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Issues involved: Assessment under section 144 of the Income Tax Act, 1961, refusal to admit fresh evidence by the Appellate Assistant Commissioner (AAC) and the Appellate Tribunal, interpretation of rules regarding admission of additional evidence in appellate proceedings.
Assessment under section 144: The assessee, engaged in contract business, failed to file income tax return voluntarily under section 139(1) and later filed it under section 139(4) after receiving notice under section 139(2). The Income Tax Officer (ITO) made the assessment under section 144, determining the income from the business at Rs. 15,000. The ITO treated loans taken by the assessee as income from undisclosed sources due to lack of evidence proving their genuineness. Refusal to admit fresh evidence by AAC and Appellate Tribunal: The AAC rejected the application to produce fresh evidence, stating that such evidence filed at the appellate stage cannot be admitted as the ITO had provided adequate opportunities earlier. The Appellate Tribunal upheld this decision, emphasizing that despite repeated chances, no evidence was submitted to prove the disputed deposits' genuineness. Interpretation of rules regarding admission of additional evidence: The AAC's discretion to admit fresh evidence is regulated by rule 46A of the Income Tax Rules, 1962, which specifies circumstances under which additional evidence can be produced. The rule restricts the admission of new evidence unless certain conditions are met. Similarly, rule 29 of the Income Tax (Appellate Tribunal) Rules, 1963, limits the Tribunal's power to allow additional evidence, emphasizing the need for reasonable exercise of discretion. In conclusion, the High Court held that the AAC and the Appellate Tribunal did not act arbitrarily in refusing to admit fresh evidence, as the appellant had multiple opportunities to provide proof earlier. The Court affirmed that the rules governing the admission of additional evidence were followed correctly in this case. Therefore, the question referred was answered in the affirmative, in favor of the department and against the assessee, who was directed to pay costs of Rs. 200.
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