COMMISSIONER OF INCOME-TAX, PATIALA V. M/S CHITTOSHO MOTORS, PATIALA

ITA/741/2010

AI Insights

The case involves an appeal by the Commissioner of Income-Tax, Patiala, against M/s Chittosho Motors, Patiala, concerning the deletion of an addition of Rs.14,00,000 on account of unexplained deposits in a partner's account. The addition was initially made by the assessing officer due to under-valuation of closing stock and unexplained deposits. However, on appeal, the CIT(A) admitted additional evidence from the assessee and partly set aside the addition, a decision upheld by the Tribunal. The High Court's decision focused on the admissibility of the additional evidence and the procedural fairness in its consideration.

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 681589 (HC-CHANDIGARH)
• Appeal Type: Others
• Pronouncement Date: 05-01-2011
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961, Income Tax Rules, 1962
• Result in Favour of: Others
• Court: HIGH COURT
• Assessee Lawyers: TEJINDER JOSHI
• Keywords: Additional evidence; Natural Justice; Perverse order; Unexplained deposits
• Section: 260A; 46A

Judgement Text

"Income-tax Appeal No.741 of 2010 -1- **** IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Income-tax Appeal No.741 of 2010 Date of decision: 5.1.2011 The Commissioner of Income-Tax, Patiala ...Appellant Versus M/s Chittosho Motors, Patiala ...Respondent CORAM: HON'BLE MR.JUSTICE ADARSH KUMAR GOEL HON'BLE MR.JUSTICE AJAY KUMAR MITTAL Present: Mr. Tejinder K. Joshi, Advocate for the appellant. **** ADARSH KUMAR GOEL, J ( Oral) . 1. This order shall dispose of ITA Nos. 741, 742 and 743 of 2010 as it is stated that all the appeals involve common questions. 2. Income-Tax Appeal No.741 of 2010 has been preferred by the revenue under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) against order dated 18.3.2010 passed by the Income Tax Appellate Tribunal, Chandigarh Bench 'B', Chandigarh in C.O.No.2/Chd/2010 raising following substantial question of law:- “1) That in facts and circumstances of the case, whether the ITAT is legally justified in confirming the order of the CIT(A) deleting the addition of Rs.14,00,000/- on a/c of unexplained deposits in the Income-tax Appeal No.741 of 2010 -2- **** partner's account by admitting additional evidences in violation of Ruled 46A. 2) That in the facts and circumstances of the case, whether the ITAT is legally justified in confirming the order of the CIT(A) deleting the addition of Rs.14,00,000/- out of the total addition of Rs.18,00,000/- made by the AO on a/c of unexplained deposits in the partner's account, without passing a speaking order on the Revenue's specific ground that the said admission of additional evidence was in violation of Rule 46A of the Income Tax Rules, 1962 and thus erroneous being, also, against the principles of natural justice. 3) That the order passed by the ITAT is perverse as it failed to test the evidences, put forth by the assessee in the shape of the sale deed, certificate from bank and copies of the bank account at the appellate stage, by calling for a report. Also, the veracity/truth of the said evidences had never been tested by any competent authority through verification.” 3. During the course of assessment, the assessing officer made addition on account of under-valuation of closing stock of motor-cycles and spare parts and unexplained deposits in the partner's account. On appeal, the said addition was partly set aside Income-tax Appeal No.741 of 2010 -3- **** by the CIT(A) on the basis of additional evidence furnished by the assessee. The said finding has been upheld by the Tribunal. 4. We have heard learned counsel for the appellant. 5. Learned counsel for the appellant fairly stated that if additional evidence was validly allowed to be led, the setting aside of addition was justified. The only objection is that additional evidence should not have been allowed. 6. Reasons for allowing additional evidence given by the CIT(A) are as under:- “2.5 I have gone through the assessment record, written submissions filed by the counsel for the assessee evidence tendered alongwith the same as also the comments of the A.O. and replication of the counsel for the assessee. The first issue in this appeal would arise regarding the admission of the additional evidence. It has been explained by the assessee in his written submission that since the partner was lying ill and the time for the disposal was short the evidence could not be filed in time. This plea of the assessee is apparent from the order itself in as much as para 3 thereof at page 3 it is evident that A.O. asked for the source of capital investment in the account of the partner actually on 18.11.2008. Although he makes a reference letter dated 7.1.2008 but it is too general in nature as the initial information was gathered by him at that time. It was Income-tax Appeal No.741 of 2010 -4- **** explained by the assessee that the partner was ill and the pay-in-slip containing the information as to the source of deposit was since lost the information could be supplied only after 17.12.2008. 2.6 In this scenario, the evidence in the shape of sale deed of land, certificate from bank regarding deposit of Rs.10 lacs as also the copies of the bank account have been filed before me in the appellate proceedings. The A.O. was given due opportunity to rebut the same but he has just replied that fresh evidence should not be admitted at the appellate stage. In fact there is specific provision in Rule 46A providing instances under which fresh evidence can be entertained. In my view, under the facts and circumstances of the case the sickness of the partner is valid reason for not producing the evidence during the assessment. The fact that the matter was taken up in the fag end of the limitation period is also relevant. Considering the totality of the circumstances, I admit the additional evidence filed by the appellant. Now considering the material on record the source of Rs.14 lacs stands duly explained by the sale deed of the agricultural land by the partner of the assessee firm who has received the sale price and contributed the additional capital by account payee cheques only which are duly reflected in the copy of bank account by the appellant. Income-tax Appeal No.741 of 2010 -5- **** The only objection on merits by the A.O. is that the date of introduction of fresh capital of Rs.10 lacs on 20.9.2005 is before the execution of the sale deed.” 7. In view of the above explanation, acceptance of which has not been shown to be perverse, the view taken by the CIT(A) as upheld by the Tribunal cannot be held to be erroneous. The appeals have to be dismissed. 8. We are of the view that there was no justification for filing these appeals when even according to the department, the addition was rightly set aside. The department is not expected to take technical plea of additional evidence being considered when such evidence may advance the interest of justice and show that there was no justification for addition. 9. A copy of this order be sent to the Chief Commissioner of Income-Tax, Chandigarh to take necessary steps to avoid filing of such appeals in future. (Adarsh Kumar Goel) Judge January 05,2011 (Ajay Kumar Mittal) Pka Judge "