2023 (2) TMI 1399 - AT - Income Tax

Revenue appeal dismissed for unexplained property funding sources after accepting remand report findings

ITAT Mumbai dismissed Revenue's appeal regarding unexplained source of funds for property purchase. The assessee had filed additional documents to ... Maintainability of the present appeal - Unexplained source of funds for purchase of property - assessee had filed additional document to substantiate the source of funds for purchase of property - CIT(A) deleted addition - Whether the CIT (A) violated Rule 46A(1) by accepting additional evidence? - As argued AO failed to consider the documents filed by the assessee in “tapal” on the date of passing assessment order - HELD THAT:- Hon’ble Madras High Court in the case of Smt. B Jayalakshmi [2018 (8) TMI 208 - MADRAS HIGH COURT] held that where the CIT (A) on the basis of remand report from AO allowed the claim of assessee, the Revenue was not entitled to maintain an appeal before the Tribunal against the said order of CIT(A). The Hon’ble High Court while holding so placed reliance on the decision in the case of Jivatlal Purtapshi [1967 (2) TMI 8 - BOMBAY HIGH COURT]. Thus, we hold that once the AO in remand report had accepted the claim of assessee and the CIT (A) based on the remand report deleted the addition, no appeal could have been filed by the Department in respect of the said issue. Consequently, the ground no. 3 raised by the Department in its appeal is misconceived and not maintainable. In view of our findings that ground no. 3 of appeal is not maintainable, the other two (2) grounds raised in appeal have the tax effect of Rs. 12,36,000/- which is less than the mandatory limit prescribed by the CBDT vide Circular No. 3/2018 for filing of appeal before the Tribunal. Hence, the appeal of Revenue is liable to be dismissed on account of low tax effect. ISSUES PRESENTED and CONSIDEREDThe appeal by the Revenue raised three primary issues:1. Whether the CIT (A) violated Rule 46A(1) by accepting additional evidence without reasonable cause, despite the assessee's failure to produce documents before the AO.2. Whether the CIT (A) erred in holding that the assessee established the source and genuineness of cash deposits amounting to Rs. 40,00,000.3. Whether the CIT (A) erred in holding that the investment in property amounting to Rs. 2,88,20,240 was from funds available in an NRE account without verifying if the funds were earned outside India and transferred to the NRE account.ISSUE-WISE DETAILED ANALYSIS1. Admission of Additional Evidence under Rule 46AThe Revenue contended that the CIT (A) improperly accepted additional evidence in violation of Rule 46A, as the assessee failed to provide necessary documents during the assessment proceedings despite being given sufficient opportunities. The relevant legal framework, Rule 46A, restricts the admission of additional evidence at the appellate stage unless the assessee demonstrates a reasonable cause for not presenting it earlier. The Court noted that the CIT (A) had forwarded the additional documents to the AO during remand proceedings, who examined and did not object to them. The Tribunal found no procedural error in the CIT (A)'s acceptance of additional evidence, as the AO had the opportunity to review these documents during remand.2. Source and Genuineness of Cash DepositsThe Revenue argued that the CIT (A) erred in accepting the assessee's explanation for cash deposits of Rs. 40,00,000. The AO had rejected the explanation during the assessment, citing insufficient evidence. However, the assessee claimed to have submitted relevant documents, including a cash book and bank statement, which the AO allegedly overlooked. The Tribunal observed that the CIT (A) relied on the remand report, where the AO did not dispute the genuineness of the cash deposits. The Tribunal found the CIT (A)'s decision reasonable, as it was based on the AO's findings during remand, which had not been contested.3. Investment in Property from NRE AccountThe Revenue challenged the CIT (A)'s decision to delete the addition related to property investment, arguing that the source of funds from the NRE account was not verified. The assessee countered that the AO had confirmed the source of funds during remand proceedings, as the investment was made from the NRE account, which contained foreign earnings. The Tribunal noted that the AO's remand report supported the assessee's claim, and the CIT (A) had no reason to conduct further inquiries. The Tribunal concluded that the CIT (A) correctly deleted the addition based on the AO's findings.SIGNIFICANT HOLDINGSThe Tribunal held that the appeal regarding the property investment was not maintainable, as the AO had accepted the assessee's claim in the remand report. The Tribunal cited precedents from the Bombay and Madras High Courts, emphasizing that an appeal cannot be maintained when the Department has accepted the claim at the appellate stage. Consequently, the Tribunal dismissed the Revenue's appeal on this ground.Regarding the other two issues, the Tribunal noted that the tax effect was below the mandatory limit prescribed by the CBDT for filing an appeal. Therefore, the appeal was dismissed on account of low tax effect.The Tribunal's decision reinforced the principle that appeals should not be pursued when the Department has accepted the assessee's claims during appellate proceedings, and emphasized adherence to CBDT guidelines on tax effect thresholds for appeals.