NANDINI NARESH HINGORANEE,MUMBAI vs. INCOME TAX OFFICER 22(2)(1), MUMBAI

On the facts and in the circumstances of the case and in law, the Learned Commissioner of Income Tax (Appeals) Ld. CIT(A) erred in holding the addition of Rs. 6,52,236/-as Undisclosed Interest Income without appreciating the fact that the appellant has already offered the said income to tax under Short Term Capital Gain (STCG) as it is arising from the sale of shares/units.

The Ld. CIT(A) and AO have made a gross error of law and facts in considering all the Income reflecting in Form 26AS as Interest Income, without appreciating the fact that the appellant is a Non Resident and thus, TDS is deductible u/s. 195 even on Income arising on transfer of shares.

The Ld. CIT(A) erred in not considering the submission made by the appellant and in not appreciating that the said addition would result in double taxation of the Income already offered to tax.

At the outset, it was noticed that the instant appeal is delayed by 183 days. The assessee has filed an application for condonation of the delay alongwith an affidavit stating that the delay occurred as the Counsel of the assessee got engaged in a medical emergency relating to his mother during the relevant time as she was ailing from kidney dysfunction and the counsel had to attend her. On due consideration, we condone the delay.

Briefly stated facts are that the AO noticed that the interest income as declared by the assessee was not matching with the interest

Aggrieved with the assessment order, the appellant filed appeal before the ld.CIT(A) and submitted that the income disputed as escaped assessment had already been offered for income as Short Term Capital Gains. However, the AO considered the same as undisclosed income and hence, considered the income twice. The explanation of the assessee was not accepted by the appellate authority on the ground that it was not supported by any documentary evidence. Also no explanation supported with the documentary evidences had been filed in respect of interest income earned of Rs. 6,52,236/- either before the AO or during the course of appellate proceedings. Hence, in absence of such supporting evidences, the appellant's claim could not be verified. The addition made was upheld dismissing the appeal.

In the course of hearing by the Bench, the assessee made a request for admission of certain additional evidence under Rule 29 of ITAT Rules. He sought to produce the following additional documents/evidence:

On careful consideration of the contentions of the assessee in the preceding para, we find that the impugned addition has been made on account of failure of the assessee to produce cogent evidences mainly on account of she being NRI. To our mind this is enough to hold that the additional evidences as stated above need to be considered by the authorities below in the interest of justice and fairplay and in accordance with the principles of natural justice. We find that the additional evidences being sought to be admitted are relevant to the facts of the case and are material for justifiable adjudication of the issue on hand. The assessee should not be disqualified from producing evidence merely for the fact it was not produced before the AO. It is incorrect to shut out the assessee in the process of administration of justice from leading evidence to prove its case. The earlier inability to lead evidences should not be held against the assessee unless there was any evidence to support that the evidence was fabricated. We therefore, admit the above stated additional evidence.

1 However, as the ld.CIT(A) did not adjudicate the issues raised in the grounds of appeal qua the materials available on record, such dismissal without deciding the appeal on merits is contrary to the principles of natural justice. The CIT(A) himself has the power to receive new/additional evidence for deciding issues in terms of rule 46A(4),if the same is necessary for disposal on merits. Moreover, every assessee has the right to file additional evidence in support of its case and if the appellate authority feels that additional evidences are material for deciding controversy in that case, then in the interest of justice, same can be allowed to be filed.

2 As the ld. AR has requested before us that the assessee may be accorded an opportunity and this request which was not vehemently objected by the ld.DR, in such a scenario, we are of the opinion that the scales of justice demand that the matter should be verified and revisited at the level of AO and accordingly, we are of the considered view that the matter should be remanded back to the file of AO for de novo adjudication by him while applying the principles of natural justice after affording sufficient opportunity of being heard to the assessee who

In the result, the appeal stands allowed for statistical purposes.