ITAT directs AO to consider Additional Evidence not produced earlier by Legal Heir due to unawareness

Late Shri Nemichand Gunavanthraj Vs ITO (ITAT Chennai)

We noted that the assessee has moved this petition under Rule 29 of the ITAT Rules and filed additional evidences i.e., confirmation letters from relatives, copies of Income-tax returns, copies of financial statements, copies of wealth tax returns of the relatives to prove the creditworthiness of the gifts received from relatives and members of HUF. The evidences could not be gathered as claimed by assessee that assessee who was managing the affairs died before the completion of assessment and these were collected by the legal heirs after lot of persuasion and by that time, order of CIT(A) was also passed. The ld.AR before us only made mercy petition that these evidences be admitted as assessee passed away before assessment proceedings and these evidences could not be gathered as the assessee’s legal heirs were not aware about the details. We are taking a sympathetic view in this case and admit these additional evidences for the reason that the assessee died and the legal heirs could not collect the evidences. But in any case, now ld.AR for the assessee stated that he is ready to pay a cost of Rs.50,000/- to be paid to Tamil Nadu State Legal Services Authority at Hon’ble High Court of Madras. In view of the above submissions and the fact that the assessee died before the assessment proceedings and the evidences could not be collected, we admit these evidences and remand the matter back to the file of the AO for fresh adjudication.

FULL TEXT OF THE ORDER OF ITAT CHENNAI

This appeal by the assessee is arising out of the order of Commissioner of Income Tax (Appeals) – 7, Chennai in ITA No. 132/CIT(A)-7/2018-19, order dated 25.09.2019. The assessment was framed by the Income Tax Officer, Ward-2, Tiruvallur for the assessment year 2016-17 u/s.143(3) of the Income Tax Act, 1961 (hereinafter the ‘Act’) vide order dated 24.12.2018.

2. The only issue in this appeal of assessee is against the order of CIT(A) restricting the addition made u/s.69A of the Act in regard to cash deposit of Rs.77,98,198/-. For this, the assessee has raised various grounds which we need not to reproduce.

3. Brief facts are that the AO during the course of assessment proceedings noticed that the assessee Late Shri Nemichand Gunavanthraj made cash deposit of Rs.1,29,49,075/- in the bank account. The AO asked the assessee to explain the source of deposit. The assessee in his reply dated 19.12.2018 explained the source of cash deposit tobe gifts and jewel loan given from HUF account but no documentary evidence was produced. Therefore, the AO added the cash deposit in the bank account amounting to Rs.1,29,49,075/-u/s.69A of the Act as unexplained money. Aggrieved, assessee preferred appeal before CIT(A). Before CIT(A) also assessee did not produce any evidence except a break-up of cash deposit of Rs.95,22,880/- in the Union Bank of India and Rs.34,26,195/- in Axis Bank on various dates. The assessee explained before the CIT(A) that he was engaged in the business of pawn broking, lends money and pledges jewels. The assessee claimed before CIT(A) that the borrowers deposited cash in assessee’s bank account and repay the borrowings. Therefore, the CIT(A) accepted the explanation to the extent of Rs.51,50,877/- as part of business transaction of the assessee. For the balance amount of Rs.77,98,198/-, the assessee could not furnish any explanation except that the amount was received from relatives and members of HUF, the CIT(A) confirmed the addition vide para 4.3 as under:-

4.3 The appellant was further questioned about of Rs.77,98,198/-(Rs.1,29,49,075 – 51,50,877). The appellant submitted that the cash of Rs.77,98,200/- was received from relatives and members of HUF. The appellant did not furnish any satisfactory explanation or supporting evidences to prove genuineness of this claim regarding cash deposits made by relative or HUF. Hence, this amount remains unexplained within the meaning of section 69A of the IT Act.

The AO is therefore directed to restrict the addition to the tune of Rs.77,98,198/- (1,29,49,075 – 51,50,877) only and to grant relief of the balance amount.

Aggrieved, now assessee is in appeal before the Tribunal.

4. Before us, the ld.AR for the assessee filed paper-book and petition under Rule 29 of the Income Tax Appellate Tribunal Rules, 1963 wherein the assessee has tried to explain the sources, the relevant explanation of Rs.77.50 lakhs is tabulated as under:-

The ld.AR stated that the assessee has filed additional evidences as under:-

• Copy of Confirmation letters from relatives and members of HUF of the petitioner,
• Copy of Income Tax Return and Income Tax Acknowledgment of the relatives filed for AY 2016-17
• Copy of Financial statements for AY 2015-16 and AY 2016-17 of the relatives.
• Copy of Wealth Tax returns of the relatives for AY 2015-16.

The assessee has also filed confirmation of gifts from all relatives, their bank account statements, their Income-tax returns and computation of income, which were neither filed before AO nor before CIT(A). The ld.AR stated that these are vital evidences and for this, he pleaded mercy and stated that a substantial cause will be destroyed in case these evidences are not admitted and issue is not adjudicated on merits after admitting the same.

5. On the other hand, the ld. Senior DR opposed admissibility of additional evidence and for this reason stated that these evidences were available to the assessee even during the course of original assessment proceedings or at the time of first appellate proceedings. The ld. Senior DR relied on the Tribunal decision in the case of Shri K.A. Palanisamy in ITA No.319/Mds/2016, order dated 28.02.2017.

6. We have heard rival contentions and gone through facts and circumstances of the case. We noted that the assessee has moved this petition under Rule 29 of the ITAT Rules and filed additional evidences i.e., confirmation letters from relatives, copies of Income-tax returns, copies of financial statements, copies of wealth tax returns of the relatives to prove the creditworthiness of the gifts received from relatives and members of HUF. The evidences could not be gathered as claimed by assessee that assessee who was managing the affairs died before the completion of assessment and these were collected by the legal heirs after lot of persuasion and by that time, order of CIT(A) was also passed. The ld.AR before us only made mercy petition that these evidences be admitted as assessee passed away before assessment proceedings and these evidences could not be gathered as the assessee’s legal heirs were not aware about the details. We are taking a sympathetic view in this case and admit these additional evidences for the reason that the assessee died and the legal heirs could not collect the evidences. But in any case, now ld.AR for the assessee stated that he is ready to pay a cost of Rs.50,000/- to be paid to Tamil Nadu State Legal Services Authority at Hon’ble High Court of Madras. In view of the above submissions and the fact that the assessee died before the assessment proceedings and the evidences could not be collected, we admit these evidences and remand the matter back to the file of the AO for fresh adjudication.

7. As committed by the ld.AR for the assessee that he will pay a cost of Rs.50,000/- to the Tamil Nadu State Legal Services Authority at Hon’ble High Court of Madras, the assessee will pay this cost and will show the challan to the AO before the assessment. Accordingly, the orders of lower authorities are set aside and matter remanded back to the file of the AO. The appeal of the assessee is allowed for statistical purposes.

8. In the result, the appeal filed by the assessee is allowed for statistical purposes.

Order pronounced in the court on 11^th May, 2022 at Chennai.