No rejection of additional evidence merely because it was not produced before AO

Assessee should not be disqualified from producing evidence merely for the fact it was not produced before the Assessing Officer (AO)

In a recent judgment, the ITAT Ranchi has held that the assessee should not be disqualified from producing evidence merely for the fact it was not produced before the Assessing Officer. It is incorrect to shut out the assessee in the process of administration of justice from leading evidence to prove its case

ABCAUS Case Law Citation:
4267 (2024) (10) abcaus.in ITAT

In the instant case, the assessee had challenged the order passed by the CIT(A)/ NFAC confirming the addition made u/s 69A of the Income Tax Act, 1961 (the Act) by the AO with regard to cash premium paid towards LIC policies purchased.

In this case the assessee had purchased LIC policies through cash in bank note denomination of ₹500/- and ₹1000/- during the demonetization period. The assessment was completed u/s 143(3) of the Act by making addition u/s 69A of the Act by treating Onetime investment in LIC policy as unexplained money. The explanation with regard to the sources of investment in LIC policy was not considered satisfactory by the Assessing Officer.

It was observed by AO that although the assessee claimed business income but could not submit any proof thereof. Similarly, the rental income from rent was not commensurate with the cash deposited in these policies.

The CIT(A) did not find any merit in the submissions of the assessee by holding that no documentary evidences or any proof of business were produced by the assessee either for the AO. He did not accept assessee’s claim of past savings. The cash flow chart was also rejected as the assessee did not maintain regular books of accounts. Further, the assessee failed to explain the reasons for keeping cash at home when she had saving bank accounts.

The CIT(A) also rejected the request of the assessee for furnishing certain additional evidences during the appellate proceedings under Rule 46A of the Income tax Rules, 1962 by stating that the assessee’s case was not covered by any of the exceptions provided in the above rule. Therefore, the additional evidences were not admitted.

The Tribunal noted that before the CIT(A), the assessee made written submissions on more than one occasion through ITBA portaI. In fact, the CIT(A) had further narrated and discussed these replies in the order also. The cases did not go unrepresented before the AO also. Rather, the assessment order itself was passed u/s 143(3) of the Act and the assessment proceedings were duly represented by the AR of the assessee. In such a situation, it was evident that the CIT(A) rejected the request of the assessee of additional evidence in terms of Rule 46A in a summary manner and that too on misplaced ground which was contrary to the record.

The Tribunal further observed that under section 250(4) of the Act, the CIT(A) is empowered and duty bound to make such further enquiry as he thinks fit or direct the AO to make further enquiry. The powers conferred on the appellate authority u/s 250(4) being quasi judicial powers, it is incumbent on him to exercise the same if the facts circumstances justify.

The Tribunal opined that the assessee should not be disqualified from producing evidence merely for the fact it was not produced before the AO. It is incorrect to shut out the assessee in the process of administration of justice from leading evidence to prove its case. The earlier inability to lead evidences should not be held against the assessee unless it is known to the court or suggested to the court or there was evidence to support that the evidence was fabricated.

In view of the above, the Tribunal held that CIT(A) was not justified in rejecting the additional evidence. Accordingly, the CIT(A) was directed to admit the same for substantive adjudication of the appeal.

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