Facts of the Case

The assessee filed an appeal before the Income Tax Appellate Tribunal (ITAT), Allahabad Bench, against the order of the Commissioner of Income Tax (Appeals) for Assessment Year 2011-12. The lower authorities had made additions on two counts:

  1. Addition of ₹4,68,902 as accrued interest on Kisan Vikas Patra (KVP).
  2. Addition of ₹5,50,000 deposited in the bank, treated as unexplained.

The assessee contended that the bank deposit had a clear source and that relevant documentary evidence could not be produced earlier due to non-availability of bank records at the relevant time.

Issues Involved

  1. Whether addition of accrued interest on KVP was justified.
  2. Whether the bank deposit of ₹5,50,000 was rightly treated as unexplained.
  3. Whether additional evidence should be admitted at the appellate stage when earlier non-production was due to sufficient cause.
  4. Whether the assessee was denied adequate opportunity, violating principles of natural justice.

Petitioner’s (Assessee’s) Arguments

  • The bank deposit had a legitimate source, supported by withdrawals from another bank account.
  • A clarification from the State Bank of India explained the discrepancy in deposit dates as arising from “shadow balance.”
  • A certificate evidencing premature withdrawal of KVP from the Post Office supported the source of funds.
  • These documents could not be produced earlier because the relevant records were not available at that time.
  • An application to admit additional evidence had been filed before the CIT(A), but the order was passed on the same day without considering it.

Respondent’s (Revenue’s) Arguments

  • The source of the bank deposit
  • The correctness of interest income computation

Court Order / Findings (ITAT)

  • The Tribunal found merit in the assessee’s explanation that he was prevented by sufficient cause from producing the evidence earlier.
  • In the interest of justice, the additional evidence was admitted.
  • The issue relating to the bank deposit of ₹5,50,000 was remanded to the Assessing Officer (AO) for fresh adjudication after providing adequate opportunity to the assessee.
  • Since the issue of KVP interest addition was interconnected, it was also remitted to the AO for reconsideration.
  • The assessee was directed to cooperate in the fresh proceedings.
  • The appeal was treated as allowed for statistical purposes.

Important Clarification

  • Admission of additional evidence is permissible where the assessee demonstrates sufficient cause for earlier non-submission.
  • Passing an appellate order without considering a pending application for additional evidence may violate principles of natural justice.
  • Remand ensures proper verification rather than outright deletion or confirmation of additions.
  • All legal pleas remain open for the assessee during fresh assessment proceedings.

Link to download the order – https://itat.gov.in/public/files/upload/1574674533-SHIV-312.pdf

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