2016 (1) TMI 352 - AT - Income Tax

Addition u/s 68 - non considering and appreciating the additional evidences submitted by the assessee under Rule 46A of the Income-tax Rules 1962 before the Learned CIT(Appeals) - Held that - After filing the additional evidence and Learned CIT(Appeals) took step provided in sub-rule(3) to Rule 46A of the Income-tax Rules giving an inference that the additional evidence sought to be produced by the assessee was relevant material and the Learned CIT(Appeals) had entertained these additional evidences and only thereafter he had sent it to the Assessing Officer under sub-rule(3) for verification. Thus after calling of the remand report on merit as contemplated in subrule( 3) to Rule 46A the Learned CIT(Appeals) is precluded with his discretion for refusing to admit the additional evidence. Since the Assessing Officer in his remand report had accepted the three deposits amounting to 14, 34, 271 in total the Learned CIT(Appeals) was not justified in upholding the same. The same is thus directed to be deleted. So far as the balance deposit of 3, 07, 011 is concerned the explanation of the assessee remained that this amount was coming from last year debtors and it was accepted by the Assessing Officer. We find that in its remand report the Assessing Officer had not accepted this explanation in absence of filing of address and PAN details of debtors but the Assessing Officer has not verified the explanation of the assessee that this amount was duly shown in the last year in the balance as on 31.3.2006. We thus set aside this matter to the file of the Assessing Officer to verify as to whether the amount of 3, 07.011 was shown in the balance sheet of the last year and make the assessment accordingly after affording an opportunity of being heard to the assessee regarding the addition of 3, 07, 011. - Decided partly in favour of assessee.

Summary

Issues:
Validity of addition under sec. 68 of the Income-tax Act, 1961
Consideration of additional evidences submitted under Rule 46A of the Income-tax Rules, 1962

Validity of Addition under Sec. 68:
The assessee failed to explain deposits totaling Rs. 20,19,609, leading to an addition under sec. 68 of the Act. The Learned CIT(Appeals) upheld the addition based on the failure to provide a satisfactory explanation for the source of the deposits. The assessee contended that certain deposits were explained, including amounts from the sale of a car, current year cash sales receipts, and a loan from a bank. The AR argued that the Assessing Officer had accepted some explained deposits but not others. The AR cited relevant case law and submitted additional evidence to support the explanations, which the CIT(A) did not admit. The AR argued that once the CIT(A) entertained the evidence and called for a remand report, refusal to admit the evidence was unjustified. The AR highlighted discrepancies in the Assessing Officer's verification process and the CIT(A)'s decision-making.

Consideration of Additional Evidences under Rule 46A:
The CIT(A) rejected the additional evidence submitted by the assessee, citing reasons like the period of the assessee's illness not aligning with the assessment proceedings. The AR argued that the CIT(A) was wrong in not admitting the evidence after calling for a remand report and should have considered the relevance of the evidence. The AR emphasized that the Assessing Officer had accepted certain explanations provided by the assessee, and hence, the CIT(A) should not have upheld the addition. The Tribunal partially allowed the appeal, directing the deletion of certain additions and sending back one aspect for further verification by the Assessing Officer.

In conclusion, the Tribunal found discrepancies in the treatment of explained deposits by the Assessing Officer and the CIT(A), emphasizing the need for a fair consideration of additional evidence under Rule 46A. The judgment highlighted the importance of verifying explanations provided by the assessee and ensuring a thorough assessment process.