Non-Mention of Rule 46A Not Ground to Reject additional evidence: ITAT Remands Rs. 23.08 Cash Deposit Matter for fresh adjudication [Read Order]

The Chennai Bench of the Income Tax Appellate Tribunal (ITAT) has remanded a case involving an addition of Rs. 23.08 lakh for unexplained cash deposits and held that the Commissioner of Income Tax (appeals) [CIT(A)] erred in rejecting additional evidence submitted by the assessee solely due to the non-mention of Rule 46A of the Income Tax Rules.

Munireddy Prakashreddy (assessee), an individual, faced scrutiny for cash deposits amounting to Rs. 23,08,000 in his bank account for the Assessment Year (AY) 2012-13. The Assessing Officer (AO) observed the assessee's failure to comply with statutory notices.

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The AO treated the entire cash deposit as unexplained income and made an addition to the total income of the assessee. Aggrieved by the AO’s order, the assessee appealed to the Commissioner of Income Tax (Appeals) [CIT(A)].

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The assessee submitted additional evidence to explain the cash deposits. However, the CIT(A) rejected the evidence, citing the assessee’s failure to make an application under Rule 46A, which governs the admission of additional evidence. The CIT(A) upheld the AO’s addition.

Aggrieved by the CIT(A)’s order, the assessee filed an appeal before the ITAT. The counsel for the assessee submitted that CIT(A) violated the principles of natural justice by not considering the additional evidence to substantiate the source of the cash deposits.

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The counsel contended that the non-mention of Rule 46A was an inadvertent omission and should not lead to the rejection of the evidence. The Counsel requested the tribunal to set aside the CIT(A)’s order and remand the matter for reconsideration.

The two-member bench comprising George George K (Vice President) and Amitabh Shukla (Accountant Member) observed the addition by the AO was due to the assessee’s failure to respond to notices.

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The tribunal further observed that the CIT(A) had rejected the additional evidence solely because the assessee did not reference Rule 46A of the Income Tax Rules. The tribunal held that the non-mention of Rule 46A was not a sufficient reason to reject the assessee’s evidence.

In the interest of justice, the tribunal set aside the CIT(A)’s order and remanded the matter back to the CIT(A) for fresh adjudication. The tribunal directed the CIT(A) to admit the additional evidence, provide the assessee with a fair opportunity to be heard, and pass a speaking order.

The appeal of the assessee was allowed for statistical purposes.

To Read the full text of the Order CLICK HERE

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