Umar Faruk Suleman Asmal Vs ITO (ITAT, Surat Bench)
Rule 46A Is Not a Locked Door—Bank Statements Explaining ₹36.23-Lakh Property Investment Must Be Examined Before Addition Is Confirmed
Summary: The Surat Bench of the ITAT has held that the CIT(A) ought to have admitted and examined additional evidence comprising the assessee’s bank statement, the lender’s bank statement and the rent-income ledger before deciding an addition of ₹36,22,960 u/s 69. Since these documents went directly to the sources claimed for the investment, their wholesale rejection prevented a proper adjudication of the controversy. The matter was consequently restored to the CIT(A) for verification and a fresh decision on merits.
The assessee, Umar Faruk Suleman Asmal, was engaged in agricultural activities and in letting out a shed used for storing agricultural produce. For AY 2014-15, he filed a belated return u/s 139(4) on 29.03.2016, declaring a total income of ₹4,53,130. The assessee claimed to have maintained books of account, vouchers and other supporting records.
During the relevant year, the assessee purchased a share in an immovable property for ₹36,22,960. When called upon to explain the source, he stated that the investment was made out of his own available funds.
The explanation consisted of two components. An amount of ₹17 lakh was claimed to represent repayment of an earlier loan advanced to Ishwarbhai Parsottambhai Patel. The balance amount of ₹19,22,960 was claimed to have been met out of the assessee’s accumulated capital, derived from agricultural activities, rental income and other available funds.
The AO required the assessee to furnish details concerning Ishwarbhai Parsottambhai Patel, including his name, address, return of income and bank statement. Evidence supporting the assessee’s agricultural income and accumulated capital was also sought.
According to the assessee, he could not respond to the show-cause notice because he was occupied with a Gram Panchayat election campaign during December 2016. His nephew was contesting the election, and the members of the joint family were involved in the campaign.
In the absence of the requested evidence, the AO treated the complete investment of ₹36,22,960 as unexplained investment u/s 69. The assessee also complained that the AO had not independently verified the loan repayment by issuing a notice u/s 133(6) to Ishwarbhai Parsottambhai Patel.
Before the CIT(A), the assessee sought to place additional documentary evidence on record. This included the bank statement of the assessee, the bank statement of Ishwarbhai Parsottambhai Patel and the rent-income ledger. These documents were intended to demonstrate the receipt of ₹17 lakh by way of loan repayment and the availability of the remaining capital.
The assessee also explained that a figure concerning rental income had been incorrectly mentioned earlier, which had created an apparent mismatch. According to him, the actual amount could be verified from the rent ledger and connected records.
The CIT(A), however, rejected the additional evidence and dismissed the appeal without examining whether the documents substantiated the sources claimed for the property investment.
Before the ITAT, the assessee submitted that the additional evidence had been rejected in its entirety even though it went to the root of the addition. It was argued that the bank statements and rental records required factual verification and that the matter should therefore be restored for proper examination.
The Revenue relied upon the orders of the AO & CIT(A).
The ITAT accepted the assessee’s request. It held that the additional evidence filed before the CIT(A) should have been taken on record. The documents were directly relevant to the disputed investment and required verification before the addition could be adjudicated.
Accordingly, the Tribunal directed the CIT(A) to admit the additional evidence, verify it and decide the issues afresh on merits. The assessee must be provided an opportunity of hearing in accordance with the principles of natural justice.
The appeal was partly allowed for statistical purposes.
The scope of the ruling must be understood correctly. The ITAT has not accepted the loan repayment of ₹17 lakh as genuine, nor has it held that the balance capital of ₹19.23 lakh was conclusively available. It has also not deleted the addition of ₹36.23 lakh. The Tribunal has merely reopened the first appellate stage so that the evidence supporting these claims can be examined.
Similarly, the assessee’s challenge to the application of s.115BBE was not adjudicated independently. That issue will depend upon the CIT(A)’s fresh findings regarding the addition u/s 69 and the law applicable to the relevant year.
Author’s Comments
The decision illustrates the proper role of Rule 46A. The Rule regulates the admission of additional evidence before the CIT(A), but it is not intended to prevent consideration of material that is essential for determining the correct tax liability. The appellate authority must examine why the evidence could not be produced earlier, its relevance to the dispute and whether verification by the AO is necessary.
In the present case, the bank statements were not peripheral documents. They were the primary evidence through which the assessee proposed to establish the receipt of ₹17 lakh as repayment of an earlier loan. Similarly, the rent ledger and financial records were relevant to the claim of accumulated capital. Confirming the addition without examining this material risked deciding the source-of-investment issue without examining the source itself.
That said, admission of evidence does not guarantee acceptance. On remand, the assessee must establish the original advancement of the ₹17-lakh loan, its reflection in earlier balance sheets or accounts, the identity and financial trail of the borrower, and the actual repayment through verifiable banking channels. Mere receipt of money from a person will not, by itself, prove that it was repayment of an old loan.
For the balance amount, a broad reference to “capital availability” will be insufficient. The assessee should prepare a year-wise capital account and cash-flow statement reconciling agricultural income, rental receipts, household withdrawals, earlier investments & the amount utilised for purchasing the property.
The alleged error in rental figures must also be transparently reconciled rather than explained generally as a clerical mistake.
The order contains an apparent reference in its factual narration to a notice u/s 143(2) for AY 2013-14, although the appeal concerns AY 2014-15. Since the Tribunal did not adjudicate any jurisdictional issue arising from that reference, it should not be treated as a finding invalidating the assessment.
The practical principle is simple: Rule 46A may regulate late evidence, but it should not become a procedural curtain behind which relevant bank records remain unseen. Evidence admitted is not evidence accepted—but it must first be examined.
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT, SURAT BENCH
The appeal filed by the assessee is against the order passed by the Commissioner of Income Tax, Appeals, ADDL/JCIT(A)-1, Gurugram [in short “CIT(A)”] dated 26.12.2025 for the Assessment Year (in short “AY”) 2014-15.
2. The assessee has raised the following grounds of appeal:
“1. On fact and circumstances of case as well as law on subject, Id CIT erred in upholding the order of AO in making addition of Rs. 36,22,960/- u/s 69 of Act.
2. On fact and circumstances of case as well as law on subject, Id CIT erred in Rejection of Additional Evidence Rule 46A.
3. On fact and circumstances of case as well as law on subject, Id CIT erred in not considering Loan Repayment of Rs. 17,00,000/-.
4. On fact and circumstances of case as well as law on subject, Id CIT erred in not considering Agricultural, Rent Income & Capital Availability.
5. On fact and circumstances of case as well as law on subject, Id AO erred in invoking S. 115BBE on addition so made.
6. It is therefore prayed that addition may please be deleted or assessment be quashed or restored back to AO.
7. The Appellant carves leave to add, alter, amend or delete any grounds of appeal.”
3. The assessee was engaged in the renting of shed to store agriculture produce and agriculture activity during the year under consideration and in earlier years. The return of income for the A.Y. 2014-15 was filed on 29.03.2016 declaring total income of Rs.4,53,130/- u/s139(4) of the Income Tax Act, 1961 (in short “the Act”) and duly complied with. The assessee had maintained all the books of accounts with vouchers and supporting evidences. The Assessing Officer (in short “the AO”) had issued notice u/s.143(2) of the Act for A.Y. 2013-14 on 19.09.2016 for assessment. The Assessee had given reply on 19.10.2016 stating that source of share purchased in property of Rs.36,22,960/- is own capital. Assessee has received back Rs.17,00,000/- from loans given during A.Y. 2014-15 and balance amount of Rs.19,22,960/- from capital balance available with him. During assessment the AO has also demanded for evidences like copy of name, address, ITR & Bank Statement of Ishwarbhai Parsottambhai Patel from whom loans received back and Agriculture bills/vouchers in support of income/capital balance issuing show cause notice directly. Assessee was busy due to Grampanchayat Election Campaign in December 2016 in Village Kathor in which his nephew was one of the candidates because they were living in joint family and was not able to reply show cause notice. The AO has passed order considering all payments made Rs.36,22,960/- as unexplained investment u/s.69 of the Act without issuing notice u/s.133(6) to Ishwarbhai Parsottambhai Patel from whom loans received back.
4. Being aggrieved by the assessment order the assessee filed appeal before the CIT(A). The CIT(A) dismissed the appeal of the assessee.
5. The Ld. Authorised Representative (in short “Ld. AR”) for the assessee submitted that the additional evidence filed before the CIT(A) was totally rejected by the CIT(A) and the appeal of the assessee was dismissed solely on the said ground. The Ld. AR submitted that the figure mentioned in the rent was wrongly mentioned and therefore there was a mismatch, but from the perusal of records it can be seen that the actual rent amount is different. The assessee at the time of appellate proceedings before the CIT(A) has given the bank statements of the assessee and the Ishwarbhai Parsottambhai Patel along with the rent income ledger, which was totally rejected by the CIT(A). The Ld. AR requested that these additional evidences require verification and the matter may be remanded back.
6. The Ld. Departmental Representative (in short “Ld. DR”) relied upon the assessment order and the order of the CIT(A).
7. We have heard both the parties and perused all the relevant materials available on record. It is pertinent to note that the additional evidences filed by the assessee before the CIT(A) should have been taken on record. Therefore, we direct the CIT(A) to admit the additional evidences and after verifying the same adjudicate the issues on merit. Needless to say, the assessee be given opportunity of hearing by following principles of natural justice.
8. In result, the appeal of the assessee is partly allowed for statistical purpose.
