ITAT Allows Additional Evidence in Cash Deposit Case:

The assessee filed his return of income under Section 139(4) of the Income Tax Act, 1961, declaring total income of Rs. 2,85,690 for AY 2016–17. His case was selected for limited scrutiny under the Computer-Assisted Scrutiny Selection (CASS) system to examine large cash deposits in bank accounts.

The AO made an addition of Rs. 28,90,028 towards business income after estimating the assessee’s income, as he had not produced books of account or supporting documents to substantiate the income declared. The assessee had declared gross turnover of Rs. 7,51,380 and presumptive income of Rs. 3,23,094 for AY 2016–17. However, owing to the assessee’s non-participation and failure to produce supporting records, the AO extrapolated the figures and applied a profit rate of 8%. The first appellate authority dismissed the appeal without the assessee effectively substantiating his case. The assessee subsequently approached the Tribunal with a delay of 147 days. For AY 2017–18, the assessee also challenged the estimation of business income, an addition under Section 69A, the computation of interest under Section 234A and the application of the enhanced tax rate of 60% under Section 69A read with Section 115BBE.

The Tribunal observed that the assessee had failed to properly participate in the proceedings before the AO and the first appellate authority despite having opportunities to produce the relevant records. It also noted that the assessee had not satisfactorily explained the delay in pursuing the appellate proceedings. Nevertheless, the Tribunal considered the additional documents submitted with the assessee’s application under Rule 29 of the Income Tax (Appellate Tribunal) Rules, 1963. Considering that the additional evidence could have a substantial bearing on the determination of the assessee’s correct tax liability, the Tribunal admitted the documents. 

The Tribunal allowed both appeals for statistical purposes only and remanded the matters to the AO for verification of the additional evidence and fresh consideration of the disputed issues. The decision does not amount to deletion of the additions or a final ruling in favour of the assessee on the merits. The ultimate determination of tax liability will depend on the verification of the supporting documents and the assessee’s compliance with the directions issued by the Tribunal.