2014 (9) TMI 933 - AT - Income Tax

Addition u/s 68 - Opportunity for production of documents not provided - Held that - The assessing officer made addition on the basis of the investment, expenditure and payments on the insurance policy, etc. after reducing the income disclosed in the returns filed in the regular course. Now the assessee claims that the addition was made only on the basis of the expenditure and the investments made by the assessee and no addition was made on the basis of the credit found u/s 68 of the Act. Therefore, the confirmation letter filed from the creditor may be irrelevant at this stage. However, the assessee has to explain the source for making investment in the landed property, expenditure like marriage, personal drawings, payments on insurance policy, etc. The assessee filed an application for admission of additional evidence seeking permission of the Tribunal on the ground that two hectares and 20.96 Are land was purchased and it was cultivated. The income from agriculture is also available with the assessee for investment in the landed property for meeting the expenditure for marriage and payment on LIC policy. Tribunal is of the considered opinion that both the authorities below had no occasion to examine the land holdings of the assessee and the cultivation said to be made by the assessee and the possible income that would have been generated from cultivation. Incometax proceedings are only to assess the correct taxable income. Merely because the assessee could not file certain documents before the lower authorities especially when the agricultural land was purchased in the earlier assessment years, this Tribunal is of the considered opinion that the same cannot be reason for not giving an opportunity to produce the necessary documents during the pendency of the proceeding before the appellate authorities. Rejecting the claim of the assessee on technicality may not be in the interest of justice. Giving one more opportunity to the assessee may not prejudice the interest of the revenue in any way. This Tribunal is of the considered opinion that giving one more opportunity to the assessee to produce the material before the assessing officer would definitely promote the cause of justice. The assessing officer can examine the documents now filed before the Tribunal as additional evidence on merit and assess the taxable income under the provisions of the Act. This Tribunal is of the considered opinion that the additional evidence filed by the assessee has to be examined by the assessing officer at the first instance. Accordingly, the orders of the lower authorities are set aside - Matter remanded back - Decided in favour of assessee.

Summary

Issues:
Assessment of income based on investments and personal expenses without considering business and agricultural income, lack of opportunity to explain the source of income, relevance of confirmation letters without PAN details, need for remand to assessing officer for reconsideration.

Analysis:
The appeals were against the CIT(A) orders for the assessment years 2005-06 to 2008-09, with a common issue. The assessee, a wholesale dealer in vegetables and fruits, contested the addition of income by the assessing officer based on investments and personal expenses. The assessing officer did not consider the income from business and agriculture. The ld.representative argued that the assessee was not given sufficient opportunity to explain the source of income for investments and personal expenses.

For the assessment years 2007-08 and 2008-09, significant additions were made by the assessing officer. The ld.representative highlighted that the income from agriculture was not explained due to insufficient opportunity. On the contrary, the ld.DR argued that the assessee had ample time to provide material but failed to do so. The confirmation letters lacked PAN details and did not clarify the outstanding amounts. The ld.DR contended that there was no need to remand the matter back to the assessing officer.

The Tribunal considered both sides' submissions and reviewed the available material. It noted that the assessing officer made additions based on investments, expenditures, and insurance policy payments. The Tribunal emphasized the need for the assessee to explain the sources of income for investments and expenses. The assessee sought to introduce additional evidence regarding agricultural land holdings and cultivation, suggesting that income from agriculture was used for investments and expenses.

The Tribunal opined that the lower authorities did not adequately examine the land holdings and cultivation income of the assessee. It stressed that tax proceedings aim to determine the correct taxable income. Denying the assessee an opportunity to present relevant documents during appellate proceedings was deemed unjust. The Tribunal directed the assessing officer to reconsider the additions based on the additional evidence presented.

The Tribunal dismissed the stay petitions as they were no longer relevant due to the appeal disposal. Ultimately, all appeals of the assessee were allowed for statistical purposes, and the stay petitions were dismissed. The orders of the lower authorities were set aside, and the additions were remitted back to the assessing officer for reassessment based on the additional evidence provided.