ITAT was not justified in declining admission of additional evidence without recording finding those documents were not necessary for deciding the case.
In a recent judgment, Hon’ble Chhattisgarh High Court held that ITAT was not justified in declining the application for admission of additional evidence as it did not record a finding that those documents were not necessary for just and proper disposal of case.
ABCAUS Case Law Citation:
4476 (2025) (03) abcaus.in HC
In the instant case, the Petitioner/assessee had challenged the order passed by the ITAT in inter alia declining the application for admission of additional evidence filed by the appellant under Rule 29 of the Income Tax (Appellate Tribunal) Rules, 1963.
The appellant/assessee firm was a builder / contractor. He e-filed its return of income for the relevant Assessment Year. The case was selected for scrutiny assessment through CASS for verifying the high amount of cash-in-hand shown in its balance sheet filed with the return of income filed under Section 139(4) of the Income Tax Act, 1961 (the Act).
The assessee firm in reply to the notice under Section 142(1) of the Act filed certain documents namely, Bank Statement, Computation of Total Income, one page of the Cash Book as on the last date of the financial year, Balance Sheet, Profit and Loss Account and Income Tax Return.
Ultimately, the Assessing Officer passed the order of assessment making additions to the income of the assessee. Feeling aggrieved against the order of assessment, the appellant preferred appeal before the Commissioner of Income Tax (Appeals) furnishing the said records and other documents in shape of additional documents. However, the CIT (Appeals) dismissed the appeal.
Aggrieved, the assessee challenged the order passed by the CIT(A) before the Income Tax Appellate Tribunal (ITAT) and also filed an application under Rule 29 of the Income-Tax (Appellate Tribunal) Rules, 1963 (ITAT Rules) and filed documents for admitting additional evidence on record.
The documents filed included day to day cash book for the whole financial year, copy of cash flow statement / abstract of cash book for the financial year and cash book receipt side (i.e. debit entries) of the financial year.
However, the ITAT dismissed the appeal and also rejected the application filed under Rule 29 of the ITAT Rules.
Before the Hon’ble High Court, the assessee submitted that ITAT was unjustified in rejecting the application for admitting additional evidence on record and it ought to have considered the application for taking additional documents in accordance with Rule 29 of the ITAT Rules as it is pari materia to Order 41 Rule 27(b) of the CPC and those documents were also sought to be preferred before the CIT (Appeals) also, but both the authorities did not consider the assessee’s application for admitting additional documents on record in its proper perspective, as the said documents were necessary for just and proper disposal of appeal. In support of his contention, the assessee relied upon the decision of the Supreme Court.
The Revenue contended that assessee firm had sufficient opportunity to prefer those documents before the Assessing Officer which the appellant deliberately did not submit for the reasons known to him and at the belated stage, the additional documents were sought to be produced which were rightly been rejected by the ITAT and which is in accordance with law. The Revenue relied upon the decision of the Bombay High Court
The Hon’ble High Court observed that Rule 29 of the ITAT Rules provide that the parties to the appeal are not entitled to produce additional evidence either oral or documentary before the Tribunal, but if the Tribunal requires any document to be produced or any witness to be examined or any affidavit to be filed to enable it to pass orders or for any other substantial cause, or, if the income-tax authorities have decided the case without giving sufficient opportunity to the assessee to adduce evidence either on points specified by them or not specified by them, the Tribunal, for reasons to be recorded, may allow such document to be produced or witness to be examined or affidavit to be filed or may alow such evidence to be adduced.
The Hon’ble High Court further noted that provision under Rule 29 of the ITAT Rules is akin to Order 41 Rule 27(b) of the CPC which states that additional evidence can be admitted where the appellate court requires any document to be produced or or any witness to be examined to enable the court to pronounce judgment or for any substantial cause.
The Hon’ble High Court observed that the Hon’ble Supreme Court while dealing with the provisions contained in Order 41 Rule 27 of the CPC had held that the appellate court should not travel outside the record of the lower court and cannot take any evidence in appeal. However, as an exception, Order 41 Rule 27 CPC enables the appellate court to take additional evidence in exceptional circumstances. The appellate court may permit additional evidence only and only if the conditions laid down in this Rule are found to exist. The parties are not entitled, as of right, to the admission of such evidence. Thus, the provision does not apply, when on the basis of the evidence on record, the appellate court can pronounce a satisfactory judgment. The matter is entirely within the discretion of the court and is to be used sparingly. Such a discretion is only a judicial discretion circumscribed by the limitation specified in the Rule itself
The Hon’ble High Court further noted that it was quite vivid that the application filed under Rule 29 of the ITAT Rules came to be rejected by the ITAT on the ground that both the cash book and cash flow statement which the assessee filed before the CIT (Appeals) were in the nature of additional evidence and the assessee firm had adopted an evasive approach in assessment proceedings and not filed either of the aforesaid documents, which formed the very basis for selecting its case for limited scrutiny assessment under Section 143(2) of the Act.
The Hon’ble High Court observed that while rejecting the application for admission of additional evidence, the ITAT did not record a finding that the documents applied for as “additional evidence” were not necessary for deciding the case and pronouncing judgment or order for any substantial cause even after having recorded finding that those documents were vital and important as they form basis for limited scrutiny assessment under Section 143(2) of the Act. So far as cash book was concerned, only one page had already been filed before the Assessing Officer and it was not the finding of the ITAT that these documents were not necessary for just and proper disposal of appeal preferred by the appellant and for pronouncing the judgment.
The Hon’ble High Court opined that the ITAT erred in law without recording a specific finding which is sine qua non for considering the admission of documents and proceeded to reject the application. The ITAT had legally erred in law in rejecting the application which runs contrary to the well settled decision in this behalf.
Consequently, the Hon’ble High Court set aside the impugned order rejecting the application filed under Rule 29 of the ITAT Rules. The application under Rule 29 of the ITAT Rules for admission of additional evidence was allowed, as it was necessary for just and proper disposal of appeal. Documents are
Accordingly, the matter was restored to the file of the ITAT for hearing and disposal afresh in accordance with law.
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