on account of interest and bank charges by admit fresh evidence in violation of r. 46A of the IT Rules, 1962.
3. The AO made the addition of Rs. 2,66,682 being the amount payable on account of cess to the Government of Assam through M/s. Assam Tea Corporation of account of purchase of green leaves from Bholaguri T.E.The AO had stated that the assessee did not pay the amount till the filing of the return of income and as such it hit the provisions of s.
43B of the Act. It was also stated by the AO that the assessee also could not be able to produce any evidence to show that the amount of assessee had been paid. The assessee filed appeal before the first appellate authority against the aforesaid disallowance.
4. During the course of hearing of the appeal before the first appellate authority the assessee filed a copy of the agreement entered upon with the M/s. Assam Tea Corporation Ltd. for green leaves purchase and also a copy of the letter from M/s. Assam Tea Corporation Ltd. for payment of additional bill in respect of cess and submitted that the cess levied was payable by the seller. The assessee argued before the first appellate authority that invoking of the provisions of s. 43B of the Act on the purchaser was unjustified and against the principle of law. The learned CIT(A) on the basis of the evidences and materials filed before him in respect of purchase agreement and the clarification made by M/s. Assam Tea Corporation Ltd. in its letter dt. 16th November, 1992 held that the cess was the liability of M/s. Assam Tea Corporation Ltd. which they had paid to the State Government.
Therefore, the question of paying the cess by the assessee does not arise and the provisions of s. 43B of the Act is not applicable in the case of the assessee. The CIT(A) deleted the addition of Rs. 2,66,682.
Hence the Department is in appeal before the Tribunal.
5. In respect of the deletion of the addition of Rs. 60,000 on account of the interest and bank charges the AO held that the assessee advanced loan of Rs. 1,00,000 each to four directors at the interest rate of 6 per cent and whereas it had taken loan from financial institution/banks @ 21 per cent. The AO added the difference between the bank interest paid by the assessee and the interest charged to the directors aggregating sum of Rs. 60,000. The assessee filed appeal before the first appellate authority.
6. During the course of hearing of the appeal the assessee submitted before the CIT(A), a copy of the Board Resolution, dt. 10th May, 1990, and submitted that the assessee gave temporary loan of Rs. 1,00,000 to each of the full-time four directors @ interest at 6 per cent per annum to enable them to construct residential houses. It was also stated that the assessee was not paying any house rent allowance to any of these full-time directors as the directors were granted loans at concessional rate of interest. The assessee also submitted that the assessee-company was benefitted by giving the loan to the directors at concessional rate of interest and otherwise the assessee had to pay house rent allowance to four full-time directors at a minimum rate of Rs. 2,000 per month per director amounting to Rs. 1,20,000 and as such the assessee was beneficial as monetarily. The CIT(A) on the basis of the resolution filed by the assessee and on the facts of the case and explanation furnished before him has deleted the addition of Rs. 60,000 made by the AO. Hence the Department is in appeal before the Tribunal.
7. At the time of hearing of the appeal the learned Departmental Representative in respect of the aforesaid deletion of Rs. 2,66,682 and Rs. 60,000 submitted that the CIT(A) arrived at a conclusion and deleted the amount on the basis of new evidences without giving opportunity to the AO in violation of r. 46A of the IT Rules, 1962. On the other hand, the learned authorised representative of the assessee, Shri A. Battacharjee, supported the order of the CIT(A) and submitted that the assessee did not furnish copies of the documents before the AO, as the same were not asked for by him.
8. We have considered the submissions of the learned representatives and the orders of the authorities below. On perusal of the order of the CIT(A) we agree with the learned Departmental Representative that the CIT(A) has deleted the addition of Rs. 2,66,682 on being satisfied that the liability to pay cess to the State Government was the liability of the seller as per the agreement entered into between the assessee and M/s. Assam Tea Corporation Ltd. and the clarification given by M/s.
Assam Tea Corporation Ltd. by its letter, dt. 16th November, 1992 admittedly the copies of the aforesaid papers were not the two produced by the assessee to the AO. Similarly we also observe from the order of the CIT(A) that the assessee furnished the copy of the resolution, dt.
10th May, 1990 approving to advance temporary loan of Rs. 1,00,000 each to four full-time directors at the concessional rate of interest at 6 per cent per annum. The assessee did not give the copy of the resolution passed by the Board of Directors before the AO.9. In view of the above, we agree that the CIT(A) had deleted the aforesaid amounts after admitting fresh evidences without giving opportunity to the AO which is in violation of r. 46A of the IT Rules, 1962. Therefore, we set aside the order of the CIT(A) in respect of the aforesaid deletion of Rs. 2,66,682 and Rs. 60,000 and restore the same to him with the direction to redecide the issue afresh after giving opportunity to the AO. Hence ground Nos. 1 and 2 of the appeal are treated as allowed.
10. The next ground of appeal is in respect of deleting the disallowance under s. 43B of the Act on account of provident fund of Rs. 75,479.
11. The AO held that the assessee did not pay provident fund contribution of an aggregate sum of Rs. 1,04,886 in respect of three period within due date and as such did not allow the deduction in view of provisions of s. 43B of the Act.
12. The assessee filed appeal before the first appellate authority in respect of the following two additions made by the AO and submitted that these contributions were made within the time and as such the contribution should not have been added by the AO under s. 43B :------------------------------------------------------------------------Period Amount Date of payment------------------------------------------------------------------------1-4-1990 to 28-4-1990 31,886 28-5-199029-4-1990 to 26-5-1990 43,593 29-6-1990------------------------------------------------------------------------ 13. The assessee submitted before the CIT(A) that the two payments were made either within one month or within one month and additional 15 days when paid by cheques. The assessee contended before the first appellate authority that all payments were made by the assessee's apex bank through cheque to the S.B.I. Guwahati and as such these two additions are outside the provisions of s. 43B of the Act. The CIT(A) agreed with the contention of the assessee and held that the aforesaid two payments of Rs. 31,886 and Rs. 43,593 are not hit by s. 43B of the Act and allowed the same. Hence the Department is in appeal before the Tribunal.
14. At the time of hearing of appeal the Departmental Representative, Shri S. K. Malakar, submitted that as per the Employees' Provident Fund Scheme, 1952, the amount is to be paid within 15 days of the close of every month and the assessee had not paid the amount within due date.
The order of AO to disallow the amount of contribution as per s. 43B of the Act is as per law. On the other hand, the learned authorised representative of the assessee, Shri A. Bhattacharjee, justified the impugned order and relying on the annual report (1984-85) on the working of Assam Tea Plantation Provident Fund and Pension Fund and Deposit Linked Insurance Fund Scheme, submitted that the due date as per s. 43B to deposit the amount within one month or if paid by cheque in another 15 days i.e. within 45 days and as such the assessee had paid the money within due date.
15. We have considered the submissions of the learned representatives and the orders of the authorities below. We have also gone through para 38 of the Employees Provident Fund Scheme, 1952, on which the learned Departmental Representative has placed reliance in support of his contention and also the annual report on the working of Assam Tea Plantation Provident Fund and Pension Fund and Deposit Linked Insurance Fund Schemes, on which the learned authorised representative has placed reliance to state that the assessee paid the contribution within due date. As per s. 43B of the Act deduction in respect of any sum payable by the assessee as an employer or by way of contribution to provident fund, etc. shall be allowed if such sum had actually been paid during the relevant previous year on or before the due date. Further Explanation to s. 36(1)(va) defines due date means the date by which the assessee is required as an employer to credit and employee's contribution to the employee's account in the relevant fund under any Act, order or notification issued thereunder or under any standing order, award, contract or service or otherwise. It is observed from the scheme filed by the assessee's representative that the period allowable to deposit the contribution is one month of collection into the Board's account is any branch of State Bank of India or United Bank of India.
Since the assessee deposited the amount within one month we agree with the order of CIT(A). Accordingly the ground No. 3 of appeal is dismissed.
16. In the result, the appeal filed by the Revenue is allowed in part as per order indicated above.
17. I have carefully gone through the order of the learned Judicial Member and I am not persuaded to accept his findings.
18. The facts of the case have been set out by the learned Judicial Member in great detail and they need not be stated here.
19. The Department is in appeal having raised the first two grounds with respect to the violation of r. 46A by the learned CIT(A). The grounds have been framed with also keeping in view the additions framed by the AO having deleted by the learned CIT(A) by accepting evidence other than those were before the AO. These have been considered by my learned Judicial Member appropriate and has sought to restore them to the file of the CIT(A) with the direction to redecide the issue afresh after giving opportunity to the AO.20. In my view the evidence that have been relied upon by the CIT(A) were before the AO as well as in much on both the grounds the Department is in appeal before us, the AO has himself accepted certain basis which according to him were to satisfactory and hence disallowance were framed.
(a) In the case of cess payable to the Government on the basis of procurement of green leaves through Assam Tea Corporation Ltd., the learned AO has made detailed discussion with respect of establishing the fact that cess collected from the assessee-company (in appeal before us) was actually to be paid by Assam Tea Corporation. Having established that the said sum remaining to the credit of Assam Tea Corporation, he infact allowed Rs. 68,480 being the sale of tea from Assam Tea Corporation which is claimed to be adjusted against the amounts payable by it. Therefrom, he concluded that the balance amount of cess payable came to Rs. 2,66,682 which he disallowed under s. 43B. This indicates that the amount of cess remaining unpaid was with Assam Tea Corporation and not the assessee-respondent before us. The learned CIT(A) appreciated that the invoking of provisions to s. 43B was not appropriate in the case of the assessee-company and rightly deleted it. The CIT(A) could not have admitted afresh evidence in the form of the agreement between the assessee and Assam Tea Corporation. The collection of cess from the assessee-company on its purchase of tea leave from Assam Tea Corporation is quite evident from the assessment order which states in the face on reading therefrom. The assessee-company is accounting it in sundry creditors as also is evident from the order of the AO who has allowed Rs. 68,480 on account of sale of tea to Assam Tea Corporation, who has not collected the cess for onward payment to the Government of Assam. It is a case of Assam Tea Corporation violating the provision of s. 43B instead of the assessee respondent here. The AO had been aware of the position and under no stretch of imagination could have established cess remaining payable by the assessee on purchases made from Assam Tea Corporation who would recover cess for onward remission to Government of Assam. In any case the learned AO disallowed it under s. 43B on account of : This confirms my view that the evidence of having it paid was also not before the CIT(A). He allowed it on the basis of his finding that it was the liability of Assam Tea Corporation Ltd. which fact was known to the learned AO. Hence, in my view there was no violation of r. 46A by the CIT(A) in confirming the deletion of the disallowance under s. 43B by the AO. The ground raised by the Department, therefore, is untenable move so by the fact that CIT(A) is authority above the AO to understand the technicalities of framing assessment and is properly adjudicating thereupon.
Therefore, this ground should be aptly dismissed instead of restoring it to the very authority who accepted the version of the AO in an authoritative manner instead of invoking provision not applicable in the instant case.
(b) In the case of deleting the addition of Rs. 60,000 framed by the AO on account of having found that nominal interest was charged from the directions (i.e. 6 per cent) vis-a-vis paying interest @ 21 per cent to financial institutions, the learned AO added difference in the rate of interest changed and paid. The Department has raised the ground of having accepted the Board resolution for allowing the contention of the assessee-respondent in violation of r. 46A by the CIT(A). In my view the AO allowed interest @ 6 per cent and sought to add the difference of 15 per cent on amount of undercharge of interest. The acceptance of 6 per cent interest is the acceptance of having granted loan at lower rate of interest. What the AO sought to add was the difference between the higher rate of interest the funds were borrowed and the lower rate of interest the assessee-company recovered from its directors.
21. There was no need of additional evidence as has been brought out by the Departmental Representative. The learned CIT(A) simply recapitulated the reasons for the allowance thereof which could not have been brought out by a copy of the Board resolution. Apart from this as part of requirement of the return, the AO was equipped with the director's report, the notes attached to the balance sheet, wherein such advances (debit balances of directors above Rs. 1,000) have to be disclosed in compliance with the provisions of the Companies Act, 1956.
The learned AO on having found undercharges accepted that the loans were sanctioned in accordance with the law and allowed deduction of Rs. 24,000. It was the case of the AO to disallow Rs. 60,000 from interest paid to the financial institution. Hence in my view there was no violation of r. 46A committed by the CIT(A) on deleting the additions framed by the AO in appeal before us in the first two grounds raised by the Department.
22. The third ground has been adjudicated by my brother Judicial Member as required.
23. In view of what is stated above instead of restoring the matter to CIT(A) for redeciding after giving an opportunity to the AO, I wish to dismiss these two grounds raised by the Department in favour of the assessee-company.
25. In this appeal there is difference of opinion between the Members on ground Nos. 1 and 2 of the appeal to the effect that the J.M. has held that the CIT(A) admitted fresh evidence in violation of r. 46A of the IT Rules, 1962, and as per para 9 of his order has restored the matter to the first appellate authority with the direction to redecide the issue a fresh after giving opportunity of being heard to the AO whereas the A.M. is of the view that there was no violation of r. 46A of the IT Rules by the first appellate authority in deleting the disallowance made by the AO. Therefore, the A.M. has rejected the ground Nos. 1 and 2 of the appeal.
26. In view thereof, there is a difference of opinion and the issue is referred to the Hon'ble President of the Tribunal under s. 255(4) of the Act for opinion of the Third Member on the issue. The issue framed is as under : "Whether in the facts and circumstances of the case the J.M. is right to hold that the first appellate authority admitted fresh evidence in violation of r. 46A of the IT Rules, 1962, or the A.M. is right to hold that no violation of r. 46A has been made by the first appellate authority in deleting the disallowances made by the AO ?" 27. In this case because of the difference between the two Members the Hon'ble President, Tribunal, was requested to appoint the Third Member for deciding the differences. The Hon'ble President was pleased to appoint me as the Third Member and, therefore, the matter was heard by me. The question referred to me is as under : "Whether in the facts and circumstances of the case the J.M. is right to hold that the first appellate authority admitted fresh evidence in violation of r. 46A of the IT Rules, 1962, or the A.M. is right to hold that no violation of r. 46A has been made by the first appellate authority in deleting the disallowances made by the AO ?" 28. The question actually relates to provisions of s. 250 and also s.
251 of the IT Act, 1961 (hereinafter referred to as "the Act") which relate to procedure in appeal as also the powers of the CIT(A) in the context of additional evidence. It will be necessary to consider first certain legal aspects in connection with the issue concerned. The proceedings before CIT(A) are quasi-judicial proceedings and, therefore, it is incumbent upon him to conform to the rules of the natural justice. He has to give proper opportunity of being heard to the assessee as also to the AO. The powers conferred are very wide as the first appellate authority has the power to set aside the order of the first authority and remit the case back to him or allow the appeal on merits or pass an order calling for fresh findings from the first authority and, therefore deal with the appeal or alter or amend or modify the order under appeal. While deciding number of matters, he is required to exercise judicial discretion on various points such as admitting additional evidence. This judicial discretion though wide enough, it is limited by statute by language in some cases and, in any event has to be exercised judicially and in accordance with well established principles. The first appellate authority, therefore, should not exceed the bounds of reason. Sub-s. (4) of s. 250 of the Act confers jurisdiction on the first appellate authority to make further enquiry as he deems fit and in the process if he asks or allows the assessee to produce additional papers or additional evidence, he had been held not to exceed jurisdiction as held by the Hon'ble Supreme Court in the case of Keshav Mills Co. Ltd. vs. CIT (1965) 56 ITR 365 (SC). The language of ss. 250 and 251 clearly indicate that the introduction of evidence, additional evidence at the appellate stage is permissible as was held in the case of Tara Devi Goenka vs. CIT (1980) 122 ITR 14 (Cal). However, while the power of admitting additional evidence was earlier unregulated, it has now to be borne in mind that the assessee had been allowed to produce additional evidence only in the circumstances specified in r. 46A of the IT Rules, 1962, which regulates the discretion to be exercised by the appellate authority.
This r. 46A was inserted by the IT Second Amendment Rules, 1973, w.e.f.
1st April, 1973. The r. 46A s is relevant for our purpose reads as under : "46A(1). - The appellant shall not be entitled to produce before the Dy. CIT(A) or, as the case may be, the CIT(A), any evidence, whether oral or documentary, other than the evidence produced by him during the course of proceedings before the AO except in the following circumstances, namely : (a) where the AO 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 AO; or (c) where the appellant was prevented by sufficient cause from producing before the AO any evidence which is relevant to any ground of appeal; or (d) where the AO 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-r. (1) unless the Dy.
CIT(A) or, as the case may be, the CIT(A) records in writing the reason for its admission.
(3) The Dy. CIT(A) or, as the case may be, the CIT(A) shall not take into account any evidence produced under sub-r. (1) unless the AO 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 effect the power of the Dy.
CIT(A) or, as the case may be, the CIT(A) 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 AO under cl. (a) of sub-s. (1) of s.
251 or the imposition of penalty under s. 271." 29. This rule (1) enumerates the circumstances in which additional evidence is permissible, (2) requires the appellate authority to record in writing his reasons for admitting it, and (3) enjoins on him a duty to give the AO a reasonable opportunity to counter such additional evidence, if necessary, by producing evidence in rebuttal. Here it may be borne in mind that in the case of CIT vs. Valimohmed Ahmedbhai (1982) 134 ITR 214 (Guj), it was held that a mere notice of hearing of the appeal would not be sufficient. Such being the fetters on the assessee's right to produce additional evidence as also on the right of the first appellate authority to admit the same, in the context of these now I shall have to examine the facts in this case.
30. The assessee is growing and manufacturing tea out of green leaves produced in its own garden. In addition, it had also purchased green tea leaves from M/s. Assam Tea Corporation Ltd. under an agreement entered into on 1st March, 1990, between the assessee and M/s. Assam Tea Corporation Ltd. Clause 2 of the agreement which is relevant for the controversy, states the rate at which the assessee is to purchase green tea leaves from M/s. Assam Tea Corporation Ltd. Clause 2 of the agreement reads as under : "2. That the first party agreed to purchase approximately 5,00,000 kgs. of green leaves of standard quality annually from the said tea estate belonging to Assam Tea Corporation Ltd., for a period of one year from the beginning of the plucking season of the year 1990 at the rate of Rs. 5.11 (rupees five and paise eleven) only per kg.
plus any amount charged for green tea leaves under the Assam Taxation (Specified Lands) Ordinance, 1989, Ex-Bholaguri Tea Estate." 31. In this clause the first party is the assessee. The assessee purchased certain quantity of green leaves for which an amount was debited in the purchase and expenses account at the rate of Rs. 5.11 per kg. plus Rs. 0.50 in respect of the cess imposed by the Government of Assam as per Assam Taxation (Specified Lands) Rules, 1990. At the end of the year, out of this purchase certain amount of cess remained payable to M/s. Assam Tea Corporation Ltd. The AO mentioned in his order as under : "On scrutiny of the accounts it is also seen that the cess payable to the Government of Assam through the M/s. Assam Tea Corporation was not paid till the filing of the return. As such it hits the provisions of s. 43B of the IT Act. However, in source of hearing it was pointed out that the assessee was to receive a sum of Rs. 68,480 being sale of tea from M/s. Assam Tea Corporation, which is claimed to be adjusted against the amounts payable to it. As such by giving benefits to the adjustment of Rs. 68,480 towards its liability, the balance amount of cess payable came to Rs. 2,66,682 which was not paid during the year and upto the filing of the return as required under s. 43B of the IT Act, 1961. The assessee also could not be able to produce any evidence in this respect to show that the amount of cess has been paid. As such I invoke the provisions of s. 43B of the IT Act and disallow the claim of Rs. 2,66,682 and added back to its income." 32. The AO while computing the income in the assessee has further made an addition of an amount of Rs. 60,000 on the basis of following order : The company had advanced loan to directors to the tune of rupees one lakh each to 4 directors at the interest rate of 6 per cent. During the year on the contrary the assessee while borrowing/taking loan from financial institution/banks paid interest @ 21 per cent.
Interest on rupees four lakhs @ 6 per cent comes to Rs. 24,000.
Interest on four lakhs @ 21 per cent comes to Rs. 84,000. Difference of charge interest and paid interest is added back to the total income of the assessee being under charge of interest." 33. The assessee had appealed to the CIT(A). In respect of the purchase of tea leaves from M/s. Assam Tea Corporation Ltd. in addition to the agreements. The assessee had also placed before the CIT(A) a letter, dt. 6th November, 1992, issued by M/s. Assam Tea Corporation Ltd., addressed to the assessee and the same reads as under : "Kindly refer to the correspondences cited above. In this connection we would like to state that as the Assam Tea Corporation Ltd. was not a party to the case filed in the Hon'ble Supreme Court, we have deposited the special cess on green-leaf @ 0.50 paise per kg. for the year 1990 in full. You are therefore requested to pay an amount of Rs. 3,53,050 (i.e. 7,06,100 kg. G.L. @ 0.50 paise per kg.) immediately, on account of green-leaf supplied to you from our Bholaguri T.E. in 1990." "After going through the facts of the case regarding liability on account of cess and the clarification made by Assam Tea Corporation Ltd. in its letter dt. 6th November, 1992, it is clear that Assam Tea Corporation Ltd. is liable for payment of the cess which was imposed by the State Government after the agreement was signed. Cess is the liability of Assam Tea Corporation Ltd. which they have paid to the State Government, therefore, the question of paying the cess by the appellant does not arise and provisions of s. 43B is not applicable in the case of the appellant." 35. In respect of the addition of Rs. 60,000 it was explained by the assessee that the Board of Directors of the company vide resolution dt.
10th May, 1990 had approved the temporary loan of Rs. 1,00,000 each to four full-time directors of the company at the rate of 6 per cent interest per annum and this loan was granted to the directors to enable the construction of residential house for them and since the company was not paying any house rent the grant of small amount of loan to each director was decided. Besides it was pointed out that this resolution was approved by the company's shareholders in an extraordinary general meeting and this arrangement benefitted the company because otherwise the company would have to spend much more by way of house rent on the accommodation required to be hired. Thereafter the CIT(A) passed the following order : "9. I have given due consideration to the submissions put forward by the authorised representative. After going through the resolution dt. 10th May, 1990 of the Board of Directors duly approved by the shareholders of the appellant company and on the facts of the case, I agree that by way of advancing Rs. 1,00,000 to each of four full-time directors, the appellant company on the other hand is beneficial on monetarily. In view thereof the addition is unjustified which is hereby deleted in full." 36. When the matter was originally heard by the Bench the learned Judicial Member, held that the first appellate authority admitted the additional evidence in the form of agreement entered into between the assessee and M/s. Assam Tea Corporation Ltd. as also the letter, dt.
6th November, 1992, issued by M/s. Assam Tea Corporation Ltd., in respect of purchase of green tea leaves. He further held that the assessee furnished additional evidence being the copy of the resolution, dt. 10th May, 1990. For this, according to him opportunity was not given to the AO.37. The learned A.M., however, was of the opinion that the evidence that was relied upon by the CIT(A) was before the AO in respect of both the grounds. Hence the difference.
38. I have heard the representatives of both the sides. Before me, it was an admitted position that the agreement entered into by the assessee with M/s. Assam Tea Corporation Ltd. in respect of purchase of green tea leaves was before the AO. However, the letter, dt. 6th November, 1992, issued by M/s. Assam Tea Corporation Ltd. was not before the AO. Similarly the admitted position was that the resolution of the Board of Directors in respect of grant of loan was not before the AO. Therefore, the position now is that the additional evidence considered by the CIT(A) consist of a letter, dt. 6th November, 1992, issued by M/s. Assam Tea Corporation Ltd. and the Board's resolution.
39. With regard to the first point the evidence which is claimed to be additional evidence is in the form of a letter, dt. 6th November, 1992, issued by M/s. Assam Tea Corporation. In my opinion, this evidence cannot be considered an additional evidence and the relief granted by the CIT(A) is also not on the basis of this additional evidence. The CIT(A) rightly stated that this letter was only a clarification made by M/s. Assam Tea Corporation Ltd. In my opinion, even this clarification was not needed because the main and the only relevant evidence i.e.
agreement between the assessee and M/s. Assam Tea Corporation Ltd. was already in the file of the AO. The learned J.M. has got an impression that this agreement was not on the record of the AO and hence the mistake.
40. With regard to the next point I am certainly of the view that the CIT(A) considered the additional evidence without giving opportunity to the AO. I do not find a copy of the resolution, dt. 10th May, 1990, on record of the Tribunal. Even before me at the time of hearing neither of the parties placed before me the copy of the said resolution. It would be worthwhile to consider in this context the explanation given in writing by the assessee vide letter, dt. 4th September, 1992, written to the Dy. CIT(A) and the same reads as under : "The above loan was sanctioned to four Directors of the company by the shareholders in 1985 for a special purpose with a subsidised rate of interest to tide over the directors from their acute financial crisis. The shareholders considered the proposal of granting the loan considering the sincere services rendered by the directors and passed in an extraordinary general meeting held on 16th April, 1985.
During the year under assessment, this is only a carried forward figure and no fresh loan was granted to them." 41. This explanation before the AO is totally in variance with the explanation given by the assessee to the CIT(A). The assessee had placed before the Bench earlier a written submission at the time of hearing of the appeal and on going through the same it is reiterated that the shareholders of the company vide resolution dt. 10th May, 1990, approved the term loan of Rs. 4,00,000 to full-time four directors of the company at 6 per cent rate of interest per annum.
Together with this written submission also no such copy of the Board's resolution is attached. But one thing is clear that the evidence before the CIT(A) was altogether different from the evidence before the AO not only with regard to the date of the resolution but also with regard to the contents of the explanation. The learned A.M. was in error when he stated in para 4 of his order that evidence which had been relied upon by the CIT(A) was before the AO, as well. The learned A.M. further fell into error when he states in para 5 of his appellate order that it was a case of the AO to disallow Rs. 60,000 from interest paid to the financial institution whereas, in fact, the AO has not made much disallowance as could be seen from the relevant portion of the assessment order stated above. So that as it may, the issue before me is whether the CIT(A) has admitted additional evidence or not and I am required to decide only this aspect and nothing more. I would, therefore, agree with the learned J.M. that the CIT(A) admitted the additional evidence without giving opportunity to the AO.42. The matter will now go to the Division Bench to pass the appropriate order in accordance with the majority.
43. Originally, this appeal was filed by the Department against the order of the CIT(A), Guwahati, dt. 30th March, 1993 for the asst. yr.
1991-92. In the first two grounds the Department has come before the Tribunal with the grievance that the CIT(A) has violated the r. 46A of the IT Rules, 1962. After hearing both the parties the Tribunal decided the appeal filed by the Department but about the first two grounds there was a difference of opinion between the learned J.M. and the learned A.M. According to the J.M. there was a violation of r. 46A by the first appellate authority and he restored the matter back to the file of the CIT(A) with the direction to redecide the issue afresh after giving the opportunity of being heard to both the AO as well as to the assessee. But the learned A.M. was of the view that there was no violation of r. 46A. Therefore, the matter was restored to the President of the Tribunal, Mumbai, who accordingly appointed a Third Member, Shri P. J. Goradia, the then Vice-President of the Tribunal, Calcutta, to decide the controversy. The Third Member vide his order dt. 9th July, 1999 discussed the issue at length and finally agreed with the observation made by the learned J.M. that the CIT(A) admitted additional evidence without giving opportunity to the AO. He also made a request that the matter should go back to the Division Bench for passing proper order in accordance with the majority. Therefore, this matter has come before us.
44. In the instant case, now the majority decision (the learned J.M.and the Third Member) is that the CIT(A) has admitted the additional evidence without giving the opportunity to the AO by violating the r.
46A of the IT Rules. To give effect of the majority decision we restore the matter back to the file of the CIT(A) to decide both following issues afresh after providing an opportunity to the AO as well as to the assessee : (i) Disallowance of Rs. 2,66,682 made on account of purchase of green leaves; and 45. About the third ground of appeal filed by the Department it may be mentioned that the CIT(A) has deleted the addition of Rs. 75,479 pertaining to provident fund. Both the Members have dismissed the ground raised by the Department and upheld the deletion made by the CIT(A). So, in this regard the earlier order of the Tribunal stand without any modification.
46. In the result, the appeal filed by the Department is partly allowed for statistical purposes as discussed above.