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Income Tax Appellate Tribunal, BANGALORE BENCH ‘B’
Before: SHRI N.V VASUDEVAN & SHRI. JASON P BOAZ
PER SHRI N.V VASUDEVAN, JUDICIAL MEMBER :
These are appeals by the assessee against the order dated 15/2/2016 and 16.5.2016 of Commissioner of Income-tax (Appeals) – 7 & 3, Bangalore, respectively, relating to asst. year 2009-10 & 2010-11.
This is an appeal by the assessee against the order dated 31/10/2017 of CIT(A)-10 Bangalore relating to asst. year 2011-12.
The assessee is an individual. For asst. year 2011-12 assessee filed return of income declaring total income of Rs.6,21,370/-. The case of the assessee was selected for scrutiny assessment because of the AIR information regarding deposit of cash by the assessee in his savings bank account. Notice u/s 143(2) of the Income Tax Act, 1961 (Act) dated 17/9/2012 was issued. Another notice u/s 143(2) of the Act was also issued but the assessee did not respond to the aforesaid notices. Another notice u/s 143(2) of the Act on 4/12/2013 was issued for which the assessee did not respond. The assessment was thereafter concluded by the AO ex-parte u/s 144 of the Act to the best of AO’s judgment. The AO treated the following cash deposits in the various bank accounts of the assesse as unexplained.
Apart from the above, the AO also made the following additions to the total income of the assessee.
Aggrieved by the order of the AO, the assessee preferred appeal before the CIT(A). Before the CIT(A), the assessee pointed out that he could not attended the proceedings before the AO as he was suffering from severe back pain and was advised bed rest by the Doctors. It was only in these circumstances that there was non-compliance by the assessee in the proceedings before the AO. The assessee further explained the source of funds out of which cash deposits were made in the bank account. The following statement was filed regarding sources of funds before the CIT(A).
The confirmation from Nizar Nazeem Fathima along with her address confirming that she had given a sum of Rs.24 lakhs as unsecured loan to the assessee was also filed before the CIT(A). The assessee requested the CIT(A) to accept the evidence filed before the CIT(A) and delete the addition made by the AO.
The CIT(A) did not admit the additional evidence filed by the assessee because according to him under Rule 46A(1) of the Income-tax Rules 1962 (Rules), additional evidence can be filed only in the following 4 circumstances before the CIT(A). These 4 circumstances are as follows:-
(a) where the [Assessing Officer] has refused to admit evidence which ought to have been admitted; or (b) where the appellant was prevented by sufficient cause from producing the evidence which he was called upon to produce by the [Assessing Officer] ; or (c) where the appellant was prevented by sufficient cause from producing before the [Assessing Officer] any evidence which is relevant to any ground of appeal ; or (d) where the [Assessing Officer] has made the order appealed against without giving sufficient opportunity to the appellant to adduce evidence relevant to any ground of appeal.
8. According to the CIT(A) none of the aforesaid 4 conditions were satisfied in the case of the assessee and he, therefore, refused to admit the additional evidence. Consequently, he confirmed the addition of Rs.77,79,000/- being cash deposits made in the bank account. With regard to other additions of Rs.10,000/- and 1 lakh made by the AO by disallowing Chapter VIA deduction and not allowing deduction u/s 80TTA, the CIT(A) deleted those 2 additions because according to him these deductions had to be allowed statutorily.
9. Aggrieved by the order of the CIT(A) confirming the addition of Rs.79,77,000/- being unexplained deposits made in the bank account, the assessee has preferred present appeal before the Tribunal.
The grounds of appeal raised by the assesee reads as follows:-
“1. The order of the lower authority is erroneous and not maintainable in law and contrary to evidences in so far as additions of Rs.77,79,000/- made is concerned. 2. The learned CIT (A) erred in upholding the addition on the technical ground that the evidence is not admissible under rule 46 (A) of the rules 1962.
3. The learned CIT (A) failed to appreciate that the case of the appellant is squarely covered by clauses (b) and (c) of the Rule 46(A) (1), in view of the letter dated 17/10/2017 filed with CIT (A) as stated in the case of the appellant (supra).
4. Without prejudice to the above the learned CIT (A) has also failed to appreciate that the expression sufficient or reasonable cause• should receive liberal interpretation so as to advance substantial justice and a meritorious case should not be defeated under the subterfuge of technicalities as settled by judicial decisions and as such should have allowed claim of the appellant. 5. For these are any other grounds of appeal that may be urged at the time of hearing it is prayed that the Honorable ITAT ma -be' pleased to allow this appeal in the Interest of Equity and Justice.”
11. The ld counsel for the assessee who submitted that the assessee was prevented by sufficient cause from producing evidence which was called by the AO. Apart from the above, it was also submitted that under Rule 46A(4), the CIT(A) has the power to direct production of any document to enable him to dispose of the appeal for any another substantial cause. The only prohibition in Rule 46A(3) is that additional evidence should not be taken into account unless the AO is allowed reasonable opportunity to examine the additional evidence and produce any evidence in rebuttal to the additional evidence produced by the assessee.
12. The ld counsel for the assessee therefore, submitted that the order of the CIT(A) should be set aside and the additional evidence to issue with regard to the addition of Rs.77,79,000/- should be remanded to the AO for fresh consideration of the additional evidence.
13. The ld DR relied on the order of the CIT(A) and placed reliance on the decision of the Hon’ble Allahabad High Court in the case of Ram Prasad Sharma Vs. CIT 119 TIR 869 Allahabad.
We have considered the rival submissions. We are of the view that the powers u/s 46A of the Act are conferred on the CIT(A) only for a purpose of enabling the CIT(A) to consider evidence available with the assessee but not to produce before the AO. The fact that the assessee was suffering from back pain and, therefore, could not attend proceedings before the AO was not disbelieved by the CIT(A). In such circumstance, the CIT(A) should have come to the conclusion that the assessee was prevented by sufficient cause from producing evidence which he was called upon to produce by the AO or it could be said that evidence which is relevant to any ground of appeal could not be produced before the AO owing to sufficient cause. The case of the assessee would thus fall within the ambit of Rule 46A(1)(b) or (c) of the Rules. In any event under Rule 46A(4), the CIT(A) has inherent power to admit additional evidence. The only limitation on his part is that he cannot rely on the additional evidence without confronting the same to the AO and affording him right of rebuttal. In our view, therefore the CIT(A) wrongly refused to admit additional evidence filed by the assessee before him. With regard to the decision of the Hon’ble Allahabad High Court in the Case Rama Prasad Sharma (Supra), cited by the learned DR before us, we are of the view that the Allahabad High Court held that it was a discretion of the first appellate authority and the Tribunal to admit additional evidence and that they have rightly exercised the discretion not to admit additional evidence because the assessee without reasonable cause failed to produce the evidence before the AO. It cannot be said that the ratio laid down in this decision is that additional evidences in all cases should be rejected. The power to admit additional evidence is at the discretion of first appellate authority and that discretion has to be exercised judiciously keeping in mind the spirit behind Rule 46A. In our view, on the facts and circumstances of the present case, the additional evidence ought to have been admitted by the CIT(A).
15. For the reason stated above, we set aside the order of the CIT(A), in so far as it relates to the addition of Rs.77,79,000/- being unexplained cash deposits in the bank account and direct the issue to be examined afresh by the AO in the light of the additional evidence filed by the assessee before the CIT(A). The AO will decide the issue afresh after taking into consideration additional evidence filed by the assessee. The AO will afford opportunity of being heard to the assesee and also allow assesse liberty to file any additional evidence that the AO may desire. The AO will decide the issue in accordance with law.
In the result, appeal by the assessee is treated as allowed for statistical purposes.
Order pronounced in the open court on 27th April, 2018.