Jammu & Kashmir High Court – Srinagar Bench
Pr. Commissioner Of Income vs Kamraz Rural Bank on 16 April, 2026
Author: Sanjeev Kumar
Bench: Sanjeev Kumar
Serial No. 16
Regular Cause List
IN THE HIGH COURT OF JAMMU & KASHMIR AND LADAKH
AT SRINAGAR
ITA 2/2018
Pr. Commissioner of Income
Tax ...Petitioner(s)/Appellant(s).
Through: Mr. Umar Rashid Wani, Advocate
Vs.
Kamraz Rural Bank ...Respondent(s).
Through: Ms Saima Mehboob, Advocate
CORAM:
HON'BLE MR. JUSTICE SANJEEV KUMAR, JUDGE
HON'BLE MR. JUSTICE SANJAY PARIHAR, JUDGE
ORDER
16.04.2026
1. This appeal by the Revenue filed under Section 260-A of the
Income Tax Act, 1961 arises from an order dated 29th May, 2018 passed
by the Income Tax Appellate Tribunal, Amritsar, [“the Tribunal”] in ITA
No. 438/Asr/2017 for assessment year 2006-07.
2. This appeal was admitted to hearing vide order dated 26 th October,
2018 on the following substantial questions of law:
(a) Whether the ITAT was right in law and fact in upholding the order of the
Ld. CIT(A), which is passed after submitting fresh evidence/details of the
assesse, without allowing the opportunity to examine the same by the
Assessing Officer as per Rule 46A of the Income Tax Rule?
(b) Whether in the facts and circumstances of the case and in law the ITAT
was right in upholding the order of CIT(A), which is given without passing
in writing an order under sub-rule (2) of Rule 46A specifying that the
assesse was prevented by any reasonable conditions as laid down in Rule
46A(1)(a), (b) or (d) during the assessment proceedings?
3. The impugned order has been assailed by the Revenue on multiple
grounds raising the aforesaid two specific questions of law for
determination.
4. Before we advert to the arguments of the learned counsel appearing
for the parties and determine the formulated substantial questions of law,
we deem it proper to briefly narrate the facts as are relevant to the disposal
of this Appeal.
5. The respondent-Assessee filed return for the assessment year 2006-
07 on 30th October, 2006 declaring the income of Rs. 5,19,46,000/-. The
return was processed under Section 143(1)(a) of the Income Tax Act,
1961 [“the Act”] and the case was taken up for scrutiny. The respondent-
Assessee was served with a notice under Section 143(2) of the Act and in
response thereof the respondent-Assessee attended the hearing before the
Assessing Officer. From perusal of the information furnished and the
books of accounts produced by the respondent-Assessee, the AO found
that the respondent-Assessee had disbursed interest on term deposits
amounting to Rs. 7,96,80,000/- but had failed to deduct tax at source as
per the provisions of Section 194A of the Act. The assessee-Bank had
failed to deduct the tax at source despite having been requested by the
Assessing Authority to do so.
6. An explanation was sought from the respondent-Assessee but the
same was not found tenable by the Assessing Authority. The Assessing
Authority thus came to the conclusion that in view of the failure of the
respondent-Assessee to deduct tax at source on interest payments on term
deposits the entire amount of Rs. 7,96,80,000/- was to be added and taken
into consideration as per the provisions of Section 40(a)(ia) of the Act. It
was noted by the Assessing Authority that the representative of the
respondent-Assessee could not furnish details of the interest payments in
excess of Rs. 10,000/-. It needs to be noticed that no tax was required to
be deducted at source where the payment of interest on the term deposits
was not exceeding Rs. 10,000/-. The AO framed the order making
additions of Rs. 7, 96, 80,000/- and raised demand.
7. The order passed by the AO dated 26th December, 2008 was
challenged in an appeal by the respondent-Assessee before the
Commissioner of Income Tax (Appeals), Jammu.
8. It seems that during the course of appeal, the appellant-assessee
produced certain documents indicating that the income tax to be deducted
at source was only in respect of the interest of Rs. 24,18,596/- paid during
the assessment year 2006-2007 on the fixed term deposits where the
interest paid was exceeding Rs. 10,000/-. It seems that without giving an
opportunity to the Assessing Authority to rebut the aforesaid documentary
evidence produced by the respondent-Assessee, the CIT(A) accepted the
evidence and, accordingly, allowed the addition of a sum of Rs.
24,18,596/- instead of Rs. 7,96,80,000/-.
9. The order passed by the CIT(A) dated 28th March, 2017 was
assailed by the Revenue before the Tribunal in ITA No. 438/Asr/2017.
The Tribunal upheld the order passed by the CIT(A) and dismissed the
appeal preferred by the Revenue.
10. This is how the Revenue is before us in this Appeal filed under
Section 260-A of the Act.
11. Having heard the learned counsel for the parties and perused the
material on record, it is necessary to first set-out Rule 46A of the Income
Tax Rules which reads as:
“46A. (1) The appellant shall not be entitled to produce before the 83 [Joint
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 84 [Joint
Commissioner] (Appeals) or, as the case may be, the Commissioner
(Appeals) records in writing the reasons for its admission.
(3) The Joint 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 84 [Joint
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.
12. From plain reading of Sub-rule-1 of Rule 46A, it is abundantly
clear that additional evidence can be permitted by appellate authority i.e.
Joint Commissioner (Appeals) or the Commissioner (Appeals), as the case
may be, only subject to fulfilment of following conditions:
(a). Where the Assessing Authority has refused to admit evidence
which he ought to have admitted or;
(b). Where the appellant was prevented by sufficient cause from
producing evidence which he was called upon to produce by the
Appellate Authority:
(c). Where the appellant was prevented by sufficient cause from
producing before the Assessing Authority any evidence which is
relevant to any of the grounds of appeal or;
(d). Where the Assessing Authority has made the order appealed
against without giving sufficient opportunity to the appellant to
adduce evidence relevant to any ground of appeal.
Such permission to lead additional evidence at the appellate stage
can only be granted by the Commissioner by passing a reasoned order in
writing. Similarly, the additional evidence permitted to be produced at the
appellate stage shall not be accepted or taken into account unless the
Assessing Authority has been allowed reasonable opportunity to examine
the evidence or document or to cross-examine the witness produced by the
appellant or to produce evidence or documents in rebuttal. The
requirements of Rule 4A (3) are mandatory and not directory. Granting
opportunity to Assessing Authority to examine the additional evidence
and to lead evidence in rebuttal is not only the mandatory requirement of
Rule 46A but is also the demand of Audi Alteram Partem rule of natural
justice. It is, therefore, a foregone conclusion that violation of procedure
laid down in Rule 46A specifically failing to give AO opportunity to
examine and rebut new evidence vitiates the order.
13. We have carefully gone through the order of the CIT(A). We do
not find that the CIT(A) has applied his mind to these aspects of the
matter or has given his reasons for allowing the respondent-Assessee to
adduce additional evidence at the appellate stage. We also could not
discern from the order passed by the CIT(A) that any opportunity was
ever granted to the Assessing Authority to rebut the documentary
evidence placed on record by the respondent-Assessee at the stage of
appeal. There is, however, a reference to the remand report called for by
the CIT(A) in the order impugned passed by the Tribunal. On a careful
scrutiny, we could not find any such order passed by the CIT(A) nor there
is any reflection of any such order passed by CIT(A) in the final order that
was passed on the appeal by the CIT(A). Besides the Revenue has, on
affidavit, specifically refuted this aspect recorded by the Tribunal. It is
stated by the Revenue very empathically that no such order calling upon
the Assessing Authority to prepare remand report on the additional
evidence produced by the respondent-Assessee was ever passed by the
CIT(A).
14. For the foregoing reasons, we are of the considered opinion that the
Tribunal was not right in law and fact in upholding the order of CIT(A)
which was primarily passed after admitting the fresh evidence/details
produced by respondent-Assessee without allowing opportunity to the
Assessing Authority to examine and rebut the same as per Rule 46A (3) of
the Income Tax Rules.
15. We are also of the clear view that the opportunity to lead additional
evidence at the appellate stage could not be granted by the First Appellate
Authority under the Act without passing a speaking order indicating
clearly that the conditions laid down in Clause 1 of Rule 46A are met.
16. In view of the aforesaid, this Appeal is allowed. The impugned
order passed by the Tribunal dated 20th October, 2018 and order passed by
the CITA dated 28th March, 2017 are set aside.
17. The matter is remanded back to the Commissioner of Income Tax
(Appeals) J&K, Jammu, to proceed in the matter by taking following
steps:
i. The CITA shall pass a speaking order on the request of the
respondent-Bank to lead additional evidence. This would be in
compliance with Sub-rule 2 read with Sub-rule 1 of the Rule 46A of
the Income Tax Rules.
ii. If the respondent-Assessee is permitted to lead evidence by
such speaking order, the Assessing Authority shall be given
opportunity to examine the same or to adduce evidence in rebuttal as is
provided in sub-rule 3 of Rule 46A.
iii. Till the matter is reconsidered and fresh order is passed, there
shall be no coercive action against the respondent-Assessee.
18. Disposed of.
(SANJAY PARIHAR) (SANJEEV KUMAR)
JUDGE JUDGE
SRINAGAR
16.04.2026
Shahid Manzoor
(I) Whether the order is reportable? Yes
(II) Whether the order is speaking? Yes