Shrivastava Associates v. Income Tax Officer, Ward-3(1), Raipur, Chhattisgarh

(Tax Case No.230/2024) 2025:CGHC:10186-DB AFR HIGH COURT OF CHHATTISGARH AT BILASPUR TAXC No. 230 of 2024 (Arising out of order dated 5-12-2023 passed by the Income Tax AppellateTribunal, Raipur Bench “SMC”, Raipur in ITA No.283/RPR/2023) Order reserved on: 13-2-2025 --Order delivered on: 332025 Shrivastava Associates, 8, Shopping Complex, Ring Road No. 1,Priyadarshani Nagar, Raipur, Chhattisgarh - 492001, PAN: ... Appellant versus Income Tax Officer, Ward-3(1), Raipur, Chhattisgarh -Division Bench: Hon'ble Shri Sanjay K. Agrawal and Hon'ble Shri Sanjay Kumar Jaiswal, JJ. C.A.V. Order Sanjay K. Agrawal, J. 1. The present appeal preferred under Section 260A of the Income TaxAct, 1961 (for short, ‘the IT Act’) has been admitted for final hearingby formulating the following two substantial questions of law:-Act, 1961 (for short, ‘the IT Act’) has been admitted for final hearingby formulating the following two substantial questions of law:- (Tax Case No.230/2024) “A. Whether on the facts and in the circumstances of the case,the Income Tax Appellate Tribunal was justified in upholdingthe addition of Rs. 29,64,532/- by recording a finding which isperverse to the record? B. Whether the ITAT was justified in declining the applicationfor admission of additional evidence filed by the appellant underRule 29 of the Income Tax (Appellate Tribunal) Rules, 1963, byrecording a finding which is perverse to the record?” 2. In order to answer the aforesaid questions of law, following facts arerequired to be noticed: -required to be noticed: - 3. The appellant / assessee firm, a builder / contractor, had e-filed itsreturn of income for the assessment year 2016-17 on 21-2-2017declaring an income of 97,270/-. The case of the appellant /₹assessee firm was selected for scrutiny assessment through CASS(Computer Assisted Scrutiny Selection) for verifying the high amountof cash-in-hand shown in its balance sheet filed with the return ofincome filed under Section 139(4) of the IT Act dated 7-11-2016 andthe assessee firm in reply to the notice under Section 142(1) of the ITAct dated 13-11-2018, filed certain documents namely, BankStatement, Computation of Total Income, Cash Book as on 31-3-2016(only one page), Balance Sheet as on 31-3-2016, Profit and LossAccount as on 31-3-2016 and Income Tax Return. Ultimately, theAssessing Officer on 13-12-2018, passed the order of assessmentassessing the income of the assessee firm as 31,90,190/-. Feeling₹aggrieved against the order of assessment, the appellant hereinpreferred appeal before the Commissioner of Income Tax (Appeals) (Tax Case No.230/2024) and again before the CIT (Appeals), the appellant preferred day to daycash book for the financial year 2015-16 and other documents inshape of additional documents. However, the CIT (Appeals) by orderdated 22-6-2023, dismissed the appeal preferred under Section 250 ofthe IT Act. Assailing the order passed by the CIT (Appeals), theappellant herein preferred appeal under Section 253 of the IT Actbefore the Income Tax Appellate Tribunal (ITAT) and also filed anapplication under Rule 29 of the Income-Tax (Appellate Tribunal)Rules, 1963 (for short, ‘the ITAT Rules’) and filed documents foradmitting additional evidence on record, on 6-11-2023. Thedocuments filed include day to day cash book for the financial year2015-16, copy of cash flow statement / abstract of cash book for thefinancial year 2015-16 and cash book receipt side (i.e. debit entries)of financial year 2015-16. The learned ITAT dismissed the appeal on5-12-2023 and also rejected the application filed under Rule 29 of theITAT Rules finding no merit against which this appeal has beenpreferred by the assessee firm / appellant herein. 4. Mr. Apurv Goyal, learned counsel appearing for the appellant herein /assessee firm, would submit that the learned ITAT is absolutelyunjustified in rejecting the application for admitting additionalevidence on record and it ought to have considered the application fortaking additional documents in accordance with Rule 29 of the ITATRules as it is pari materia to Order 41 Rule 27(b) of the CPC andassessee firm, would submit that the learned ITAT is absolutelyunjustified in rejecting the application for admitting additionalevidence on record and it ought to have considered the application fortaking additional documents in accordance with Rule 29 of the ITATRules as it is pari materia to Order 41 Rule 27(b) of the CPC and (Tax Case No.230/2024) those documents were also sought to be preferred before the CIT(Appeals) also, but both the authorities did not consider the assessee’sapplication for admitting additional documents on record in its properperspective, as the said documents were necessary for just and properdisposal of appeal. He would rely upon the decision of the SupremeCourt in the matter of Sanjay Kumar Singh v. State of Jharkhand1in support of his contention and in that view of the matter, the appealdeserves to be allowed. Secondly, learned counsel prays for remittingthe appeal itself before the ITAT with a direction to allow theadditional documents on record and to decide the appeal afresh inaccordance with law. 5. Mr. Ajay Kumrani, learned counsel appearing on behalf of Mr. AmitChaudhari, learned Standing Counsel for the Income Tax Department,would submit that the appellant herein / assessee firm had sufficientopportunity to prefer those documents before the Assessing Officerwhich the appellant deliberately did not submit for the reasons knownto him and at the belated stage, the additional documents were soughtto be produced which has rightly been rejected by the ITAT and whichis in accordance with law. Learned counsel would rely upon thedecision of the Bombay High Court in the matter of Velji Deoraj &Co. v. Commissioner of Income-tax2 to buttress his submission. As 1(2022) 7 SCC 247 2[1968] 68 ITR 708 (Bombay) (Tax Case No.230/2024) such, the appeal deserves to be dismissed as none of the substantialquestions of law arise for consideration in this appeal. 6. We have heard learned counsel for the parties and considered theirrival submissions made herein-above and also went through the recordwith utmost circumspection.rival submissions made herein-above and also went through the recordwith utmost circumspection. 7. In order to answer the aforesaid two substantial questions of law, inour considered opinion, firstly, substantial question No.B, is requiredto be dealt with, as answer to substantial question No.A would dependupon the outcome of substantial question No.B.our considered opinion, firstly, substantial question No.B, is requiredto be dealt with, as answer to substantial question No.A would dependupon the outcome of substantial question No.B. Answer to substantial question No.B 8. Substantial question of law No.B relates to rejection of applicationunder Rule 29 of the ITAT Rules i.e. admission of additionaldocuments which has been rejected by the ITAT by the impugnedorder. under Rule 29 of the ITAT Rules i.e. admission of additionaldocuments which has been rejected by the ITAT by the impugnedorder. 9. The ITAT Rules have been framed in exercise of the powers conferredby sub-section (5) of Section 255 of the IT Act. Rule 29 of the ITATRules states as under: -by sub-section (5) of Section 255 of the IT Act. Rule 29 of the ITATRules states as under: - “Production of additional evidence before the Tribunal. Answer to substantial question No.B 8. Substantial question of law No.B relates to rejection of applicationunder Rule 29 of the ITAT Rules i.e. admission of additionaldocuments which has been rejected by the ITAT by the impugnedorder. under Rule 29 of the ITAT Rules i.e. admission of additionaldocuments which has been rejected by the ITAT by the impugnedorder. 9. The ITAT Rules have been framed in exercise of the powers conferredby sub-section (5) of Section 255 of the IT Act. Rule 29 of the ITATRules states as under: -by sub-section (5) of Section 255 of the IT Act. Rule 29 of the ITATRules states as under: - “Production of additional evidence before the Tribunal. 29.The parties to the appeal shall not be entitled to produceadditional evidence either oral or documentary before theTribunal, but if the Tribunal requires any document to beproduced or any witness to be examined or any affidavit to befiled to enable it to pass orders or for any other substantial cause,or, if the income-tax authorities have decided the case withoutgiving sufficient opportunity to the assessee to adduce evidenceeither on points specified by them or not specified by them, theTribunal, for reasons to be recorded, may allow such document (Tax Case No.230/2024) to be produced or witness to be examined or affidavit to be filedor may allow such evidence to be adduced.” 10. A careful perusal of the aforesaid rule would show that the parties tothe appeal are not entitled to produce additional evidence either oral ordocumentary before the Tribunal, but if the Tribunal requires anydocument to be produced or any witness to be examined or anyaffidavit to be filed to enable it to pass orders or for any othersubstantial cause, or, if the income-tax authorities have decided thecase without giving sufficient opportunity to the assessee to adduceevidence either on points specified by them or not specified by them,the Tribunal, for reasons to be recorded, may allow such document tobe produced or witness to be examined or affidavit to be filed or mayalow such evidence to be adduced. 11. This provision under Rule 29 of the ITAT Rules is akin to Order 41 Rule 27(b) of the CPC which states as under: - "27. Production of additional evidence in Appellate Court.-(1) The parties to an appeal shall not be entitled to produceadditional evidence, whether oral or documentary, in theAppellate Court. But if— (b) the Appellate Court requires any document to beproduced or any witness to be examined to enable it topronounce judgment, or for any other substantial cause, the Appellate Court may allow such evidence or document to beproduced or witness to be examined. (Tax Case No.230/2024) (2) Whenever additional evidence is allowed to beproduced by an Appellate Court, the Court shall record thereason for its admission." 12. Order 41 Rule 27(b) of the CPC states that additional evidence can be admitted where the appellate court requires any document to beproduced or or any witness to be examined to enable the court to pronounce judgment or for any substantial cause. 13. The Privy Council in the matter of Parsotim Thakur v. Lal Mohar Thakur3 held that additional evidence can be admitted, but it must be the court that requires it, and observed as under: - “By the terms of Order XLI, r. 27(b) it is only where anappellate court “requires” it (that is, finds it needful) thatadditional evidence can be admitted. It may be required toenable the Court to pronounce judgment, or for any othersubstantial cause, but it must be the Court that requires it. Thepower cannot be exercised on an application by a party beforethe appeal is heard.” 14. Similarly, in Velji Deoraj & Co. (supra), the Bombay High Court pronounce judgment or for any substantial cause. 13. The Privy Council in the matter of Parsotim Thakur v. Lal Mohar Thakur3 held that additional evidence can be admitted, but it must be the court that requires it, and observed as under: - “By the terms of Order XLI, r. 27(b) it is only where anappellate court “requires” it (that is, finds it needful) thatadditional evidence can be admitted. It may be required toenable the Court to pronounce judgment, or for any othersubstantial cause, but it must be the Court that requires it. Thepower cannot be exercised on an application by a party beforethe appeal is heard.” 14. Similarly, in Velji Deoraj & Co. (supra), the Bombay High Court relying upon the decision of the Privy Council in Parsotim Thakur(supra) has held that the admission of additional evidence isdependent solely on the requirement of the court and it is for the courtto decide whether for pronouncing its judgment or for any othersubstantial cause it is necessary to have the additional evidence before it, and observed as under: - “Now, the power of the Tribunal to admit additional evidence inappeal is governed by rule 29 of the rules and orders relating tothe Appellate Tribunal. That rule is similar in terms to Order 41,rule 27, of the Code of Civil Procedure. Now, it is well settledthat the admissibility of additional evidence in appeal under the (Tax Case No.230/2024) provisions of Order 41, rule 27, of the Civil Procedure Code ismade to depend not upon the relevancy or materiality to theissue before the court of the evidence sought to be admitted orupon the fact whether or not the applicant had sufficientopportunity of adducing the evidence at an earlier stage, butupon whether or not the appellate court requires the evidence toenable it to pronounce judgment or for any other substantialcause. The admission of additional evidence at the appellatestage is not referable to any right of the party to produce theevidence but is dependent solely on the requirement of the courtand it is for the court to decide whether for pronouncing itsjudgment or for any other substantial cause it is necessary tohave the additional evidence before it. The mere fact that theevidence sought to be produced is vital and important does notprovide a substantial cause to allow its admission at theappellate stage especially when the evidence was available to theparty at the initial stage and had not been produced by him. Ashas been observed by the Privy Council in Parsotim v. LalMohar [(1931) L.R. 58 I.A. 254 : A.I.R. 1931 P.C. 143.], the ruleis not intended to allow a litigant who has been unsuccessful inthe lower courts to patch up the weak parts of his case and fill upomissions in the court of appeal. Mr. Mehta referred to theobservations of Ameer Ali J. in the Privy Council case, IndrajitPratap Bahadur Sahi v. Amar Singh [(1923) L.R. 50 I.A. 183 :A.I.R. 1923 P.C. 128.] , viz., that the jurisdiction of an appellatecourt under Order 41, rule 27, of the Code of Civil Procedure,1908, to admit additional evidence is not confined to cases inwhich the court itself discovers a lacuna or defect and requiresevidence to fill up or remedy it. Under the words “or for anyother substantial cause” an appellate court has a discretion toadmit further evidence upon the application of a party.” 15. The Supreme Court in the matter of Jagdish Prasad Patel (dead) Through Legal Representatives and another v. Shivnath and others4 while dealing with the provisions contained in Order 41 Rule27 of the CPC held that the general principle is that “the appellatecourt should not travel outside the record of the lower court andcannot take any evidence in appeal. However, as an exception, Order41 Rule 27 CPC enables the appellate court to take additional 4(2019) 6 SCC 82 (Tax Case No.230/2024) 15. The Supreme Court in the matter of Jagdish Prasad Patel (dead) Through Legal Representatives and another v. Shivnath and others4 while dealing with the provisions contained in Order 41 Rule27 of the CPC held that the general principle is that “the appellatecourt should not travel outside the record of the lower court andcannot take any evidence in appeal. However, as an exception, Order41 Rule 27 CPC enables the appellate court to take additional 4(2019) 6 SCC 82 (Tax Case No.230/2024) evidence in exceptional circumstances. The appellate court maypermit additional evidence only and only if the conditions laid downin this Rule are found to exist. The parties are not entitled, as of right,to the admission of such evidence. Thus, the provision does not apply,when on the basis of the evidence on record, the appellate court canpronounce a satisfactory judgment. The matter is entirely within thediscretion of the court and is to be used sparingly. Such a discretionis only a judicial discretion circumscribed by the limitation specifiedin the Rule itself”. Relying upon the earlier decision in the matter ofthe Union of India v. Ibrahim Uddin5, their Lordships observed asunder: - “30.In Union of India v. Ibrahim Uddin, (2012) 8 SCC 148 :(2012) 4 SCC (Civ) 362, this Court held as under : (SCC pp.167-68 & 170, paras 36-37, 40 & 47) “36. The general principle is that the appellatecourt should not travel outside the record of the lowercourt and cannot take any evidence in appeal. However,as an exception, Order 41 Rule 27 CPC enables theappellate court to take additional evidence in exceptionalcircumstances. The appellate court may permit additionalevidence only and only if the conditions laid down in thisRule are found to exist. The parties are not entitled, as ofright, to the admission of such evidence. Thus, theprovision does not apply, when on the basis of theevidence on record, the appellate court can pronounce asatisfactory judgment. The matter is entirely within thediscretion of the court and is to be used sparingly. Such adiscretion is only a judicial discretion circumscribed bythe limitation specified in the Rule itself. (Vide K.Venkataramiah v. A. Seetharama Reddy[6], MunicipalCorpn., Greater Bombay v. Lala Pancham[7], Soonda Ram 5(2012) 8 SCC 1486AIR 1963 SC 15267AIR 1965 SC 10086AIR 1963 SC 15267AIR 1965 SC 1008 (Tax Case No.230/2024) v. Rameshwarlal [Soonda Ram v. Rameshwarlal[8]andSyed Abdul Khader v. Rami Reddy [Syed Abdul Khader v.Rami Reddy[9].) 37. The appellate court should not ordinarily allownew evidence to be adduced in order to enable a party toraise a new point in appeal. Similarly, where a party onwhom the onus of proving a certain point lies fails todischarge the onus, he is not entitled to a freshopportunity to produce evidence, as the court can, in sucha case, pronounce judgment against him and does notrequire any additional evidence to enable it to pronouncejudgment. (Vide Haji Mohammed Ishaq v. Mohd. Iqbaland Mohd. Ali & Co.[10].) 40. The inadvertence of the party or his inability tounderstand the legal issues involved or the wrong adviceof a pleader or the negligence of a pleader or that theparty did not realise the importance of a document doesnot constitute a “substantial cause” within the meaning ofthis Rule. The mere fact that certain evidence isimportant, is not in itself a sufficient ground for admittingthat evidence in appeal. * 47. Where the additional evidence sought to beadduced removes the cloud of doubt over the case and theevidence has a direct and important bearing on the mainissue in the suit and interest of justice clearly renders itimperative that it may be allowed to be permitted onrecord, such application may be allowed.” 16. Reverting to the facts of the case in light of the parameters laid down 40. The inadvertence of the party or his inability tounderstand the legal issues involved or the wrong adviceof a pleader or the negligence of a pleader or that theparty did not realise the importance of a document doesnot constitute a “substantial cause” within the meaning ofthis Rule. The mere fact that certain evidence isimportant, is not in itself a sufficient ground for admittingthat evidence in appeal. * 47. Where the additional evidence sought to beadduced removes the cloud of doubt over the case and theevidence has a direct and important bearing on the mainissue in the suit and interest of justice clearly renders itimperative that it may be allowed to be permitted onrecord, such application may be allowed.” 16. Reverting to the facts of the case in light of the parameters laid down by their Lordships of the Supreme Court, it is quite vivid that theapplication filed under Rule 29 of the ITAT Rules came to be rejectedby the ITAT on the ground that both the cash book and cash flowstatement which the assessee filed before the CIT (Appeals) were inapplication filed under Rule 29 of the ITAT Rules came to be rejectedby the ITAT on the ground that both the cash book and cash flowstatement which the assessee filed before the CIT (Appeals) were in 8(1975) 3 SCC 6989(1979) 2 SCC 60110 (1978) 2 SCC 4939(1979) 2 SCC 60110 (1978) 2 SCC 493 (Tax Case No.230/2024) the nature of additional evidence and the assessee firm had adopted anevasive approach in assessment proceedings and not filed either of theaforesaid documents, which formed the very basis for selecting itscase for limited scrutiny assessment under Section 143(2) of the ITAct. The ITAT did not record a finding that the documents mentionedin paragraph 6 of the order as “additional evidence” are not necessaryfor deciding the case and pronouncing judgment or order for anysubstantial cause even after having recorded finding that thosedocuments are vital and important as they form basis for limitedscrutiny assessment under Section 143(2) of the Act. However, it ispertinent to note that so far as cash book is concerned, only one pagehad already been filed before the Assessing Officer and it is not thefinding of the ITAT that these documents are not necessary for justand proper disposal of appeal preferred by the appellant and forpronouncing the judgment. The ITAT has erred in law withoutrecording a specific finding which is sine qua non for considering theadmission of documents and proceeded to reject the application. Thelearned ITAT has legally erred in law in rejecting the applicationwhich runs contrary to the well settled decision in this behalf andconsequently, the impugned order rejecting the application filed underRule 29 of the ITAT Rules is set aside and subsequently, the appellateorder dated 5-12-2023 is also set aside. The application under Rule 29of the ITAT Rules for admission of additional evidence is allowed, asit is necessary for just and proper disposal of appeal. Documents are Soma (Tax Case No.230/2024) taken on record. In view of our answer to substantial question of lawNo.B, we deem it inexpedient to answer substantial question of lawNo.A, as it would be open for the ITAT to take fresh view in thematter since the application under Rule 29 of the ITAT Rules has beenallowed. The matter is restored to the file of the ITAT for hearing anddisposal afresh in accordance with law. 17. The appeal is allowed to the extent indicated herein-above leaving the parties to bear their own cost(s). Sd/- Sd/- (Sanjay K. Agrawal) (Sanjay Kumar Jaiswal)JUDGE JUDGE