2023 (1) TMI 774 - AT - Income Tax

Tribunal reinstates additions by AO, stresses adherence to Rule 46A for income assessment

The Tribunal allowed the Department's appeal, setting aside the CIT(A) order and remanding the matter to the AO for fresh adjudication after proper ... CIT-A admitting additional evidence during the appellate proceedings - cash deposit in the bank account - Addition u/s 69A - unexplained sale proceeds and applying a GP rate of 24% - CIT(A) has restricted the addition made by the AO towards the credit in the current account to the GP rate at 24% which was declared by the assessee on the disclosed turnover - HELD THAT:- The assessee first time produced these evidences in support of the source of deposits in the current account and saving bank account. Though, the CIT(A) called for a remand report from the AO however, the AO in his report dated 13.8.2019 has objected to the admission of the additional evidence / documents, facts and grounds and consequently pleaded that the same should not be entertained. CIT(A) without asking the AO to submit a remand report based on the verification and examination of the said evidence has passed the impugned order. Therefore, we are of the considered opinion that the evidence produced by the assessee first time before the CIT(A) is required to be verified and examined at the level of AO. Hence, the impugned order of the CIT(A) is set aside and the matter is remanded to the record of the AO for adjudication of the same afresh after proper verification and examination of the evidence and details produced by the assessee before the CIT(A). Appeal of the Department is allowed for statistical purpose. Issues:1. Addition of Rs. 2,23,91,526/- by admitting additional evidence during appellate proceedings.2. Combining two additions as sale proceeds and applying a GP rate of 24%.3. Deleting addition based on turnover accepted in penalty order u/s271B.4. Accepting cash deposits in saving bank account as sale proceeds.5. Violation of Rule 46A and remanding the matter for proper examination.Analysis:Issue 1: Addition of Rs. 2,23,91,526/- by admitting additional evidence during appellate proceedingsThe Revenue challenged the deletion of the addition by the CIT(A) based on the admission of additional evidence during the appellate proceedings. The AO had added the amount as suppressed sales due to lack of explanation from the assessee. The CIT(A) restricted the addition to the GP rate at 24% declared by the assessee on disclosed turnover. The Revenue argued that the additional evidence was not verified by the AO, violating Rule 46A. The Tribunal set aside the CIT(A) order, remanding the matter to the AO for proper examination of the evidence.Issue 2: Combining two additions as sale proceeds and applying a GP rate of 24%The CIT(A) treated the cash deposit in the savings bank account as turnover of the assessee and applied a GP rate of 24%. The Revenue contended that the CIT(A) considered additional evidence without proper verification by the AO, violating Rule 46A. The Tribunal set aside the CIT(A) order for fresh adjudication by the AO after proper verification.Issue 3: Deleting addition based on turnover accepted in penalty order u/s271BThe CIT(A) deleted the addition based on turnover accepted in a penalty order u/s271B. The Revenue argued that the AO had treated the deposits as suppressed sales due to lack of evidence. The Tribunal remanded the matter to the AO for proper examination of the evidence produced by the assessee.Issue 4: Accepting cash deposits in saving bank account as sale proceedsThe AO added the cash deposits in the saving bank account as income from unexplained sources under section 69A. The CIT(A) restricted the addition to the GP rate at 24%. The Revenue contended that the CIT(A) considered additional evidence without proper verification by the AO. The Tribunal set aside the CIT(A) order for fresh adjudication by the AO after proper verification.Issue 5: Violation of Rule 46A and remanding the matter for proper examinationThe Revenue argued that the CIT(A) violated Rule 46A by considering additional evidence without proper verification by the AO. The Tribunal agreed with the Revenue, setting aside the CIT(A) order and remanding the matter to the AO for proper examination of the evidence produced by the assessee.In conclusion, the Tribunal allowed the appeal of the Department for statistical purposes, setting aside the CIT(A) order and remanding the matter to the AO for fresh adjudication after proper verification and examination of the evidence.