2013 (10) TMI 110 - HC - Income Tax

Addition u/s 68 of the Income Tax Act read with Rule 46A of the Income Tax Rules Held that - Sufficient reasons for admitting the additional evidence on the conditions laid down in Rule 46-A, and further that the documents were forwarded to AO under Section 46-A vide letter dated 21.5.2008, calling for a remand report, and on which the AO had filed the remand report - Share transactions were genuine and thus the addition made at Rs.10,62,000/- was liable to be deleted Decided against the Revenue.

Summary

Issues:
Income Tax Appeal under Section 260-A of the Income Tax Act, 1961 challenging the order of the Income Tax Appellate Tribunal, Delhi Bench 'E', New Delhi in Income Tax Appeal No. 2232/Del/2009 for the Assessment Year 2005-06. The department raised substantial questions of law regarding the acceptance of additional evidence under Rule 46-A and the application of Section 68 of the IT Act in the case.

Analysis:

Issue 1: Acceptance of Additional Evidence under Rule 46-A
The AO did not accept the receipt of Rs.10,62,000/- on the sale of shares initially, adding the entire amount to the assessee's income. However, the assessee filed additional evidence under Rule 46-A during the appeal process. The appellate authority accepted this evidence, deeming it necessary for adjudicating the issue. The CIT (A) found the additional evidence crucial, including documents like share certificates, contract notes, banking transactions, and market rate evidence. The CIT (A) admitted all additional evidence at the appellate stage, emphasizing the importance of these documents in proving the genuineness of the transaction. The Tribunal upheld the admission of additional evidence under Rule 46-A, noting that the CIT (A) did not rely solely on this evidence and followed the proper procedure by forwarding it to the AO for a remand report.

Issue 2: Application of Section 68 of the IT Act
The department contended that Section 68 of the IT Act was not fulfilled in the case. However, both the CIT (A) and the Tribunal found that the conditions laid down in Rule 46-A for admitting additional evidence were met. The CIT (A) obtained a remand report after forwarding the documents to the AO, who did not challenge the genuineness of the transaction. The Tribunal emphasized that the CIT (A) and the AO provided sufficient reasons for admitting the additional evidence and subsequently deleting the addition made by the AO. The Tribunal concluded that the substantial questions of law reframed by the department did not warrant consideration, as the evidence presented was crucial for deciding the issues.

In conclusion, the High Court dismissed the Income Tax Appeal, stating that there was no merit in the challenge raised by the department. The Court found that the CIT (A) and the Tribunal had valid reasons for admitting the additional evidence under Rule 46-A and for deleting the addition made by the AO, ultimately upholding the genuineness of the transaction in question.