COMMISSIONER OF INCOME-TAX, PATIALA vs. M/S CHITTOSHO MOTORS, PATIALA

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ITA/741/2010HC Punjab & HaryanaPHHC01093708201005 January 2011Author: MR. JUSTICE ADARSH KUMAR GOEL,MR. JUSTICE AJAY KUMAR MITTAL5 pages

AI SummaryDismissed

What did the High Court hold?

The High Court held that the view taken by the CIT(A), as upheld by the ITAT, could not be held to be erroneous. The Court found no justification for filing these appeals. The Court noted that the Revenue's learned counsel fairly stated that if additional evidence was validly allowed, the setting aside of the addition was justified, and the only objection was to the admission of such evidence. The Court agreed with the CIT(A)'s reasoning for admitting additional evidence, citing the partner's sickness and the fact that the matter was taken up at the fag end of the limitation period. The Court observed that the AO was given an opportunity to rebut the evidence. The Court concluded that the acceptance of the additional evidence by the CIT(A) was not perverse and that such evidence might advance the interest of justice and show no justification for the addition. Therefore, the appeals were dismissed. The Court also directed a copy of the order to be sent to the Chief Commissioner of Income-Tax to avoid filing such appeals in the future.

What were the facts?

The Revenue (Commissioner of Income-Tax, Patiala) appealed to the High Court of Punjab and Haryana against an order of the Income Tax Appellate Tribunal (ITAT), Chandigarh Bench. The ITAT had upheld an order of the CIT(A) which deleted an addition of Rs. 14,00,000/- made by the Assessing Officer (AO) on account of unexplained deposits in a partner's account. The CIT(A) had allowed the deletion based on additional evidence furnished by the assessee (M/s Chittosho Motors, Patiala) during the appellate proceedings. The AO had also made an addition for under-valuation of closing stock, which was partly set aside by the CIT(A). The appeals before the High Court involved common questions.

What were the issues?

1. Whether the ITAT was legally justified in confirming the CIT(A)'s order deleting the addition of Rs. 14,00,000/- on account of unexplained deposits in the partner's account by admitting additional evidence in violation of Rule 46A of the Income Tax Rules, 1962. 2. Whether the ITAT was legally justified in confirming the CIT(A)'s order deleting Rs. 14,00,000/- out of the total addition of Rs. 18,00,000/- made by the AO on account of unexplained deposits in the partner's account, without passing a speaking order on the Revenue's specific ground that the admission of additional evidence was in violation of Rule 46A and thus erroneous and against the principles of natural justice. 3. Whether the order passed by the ITAT was perverse as it failed to test the evidences (sale deed, bank certificate, bank account copies) put forth by the assessee at the appellate stage by calling for a report, and whether the veracity of these evidences had never been tested by any competent authority through verification. Assessee's Contention: The assessee argued that the additional evidence could not be filed in time during assessment because the partner was ill and the time for disposal was short. The pay-in-slip was lost, and information could only be supplied later. The AO was given an opportunity to rebut the evidence. The CIT(A) found the sickness of the partner and the late stage of assessment as valid reasons for admitting additional evidence under Rule 46A. Revenue's Contention: The Revenue's primary objection was that additional evidence should not have been allowed to be led at the appellate stage, as it was in violation of Rule 46A. They also argued that the ITAT's order was perverse for failing to test the veracity of the evidence.

Which sections of the Income-tax Act were involved?

Section 260A

AI-generated summary — verify with the full judgment below

of 2010

-1- **** IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH of 2010

Date of decision: 5.1.2011 The Commissioner of Income-Tax, Patiala ...Appellant Versus M/s Chittosho Motors, Patiala ...Respondent CORAM: HON'BLE MR.JUSTICE ADARSH KUMAR GOEL HON'BLE MR.JUSTICE AJAY KUMAR MITTAL Present: Mr. Tejinder K. Joshi, Advocate for the appellant.

**** ADARSH KUMAR GOEL, J (

Oral)

This order shall dispose of ITA Nos. 741, 742 and 743 of 2010 as it is stated that all the appeals involve common questions.

Income-Tax Appeal No.741 of 2010 has been preferred by the revenue under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) against order dated 18.3.2010 passed by the Income Tax Appellate Tribunal, Chandigarh Bench 'B', Chandigarh in C.O.No.2/Chd/2010 raising following substantial question of law:- “1) That in facts and circumstances of the case, whether the ITAT is legally justified in confirming the order of the CIT(A) deleting the addition of Rs.14,00,000/- on a/c of unexplained deposits in the of 2010

-2- **** partner's account by admitting additional evidences in violation of Ruled 46A. 2) That in the facts and circumstances of the case, whether the ITAT is legally justified in confirming the order of the CIT(A) deleting the addition of Rs.14,00,000/- out of the total addition of Rs.18,00,000/- made by the AO on a/c of unexplained deposits in the partner's account, without passing a speaking order on the Revenue's specific ground that the said admission of additional evidence was in violation of Rule 46A of the Income Tax Rules, 1962 and thus erroneous being, also, against the principles of natural justice. 3) That the order passed by the ITAT is perverse as it failed to test the evidences, put forth by the assessee in the shape of the sale deed, certificate from bank and copies of the bank account at the appellate stage, by calling for a report. Also, the veracity/truth of the said evidences had never been tested by any competent authority through verification.”

During the course of assessment, the assessing officer made addition on account of under-valuation of closing stock of motor-cycles and spare parts and unexplained deposits in the partner's account. On appeal, the said addition was partly set aside of 2010

-3- **** by the CIT(A) on the basis of additional evidence furnished by the assessee. The said finding has been upheld by the Tribunal.

We have heard learned counsel for the appellant.

Learned counsel for the appellant fairly stated that if additional evidence was validly allowed to be led, the setting aside of addition was justified. The only objection is that additional evidence should not have been allowed.

Reasons for allowing additional evidence given by the CIT(A) are as under:- “2.5 I have gone through the assessment record, written submissions filed by the counsel for the assessee evidence tendered alongwith the same as also the comments of the A.O. and replication of the counsel for the assessee. The first issue in this appeal would arise regarding the admission of the additional evidence. It has been explained by the assessee in his written submission that since the partner was lying ill and the time for the disposal was short the evidence could not be filed in time. This plea of the assessee is apparent from the order itself in as much as para 3 thereof at page 3 it is evident that A.O. asked for the source of capital investment in the account of the partner actually on 18.11.2008. Although he makes a reference letter dated 7.1.2008 but it is too general in nature as the initial information was gathered by him at that time. It was of 2010

-4- **** explained by the assessee that the partner was ill and the pay-in-slip containing the information as to the source of deposit was since lost the information could be supplied only after 17.12.2008.

6 In this scenario, the evidence in the shape of sale deed of land, certificate from bank regarding deposit of Rs.10 lacs as also the copies of the bank account have been filed before me in the appellate proceedings. The A.O. was given due opportunity to rebut the same but he has just replied that fresh evidence should not be admitted at the appellate stage. In fact there is specific provision in Rule 46A providing instances under which fresh evidence can be entertained. In my view, under the facts and circumstances of the case the sickness of the partner is valid reason for not producing the evidence during the assessment. The fact that the matter was taken up in the fag end of the limitation period is also relevant. Considering the totality of the circumstances, I admit the additional evidence filed by the appellant. Now considering the material on record the source of Rs.14 lacs stands duly explained by the sale deed of the agricultural land by the partner of the assessee firm who has received the sale price and contributed the additional capital by account payee cheques only which are duly reflected in the copy of bank account by the appellant.

of 2010

-5- **** The only objection on merits by the A.O. is that the date of introduction of fresh capital of Rs.10 lacs on 20.9.2005 is before the execution of the sale deed.”

In view of the above explanation, acceptance of which has not been shown to be perverse, the view taken by the CIT(A) as upheld by the Tribunal cannot be held to be erroneous. The appeals have to be dismissed.

We are of the view that there was no justification for filing these appeals when even according to the department, the addition was rightly set aside. The department is not expected to take technical plea of additional evidence being considered when such evidence may advance the interest of justice and show that there was no justification for addition.

A copy of this order be sent to the Chief Commissioner of Income-Tax, Chandigarh to take necessary steps to avoid filing of such appeals in future.

(Adarsh Kumar Goel)

Judge January 05,2011 (Ajay Kumar Mittal) Pka

Judge

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