2018 (1) TMI 734 - AT - Income Tax

Unexplained cash credit - addition u/s 68 - Held that - Amounts have been satisfactorily explained by the assessee before the AO in the remand proceedings by way of clinching supporting evidences which facts have not been assailed. The evidences relied upon and considered have not been assailed or rebutted by any contrary evidence in the present proceedings. In the circumstances, it is of the view that the occasion to raise a ground against the relief granted did not arise. Tax Authorities did not see the proceedings in continuation of the proceedings. A different man coming at a different point of time, it appears mechanically has proposed the raising of the ground. It is seen that the present appeal has been filed with the approval of the orders dated 21.07.2017 of Pr. CIT-2, Ludhiana and it is unfortunate that even the said Authority did not care to keep a control on the quality of the appeal filed. The AO, who filed the remand report, is not named. However, the remand report is extracted in the impugned order. Although, the name of the AO who has filed the present appeal is given, however the fact that there are checks and balances in place to ensure that frivolous appeals are not filed apparently are not working. Adequate efforts are made to inform the public that documents having financial implications like copies of Sale Deed etc. are retained even by the seller in order to avoid unnecessary harassment of tracing them to substantiate the availability of funds which is bound to be questioned by the Tax Administration. As a result of developmental activities of the State, the fruits of development have developed on at times on teaming masses who educationally, socially and financially were ill prepared to handle the bonanza. These incidents have suddenly attracted the ill prepared citizens in the tax net who on account of their ignorance are left battling their gain and good fortune in the mindless maze of the administrative requirements. Efforts of broadcasting of information through audio visual means etc must ensure percolation of information, awareness and education right down to the grass roots to prepare the citizens to handle their financial successes and failures as these efforts would go a long way to help the people to become tax compliant. With the said observations, the appeal of the Revenue is dismissed.

Summary

Issues Involved
1. Restriction of disallowance under Section 68 of the Income Tax Act, 1961.
2. Admission of fresh evidence by the CIT(A).
3. Relevance and correctness of the fresh evidence.
4. Procedural fairness and conduct of the tax authorities.
5. Frivolous appeals by the tax authorities.

Detailed Analysis

1. Restriction of Disallowance under Section 68 of the Income Tax Act, 1961
The primary issue in this appeal is whether the CIT(A) was correct in restricting the disallowance of ?36,50,000/- to ?1,10,500/- under Section 68 of the Income Tax Act, 1961, on account of unexplained cash credit. The assessee failed to explain the sources of cash deposits in his Savings Bank Account, leading to the addition of ?36,50,000/- during the assessment proceedings.

2. Admission of Fresh Evidence by the CIT(A)
The assessee, in the appeal before the First Appellate Authority (CIT(A)), sought the admission of fresh evidence to explain the cash deposits. The CIT(A) confronted this evidence to the Assessing Officer (AO), who objected to its admission. However, the CIT(A) directed the AO to consider the evidence on its merits. The AO, in his Remand Report, accepted the evidence partially, leading to the relief granted by the CIT(A).

3. Relevance and Correctness of the Fresh Evidence
The fresh evidence included a duplicate copy of the Registered Sale Deed received on 03.06.2015, which the assessee claimed was the source of the cash deposits. The CIT(A) found the evidence relevant and crucial, noting that the assessee was prevented by sufficient cause from producing it earlier. The AO, in the Remand Report, accepted the genuineness of deposits amounting to ?35,39,500/-, leaving only ?1,10,500/- unexplained. This partial acceptance formed the basis for the relief granted by the CIT(A).

4. Procedural Fairness and Conduct of the Tax Authorities
The judgment highlights the procedural fairness and conduct of the tax authorities. The CIT(A) provided sufficient reasons for admitting fresh evidence, considering the assessee's illiteracy and lack of understanding of tax procedures. The judgment criticizes the tax authorities for mechanically filing appeals without rebutting the evidence considered in the remand proceedings. It emphasizes the need for the tax administration to act fairly and judiciously, avoiding frivolous appeals that cause unnecessary harassment to taxpayers.

5. Frivolous Appeals by the Tax Authorities
The judgment strongly condemns the filing of frivolous appeals by the tax authorities, noting that such actions erode public trust and waste government resources. It calls for a more qualitative assessment of the work of tax officers, stressing that efficiency should not be measured by the number of appeals filed. The judgment refrains from imposing costs, hoping that the tax administration will instruct officers to exercise discretion judiciously and avoid filing appeals mindlessly.

Conclusion
The appeal by the Revenue is dismissed, with the judgment upholding the CIT(A)'s decision to restrict the disallowance to ?1,10,500/-. The judgment underscores the importance of procedural fairness, the relevance of fresh evidence, and the need for the tax authorities to avoid filing frivolous appeals. The observations aim to improve the efficiency and fairness of the tax administration, promoting trust and compliance among taxpayers.