2017 (1) TMI 889 - AT - Income Tax

Admission of additional evidence - Held that - The Incometax Act, by a statutory mandate, gives the right to an assessee to submit additional evidence and obliges the appellate authority to decide whether the additional evidence is admissible for consideration in terms of Rule 46A of the Income-tax Rules, which has not been done in this case resulting in a statutory mistake in the order which needs to be corrected. Be that as it may, looking at the fact that the assessee is a student and indulged in share trading activities which are claimed to be resulted into losses, no comments on merits of the facts of the case can be commented from the Bench at this level. However, looking at the facts and circumstances of the case, it is directed that the additional evidence stands admitted. The appeal is thus remitted back to the ld. CIT(A) to consider the additional evidences filed by the assessee and decide the appeal after affording the assessee adequate opportunity of being heard.

Summary

Issues:
1. Admissibility of additional evidences
2. Set off of trading loss on share business
3. Enhancement of assessed income
4. Rejection of explanation for credits in bank accounts

Admissibility of additional evidences:
The assessee raised grounds challenging the rejection of additional evidences related to share trading loss, commission earned, profit & loss a/c, and the right to set off trading loss. The CIT(A) found that the cash deposits in the bank accounts were not verifiable, leading to an addition of ?7,00,779 as peak balance. The appellant contended that the additional evidences were crucial, but the CIT(A) did not address their admissibility, resulting in a per incuriam order. The Tribunal held that the appellant should have the right to submit additional evidence, remitting the case back to the CIT(A) for proper consideration.

Set off of trading loss on share business:
The appellant claimed that the share trading activities were on behalf of farmer relatives, seeking a set off of losses against other income. However, the CIT(A) found the explanations contradictory and lacking in proof. The appellant failed to disclose income from share trading or commission in the tax returns. The Tribunal noted that the appellant did not file a revised return showing losses from share trading, as required by law. Consequently, the claim for set off was denied, and the entire cash deposit of ?36,76,800 was treated as undisclosed income.

Enhancement of assessed income:
The CIT(A) issued a notice of enhancement under sections 251(1) and 251(2) of the IT Act, raising the assessed income from ?7,00,779 to ?36,76,800 due to discrepancies in cash flow and peak working. The appellant argued against the enhancement, stating that it lacked justification and resulted in a high-pitched assessment without basis. The Tribunal found that the CIT(A) did not consider the admissibility of additional evidences, leading to a statutory mistake. As a result, the appeal was remitted back to the CIT(A) for proper consideration.

Rejection of explanation for credits in bank accounts:
The appellant explained that cash deposits were investments from farmer relatives, supported by agreements and identity proofs. However, the Assessing Officer and CIT(A) found the explanations fabricated and unverifiable. The CIT(A) enhanced the assessed income, treating the entire cash deposit as undisclosed income. The Tribunal emphasized the need for proper consideration of additional evidences and a fair opportunity for the appellant to present their case, remitting the matter back to the CIT(A) for further review.