2019 (12) TMI 382 - HC - Income Tax

Tribunal power of accepting additional evidence - whether the production of such additional evidence was to be allowed or not ? - HELD THAT - ITAT does have the power to permit production of additional evidence before the Tribunal if the case for the same is indeed made out by the parties. This means that the Tribunal is duty bound to consider the application seeking leave to produce additional evidence at the appellate stage. Since this has not been done, the substantial question of law, now framed, is required to be answered in favour of the appellant and against the revenue. Accordingly, without going into the merits of the main matter or without even going in the merits of the application made by the appellant seeking leave to produce additional evidence at the appellate stage, we, for the aforesaid reasons, set aside the impugned judgment

Summary

Issues Involved:
1. Deemed unexplained expenditure under Section 69C of the Income Tax Act, 1961.
2. Consideration of additional evidence by the ITAT at the appellate stage.
3. Application of Rule 29 of the Income Tax (Appellate Tribunal) Rules, 1963.

Analysis:

Deemed Unexplained Expenditure (Section 69C):
The appeal in question dealt with the issue of deemed unexplained expenditure under the proviso to Section 69C of the Income Tax Act, 1961. The ITAT had held that an amount of ?80 lakhs expended by the appellant was to be treated as unexplained expenditure and deemed income of the appellant-assessee. The appellant had produced documents, including cheques and an agreement, to explain the source of the amount and the expenditure. However, the ITAT did not consider this material in its judgment, leading to the framing of a new substantial question of law regarding the consideration of additional evidence.

Consideration of Additional Evidence:
The significant question arose whether the ITAT was required to consider the application for the production of additional evidence by the appellant at the appellate stage. The appellant sought to introduce evidence in the form of cheques, demand drafts, and banking documents to evidence the source of payments. The Court highlighted Rule 29 of the Income Tax (Appellate Tribunal) Rules, 1963, which allows the Tribunal to permit additional evidence if deemed necessary. The failure of the ITAT to consider the application for additional evidence was seen as a failure to exercise jurisdiction, leading to the setting aside of the impugned judgment.

Application of Rule 29 of the Income Tax (Appellate Tribunal) Rules, 1963:
Rule 29 of the Income Tax (Appellate Tribunal) Rules, 1963, was crucial in this case as it outlines the procedure for the production of additional evidence before the Tribunal. The rule empowers the Tribunal to allow additional evidence to be produced for substantial cause or if the income-tax authorities had not given sufficient opportunity to the assessee to adduce evidence. The Court emphasized that the ITAT has the duty to consider applications for additional evidence at the appellate stage, and the failure to do so necessitated the remand of the matter for fresh adjudication.

In conclusion, the High Court set aside the ITAT's judgment and remanded the case for fresh adjudication, directing the ITAT to consider the appellant's application for additional evidence in accordance with the law. The Court stressed the importance of affording both parties a fair hearing and keeping all contentions open for further consideration.