2011 (1) TMI 189 - HC - Income Tax

Additional evidence - Rule 46A - Deleting the Addition of Rs. 14, 00, 000 on account of unexplained deposits - Rule 46A providing instances under which fresh evidence can be entertained - The sickness of the partner is valid reason for not producing the evidence during the assessment - The fact that the matter was taken up in the fag end of the limitation period is also relevant - the additional evidence filed by the appellant - Considering the material on record the source of Rs. 14 lakhs stands duly explained by the sale deed of the agricultural land by the partner of the assessee firm who has received the sale price and contributed the additional capital by account payee cheques only which are duly reflected in the copy of bank account by the appellant - Hence the view taken by the CIT(A) as upheld by the Tribunal cannot be held to be erroneous -The appeals have to be dismissed.

Issues:
1. Validity of allowing additional evidence in income tax appeal.
2. Legality of confirming deletion of addition on account of unexplained deposits in partner's account.
3. Assessment of under-valuation of closing stock of motor-cycles and spare parts.

Issue 1: Validity of allowing additional evidence in income tax appeal

The judgment deals with the validity of allowing additional evidence in an income tax appeal under section 260A of the Income-tax Act, 1961. The Revenue appealed against the order of the Income-tax Appellate Tribunal (ITAT) regarding the deletion of an addition of Rs. 14,00,000 on account of unexplained deposits in the partner's account. The CIT(A) partly set aside the addition based on additional evidence furnished by the assessee, which was upheld by the Tribunal. The appellant argued against the allowance of additional evidence, contending that it should not have been permitted. The CIT(A) justified the admission of additional evidence due to the partner's illness and the timing constraints for filing the evidence. The evidence included a sale deed, a bank certificate, and bank account copies. The Tribunal upheld the CIT(A)'s decision, stating that the acceptance of the explanation provided was not shown to be perverse. The court dismissed the appeals, emphasizing that technical objections should not be raised when additional evidence serves the interest of justice.

Issue 2: Legality of confirming deletion of addition on account of unexplained deposits in partner's account

The judgment addresses the legality of confirming the deletion of an addition on account of unexplained deposits in the partner's account. The Assessing Officer made the addition during assessment, alleging under-valuation of closing stock of motor-cycles and spare parts along with unexplained deposits in the partner's account. The CIT(A) partly set aside the addition based on additional evidence submitted by the assessee, which the Tribunal upheld. The appellant contended that the additional evidence should not have been allowed. The CIT(A) justified the admission of additional evidence due to the partner's illness and timing constraints for filing the evidence. The Tribunal upheld the CIT(A)'s decision, finding no error in the view taken. The court held that the department should not raise technical objections when additional evidence can serve the interest of justice, ultimately dismissing the appeals.

Issue 3: Assessment of under-valuation of closing stock of motor-cycles and spare parts

The judgment also involves the assessment of under-valuation of closing stock of motor-cycles and spare parts. The Assessing Officer made additions during assessment, alleging under-valuation of closing stock of motor-cycles and spare parts along with unexplained deposits in the partner's account. The CIT(A) partly set aside the addition based on additional evidence submitted by the assessee, which the Tribunal upheld. The appellant challenged the allowance of additional evidence, arguing against its validity. The CIT(A) justified the admission of additional evidence due to the partner's illness and timing constraints for filing the evidence. The Tribunal upheld the CIT(A)'s decision, finding no error in the view taken. The court dismissed the appeals, emphasizing that technical objections should not be raised when additional evidence can advance the interest of justice.

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