2021 (3) TMI 316 - AT - Income Tax

Unexplained deposits - Rejection of Additional information submitted before the CIT (A)- violation of Rule 46A of I.T. Rules - DR submitted that the assessee had filed only part information before the AO and has filed certain additional information before the CIT (A) who granted relief to the assessee by accepting the said evidence and CIT (A) has neither verified the evidence nor called for a remand report from the AO and therefore, the order of the CIT (A) is in violation of Rule 46A of I.T. Rules - HELD THAT - We find that the assessee had filed only part information before the AO and before the CIT (A) the assessee has filed the following additional evidence (a) with regard to the sale of agricultural land, the assessee has filed pattedar pass books; (b) with regard to the long term borrowings, the copy of the agreement of sale evidencing the advance payment verified; (c) with regard to the agricultural income, the assessee filed evidence that he has offered agricultural income in the earlier years which was accepted by the AO; (d) with regard to bank transactions in HDFC Bank, the evidence to the effect that the assessee has received share application money from various parties during the relevant A.Ys was filed. We find that the CIT (A) has neither verified the evidence by herself nor has called for any remand report from the AO, but has summarily accepted the evidence filed by the assessee. The additional evidence filed by the assessee before the CIT (A) ought to have been verified by the AO. In view of the same, we deem it fit and proper to set aside the issue to the file of the AO with a direction to the assessee to file all the relevant information before the AO and the AO shall re-adjudicate the issue denovo in accordance with law. Revenue s appeal is treated as allowed for statistical purposes.

Summary

Issues:
1. Treatment of land sale as agricultural income
2. Addition of unexplained investment
3. Treatment of agricultural income
4. Addition of unexplained deposits
5. Compliance with Rule 46A of I.T. Rules

Issue 1: Treatment of land sale as agricultural income
The appellant argued that the land was converted into plots and sold as a trade venture, not as agricultural land. The AO disallowed the agricultural income offered by the assessee due to lack of evidence and treated it as income from other sources. The CIT (A) deleted the addition, relying on previous acceptance of agricultural income. The ITAT found the CIT (A) did not verify evidence or call for a remand report, violating Rule 46A. The case was set aside for the AO to re-adjudicate after the assessee submits all relevant information.

Issue 2: Addition of unexplained investment
The AO disallowed a claim of long-term borrowings due to lack of confirmation letters on genuineness. The appellant argued that all information was submitted to both the AO and CIT (A). The ITAT found the CIT (A) did not verify evidence, violating Rule 46A. The case was remanded to the AO for a fresh assessment.

Issue 3: Treatment of agricultural income
The AO treated the agricultural income as income from other sources due to lack of evidence. The CIT (A) deleted the addition based on previous acceptance of agricultural income. The ITAT found the CIT (A) did not verify evidence, violating Rule 46A. The case was remanded to the AO for a fresh assessment.

Issue 4: Addition of unexplained deposits
The AO treated certain deposits as unexplained income due to lack of evidence of business activity. The CIT (A) deleted the addition. The ITAT found the CIT (A) did not verify evidence, violating Rule 46A. The case was remanded to the AO for a fresh assessment.

Issue 5: Compliance with Rule 46A of I.T. Rules
The ITAT found that the CIT (A) did not verify evidence or call for a remand report, violating Rule 46A. The case was remanded to the AO for a fresh assessment.