Sanchayita Lahkar

The High Court of Kerala, Division Bench of Justice A. Muhamed Mustaque and Justice Harisankar V. Menon dismissed two income-tax appeals challenging the treatment of cash seized during a 2016 excise operation as unexplained income. The Court upheld the Income Tax Appellate Tribunal’s refusal to admit additional affidavits seeking to explain the source of the seized funds, ruling that returns voluntarily filed cannot later be revised through such evidence. It emphasized that Rule 29 of the Income Tax (Appellate Tribunal) Rules, 1963 permits the Tribunal to admit additional evidence only for a substantial cause, which was not established in these cases.

The dispute arose from the seizure of cash during an excise operation at Muthanaga Check Post on 19 July 2016. Officials intercepted a private bus traveling from Hyderabad to Kozhikode and seized a total amount of ₹2,39,57,500 from three passengers. The custody of the amount was handed over to the Income Tax Department under the provisions of the Income Tax Act, 1961.

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Two of the individuals later submitted letters declaring the respective amounts seized from them as their income from other sources for the financial year 2016-17. Their returns were filed accordingly, and the assessing authority treated the declared amounts as unexplained income under Section 69A of the Act and levied tax under Section 115BBE.

The assessees challenged the assessments before the Commissioner of Income Tax (Appeals). One of them produced certain financial and bank statements of a partnership firm and income tax returns of family members to explain the source of the cash. The first appellate authority refused to admit the additional evidence, holding that such evidence would effectively revise the voluntarily filed returns, which was not permissible. The other assessee did not appear before the first appellate authority, leading to dismissal of the appeal.

Both individuals then approached the Income Tax Appellate Tribunal, producing additional affidavits from various persons claiming to have provided the funds. One of them contended that the cash actually belonged to a third party who intended to purchase raw gold in Kerala, and affidavits were produced to establish that person’s source of funds.

The Tribunal declined to accept the additional evidence under Rule 29 of the Income Tax (Appellate Tribunal) Rules, 1963, and dismissed the appeals. This led to the filing of the present appeals before the High Court of Kerala.

The Division Bench recorded that the primary question was the acceptance of additional evidence. It observed: “True, the Income Tax Appellate Tribunal can accept additional evidence filed before it. However, it is not as if such evidence once produced requires to be accepted by the Tribunal and acted upon.”

Quoting Rule 29, the Court recorded: “The parties to the appeal shall not be entitled to produce additional evidence either oral or documentary before the Tribunal, but if the Tribunal requires any documents to be produced or any witness to be examined or any affidavit to be filed to enable it to pass orders or for any other substantial cause… the Tribunal… may allow such document to be produced or witness to be examined or affidavit to be filed or may allow such evidence to be adduced.”

The Court stated that such evidence is admissible only where the assessee was prevented from adducing it by the assessing authority. It observed: “In the case at hand… though one of the appellants claimed that the cash actually belonged to one Ramesh, no evidence was produced. The other did not raise any such contention. Before the first appellate authority, the affidavits were not produced.”

The Bench further recorded: “We are of the opinion that since returns have been presented by the respective appellants, declaring the respective figures as income from other sources, at the belated stage of the second appeal to the Tribunal, if the venture of the appellants is accepted, that would lead to the revision of the returns voluntarily filed, which is not possible under the statute.”

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It observed that one claimant never came forward at the original stage and concluded: “The additional evidence in the form of affidavits produced before the Tribunal is the result of an afterthought alone. The Tribunal is justified in refusing to act on the afore basis.”

The Court concluded: “We are of the opinion that the orders of the Tribunal are virtually based on the factual situations noticed earlier, and no infirmity can be attached to those orders.”

“Resultantly, we find no reason to interfere, and the appeals would stand dismissed, answering the questions raised in these appeals against the assessee and in favour of the revenue.”

Advocates Representing the Parties

For the Petitioners: Shri. Abraham Joseph Markos, Shri. Isaac Thomas, Shri. P.G. Chandapillai Abraham, Shri. John Vithayathil, Shri. Alexander Joseph Markos

For the Respondents: Shri. Navaneeth N. Nath, CGC, Smt. Susie B. Varghese, Shri. Jose Joseph, Standing Counsel

Case Title: Sravan Kumar Neela v. Assistant Commissioner of Income Tax
Neutral Citation: 2025:KER:68910
Case Number: ITA No. 58 and 59 of 2024
Bench: Justice A. Muhamed Mustaque and Justice Harisankar V. Menon