CIT(A) cannot Reject Additional evidence u/r 46 A of Income Tax Rules against unexplained Investment Merely because of non-furnishing before AO: ITAT [Read Order]

The Chennai bench of the Income Tax Appellate Tribunal (ITAT) allowed the assessee to furnish the additional evidence under rule 46 A of the Income Tax Rules, 1962 before the Assessing Officer (AO), as the Commissioner of Income Tax (Appeal) (CIT(A)) had added the value of an immovable property Rs.30,00,000 as unexplained investment due to the assessee’s failure to submit necessary documentary evidence.

In this case, Varatharaj Venugopal, the assessee had filed an appeal against the Commissioner of Income Tax Appellate(CIT(A)) and National Faceless Appellate Centre (NFAC). The income of the assessee during the assessment year 2018-19 was Rs.4,34,460. Later, the assessing officer noted that the assessee had purchased an immovable property of Rs.33,00,000 during the same assessment year. The assessing officer issued a notice under section 148 of the Income Tax Act on 25th April 2022. In response to which the assessee filed a revised return of income on 17th may 2022 declaring Rs.4,34,460 as total income.

Subsequently, the Assessing Officer issued various statutory notices under section 142(2) and 142(1) of the Income Tax Act, along with the show cause notice under section 144 on 16th January 2024 and 13th February 2024. Due to the assessee's failure to respond to the statutory and show cause notices , the assessment was completed under section 147 read with 144B of the Income Tax Act and the investment of Rs.33,00,000 in the purchase of immovable property was treated as unexplained under section 69 of the act and added to the assessee’s total income.

Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here

The CIT(A) rejected the assessee’s appeal and refused to admit the affidavits submitted as additional evidence, as the assessee had not furnished them during the assessment proceedings. The assessee stated that the failure to respond to the notices issued by the AO was neither deliberate nor wanton but due to circumstances beyond his control.

It was contended that the CIT(A) had erred in dismissing the appeal by refusing to admit additional evidence under Rule 46A of the Income Tax Rules, despite having the jurisdiction to do so and without examining the veracity of the documents submitted to establish the source of funds for the property purchase. The assessee requested that he be given another opportunity to substantiate his case before the AO.

The CIT(A) did not oppose the submissions made by the assessee. The tribunal heard both parties and examined the material available on record. It was noted that the AO had completed the assessment under section 147 read with section 144B of the Income Tax Act, whereby the value of immovable property Rs.33,00,000 as an unexplained investment under section 69 of the Act due to the absence of documentary evidence. However, the assessee had submitted additional evidence before the CIT(A) under Rule 46A of the Income Tax Rules.

Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here

The tribunal observed that the CIT(A), having coterminous powers, had not acted justifiably in rejecting the additional evidence solely on the ground that it had not been furnished before the AO, without examining it on the merits or calling for a remand report.

The two-member bench comprising Viswanethra Ravi (Judicial Member) & Jagadish (Accountant Member) had set aside and remanded the matter to the AO to examine documentary evidence as may be filed by the assessee. The appeal was allowed for statistical purposes.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates