2012 (10) TMI 1199 - AT - Income Tax

Summary

Issues Involved:
The issues involved in this case are:
1. Validity of assessment u/s 144 r.w.s. 153A of the Income-tax Act, 1961.
2. Addition of opening balance of capital account as unexplained cash credit u/s 68 of the Act.
3. Rejection of evidence explaining the credit.
4. Disallowance u/s 80L of the Act.
5. Basis of additions made by the Assessing Officer not being material found during search.
6. Opportunity for the assessee to present evidence.

Validity of Assessment u/s 144 r.w.s. 153A:
The appeal challenged the order passed by the Assessing Officer u/s 144 r.w.s. 153A of the Income-tax Act, 1961, contending it to be invalid and bad in law. The assessment was framed under section 144 of the Act due to the assessee's failure to submit required evidence, resulting in the addition of the entire opening balance as unexplained cash credit. The appellant argued that the necessary documents were under dispute and seized by the Civil Court, thus preventing their submission. The appellant sought a denovo assessment with proper opportunity for hearing, emphasizing the lack of opportunity given during the initial assessment.

Addition of Opening Balance as Unexplained Cash Credit:
The addition of &8377; 13,39,776/- as unexplained cash credit u/s 68 of the Act was contested by the appellant, who claimed that the evidence explaining the credit was rejected without sufficient consideration. The appellant highlighted that the opening capital balance was added erroneously without adequate opportunity for explanation. Additional evidence submitted by the appellant was not admitted by the Ld. CIT(A) on the grounds of failure to prove reasonable cause for non-submission during the assessment proceedings.

Disallowance u/s 80L:
The disallowance made by the Assessing Officer u/s 80L of the Act amounting to &8377; 1,121/- was sustained by the Ld. CIT(A), leading to further contention by the appellant. The appellant argued that the additions were not based on material found during the search, rendering them legally unsound.

Opportunity for the Assessee to Present Evidence:
The appellant's plea for a reasonable opportunity to present all required documents to substantiate the genuineness of the opening capital balance and other minor additions was accepted by the Appellate Tribunal. It was held that the appellant was prevented by reasonable cause from producing relevant documents, and the Ld. CIT(A) should have admitted the additional evidence. Consequently, the assessment order and the Ld. CIT(A)'s decision were set aside, directing a denovo assessment by the AO with proper opportunity for the assessee to be heard.

Conclusion:
The appeal was considered allowed for statistical purposes, with the assessment being restored to the file of the AO for a fresh assessment in accordance with the directions provided by the Appellate Tribunal. The merits of the challenged additions were left for readjudication by the AO based on the new assessment process.