The central legal point established in the judgment is that the admission of additional evidence in income tax appeals must comply with the principles of natural justice, including the recording of reasons for admission and the allowance of a reasonable opportunity for the assessing authority to examine or rebut the evidence.

PRAKASH KRISHNA, J.

( 1 ) THE Income-tax Appellate Tribunal, Allahabad, has referred the following question of law under Section 256 (1) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), for the opinions of this court :

"whether upon the facts and circumstances of the case, the Income-tax Appellate Tribunal was legally right in setting aside the order of the Commissioner of Income-tax (Appeals) in respect of (i) Rs. 1,93,183 in biri account (ii) Rs. 5,16,279 in wrapper, label and labelling account, Rs. 2,00,850 in tobacco account and Rs. 1,50,000 cash credit in the name of Vishwanath Singh on the ground that the Commissioner of Income-tax (Appeals) failed to follow the mandatory provision regarding recording of reasons before admitting new evidence at the appellate stage and also on the ground that no opportunity was afforded to the Income-tax Officer to rebut the evidence ?"

( 2 ) BRIEFLY stated the facts in the present case are as follows :

( 3 ) THE matter relates to the assessment year 1974-75. The assessee is individual and disclosed income from the salary, house property, business and from the beneficial interest in the waqf, m/s. Haji Lal Mohd. Biri Works, Allahabad.

( 4 ) THE Inspecting Assistant Commissioner of Income-tax, Range-II, Allahabad, made the following additions in the income of the assessee :

(i) Rs. 1,93,183 in bin account for alleged sale of biri in excess of the biri available in the books out of opening stock and purchases ; (ii) Rs. 5,16,279 for excessive expenses incurred in wrapper label and labelling accounts ; (iii) Rs. 2,00,850 for alleged excessive claim for tobacco consumption ; (iv) Rs. 1,50,000 alleged unexplained credit in the name of one Sri Vishwanath Singh.

( 5 ) THE said order was challenged in appeal before the Commissioner of Income-tax (Appeals ). During the course of argument of the appeal the assessee produced certain evidence by way of additional evidence. Taking into consideration the additional evidence produced by the assessee before the Commissioner of Income-tax (Appeals), he deleted the additions made in the biri account, in wrapper label and labelling accounts, in tobacco account and cash credit in the name of Sri Vishwanath Singh. The Department challenged the order before the Appellate Tribunal. The appellate authority found that the additional evidence in the shape of certificate from Hind tobacco Company was admitted in evidence by the Commissioner of Income-tax (Appeals)without recording reasons in writing. It was found that the Commissioner of Income-tax (Appeals) contravened the provisions of Rule 46a (2) of the Income-tax Rules. The further finding was that no reasonable opportunity to the assessing authority to examine new evidence produced in evidence and rebuttal, was given. On the above issue the order of the Commissioner of Income-tax (Appeals) was set aside and was restored to his file for deciding the same afresh, according to law after observing the provisions of Rule 46a of the Rules.

( 6 ) WE have heard Sri Shakil Ahmad, learned counsel for the assessee, and Sri A. N. Mahajan, learned counsel for the Revenue.

( 7 ) LEARNED counsel for the assessee submitted that the assessing authority was present before the commissioner of Income-tax (Appeals) and the said certificate was filed in his presence. He did not raise any objection for admission of the said certificate as additional evidence on record. Rule 46a is only procedural and thus will not vitiate the order, the Department has not suffered, in any manner, and, as such, the order of the Tribunal is liable to be set aside. Strong reliance was placed by him on the judgment of the apex court in the case of K. Venkataramiah v. A. Seetharama Reddy, AIR 1963 SC 1526.

( 8 ) IN contra, learned counsel for the Revenue, submitted that the mere presence of the assessing authority at the time of hearing of appeal before the Commissioner of Income-tax (Appeals) is not sufficient compliance with Rule 46a of

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