ITAT Mumbai remands Aspri Spirits tax dispute over Rule 46A violation and additional evidence issue.

May 19, 2026 : The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) has set aside a major appellate relief granted to liquor distributor Aspri Spirits Private Limited after finding that the Commissioner of Income Tax (Appeals) relied heavily on additional evidence without giving the Assessing Officer an adequate opportunity to verify the documents, thereby violating Rule 46A of the Income Tax Rules and principles of natural justice.

The ruling came in cross appeals filed by Aspri Spirits Pvt. Ltd. and the Income Tax Department for the Assessment Year 2023-24 before a bench comprising Accountant Member Shri Om Prakash Kant and Judicial Member Shri Anikesh Banerjee.

Aspri Spirits, a Mumbai-based company engaged in the import, trading, and distribution of liquor, had declared a total income of Rs. 25.83 crore in its return for AY 2023-24. During scrutiny assessment under Section 143(3) read with Section 144B of the Income Tax Act, 1961, the Assessing Officer made several additions and disallowances, including an addition of Rs. 1.07 crore under Section 68 relating to unsecured loans, disallowance of interest expenditure under Section 37, addition of Rs. 7.59 crore towards trade payables, and an ad hoc disallowance of 10 percent of incentive and promotion expenses amounting to Rs. 3.90 crore.

The company challenged the assessment before the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre. The CIT(A) granted substantial relief by deleting additions relating to unsecured loans and trade payables and also deleting the disallowance of interest expenditure. The appellate authority further reduced the disallowance on promotion and incentive expenses from Rs. 3.90 crore to Rs. 50 lakh.

The Revenue Department challenged the appellate order before the ITAT, arguing that the CIT(A) had improperly admitted additional evidence in violation of Rule 46A of the Income Tax Rules, 1962. The Department contended that confirmations, bank statements, income-tax acknowledgements, invoices, reconciliations, delivery challans, Form 16, Form 26AS, and other supporting records were produced for the first time during appellate proceedings without giving the Assessing Officer a proper chance to verify or rebut them.

The Tribunal noted that both parties fairly admitted during the hearing that substantial documentary evidence not forming part of the original assessment record had indeed been submitted before the CIT(A) and had become the basis for granting relief to the assessee.

The bench observed that the appellate authority extensively relied on fresh documents while deleting additions made under Section 68 and while substantially reducing the disallowance relating to promotion expenses. The Tribunal specifically referred to fresh evidence concerning unsecured loans received from Sunrise Petroleum Services and trade payables involving ASK Agencies & Investments Pvt. Ltd. and Moet Hennessy India Pvt. Ltd.

Explaining the legal position, the ITAT emphasized the mandatory nature of Rule 46A, which governs admission of additional evidence before appellate authorities in income tax proceedings. The Tribunal said the rule is rooted in principles of natural justice and requires that whenever additional evidence is admitted, the Assessing Officer must be given a reasonable opportunity to examine the material, conduct inquiries, and file rebuttal if necessary.

In a significant observation, the Tribunal held that “Compliance with Rule 46A is not a mere procedural formality but a substantive safeguard intended to preserve fairness in adjudication.”

The bench further observed that the appellate findings had become “procedurally unsustainable” because the Assessing Officer was not granted an effective remand opportunity to verify the authenticity and evidentiary value of the additional documents relied upon by the CIT(A).

According to the Tribunal, once the appellate authority intended to rely upon new material for reversing findings recorded during assessment proceedings, “adherence to the mandate of Rule 46A became imperative.”

While setting aside the appellate order, the ITAT clarified that the additional evidence furnished by the assessee could still have a material bearing on the outcome of the case. Therefore, instead of restoring the assessment outright, the Tribunal remanded the entire matter back to the Assessing Officer for fresh adjudication after proper verification of all documents and after granting adequate hearing opportunities to the assessee.

The Tribunal directed the Assessing Officer to examine all additional evidence, conduct necessary inquiries, and pass a fresh order in accordance with law. It also instructed the assessee to fully cooperate and furnish all relevant documents during the fresh proceedings.

The decision is significant for taxpayers and tax practitioners because it reiterates the procedural safeguards governing appellate proceedings under the Income Tax Act. The ruling reinforces that appellate authorities cannot rely on fresh documentary evidence to overturn assessment findings without complying with Rule 46A requirements. It also highlights the continuing judicial emphasis on balancing taxpayer rights with procedural fairness for revenue authorities.

The case also carries wider implications for faceless appellate proceedings conducted through the National Faceless Appeal Centre. The Tribunal’s observations indicate that even in digital and faceless tax adjudication systems, procedural safeguards and principles of natural justice remain central to the validity of appellate orders.

The appeals filed by both Aspri Spirits Pvt. Ltd. and the Revenue were ultimately allowed for statistical purposes, with the entire dispute remanded for fresh consideration by the Assessing Officer.

Case Title: Aspri Spirits Private Limited v. NFAC/DCIT & ACIT v. Aspri Spirits Pvt. Ltd.
Court: Income Tax Appellate Tribunal, Mumbai Bench “A”
Coram: Shri Om Prakash Kant and Shri Anikesh Banerjee
Decision Date: May 19, 2026