SHRIVASTAVA ASSOCIATES, V. INCOME TAX OFFICER

TAXC/230/2024

AI Insights

The case involves Shrivastava Associates, a builder/contractor firm, which appealed against the order of the ITAT that upheld the addition of Rs. 29,64,532 to their income and rejected their application for admission of additional evidence under Rule 29 of the ITAT Rules. The additional evidence included crucial financial documents that the firm argued were necessary for a just and proper disposal of their appeal. The High Court found that the ITAT had erred in law by not considering the additional documents which were vital for the assessment and had been improperly rejected without a specific finding on their necessity for the case.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 746802 (HC-CHHATTISGARH)
• Appeal Type: Others
• Pronouncement Date: 03-03-2025
• Assessment Year: misc
• Other Referred Cases: Sanjay Kumar Singh v. State of Jharkhand, Velji Deoraj & Co. v. Commissioner of Income-tax, Parsotim Thakur v. Lal Mohor Thakur, Jagdish Prasad Patel (dead) Through Legal Representatives and another v. Shivnath and others, Union of India v. Ibrahim Uddin
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: AJAY KUMRANI
• Assessee Lawyers: APURV GOYAL; NIKHILESH BEGANI
• Keywords: Additional evidence; Cash in hand; Income Tax; ITAT; Rule 29; Scrutiny assessment
• Section: 142(1); 143(2); 250; 139(4); 260A; 253; 29

Judgement Text

"Page 1 of 12 (Tax Case No.230/2024) 2025:CGHC:10186-DB AFR HIGH COURT OF CHHATTISGARH AT BILASPUR TAXC No. 230 of 2024 (Arising out of order dated 5-12-2023 passed by the Income Tax Appellate Tribunal, Raipur Bench “SMC”, Raipur in ITA No.283/RPR/2023) Order reserved on: 13-2-2025 Order delivered on: 3-3- 2025 Shrivastava Associates, 8, Shopping Complex, Ring Road No. 1, Priyadarshani Nagar, Raipur, Chhattisgarh - 492001, PAN: ABEFS6510J ... Appellant versus Income Tax Officer, Ward-3(1), Raipur, Chhattisgarh ... Respondent For Appellant : Mr. Apurv Goyal and Mr. Nikhilesh Begani, Advocates. For Respondent : Mr. Ajay Kumrani, Advocate on behalf of Mr. Amit Chaudhari, Standing Counsel for the Income Tax Department. Division Bench: - Hon'ble Shri Sanjay K. Agrawal and Hon'ble Shri Sanjay Kumar Jaiswal, JJ. C.A.V. Order Sanjay K. Agrawal, J. 1. The present appeal preferred under Section 260A of the Income Tax Act, 1961 (for short, ‘the IT Act’) has been admitted for final hearing by formulating the following two substantial questions of law:- SISTA SOMAYAJULU Digitally signed by SISTA SOMAYAJULU Date: 2025.03.04 10:29:00 +0530 Page 2 of 12 (Tax Case No.230/2024) “A. Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was justified in upholding the addition of Rs. 29,64,532/- by recording a finding which is perverse to the record? B. Whether the ITAT was justified in declining the application for admission of additional evidence filed by the appellant under Rule 29 of the Income Tax (Appellate Tribunal) Rules, 1963, by recording a finding which is perverse to the record?” 2. In order to answer the aforesaid questions of law, following facts are required to be noticed: - 3. The appellant / assessee firm, a builder / contractor, had e-filed its return of income for the assessment year 2016-17 on 21-2-2017 declaring an income of 97,270/-. The case of the appellant / ₹ assessee firm was selected for scrutiny assessment through CASS (Computer Assisted Scrutiny Selection) 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 IT Act dated 7-11-2016 and the assessee firm in reply to the notice under Section 142(1) of the IT Act dated 13-11-2018, filed certain documents namely, Bank Statement, Computation of Total Income, Cash Book as on 31-3-2016 (only one page), Balance Sheet as on 31-3-2016, Profit and Loss Account as on 31-3-2016 and Income Tax Return. Ultimately, the Assessing Officer on 13-12-2018, passed the order of assessment assessing the income of the assessee firm as 31,90,190/-. Feeling ₹ aggrieved against the order of assessment, the appellant herein preferred appeal before the Commissioner of Income Tax (Appeals) Page 3 of 12 (Tax Case No.230/2024) and again before the CIT (Appeals), the appellant preferred day to day cash book for the financial year 2015-16 and other documents in shape of additional documents. However, the CIT (Appeals) by order dated 22-6-2023, dismissed the appeal preferred under Section 250 of the IT Act. Assailing the order passed by the CIT (Appeals), the appellant herein preferred appeal under Section 253 of the IT Act before the Income Tax Appellate Tribunal (ITAT) and also filed an application under Rule 29 of the Income-Tax (Appellate Tribunal) Rules, 1963 (for short, ‘the ITAT Rules’) and filed documents for admitting additional evidence on record, on 6-11-2023. The documents filed include day to day cash book for the financial year 2015-16, copy of cash flow statement / abstract of cash book for the financial year 2015-16 and cash book receipt side (i.e. debit entries) of financial year 2015-16. The learned ITAT dismissed the appeal on 5-12-2023 and also rejected the application filed under Rule 29 of the ITAT Rules finding no merit against which this appeal has been preferred by the assessee firm / appellant herein. 4. Mr. Apurv Goyal, learned counsel appearing for the appellant herein / assessee firm, would submit that the learned ITAT is absolutely 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 Page 4 of 12 (Tax Case No.230/2024) 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. He would rely upon the decision of the Supreme Court in the matter of Sanjay Kumar Singh v. State of Jharkhand1 in support of his contention and in that view of the matter, the appeal deserves to be allowed. Secondly, learned counsel prays for remitting the appeal itself before the ITAT with a direction to allow the additional documents on record and to decide the appeal afresh in accordance with law. 5. Mr. Ajay Kumrani, learned counsel appearing on behalf of Mr. Amit Chaudhari, learned Standing Counsel for the Income Tax Department, would submit that the appellant herein / 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 has rightly been rejected by the ITAT and which is in accordance with law. Learned counsel would rely upon the decision of the Bombay High Court in the matter of Velji Deoraj & Co. v. Commissioner of Income-tax2 to buttress his submission. As 1 (2022) 7 SCC 247 2 [1968] 68 ITR 708 (Bombay) Page 5 of 12 (Tax Case No.230/2024) such, the appeal deserves to be dismissed as none of the substantial questions of law arise for consideration in this appeal. 6. We have heard learned counsel for the parties and considered their rival submissions made herein-above and also went through the record with utmost circumspection. 7. In order to answer the aforesaid two substantial questions of law, in our considered opinion, firstly, substantial question No.B, is required to be dealt with, as answer to substantial question No.A would depend upon the outcome of substantial question No.B. Answer to substantial question No.B 8. Substantial question of law No.B relates to rejection of application under Rule 29 of the ITAT Rules i.e. admission of additional documents which has been rejected by the ITAT by the impugned order. 9. The ITAT Rules have been framed in exercise of the powers conferred by sub-section (5) of Section 255 of the IT Act. Rule 29 of the ITAT Rules states as under: - “Production of additional evidence before the Tribunal. 29. The parties to the appeal shall not be 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 Page 6 of 12 (Tax Case No.230/2024) to be produced or witness to be examined or affidavit to be filed or may allow such evidence to be adduced.” 10. A careful perusal of the aforesaid rule would show 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. 11. This provision under Rule 29 of the ITAT Rules is akin to Order 41 Rule 27(b) of the CPC which states as under: - \"27. Production of additional evidence in Appellate Court.- (1) The parties to an appeal shall not be entitled to produce additional evidence, whether oral or documentary, in the Appellate Court. But if— (a) xxx xxx xxx (aa) xxx xxx xxx (b) the Appellate Court requires any document to be produced or any witness to be examined to enable it to pronounce judgment, or for any other substantial cause, the Appellate Court may allow such evidence or document to be produced or witness to be examined. Page 7 of 12 (Tax Case No.230/2024) (2) Whenever additional evidence is allowed to be produced by an Appellate Court, the Court shall record the reason for its admission.\" 12. Order 41 Rule 27(b) of the CPC 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. 13. The Privy Council in the matter of Parsotim Thakur v. Lal Mohar Thakur3 held that additional evidence can be admitted, but it must be the court that requires it, and observed as under: - “By the terms of Order XLI, r. 27(b) it is only where an appellate court “requires” it (that is, finds it needful) that additional evidence can be admitted. It may be required to enable the Court to pronounce judgment, or for any other substantial cause, but it must be the Court that requires it. The power cannot be exercised on an application by a party before the appeal is heard.” 14. Similarly, in Velji Deoraj & Co. (supra), the Bombay High Court relying upon the decision of the Privy Council in Parsotim Thakur (supra) has held that the admission of additional evidence is dependent solely on the requirement of the court and it is for the court to decide whether for pronouncing its judgment or for any other substantial cause it is necessary to have the additional evidence before it, and observed as under: - “Now, the power of the Tribunal to admit additional evidence in appeal is governed by rule 29 of the rules and orders relating to the Appellate Tribunal. That rule is similar in terms to Order 41, rule 27, of the Code of Civil Procedure. Now, it is well settled that the admissibility of additional evidence in appeal under the 3 AIR 1931 PC 143 Page 8 of 12 (Tax Case No.230/2024) provisions of Order 41, rule 27, of the Civil Procedure Code is made to depend not upon the relevancy or materiality to the issue before the court of the evidence sought to be admitted or upon the fact whether or not the applicant had sufficient opportunity of adducing the evidence at an earlier stage, but upon whether or not the appellate court requires the evidence to enable it to pronounce judgment or for any other substantial cause. The admission of additional evidence at the appellate stage is not referable to any right of the party to produce the evidence but is dependent solely on the requirement of the court and it is for the court to decide whether for pronouncing its judgment or for any other substantial cause it is necessary to have the additional evidence before it. The mere fact that the evidence sought to be produced is vital and important does not provide a substantial cause to allow its admission at the appellate stage especially when the evidence was available to the party at the initial stage and had not been produced by him. As has been observed by the Privy Council in Parsotim v. Lal Mohar [(1931) L.R. 58 I.A. 254 : A.I.R. 1931 P.C. 143.], the rule is not intended to allow a litigant who has been unsuccessful in the lower courts to patch up the weak parts of his case and fill up omissions in the court of appeal. Mr. Mehta referred to the observations of Ameer Ali J. in the Privy Council case, Indrajit Pratap Bahadur Sahi v. Amar Singh [(1923) L.R. 50 I.A. 183 : A.I.R. 1923 P.C. 128.] , viz., that the jurisdiction of an appellate court under Order 41, rule 27, of the Code of Civil Procedure, 1908, to admit additional evidence is not confined to cases in which the court itself discovers a lacuna or defect and requires evidence to fill up or remedy it. Under the words “or for any other substantial cause” an appellate court has a discretion to admit further evidence upon the application of a party.” 15. The Supreme Court in the matter of Jagdish Prasad Patel (dead) Through Legal Representatives and another v. Shivnath and others4 while dealing with the provisions contained in Order 41 Rule 27 of the CPC held that the general principle is 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 4 (2019) 6 SCC 82 Page 9 of 12 (Tax Case No.230/2024) 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”. Relying upon the earlier decision in the matter of the Union of India v. Ibrahim Uddin5, their Lordships observed as under: - “30. In Union of India v. Ibrahim Uddin, (2012) 8 SCC 148 : (2012) 4 SCC (Civ) 362, this Court held as under : (SCC pp. 167-68 & 170, paras 36-37, 40 & 47) “36. The general principle is 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. (Vide K. Venkataramiah v. A. Seetharama Reddy6, Municipal Corpn., Greater Bombay v. Lala Pancham7, Soonda Ram 5 (2012) 8 SCC 148 6 AIR 1963 SC 1526 7 AIR 1965 SC 1008 Page 10 of 12 (Tax Case No.230/2024) v. Rameshwarlal [Soonda Ram v. Rameshwarlal8 and Syed Abdul Khader v. Rami Reddy [Syed Abdul Khader v. Rami Reddy9.) 37. The appellate court should not ordinarily allow new evidence to be adduced in order to enable a party to raise a new point in appeal. Similarly, where a party on whom the onus of proving a certain point lies fails to discharge the onus, he is not entitled to a fresh opportunity to produce evidence, as the court can, in such a case, pronounce judgment against him and does not require any additional evidence to enable it to pronounce judgment. (Vide Haji Mohammed Ishaq v. Mohd. Iqbal and Mohd. Ali & Co.10.) * * * 40. The inadvertence of the party or his inability to understand the legal issues involved or the wrong advice of a pleader or the negligence of a pleader or that the party did not realise the importance of a document does not constitute a “substantial cause” within the meaning of this Rule. The mere fact that certain evidence is important, is not in itself a sufficient ground for admitting that evidence in appeal. * * * 47. Where the additional evidence sought to be adduced removes the cloud of doubt over the case and the evidence has a direct and important bearing on the main issue in the suit and interest of justice clearly renders it imperative that it may be allowed to be permitted on record, such application may be allowed.” 16. Reverting to the facts of the case in light of the parameters laid down by their Lordships of the Supreme Court, it is 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 8 (1975) 3 SCC 698 9 (1979) 2 SCC 601 10 (1978) 2 SCC 493 Page 11 of 12 (Tax Case No.230/2024) 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 IT Act. The ITAT did not record a finding that the documents mentioned in paragraph 6 of the order as “additional evidence” are not necessary for deciding the case and pronouncing judgment or order for any substantial cause even after having recorded finding that those documents are vital and important as they form basis for limited scrutiny assessment under Section 143(2) of the Act. However, it is pertinent to note that so far as cash book is concerned, only one page had already been filed before the Assessing Officer and it is not the finding of the ITAT that these documents are not necessary for just and proper disposal of appeal preferred by the appellant and for pronouncing the judgment. The ITAT has 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 learned ITAT has legally erred in law in rejecting the application which runs contrary to the well settled decision in this behalf and consequently, the impugned order rejecting the application filed under Rule 29 of the ITAT Rules is set aside and subsequently, the appellate order dated 5-12-2023 is also set aside. The application under Rule 29 of the ITAT Rules for admission of additional evidence is allowed, as it is necessary for just and proper disposal of appeal. Documents are Page 12 of 12 (Tax Case No.230/2024) taken on record. In view of our answer to substantial question of law No.B, we deem it inexpedient to answer substantial question of law No.A, as it would be open for the ITAT to take fresh view in the matter since the application under Rule 29 of the ITAT Rules has been allowed. The matter is restored to the file of the ITAT for hearing and disposal afresh in accordance with law. 17. The appeal is allowed to the extent indicated herein-above leaving the parties to bear their own cost(s). Sd/- Sd/- (Sanjay K. Agrawal) (Sanjay Kumar Jaiswal) JUDGE JUDGE Soma "