Y RADHA KUMAR REDDY (HUF),HYDERABAD vs. INCOME TAX OFFICER, WARD-11(5), HYDERABAD

Facts of the case, in brief, are that the assessee HUF Sri Y. Radha Kumar Reddy filed his return of income for the A.Y 2012-13 on 6.3.2013 declaring total income ‘Nil’. The case of the assessee was selected for scrutiny through CASS to verify the genuineness of the large increase of unsecured loans. In response to the notice u/s 143(2) issued to the assessee HUF on 23.2.2015, there was no response from the side of the assessee. Assessing Officer, therefore, issued final show-cause notice asking assessee

Before the learned CIT (A), the assessee filed certain additional evidence which were not filed before the Assessing Officer. The learned CIT (A) therefore, called for a remand report from the Assessing Officer. After considering the remand report from the Assessing Officer and the rejoinder of the assessee to such remand report, the learned CIT (A) deleted an amount of Rs.31,00,000/- but confirmed the addition of Rs.49,60,000/- in respect of the following 2 persons:

Aggrieved with such order of the learned CIT (A), the assessee is in appeal before the Tribunal by raising the following grounds of appeal:

The learned Counsel for the assessee strongly challenged the order of the learned CIT (A) in sustaining the addition of Rs.49,60,000/-. The learned Counsel for the assessee filed an application requesting for admission of the following additional evidence: a) Affidavit filed by Mr. Vemareddy Ramachandra Reddy along with bank statement b) Confirmation letter of Smt. Revathi and Pattadhar Pass Book. c) Affidavit filed by Mr. Raghava Rao along with ledger copy and bank statement.

The learned Counsel for the assessee submitted that the additional evidences could not be produced before the Assessing Officer and the CIT (A) as the creditors did not provide the letters of confirmation. Now that these persons have given confirmation, therefore, the additional evidences should be admitted and justice should be given to the assessee by deleting the addition. In his alternate contention he submitted that he has no objection, if the matter is restored to the file of the Assessing Officer for fresh adjudication.

The learned DR, on the other hand, strongly objected to the admission of the additional evidences filed by the assessee before the Tribunal. Referring to the decision of the Hon'ble jurisdictional High Court in the case of A.K. Babu Khan vs. CIT (1976) 102 ITR 757 (A.P), he submitted that the Hon'ble High Court in the said decision has held that a party guilty of

Referring to the decision of the Hon'ble Punjab & Haryana High Court in the case of CIT vs. S.A. Builders Ltd reported in (2013) 38 Taxmann.com 255 (P&H), he submitted that the Hon'ble High Court has held in the said decision that the Tribunal cannot allow a party to change its stance by reference to new facts that were not pleaded or asserted before the Assessing Officer or CIT (A).

Referring to the decision of the Chennai Bench of the Tribunal in the case of Kanniappan Murugadoss vs. ITO reported in (2017) 79 taxmann.com 244 (Chennai Trib.), he submitted that the Tribunal in the said decision has held that mere fact that evidence sought to be produced is vital and important does not provide a substantial cause to allow its admission at appellate stage, especially when evidence was available to party at initial stage and had not been produced by him.

He submitted that the assessee was given ample opportunities during the assessment proceedings as well as appellate proceedings and remand proceedings. The assessee never stated that he has obtained loan from V. Ramachandra Reddy instead of Smt. V. Revathi. Similarly, the assessee is now changing his stand that instead of obtaining loan of Rs.30.00 lakhs from V. Raja Sekhar, he had obtained loan from Shri P.V.Raghava Rao and Sr. D. Pavan Kumar. Since the assessee is now changing his stand, therefore, the addition made by the Page 6 of 14

We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and the learned CIT (A) and the paper book filed on behalf of the assessee. We have also considered the various decisions before us. We find the assessee in the instant case has obtained unsecured loan of Rs.2,43,78,298/- during the year out of which the Assessing Officer made the addition of Rs.80,60,000/- u/s 68 of the Act on the ground that the assessee could not substantiate with evidence to his satisfaction regarding the identity and creditworthiness of loan creditors and genuineness of the transactions in respect of six parties, the details of which are already given in Paragraph 2 of this order. We find the learned CIT (A) deleted the addition to the tune of Rs.31.00 lakhs but confirmed the addition of Rs.49,69,000/- in respect of two parties namely V. Rajasekhar (Rs.30.00 lakhs) and V. Revati (Rs.19,60,000). We find during the remand proceedings, the Assessing Officer has held as under in respect of V. Rajasekhar who had given loan of Rs.30.00 lakhs: “In response to summons issued u/s 131 of the Act, Shri V. Rajasekhar could not produce additional evidence in support of amount given to Shri Y. Radha Kumar Reddy (HUF). In the absence of proper confirmation and documentary evidence, the same cannot be treated as genuine investment and the amount advanced of Rs.30,00,000/- is treated as unproved”.

Similarly in respect of Smt. V. Revathi, the Assessing Officer in his remand proceedings had given the following observations: “In response to summons issued u/s 131 of the Act, Smt. V. Revati could not produce additional evidences in support of amount given to Shri Y. Radha Kumar Reddy Page 7 of 14

Now it is the submission of the assessee that the assessee has not obtained loan of Rs.30.00 lakhs from V. Rajasekhar but the same was extended by Shri P.V.Raghava Rao (Rs.15,60,000) and Sri D. Pavan Kumar (Rs.14,40,000). Similarly, in respect of V. Revati from whom it was stated to have obtained loan of Rs.19,60,000, it is the submission of the learned Counsel for the assessee that the same was obtained from Shri V. Ramachandra Reddy husband of V. Revati. We do not find any substance in the arguments advanced by the learned Counsel for the assessee for admission of the additional evidences and decide the issue in favour of the assessee. We find the assessee was given ample opportunities during the course of assessment proceedings by the Assessing Officer and the assessee had never stated that he has not obtained loan from R. Rajasekhar and V.Revati but has obtained loan from other persons. Similarly, during the remand proceedings also, the assessee though given sufficient opportunities could not substantiate with evidence to the satisfaction of the Assessing Officer regarding the loans obtained.

We find the Hon'ble A.P High Court in the case of A.K. Babu Khan vs. C.W.T (cited Supra) while adjudicating the issue of admissibility of additional evidence has observed as under:

This is not a case where the Wealth-tax Officer had decided the case without affording sufficient opportunity to the assessee to adduce evidence. Any number of adjournments given by the Wealth-tax Officer or by the Appellate Assistant Commissioner were not availed of by the assessee to place an iota of evidence with the result that the Wealth-tax Officer and the Appellate Assistant Commissioner had to determine the net wealth of the assessee ex parte. It is also not a case where the Tribunal required any documents to enable it to determine the question of the net wealth of the assessee. It is purely within the discretion of the Tribunal to permit additional evidence to be adduced to enable it to pass orders or, in its opinion, if there is any substantial cause for receiving additional evidence.

The expression " or for any other substantial cause" occurs in Rule 27(1)(b) of Order 41, Civil Procedure Code, and this expression has been the subject-matter of decisions by the Privy Council, Supreme Court and High Courts. In Parsotim Thakur v. Lal Mohar Thakur, AIR 1931 PC 143 it was held that the words "for any other substantial cause" must be read with the word "requires" in the beginning of the sentence and it is only where the appellate court 'requires any document to be produced or any witness to be examined that this rule will apply. The discretion to receive additional evidence is to be exercised only when any point is required to be cleared up in the interests of justice. This power given to the Tribunal has to be exercised cautiously and sparingly in order to advance the interests of justice. Rule 29 is not intended to allow an assessee who has been unsuccessful throughout to patch up the weak parts of his case or to fill up omissions.

It is well settled that a party guilty of remissness and gross negligence as in this case is not entitled to indulgence being shown to adduce additional evidence. The assessee had ample opportunities and year after year, he was given opportunities to produce material so that assessment could be made on a consideration of the material placed by him. Merely for the reason that the legal representative of the deceased-assessee has come on record at the stage of second appeal before the Tribunal, it will not entitle him to say that he should be afforded sufficient opportunity to dispute the assessments made by the Wealth-tax Officer. He cannot put

Satyanarayana Raju J. (as he then was) in Bobbili Gowresu v. Kottu Subhadramma, AIR 1957 AP 961, 964 while construing Rule 27 of Order 41, Civil Procedure Code, observed :

The Supreme Court in Arjan Singh v. Kartar Singh, observed :

Dealing with the scope of Rule 29, a Division Bench of the Madhya Pradesh High Court in Commissioner of Income-tax v. Babulal Nim, [1963] 47 ITR 864 (MP) held that the admissibility of additional evidence under Rule 29 depends on whether or not the Tribunal requires it to enable it to pass orders or for any other substantial cause.

There is also nothing to suggest from the order of the Tribunal that it had not exercised its discretion properly in refusing to receive the additional evidence sought to be produced by the legal representative. We, therefore, answer the question in the negative and against the assessee”.

We find the Punjab & Haryana High Court in the case of CIT vs. S.A. Builders (Supra) while adjudicating the issue of admissibility of additional evidence has observed as under:

The question that, therefore, arises in terms of these facts and the second question of law, as modified, at request of counsel for the revenue, is whether the Income Tax Appellate Kumar Naresh N 2013.09.02 15:20 I attest to the accuracy and integrity of this document High Court Chandigarh Tribunal can entertain a new plea based upon facts that have neither been pleaded nor urged, before the Assessing Officer or CIT(Appeals)?

An answer to this question would necessarily require appraisal of provisions of Section 254 of the Act. Section 254 of the Act reads as follows:-

Section 254 of the Act is couched in the widest possible terms and takes within its ambit a duty to ensure that an assessment order is passed in accordance with provisions of the Act and while appraising an order to rectify an erroneous imposition of tax or an erroneous escape of revenue. The Tribunal may, therefore, allow parties to raise fresh pleas and grounds but only if the factual foundation for the fresh plea or ground has already been laid before the Assessing Officer or the CIT(Appeals). The power, in our considered opinion, cannot be construed to confer a power so wide and unbridled, as to enable a Tribunal to disregard basic principles that govern exercise of appellate power, namely, the power to appraise orders and discern whether subordinate authorities have committed any Kumar Naresh N 2013.09.02 15:20 I attest to the accuracy and integrity of this document High Court Chandigarh error of law or of fact. A reference in this regard may be made to a judgment of the Hon'ble Supreme Court in National Thermal Power Co. Ltd. v. Commissioner of Income Tax, 1997(7) SCC 489, which reads as follows:-

Under Section 254 of the Income tax Act, the Appellate Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit. The power of the Tribunal in dealing with appeals is thus expressed in the widest possible term. The purpose of the assessment proceedings before the taxing authorities is to assess correctly the tax liability of an assessee in accordance with law. If, for example, as a result of a judicial decision given while the appeal is pending before the Tribunal, it is found that a non-taxable item is taxed or a permissible deduction is denied, we do not see any reason why the assessee should be prevented from raising that question before the Tribunal for the first time, so long as the relevant facts are on record in respect of that item. We do not see any reason to restrict the power of the Tribunal under Section 254 only to decide the grounds Kumar Naresh N 2013.09.02 15:20 I attest to the accuracy and integrity of this document High Court Chandigarh which arises from the order of the Commissioner of Income-tax (Appeals). Both the assessee as well as the Department have a right to file an appeal/cross-objections before the Tribunal. We fail to see why the Tribunal should be prevented from considering questions of law arising in assessment proceedings although not raised earlier."

A perusal of the above extract reveals that a Tribunal may allow a party to raise a fresh plea for the first time, so long as relevant facts are

A perusal of findings recorded by the Assessing Officer as well as by the CIT(Appeals), while rejecting the explanation offered by the appellant with respect to cash payments made at Calcutta, is that the appellant has not been able to establish his explanation that parties insisted upon cash payment. The Tribunal has allowed the assessee to raise a new plea that the assessee did not have bank account at Calcutta. A perusal of the record reveals that such a plea was not raised at any stage of the proceedings whether before the Assessing Officer or CIT (Appeals) and, therefore, could not be raised for Kumar Naresh N 2013.09.02 15:20 I attest to the accuracy and integrity of this document High Court Chandigarh first time before the Income Tax Appellate Tribunal. We would, at this stage, reiterate that , though, the Tribunal is entitled to permit parties to raise fresh and new grounds but can only entertain such fresh or new grounds as are founded on facts already pleaded before the Assessing Officer or the CIT (Appeals). The Income Tax Appellate Tribunal, in our considered opinion, cannot allow a party to change its stance by reference to new facts that were not pleaded or asserted before the Assessing Officer or the CIT(Appeals). The modified second question of law is answered accordingly.

Since the assessee in the instant case was given sufficient opportunities during the assessment proceedings as well as appellate proceedings to substantiate the loan obtained by it but failed to discharge the onus cast on him and since now the assessee is changing his stand before the Tribunal by filing certain additional evidences that the loans were obtained from different persons, therefore, the same, in our opinion cannot be accepted at this juncture. We, therefore, reject the request for admission of additional evidences. Since the assessee failed to discharge the onus cast on it by proving the identity and creditworthiness of the loan creditors and genuineness of the transactions, therefore, the order of the learned CIT (A) sustaining the addition of Rs.49,60,000/- is upheld and the grounds raised by the assessee are dismissed. Page 12 of 14

In the result, appeal filed by the assessee is dismissed.