Failure to Furnish Supporting Evidence against addition under Income Tax Act: Kerala HC upholds addition to Capital Account of Partner [Read Order]

The Kerala High Court upheld the addition to the capital account of the partner's failure to furnish supporting evidence against the addition under the Income Tax Act, 1961.

M/S Sunny Silks, the petitioner had approached the Court impugning the assessment order, against which the petitioner had preferred an appeal before the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC).  The petitioner had also moved an application for staying the demand issued in pursuance of the assessment order. 

The addition under section 145A of the Income Tax Act, 1961 is seen to be done based on judicial pronouncements and therefore the merit in the addition can be considered only at the time of disposal of appeal. Since the addition is disputed in appeal, you are hereby allowed to pay 20% of the demand upon which the balance will be stayed.

The next point of addition relates to addition in the Capital account of the partner.  On verification of the records, it is seen that this specific issue was raised during the assessment and there was a failure on your part to furnish supporting pieces of evidence which led to the addition being made. The merit in the addition can be considered only at the time of disposal of appeal.  Because the addition is disputed in appeal, you are hereby allowed to pay 20% of the demand upon which the balance will be stayed.

In the event you require an instalment facility for payment of 20% of the demand, you may approach this office on 15-112023. It may also be noted that in the event 20% of the disputed demand is not paid by 15-11-2023 or a request for an instalment facility is not made by 15-11-2023, it will be deemed that you are an assessee in default.

 The impugned order passed by the 3rd respondent does not suffer from any jurisdictional error, and also, it does not violate the principles of natural justice.  The view taken by the 3rd respondent in the impugned order that the question of addition under Section 145A of the Income Tax Act 1961 is to be considered at the time of disposal of the appeal is perfectly as per the settled law.

The assessee/petitioner regarding the addition to the capital account of the partner, the 3rd respondent has examined the records and held that this specific issue was raised during the assessment, and the assessee failed to furnish supporting evidence in respect of the said issue.  It is further said that the merit in the addition can only be considered at the time of disposal of the appeal.  

The petitioner has been directed to pay 20% of the demand upon which the balance would be stayed.  The petitioner has also been granted an instalment facility for payment of 20% of the demand, for which the petitioner could have approached the 3rd respondent on or before 15.11.2023.  It is also said that if 20% of the disputed demand could not be paid by 15.11.2023 or the request for an instalment facility is not made by 15.11.2023, the assessment/petitioner would be considered an assessee in default.

A single bench of Justice Dinesh Kumar Singh observed that the Appellate Authority has passed the order after considering the merit and after giving an opportunity of hearing to the petitioner and the Court cannot interfere with the said order as the Court is not sitting in appeal against the order passed by the 3rd respondent.  The Court dismissed the petition.

To Read the full text of the Order CLICK HERE

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