ASHOK KUMAR MITTAL,NASIRABAD vs. PR. CIT, AJMER

At the outset, it is noted that there is a delay in filing the present appeal by 143 days. In this regard, the ld. AR has submitted as under:-

After hearing both the parties and considering the prevailing situation in the condition on account of covid-19 pandemic and the relaxation so provided in filing the appeal, the delay in filing the present appeal is condoned and the appeal is admitted for adjudication. 2 Fitness Certificates etc. for the vehicles. In this process, he gets cash/ cheques from parties out of which major part pertains to payment of fees to the transport department. The appellant deposits such cash/ cheque in his account and makes payment of such fees to the department through cheque/ online payments. Some part of the receipts from parties is retained by the appellant as his service charges. In the return, the appellant had shown his nature of business as “Trading - Others" and had declared that he had received gross income of Rs. 6,40,800/- and had offered a sum of Rs. 1,40,300/- as net income. The case was selected for scrutiny and various notices were issued by the ld. AO but same were not complied with due to one or the other reason. The ld. AO for completing the assessment collected bank statements of the appellant from respective bank and found that the appellant had deposited cash of Rs. 84,47,450/- in his bank accounts during the year under consideration. Based on non compliances, the ld. AO opined that such cash deposit entries are treated as unexplained. However, he recorded a very categorical finding that the assessee made various debit entries through cheques or transfer and based on this fact, he assessed a sum of Rs. 8,44,745/- being 10% of cash deposits as net income of the assessee. The said order of the ld. AO passed u/s 144 r.w.s. 143(3) of the Act was challenged in appeal before the ld. CIT (Appeals), Ajmer and is pending as of now. The ld. Pr, CIT, Ajmer examined the assessment records and alleged that as per opinion of the ld. AO, the whole amount of cash deposit was to be treated as unexplained u/s 68 whereas he had assessed the income only at 10% of the cash so deposited and hence the order has been held to be erroneous and prejudicial to the interest of Revenue. Hence 3

It was submitted by the ld AR that it is quite apparent from the order of the ld. AO that there were various withdrawals also in the various bank accounts of the appellant and hence he arrived at a satisfaction that whole amount of cash deposit cannot be treated as income and he applied 10% of such cash deposit for assessing the net income of the appellant. Under these circumstances, it cannot be presumed that the order passed by the ld. AO was erroneous so far as prejudicial to the interest of Revenue. It seems that the ld. Pr. CIT has only gone on the wordings of the ld. AO which he has mentioned on page 2 (Last para) and page 3 (Top Line) but did not care to see that in the bank accounts various debits are also appearing and therefore whole cash deposit cannot be assessed as undisclosed income. The AO has passed the order after careful examination of the bank accounts. Further the ld. Pr. CIT did not consider the details furnished by the appellant in the return. In the return the appellant had disclosed a sum of Rs. 6,40,800/- as his gross receipts which was his gross commission and after deducting expenses for running his business, he has offered Rs. 1,40,300 as his income from this business, against which the ld. AO has estimated the income at Rs. 8,44,745/-. Hence the order passed by the ld. Pr. CIT is bad in law and is required to be quashed. Reliance in this regard is placed on the judgment of the Hon’ble Mumbai High Court in the case of Pr. CIT v/s Cartier Leaflin P. Ltd. (268 Taxman 222) (2020) wherein the ld. Pr. CIT passed order u/s 263 on account of lack of enquiry by the ld. AO on account of claim of operating loss of Rs. 8.80 Crores. The Hon'ble Mumbai

Per contra, the ld. DR submitted that during the course of assessment proceedings, the assessee neither attended to the various notices issued by the Assessing Officer nor any written submissions were filed and even the assessee failed to respond to the final show-cause notice issued by the Assessing Officer dated 30.11.2017. It was submitted that the Assessing Officer accordingly completed the assessment u/s 144 read with section 143(3) considering that the cash deposits totaling to Rs. 84,47,450/- as unexplained income from undisclosed sources. It was submitted that once the Assessing Officer has reached such a conclusion then the entire amount of cash deposit should have been brought to tax u/s 68 of the Act. However, the Assessing officer has made the addition only to the extent of 10% of such cash deposits which has rendered the assessment order erroneous in so far as prejudicial to the interest of the Revenue. It was further submitted that the tax was also calculated at normal rate instead of 30% as per section 115BBE of the Act. 5

It was further submitted by the ld DR that during the revisionary proceedings, the assessee was issued a show cause and he submitted that his main source of income of the assessee was from Services/Commission in respect of RTO services to transporters. However, no documentary evidence has been filed in support of his contention in terms of receipt and payment in relation to such services. Regarding the contention of the assessee that the assessee had preferred in appeal before the ld. Pr. CIT, it was submitted that no supporting evidence was furnished before the ld. Pr. CIT and even if the appeal has been filed by the assessee, the ld Pr. CIT continue to enjoy the juri iction u/s 263 so long as the matter had not been considered and decided in such appeal. He accordingly supported the order of the ld. Pr. CIT and submitted that there is no infirmity in the exercise of his juri iction u/s 263 and passing of the necessary directions wherein the matter has been set aside to the file of the Assessing Officer for passing a fresh order after carrying out necessary enquiry and providing reasonable opportunity to the assessee.

We have heard the rival contentions and purused the material available on record. We refer to the relevant findings of the Assessing officer and the same reads as under:

We find that the Assessing officer has recorded a finding that cash deposit in the assessee’s bank account is out of income from undisclosed sources and thereafter, he has held that taking a reasonable view, 10% of such deposits are to be brought to tax as income from other sources. Once he has arrived at a finding that the whole of the deposits are from undisclosed sources and remain unexplained and then instead of bringing the whole of such deposits to tax and bringing only 10% of such deposits to tax is clearly erroneous. Further, the basis of arriving at 10% of such deposits as income has not been spelt out and therefore, there is clearly an inconsistency between these findings and arriving at the taxable income and the order so passed is clearly erroneous and prejudicial to the interest of the Revenue. Given that the assessee has failed to respond to the show-cause issued by the AO and there was no explanation/submissions filed by the assessee before the AO, it would be wrong to assume that the AO had considered the nature and impact of the debit entries so reflected in the bank statements while arriving at the taxable income. At the same time, considering the contention of the ld AR that main source of income of the assessee was from Services/Commission in respect of RTO services to transporters and in the bank accounts, there are various debit entries in terms of payments in relation to such services which can be duly explained and therefore whole cash deposit cannot be assessed as undisclosed income, we direct the AO to verify such debit entries and consider the explanation of the assessee as may be submitted besides the credit entries in 7

Regarding the contention of the ld AR that an appeal has been preferred against the assessment order before the ld CIT(A) and therefore, the matter is beyond the juri iction of the ld Pr CIT u/s 263, we find that though there is no dispute that the assessee has preferred an appeal before the ld CIT(A), however, such an appeal has been delayed filed and there is nothing on record that the delay has been condoned and the appeal has been admitted for adjudication and in such a situation, it cannot be held that mere filing an appeal where such appeal has not even been admitted for adjudication act as an estoppel in exercise of juri iction by the Pr. CIT u/s 263 of the Act. In any case, the ld AR has stated at the Bar that the assessee didn’t wish to press ground no. 3 relating to clause (c) to explanation 1 to section 263 where it has been clearly spelt out that powers of the Pr CIT shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in an appeal. In the instant case, where the appeal has not even been admitted for adjudication by the ld CIT(A), the question of subject matter of appeal been considered and decided in such appeal doesn’t arise and therefore, the doctrine of merger of the assessment order with that of the appellate order doesn’t arise for consideration and thus, in the instant case, there is no bar on exercise of juri iction of ld. Pr CIT u/s 263 of the Act. The ground no. 2 and 3 are thus dismissed. Order pronounced in the open Court on 07/12/2020. ¼ lanhi xkslkbZ ½ ¼foØe flag ;kno½ (Sandeep Gosain) (Vikram Singh Yadav) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 07/12/2020 *Ganesh Kr. आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. vihykFkhZ@The Appellant- Sh. Ashok Kumar Mittal, Nasirabad 2. izR;FkhZ@ The Respondent- The PCIT, Ajmer 3. vk;dj vk;qDr@ CIT 4. vk;dj vk;qDr@ CIT(A) 5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत. 6. xkMZ QkbZy@ Guard File {ITA No. 301/JP/2020} vkns'kkuqlkj@ By order, सहायक पंजीकार@Aेेज. त्महपेजतंत