2021 (1) TMI 951 - AT - Income Tax

Deemed unexplained expenditure u/s 69C - admission of additional evidence - HELD THAT - In the appeal before the Tribunal the assessee has produced on record certain documents by its application dated 3rd May 2011 and those documents inter alia includes reference to certain cheques which explains the source of the amount and the source of expenditure. Along with the application even agreement dated 30th March 2004 was produced. In the case of M/s. Braganza Construction Pvt. Ltd 2019 (12) TMI 382 - BOMBAY HIGH COURT has observed that the Tribunal in the first round of appeal before it has not considered the application by the assessee for admitting those evidences and also there is no discussion whether such materials/evidences could be admitted as evidence at the appellate stage or not. Taking the proviso of Rule 29 of the Income Tax (Appellate Tribunal) Rules 1963 the Hon ble High Court was satisfied that substantial question of law was involved in this matter and hence the matter was admitted. As both the parties agreed that in conformity with the procedure of law laid down in the Act for admission of additional evidences the matter may be restored to the file of the Assessing Officer and the assessee may be directed to produce all the necessary documents/evidences before him in order to represent his case on merits. Having heard the parties herein we are of the considered view that in the due process of natural justice the additional evidences placed on record before the Tribunal should have to be always verified by the Sub-ordinate Authorities more particularly by the Assessing Officer and his submissions are also to be brought on record while admission of the same - Appeal of the Revenue is allowed for statistical purposes.

Issues:
1. Allowance of relief to the assessee without producing documentary evidence of legal ownership of land.
2. Disallowance of expenditure towards the cost of land due to lack of corroborative evidence.
3. Reduction of cost from closing work without proper merit assessment.
4. Deemed unexplained expenditure under Section 69C of the Act.
5. Admission of additional evidence before the Income Tax Appellate Tribunal.

Issue 1:
The appeal involved the question of whether the CIT(A) was correct in granting relief to the assessee without the production of documentary evidence such as stamp papers or registration documents to establish legal ownership of the land. The Assessing Officer disallowed the expenditure of ?80.00 lakhs towards the cost of land due to the absence of such evidence. However, the Ld. CIT(Appeals) reduced the cost of land from the total work in progress, following the 'completed method' of accounting and a precedent set by the Mumbai Bench of the Tribunal. The decision was based on the fact that no income was recognized during the relevant assessment year, and the work in progress included the cost of land.

Issue 2:
The second issue revolved around the disallowance of expenditure towards the cost of land because the assessee failed to produce corroborative evidence like a confirmation letter from the seller or bank passbook. The Assessing Officer noted discrepancies in the amounts cited and the lack of supporting documents. However, the Ld. CIT(Appeals) considered the facts and circumstances, ultimately directing the Assessing Officer to recompute the income by reducing the cost of land from the total work in progress.

Issue 3:
Regarding the reduction of cost from the closing work without a proper merit assessment, the CIT(A) was criticized for not delving into the merits of the case. The appellant sought permission to amend the grounds of appeal, highlighting the need for a thorough examination of the decision to reduce the cost. However, the judgment did not provide further details on the specific outcome of this issue.

Issue 4:
The issue of deemed unexplained expenditure under Section 69C of the Act arose from a previous order where the amount expended by the assessee was treated as unexplained expenditure. In the subsequent appeal, the assessee submitted additional documents, including cheques and an agreement, explaining the source of the amount and expenditure. The Hon'ble Bombay High Court, Goa Bench observed that the Tribunal had not considered the application for admitting these evidences, leading to a remand for fresh adjudication by the ITAT.

Issue 5:
The final issue centered on the admission of additional evidence before the Income Tax Appellate Tribunal. The Hon'ble High Court emphasized that the Tribunal has the power to permit the production of additional evidence if parties make a case for it. The Court found that the Tribunal had failed to consider the appellant's application seeking leave to produce additional evidence, leading to a remand for proper consideration. The matter was directed to be returned to the Assessing Officer for the submission of all necessary documents and evidences to ensure a fair representation of the case.

The judgment addressed various critical issues, including the allowance of relief without proper documentary evidence, the disallowance of expenditure due to lack of corroborative evidence, and the admission of additional evidence before the Tribunal. The decision highlighted the importance of following due process, verifying additional evidence by the Assessing Officer, and ensuring compliance with the principles of natural justice. Ultimately, the appeal of the Revenue was allowed for statistical purposes, emphasizing the need for thorough consideration and adherence to legal procedures in tax matters.

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