2011 (5) TMI 1134 - AT - Income Tax

Summary

Issues involved: Rejection of assessee's contention for admission of additional evidence under Rule 46-A(1) of the Income Tax Rules and confirmation of the addition of Rs.25,00,000/- as share capital under section 68 of the Income Tax Act.

Issue 1: Rejection of additional evidence under Rule 46-A(1) of the Income Tax Rules
- The assessing officer treated unsubstantiated share capital as unexplained under section 68 of the Act due to lack of proof of identity, creditworthiness, and genuineness of share applicants.
- Assessee filed additional evidence, objected by assessing officer citing non-compliance with Rule 46A(1) and lack of explanation for money sources.
- CIT (Appeals) held that the power to admit additional evidence is restricted, citing precedents and ruling that the assessee does not have an absolute right to file additional evidence.
- CIT (Appeals) rejected admission of additional evidence, deciding the appeal on merits without considering the additional evidence filed by the assessee.

Issue 2: Addition of share capital under section 68 of the Income Tax Act
- Assessee introduced share capital of Rs.25 lakhs from four persons, but failed to prove identity, creditworthiness, and genuineness of the transactions.
- Assessing officer added the unsubstantiated share capital under section 68 of the Act.
- Assessee argued for admission of additional evidence, including PAN numbers and addresses of share applicants, which were not initially accepted.
- Tribunal admitted the additional evidence and directed CIT (Appeals) to decide the issue afresh after considering the additional evidence and providing a reasonable opportunity for the assessee to be heard.

In summary, the Tribunal allowed the appeal by the assessee, directing the CIT (Appeals) to reconsider the issue of rejecting additional evidence under Rule 46-A(1) and the addition of share capital under section 68 of the Income Tax Act, emphasizing the importance of providing a fair opportunity for the assessee to present evidence and be heard in the proceedings.