2015 (3) TMI 835 - AT - Income Tax

Penalty levied under section 271(1)(a) - Unexplained bank deposit / credits, Unexplained LIC premium payments u/s 69, benefit of telescoping of additions of deposits in bank and payment of LIC premium denied, agricultural income of ₹ 9,85,000/- declared by appellant is not substantiated, estimated addition of house hold expenses of ₹ 3,00,000/- Revenue submitted that the details were not submitted before the Assessing Officer though sufficient opportunity was granted to the assessee. - Held that - Addition has been made by the Assessing Officer on account of unexplained cash credit in the bank account, LIC premium payments, household expenses and agriculture income. We find that the assessee submitted the details before the ld. CIT(A) which is also placed on record at page Nos. 39 and 40 of the paper-book. From the details, it is seen that the assessee has furnished explanation and also the relevant page numbers of the evidences in support of his explanation. We find that the aforesaid submissions were not considered by ld. CIT(A) and it was considered as additional evidences to be not admissible. Procedural defects and irregularities which are curable should not be allowed to defeat substantive rights or to cause injustice. Procedure, a hand maiden to justice, should never be made a tool to deny justice or perpetuate injustice by any oppressive or punitive use. Considering the totality of the facts and relying of the aforesaid decision of CIT vs. Scientific Chemicals, (2005 (6) TMI 27 - GUJARAT High Court ), after applying the ratio of Tin Box Co. Vs. CIT, (2001 (2) TMI 13 - SUPREME Court) - Decided in favour of assessee for statistical purposes.

Issues Involved:
1. Non-admission of additional evidence under Rule 46A of I.T. Rules.
2. Addition on account of unexplained bank deposits/credits.
3. Addition on account of unexplained LIC premium payments under Section 69 of the Act.
4. Non-substantiation of declared agricultural income.
5. Estimated addition of household expenses.
6. Benefit of telescoping of additions.

Issue-wise Detailed Analysis:

1. Non-admission of Additional Evidence under Rule 46A of I.T. Rules:
The assessee contended that the Commissioner of Income Tax (Appeals) [CIT(A)] erred in not admitting additional evidence as per Rule 46A of the I.T. Rules. The CIT(A) held that the assessee had been given sufficient opportunities to provide details during the assessment proceedings but failed to do so. The CIT(A) relied on the Hon'ble Gujarat High Court's decision in the case of Fairdeal Filaments Ltd., which established that additional evidence should not be admitted if the assessee was negligent and non-cooperative during the assessment process. The Tribunal found that the CIT(A) had correctly exercised discretion in rejecting the additional evidence, as the assessee did not justify the delay in providing the evidence.

2. Addition on Account of Unexplained Bank Deposits/Credits:
The Assessing Officer (AO) noted credits/deposits of Rs. 18,60,736 in the assessee's bank account and considered them unexplained due to the lack of satisfactory evidence. The assessee initially claimed not to maintain books of accounts but later submitted a cash book, which the AO viewed as an afterthought. The CIT(A) upheld the AO's addition, noting that the assessee failed to provide sufficient evidence to explain the deposits. The Tribunal agreed with the CIT(A), emphasizing that the assessee did not furnish relevant evidence during the assessment and appellate proceedings.

3. Addition on Account of Unexplained LIC Premium Payments under Section 69 of the Act:
The AO added Rs. 11,82,360 to the income as unexplained LIC premium payments, as the assessee could not substantiate the source of these payments. The CIT(A) upheld this addition, noting the lack of evidence for the opening balance in the cash book and the failure to substantiate agricultural income, which was claimed as the source of funds. The Tribunal found that the CIT(A) had rightly confirmed the AO's action, as the assessee did not provide necessary evidence to justify the LIC premium payments.

4. Non-substantiation of Declared Agricultural Income:
The AO rejected the assessee's claim of Rs. 9,85,000 as agricultural income due to insufficient evidence, such as sales bills for agricultural products and expenses for seeds and fertilizers. The CIT(A) upheld this view, noting that the land was small and jointly owned, and the assessee's name did not appear as an agriculturist in the land records. The Tribunal agreed with the CIT(A), emphasizing the lack of supporting evidence for the agricultural income claim.

5. Estimated Addition of Household Expenses:
The AO estimated the household expenses at Rs. 3,00,000 annually, as the assessee failed to provide details of household expenditure and supporting evidence. The CIT(A) upheld this estimation, noting that the assessee did not furnish details of drawings or contributions from other family members. The Tribunal found the estimation reasonable, given the assessee's failure to disprove the AO's estimation with concrete details.

6. Benefit of Telescoping of Additions:
The assessee argued for the benefit of telescoping of additions of deposits in the bank and payment of LIC premium. However, the CIT(A) and the Tribunal did not explicitly address this issue, as the primary focus was on the lack of evidence to substantiate the sources of funds for both the bank deposits and LIC premium payments.

Conclusion:
The Tribunal, considering the procedural defects and the interest of justice, remitted the matter back to the CIT(A) for reconsideration. The CIT(A) was directed to decide the issue afresh after considering the submissions and any additional evidence provided by the assessee. The Tribunal emphasized the need for the CIT(A) to grant adequate opportunity to both parties and to make a decision based on the material on record. The appeals were allowed for statistical purposes, with similar directions applied to all the appeals under consideration.

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