2015 (2) TMI 583 - AT - Income Tax

Addition on account of alleged peak credit and business income - CIT(A)deleted the addition entertaining additional evidence - whether the provisions of Rule46A of the Income Tax Rules, 1962 were not adhered to by CIT(A) - Held that - Obtaining a remand report per-se is not a substitute for recording of the finding of the ld CIT(A) setting out the reason and fulfilment of conditions of the Rule 46A. It would be also appropriate to state here that assessee did not move an application under Rule 46A, specifically stating the fulfilment of conditions specified under Rule 46A, though it is seen that ld CIT(A) has noted that non-compliance before AO was on account of the fact, that the assessee was having marital discord with his wife Mrs. Sonu Seth which kept the assessee engaged in litigation. Thus it would be just and fair to remit the matter back to the file of AO for fresh adjudication.- Decided in favour of revenue for statistical purposes.

Summary

Issues:
Appeal against order of ld CIT(A) for Assessment Year 2006-07. Three main issues: (A) Deposit of Rs. 20,00,000 in ICICI Bank account. (B) Addition of Rs. 7,36,607 as maximum credit balance on 28-06-2005. (C) Addition of Rs. 2,54,158 as income from business @ 10% of total credits in bank account.

Analysis:
The AO completed the assessment on 24th December, 2008, u/s 144 of the Act at an income of Rs. 32,85,655. On appeal, the ld CIT(A) identified three main issues. Regarding the deposit of Rs. 20 lakhs, it was established that the cash deposited in the ICICI Bank belonged to HUF and not the appellant. The ld CIT(A) concluded that the addition of Rs. 20 lakhs for alleged cash deposit was not justified and deleted it. For the addition of Rs. 9,90,765, the ld CIT(A) found that the AO did not adequately utilize available information and did not seek further details from the bank. The ld CIT(A) accepted the explanation provided by the appellant and deleted the addition of Rs. 9,90,765.

The Revenue challenged the action of the ld CIT(A) to entertain additional evidence without following Rule 46A of the Income Tax Rules, 1962. The Tribunal noted that the additional evidence furnished by the assessee led to the deletion of additions. However, it was observed that the ld CIT(A) did not follow the requirements of Rule 46A as mandated by the jurisdictional High Court in a specific case law. As the assessee did not move an application under Rule 46A and the reasons for non-compliance before the AO were related to personal issues, the Tribunal remitted the matter back to the AO for fresh adjudication.

In conclusion, the Tribunal allowed Ground No.4 for statistical purposes and set aside the orders of the authorities below. The matter was remitted back to the AO for fresh assessment after giving adequate opportunity to the assessee. The remaining grounds of appeal regarding the merit of additions were not adjudicated. The appeal was allowed for statistical purposes.

This detailed analysis of the judgment showcases the issues raised, the findings of the ld CIT(A), the challenges by the Revenue, the Tribunal's observations on Rule 46A compliance, and the final decision to remit the matter back to the AO for fresh adjudication.