SHANKARAPPA RAVICHANDRA ,BANGALORE vs. INCOME TAX OFFICER WARD-7(2)(3), BANGALORE

This appeal by the assessee is directed against the order of CIT(A) - 7, Bangalore, dated 03.01.2019 for Assessment Year 2015-16.

2.1 The assessee, in the business of civil contract works, filed his return of income for Assessment Year 2015-16 on 20.01.2017 declaring income of Rs.3,67,090/-. The return was processed under section 143(1) of the Income Tax Act, 1961 (in short ‘the Act’) and the case was taken up for scrutiny for examining cash deposits in the assessee’s savings bank account with Federal Bank Ltd. The assessment was completed under section 143(3) of the Act vide order dated 29.12.2017, wherein the assessee’s income was determined at Rs.47,47,880/-, in view of an addition of Rs.44,50,000/- as the Assessing Officer (AO) found the assessee’s explanation for this deposit in his savings bank account with Federal Bank to be unsatisfactory.

2.2 Aggrieved by the order of assessment dated 29.12.2017 for Assessment Year 2015-16, the assessee filed an appeal before the CIT(A)-7, Bangalore, raising various grounds and contentions assailing the addition of Rs.44.50 lakhs made by the AO as unexplained cash deposits in the assessee’s savings bank account in Federal Bank Ltd. In the course of appellate proceedings, apart from filing written submissions to submit that the aforesaid cash deposit in his bank account was out of sale consideration arising out of sale of property, the assessee filed certain documents (16 pages) in support of the above explanation. The CIT(A) was of the view that the aforesaid documents were additional evidence and observing that the assessee has failed to provide any cause for not filing the said documents before the AO, refused to admit the same under Rule 46A of the Income Tax Rules, 1962 (in short ‘the Rules’). In that view of the matter, the CIT(A) dismissed the assessee’s appeal vide the impugned order dated 03.01.2019 observing that the assessee has failed to explain the cash deposit of Rs.44.50 lakhs.

3.1 Aggrieved by the order of CIT(A)-7, Bangalore, dated 03.01.2019 for Assessment Year 2015-16, the assessee has preferred this appeal before the Tribunal, wherein he has raised the following grounds:-

3.2 On a perusal of the grounds raised (supra), it is seen that the only issue raised by the assessee is the non-admission of additional evidence of 16 pages; furnished by the assessee before the CIT(A) to explain the cash deposit of Rs.44.50 lakhs in his bank account with Federal Bank Ltd. In support of the admission of 16 pages of additional evidence (placed at pages 10 to 25 of Paper Book) for explaining the said cash deposit in the assessee’s bank account, the learned AR of the assessee has filed the following written submissions (copy placed at pages 1 to 4 of the Paper Book).

3.3 Per contra, the learned DR for Revenue supported the order of the CIT(A) in not admitting the additional evidence filed by the assessee.

3.4.1 I have considered the rival submissions and perused and carefully considered the material on record in the matter of admission of additional evidence (16 pages) filed by the assessee before the CIT(A); including the judicial pronouncements cited on both sides. After a careful consideration of the matter, I am of the view the powers under Rule 46A of the Rules are conferred on the CIT(A) only for the purpose of enabling the CIT(A) to consider evidence with the assessee but not produced before the AO. The CIT(A), in the case on hand, has observed that the assessee failed to explain the cash deposit in his bank account in spite of adequate opportunities provided. A perusal of the column 10 – Dates of hearings on page 1 of the order of assessment indicates that the adequate opportunities granted by the AO were five in number; in the period of less than a month (i.e., between 21.11.2007 to 19.12.2007). Admittedly, as per the averments of the learned AR, the assessee was only able to get the details, now sought to be admitted as additional evidence, after the completion of assessment proceedings.

3.4.2 In my view, in such circumstances as above, the CIT(A) ought to have come to the conclusion that the assessee was prevented by sufficient cause from producing evidence required before the AO. The case of the assessee would thus fall within the ambit of Rule 46A1(b) or (c) of the Rules. In any case, under Rule 46A(4) of the Rules, the CIT(A) has the inherent power to admit additional evidence. The only limitation on the part of the CIT(A) is that he / she cannot rely on the additional evidence without confronting the same to the AO and affording him the right of rebuttal. The power to admit additional evidence is at the discretion of the first appellate authority and that discretion has to be exercised judiciously, keeping in mind the spirit behind Rule 46A of the Rules. Based on the facts and circumstances of the case, as narrated above, I am of the view that the CIT(A) wrongly refused to admit the additional evidence furnished by the assessee in order to explain the source of the cash deposit of Rs.44.50 lakhs in his bank account with Federal Bank Ltd., and rather, ought to have admitted the same for examination / verification of the assessee’s claim.

3.4.3 For the reasons stated above, I set aside the order of the CIT(A), in so far as it relates to the cash deposit of Rs.44.50 lakhs in the assessee’s bank account with Federal Bank Ltd., and direct that the issue be examined afresh by the AO in the light of the additional evidence (16 pages) filed by the assessee before the CIT(A). The AO is directed to decide the issue afresh after taking into account the additional evidence filed by the assessee after affording the assessee adequate opportunity of being heard and to file details / documents / submissions required; which shall duly be considered by the AO before deciding the issue. It is accordingly ordered. In coming to this finding, support was drawn from the decision of ITAT, Bangalore Bench in the case of Shri. G. Muniraju in dated 15.02.2019.

Order pronounced in the open court on this 12th day of July, 2019.