P CHADRA SEKHAR REDDY,NELLORE vs. THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, TIRUPATHI

Aggrieved with the order of the Ld. AO, the assessee preferred appeal before the Ld. CIT(A), who partly allowed the appeal of the assessee.

Aggrieved with the order of the Ld. CIT (A), the assessee had filed appeal before this Tribunal. In the first round of appeal, the appeal of the assessee was dismissed by this Tribunal vide order dated 07.10.2024, due to withdrawal of appeal by the assessee. However, the case of the assessee could not cover under the Direct Taxes Vivad-se-Vishwas Scheme 2024, the case of the assessee has been recalled in M.A No.09/Hyd/2025 dated 25.02.2025 for adjudication on merits.

At the outset, the Learned Authorized Representative (“Ld. AR”) submitted that the ground nos. 1 and 4 of the assessee are general in nature and do not require any separate adjudication. Accordingly, ground nos. 1 and 4 of the assessee are dismissed being not pressed.

The ground no.2 of the assessee relates to the addition of Rs.63,00,000/- made on account of investment made by the assessee in the money-lending business. In this regard, the Ld. AR submitted that during the search operation, one diary and certain

Per contra, the Ld. DR relied on the orders of the lower authorities and submitted that the balance sheet and return of income of the assessee’s HUF placed at page nos. 2 to 5 of the paper book were not filed by the assessee before the Ld. AO or the Ld. CIT(A). Therefore, the claim of the assessee that part of the loans was advanced from HUF funds requires verification. Accordingly, the Ld. DR requested that the matter may be remanded to the file of the Ld. AO for proper verification.

We have heard the rival contentions and perused the material available on record. We observe that the peak balance computation, entries in diary and promissory notes were the primary basis of the addition of Rs.63 lakhs by the Ld. AO. The assessee’s claim that some amount out of the peak balance pertains to HUF funds is supported by the HUF balance sheet and loan details placed in the paper book. The assessee has also claimed telescoping benefit of Rs.20 lakhs based on the peak balance of F.Y. 2011–12, as reflected at page no. 11 of the assessment order. However, the HUF balance sheet, loan details, and related evidence were admittedly not filed before the lower authorities and therefore require verification. Given these facts, and in the interest of justice, we consider it appropriate to remand the issue of addition of Rs.63 lakhs to the file of the Ld. AO for proper examination of the assessee’s claims. Accordingly, the issue relating to the addition of Rs.63 lakhs on account of alleged unexplained investment in money-lending activity is restored to the file of the Ld. AO with the following specific directions:

Ground no.3 of the assessee relates to the addition of Rs.10,00,000/- towards Unexplained Credit in Capital Account of the assessee. In this regard, the Ld. AR submitted that the assessee had received a gift of Rs.10,00,000/- during the year from Shri N. Subba Reddy, who is the brother of the assessee’s father. It was submitted that during the assessment proceedings, the assessee was unable to produce the supporting evidence due to unavoidable circumstances. Consequently, the Ld. AO treated the amount as unexplained credit and made the addition under section 68 of the Act. The Ld. AR further submitted that Shri N. Subba Reddy expired, and therefore the assessee has now collected relevant documentary evidence from the wife of Shri N. Subba Reddy. These evidences have been submitted before the Tribunal as additional evidence. The Ld. AR prayed that the Tribunal may admit the same under Rule 29 of the Income Tax (Appellate Tribunal) Rules, 1963,

Per contra, the Ld. DR submitted that the evidence being furnished for the first time before the Tribunal require proper verification. Therefore, while he has no objection to the Tribunal admitting the evidence under Rule 29, he submitted that the matter may be restored to the file of the Ld. AO for necessary verification in accordance with law.

We have considered the rival contention and perused the material available on record including the additional evidence placed before us. These documents are related to the gift of Rs.10 lakhs received by the assessee from Shri N Subba Reddy. In our considered view, the evidence now furnished by the assessee are crucial and vital for adjudicating the correctness of the addition made by the Ld. AO under section 68 of the Act. Accordingly, in the interest of justice, we deem it appropriate to admit the additional evidence under Rule 29 of the ITAT Rules, as the same is essential for proper disposal of the matter. Since these evidences were never examined by the lower authorities, we consider it fit to restore the issue to the file of the Ld. AO for de novo adjudication of the issue as per law.

In the result, the appeal of the assessee is allowed for statistical purposes.