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Income Tax Appellate Tribunal, JABALPUR BENCH, JABALPUR
O R D E R PER OM PRAKASH KANT, A.M.: This appeal by the assessee is directed against order dated 18.01.2023 passed by Ld. Commissioner of Income Tax(Appeals), National Faceless Appeal Centre, Delhi [in short “Ld.CIT(A)”] for assessment year 2017-18, raising following grounds:
1. “The learned Commissioner of Income tax (Appeal) was not justified in Confirming the addition of Rs.11,43,000 on account of cash deposit made during the demonetization period even though appellant has fully explained the source of deposit.
2. The learned Commissioner of Income tax (Appeal) was not justified in accepting the opening balances which was duly explained during the assessment proceeding and also before the learned CIT(A) hence rejection on vague finding is bad in law.
The learned Commissioner of Income tax (Appeal) was not justified in Confirming the addition of Rs.11,43,000 on account of cash deposit made during the demonetization period on technical ground that appellant has filed ITR 1 and therefore there is no existence of business even though all the details including VAT return was submitted before the learned CIT(A). 4. The learned Commissioner of Income tax (Appeal) was not justified in accepting the additional documents as these are VAT/GST returns which was filed before state authority. 5. The learned Commissioner of Income tax (Appeal) was not justified in confirming the addition under section 69A even though AO has wrongly invoked the section and further applicability of section 115BBE is also not applicable in the present case. 6. The learned Commissioner of Income tax (Appeal) was not justified in rejecting the alternate submission that when appellant has proved the source of cash deposit than only net profit rate is to be applied. 7. The appellant craves for leave to amend, add to or omit any ground up to the time of hearing of the appeal.”
Briefly stated facts of the case are that the assessee filed return of income on 31.07.2017, declaring total income of Rs.2,87,310/-. The return of income was selected for scrutiny assessment and statutory notices were issued under the Income- tax Act, 1961 ( in short the ‘ Act’) and complied with. In the assessment, the Assessing Officer (in short “AO”) made addition for the cash deposits of Rs.11,43,000/- appearing in bank account on the ground that no business activity was carried out for the year under consideration as return of income was filed in form No. ITR-1 only. Before Ld.CIT(A), the assessee contended that in immediately preceding assessment year, return was filed in form No. ITR-4 and income from business activity was duly declared. However, during the year under consideration, due to mistake, the return was filed under form No. ITR-1, but, he submitted that purchase and sales were duly declared before Value Added Tax (VAT) authorities. However, Ld.CIT(A) upheld the addition by observing as under:-
“I have carefully considered the grounds of appeal, statement of facts, contents of assessment order and written submissions made by the appellant. There is no dispute on the fact that the appellant has made a cash deposit of Rs. 11,43,000/- in the two bank accounts under consideration in the F.Y. 2016-17. Return for assessment year 2017-18 was filed in ITR-1 on 31.07.2017. The cash deposited during the demonetization period alone was to the extent of Rs. 10,53,000/-. In other months there was no significant deposit of cash. Filing return in ITR-1 also shows that there is no existence of business. Even the return for assessment year 2016-17 was filed on 09.11.2016 which was after the announcement of demonetization. Therefore, the closing cash balance show in the ITR of the A.Y. 2016-17 is not a full proof evidence in absence of complete cash flow statement showing all payments or receipts and the availability of cash balance on the date of deposit. The assessee has filed return in ITR-4 for A.Y. 2016-17. Therefore, there is no reason to file return for A.Y. 2017-18 in ITR-1 if the assessee was carrying on any business activity. The assessee has also submitted that copy of GST return/VAT return should be admitted as additional evidence as the counsel who has filing the GST/VAT return was not well. This contention of the assessee is without any evidence or supporting documents. On perusal of the assessment order, it is found that notice u/s 142(1) was issued on 30.04.2019, 10.10.2019 and 28.10.2019 to explain the source of cash deposit. The assessee did not file any response to the first two hearing notices. In response to third notice, computation of income, trading and PL A/c was submitted. Final show cause notice u/s 142(1) was issued on 19.11.2019 but there was no response from the side of assessee. The appellant has not demonstrated the reasons for not filing copy of VAT/GST return before the AO. Merely saying that the counsel was not well is not a sufficient reason in view of the facts that several opportunities in the period from 4 | P a g e 30.04.2019 to 19.11.2019 was allowed. Therefore, the additional evidences are not admitted. Without prejudice to above, filing return in ITR-1, absence of complete cash flow statement showing availability of cash on the date of deposit are the most relevant factors which goes against the assessee and therefore it is held that the AO has correctly added the amount of Rs. 11,43,000/- being cash deposits in the two bank accounts of the assessee. All the Grounds of appeal
are dismissed.”
3. We have heard Ld. Authorized Representatives of the parties on issue in dispute and perused the relevant material available on record. The ld counsel referred to ground No. 4 of the appeal and submitted that Ld.CIT(A) held that the assessee did not demonstrate reasons for not filing copy of GST return before the AO and rejected the additional evidences filed by the assessee. Before us, the assessee has filed an application for admitting those additional evidences containing VAT summary and relevant forms filed for the year under consideration and requested for admission of the additional evidence and restore the matter back to the file of AO. In our opinion, the addition has been sustained by the AO mainly, on the ground that no business activity was carried out by the assessee in the year under consideration. In such, a circumstance, considering the VAT form is crucial for determination of whether the assessee was engaged in the business activity of trading in the year under consideration. Therefore, it is necessary to admit those additional evidences. Accordingly, we admit the additional evidences filed by the assessee and restore the matter back to the AO for deciding the issue in dispute after taking into consideration those additional evidences and other documentary evidences filed further by the assessee. It is needless to mention that the AO shall afford adequate opportunity of being heard to the assessee and decide the issue in accordance with law. Ground No. 4 of appeal is accordingly, allowed. The other grounds raised are rendered merely academic as we have already restored the matter back to the ld AO.
In the result, the appeal filed by the assessee is allowed for statistical purposes.
Order pronounced in the open Court on 22/09/2023.