2014 (3) TMI 151 - HC - Income Tax

Court affirms Tribunal's tax ruling on Rule 46A violations & income deletions, dismissing appeal

Commissioner of Income Tax- III Versus Kamlaben Sureshchandra Bhatti

The court upheld the Income Tax Appellate Tribunal's decision regarding the violation of Rule 46A, deletion of Rs. 59.73 lakhs by the CIT (A) confirmed by ... Admission of additional evidence under Rule 46A of the Act – Held that:- The CIT (A) recorded that the notice of hearing issued by the Assessing Officer on 31st October 2011 was received by the assessee on the date of hearing itself - It was therefore that the assessee could not produce necessary evidence on such date - When subsequently, he attended the office of the Assessing Officer on 25th November 2011 with necessary evidence, he learnt that the order of assessment was already passed on 21st November 2011- on this ground that the CIT (A) permitted additional evidence to be produced – thus, CIT (A) committed no error nor the admission of additional evidence can be stated to be in breach of the requirement of Rule 46A of the Rules - Particularly when the interest of the Revenue was safeguarded by calling for the remand report and permitting the Assessing Officer to comment on such additional evidence – there is no reason to interfere - Decided against Revenue. Deletion confirmed by Tribunal – Held that:- CIT(A) was of the view that the entries of cash deposited are duly reflected in the personal cash book which the appellant has submitted under Rule 46A - The appellant has given documentary evidence relating to loans taken – thus, the source of the same is not questionable - From the contents of the order passed by the CIT (A), it can be seen that the entire issue is based on appreciation of evidence on record - The CIT (A) having undertaken detailed exercise of reconciling the accounts and examined the source of different deposits in cash, limited the addition to ₹ 10,45,000 – thus, there was no question of law arises - Decided against Revenue. Deletion made u/s 69 of the Act – CIT(A) was of the view that the source of cash is duly explained by the appellant with the help of cash book and sources of cash deposited in the cash book and in the bank account – thus, the source of investment in the property is treated as explained - The CIT (A) has given cogent reasons and found no grounds for sustaining the addition made by the Assessing Officer - the source of investment in the property stood explained – the order of the CIT(A) confirmed by the Tribunal – thus, no question of law arises – Decided against Revenue. Issues Involved:- Violation of Rule 46A of the Income Tax Rules, 1962- Deletion of Rs. 59.73 lakhs by the CIT (A) confirmed by the Tribunal- Deletion of Rs. 2.39 Crores made by the Assessing Officer under Section 69 of the Income Tax Act, 1961Issue-wise Detailed Analysis:1. Violation of Rule 46A of the Income Tax Rules, 1962:The Revenue contended that the Income Tax Appellate Tribunal (ITAT) erred in holding that there was no violation of Rule 46A without examining the facts and circumstances of the case. Specifically, the CIT (A) did not pass a specific order disposing of the petition for admission of additional evidence filed by the assessee and the objection of the Assessing Officer. The CIT (A) allowed additional evidence because the notice of hearing was received by the assessee on the date of the hearing itself, preventing the production of necessary evidence. Subsequently, when the assessee attended the office of the Assessing Officer with the necessary evidence, the assessment order had already been passed. The CIT (A) also called for a remand report from the Assessing Officer, safeguarding the Revenue's interest. The court found no error in the CIT (A)'s actions, concluding that the admission of additional evidence did not breach Rule 46A.2. Deletion of Rs. 59.73 lakhs by the CIT (A) confirmed by the Tribunal:The CIT (A) made a detailed examination of the cash deposits in the Kalupur Commercial Bank Limited and HDFC Bank Limited. The appellant had claimed that the cash deposits were accounted for in their personal books of account. The CIT (A) reconciled the cash deposits with the entries in the appellant's cash book, noting that the cash deposits in the bank could be reconciled by the entries shown in the personal cash book. The CIT (A) identified a factual error by the Assessing Officer, who had mistaken the cash deposits in HDFC Bank as deposits in Kalupur Commercial Cooperative Bank Limited. The CIT (A) accepted the appellant's explanations for the cash deposits, except for Rs. 10,45,000/-, which were found to be unexplained. The Tribunal confirmed this order, and the court noted that the issue was based on the appreciation of evidence on record, finding no question of law arising from the CIT (A)'s detailed exercise.3. Deletion of Rs. 2.39 Crores made by the Assessing Officer under Section 69 of the Income Tax Act, 1961:The CIT (A) examined the source of investment for Rs. 94,73,000/- and Rs. 1,85,00,000/- for the purchase of properties. The CIT (A) found that the source of investment for the property purchased on 29/01/2009 was explained through funds received from the sale of agricultural land and a bank loan. Similarly, the investment for the property purchased on 31/03/2009 was explained through a loan from Gruh Finance and other sources discussed in the preceding ground of appeal. The CIT (A) treated the sources of investment as explained and allowed the appeal. The Tribunal confirmed this order, and the court observed that the entire issue was based on facts and had been examined by both the CIT (A) and the Tribunal, resulting in a concurrent finding of fact. The court found no question of law arising and dismissed the tax appeal.