2011 (5) TMI 204 - HC - Income Tax

Reopening - Donations Rs. 53,52,900 and unsecured loans of Rs. 1,14,58,500 - A number of opportunities were provided by the Assessing Officer for this purpose but the assessee failed to avail of the said opportunities and furnish the details thereof - Held that at this stage admission of the additional evidence admitted by the Commissioner of Income-tax (Appeals) cannot be interfered with - It was because of the reasons that the Assessing Officer strongly felt that there was lapse on the part of the assessee in not producing the evidence before him when it had been given a number of opportunities and therefore, he objected to the admission of the said evidence and did not do any further exercise to verify the same - Decided in favour of the assessee

Summary

Issues:
Reopening of assessment based on accommodation entries, non-furnishing of details by the assessee, addition of undisclosed income under section 68 of the Income-tax Act, admission of additional evidence by the Commissioner of Income-tax (Appeals), challenge to the admission of additional evidence, verification of evidence by the Assessing Officer, repayment of unsecured loans, remand of the case back to the Assessing Officer.

Analysis:
The judgment involves a charitable trust whose assessment for the year 1999-2000 was reopened by the Assessing Officer under section 148 of the Income-tax Act based on information regarding accommodation entries received by the trust. The trust failed to provide necessary details requested by the Assessing Officer regarding donations and unsecured loans, leading to the reassessment order treating these amounts as undisclosed income under section 68 of the Income-tax Act.

Upon appeal, the Commissioner of Income-tax (Appeals) admitted additional evidence produced by the trust for the first time. The Assessing Officer objected to the admission of this evidence, citing non-compliance with rule 46A of the Income-tax Rules. However, the Commissioner of Income-tax (Appeals) accepted the evidence, allowing the appeal on the grounds that the trust was able to explain the source and utilization of the donations and loans through the additional evidence.

The Income-tax Appellate Tribunal upheld the Commissioner's order, leading to a further challenge under section 260A of the Income-tax Act. The main contention was against the admission of additional evidence without prior submission to the Assessing Officer. The High Court, after considering the arguments, decided that the additional evidence admitted by the Commissioner of Income-tax (Appeals) should stand, but directed the case to be remitted back to the Assessing Officer for verification of the documents.

The High Court emphasized the need for balance, allowing the trust to rely on the additional evidence while providing the Assessing Officer an opportunity to verify the documents. The court instructed the Assessing Officer to examine the veracity of the evidence and directed the trust to explain the repayment of unsecured loans. If the trust adequately explains the donations and loans, the Assessing Officer is to accept the same, thereby disposing of the appeal in these terms.