2014 (4) TMI 961 - AT - Income Tax

Admission of additional evidence Violation of Rule 46A of the Rules Held that - The CIT(A) rightly held that the AO could not be said to have allowed in-adequate opportunity to the assessee and that even otherwise, the assessee had been afforded adequate opportunity in the appellate proceedings - The additional evidence was admitted by the CIT(A) on having taking into consideration the totality of the facts and circumstances, there was no error in the action of the CIT(A) Decided against Revenue. Deletion made u/s 68 of the Act Unexplained cash credits Held that - The confirmation from the partners of Grover Developers , which confirmation was notarized and was on stamp paper, showed that the assessee had been paid Rs.10 lac and Rs.5lac by cheque on 6/7/2007 & 7/1/08 - The assessee was found to have received cash of Rs.20,50,000/- through Shri Diwan Singh, father of Shri Surender Singh Grover, partner of M/s Grover Developers - The cash flow statement showed withdrawal of cash of Rs.14 lacs on various dates and re-deposit of Rs.10 lacs - the deposits in the bank tallied with the cash advance received by the assessee from the buyers - after having duly taken into consideration CIT(A) deleted the addition - revenue has not been able to dispute the categorical findings of fact recorded by the CIT(A) Decided against Revenue. Disallowance of deduction u/s 80C of the Act Held that - The assessee had invested the amount to Rs.1 lac through his Axis Bank Account in a term deposit - The merits of the action of the CIT(A) in admitting additional evidence have been discussed - Such investment in a term deposit is eligible for deduction u/s 80C (2) (xxi) of the Act, as correctly held by the CIT(A) thus, there was no error in the CIT s action of deleting the disallowance Decided against Revenue.

Summary

Issues:
1. Admissibility of additional evidence under Rule 46A of the Income Tax Act.
2. Treatment of unexplained cash credits under section 68 of the Income Tax Act.
3. Disallowance of deduction under section 80C of the Income Tax Act.

Analysis:

Issue 1: Admissibility of additional evidence under Rule 46A of the Income Tax Act
The appellant challenged the acceptance of additional evidence by the Ld. CIT(A) in violation of Rule 46A. The appellant contended that the notices under sections 143(2) and 142(1) were not received due to a change in address. The additional evidence presented included bank statements, explanations of cash deposits, and agreements for property sale. The Ld. CIT(A) forwarded the evidence to the AO for a remand report. The AO objected to the admission of additional evidence, stating discrepancies in the sale agreements. The appellant reiterated the genuineness of the evidence, highlighting cash advances received against property sales. The Ld. CIT(A) admitted the evidence, considering the totality of facts. The Tribunal upheld the Ld. CIT(A)'s decision, emphasizing the appellant's adequate opportunity during appellate proceedings.

Issue 2: Treatment of unexplained cash credits under section 68 of the Income Tax Act
The AO treated cash deposits in the appellant's bank account as unexplained credits under section 68. The appellant provided explanations and evidence of cash receipts from property sales. The Ld. CIT(A) analyzed the agreements, bank statements, and cash flow, finding the deposits aligned with cash advances received. The Ld. CIT(A) deleted the addition based on factual findings, upheld by the Tribunal due to the Department's inability to dispute them. Ground No. 2 was rejected.

Issue 3: Disallowance of deduction under section 80C of the Income Tax Act
The AO disallowed the deduction under section 80C due to lack of supporting documents. The Ld. CIT(A) deleted this disallowance based on additional evidence filed by the appellant. The Tribunal upheld the Ld. CIT(A)'s decision, noting the undisputed investment in a term deposit eligible for deduction under section 80C. Ground No. 3 was rejected, and the appeal filed by the Department was dismissed.