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Income Tax Appellate Tribunal, “SMC - C” BENCH : BANGALORE
Before: SHRI GEORGE GEORGE K
This appeal at the instance of the assessee is directed against CIT(A)’s order dated 27.03.2023, passed under section 250 of the Income Tax Act, 1961 (hereinafter called ‘the Act’). The relevant Assessment Year is 2020-21.
Brief facts of the case are as follows:
Assessee is an individual engaged in the business of buying and selling of Raw Silks, twisted silks at Bangalore. He runs a proprietary concern by name “S. A. Silks”. His wife Mrs. Neelufar is also engaged in trading of raw silk and is running a proprietary concern by name “Neelu Silks” at Wilson Garden, Bangalore. For the Assessment Year 2020-21, return of income was filed on 19.08.2020 declaring total income at Rs.7,67,380/- (income from house property, income from business and income from other sources). There was a cash seizure from the assessee amounting Rs.10,35,000/- by the SHO, Chirala on 14.11.2019. Subsequently, requisition under section 132A of the Act was made by the income tax department on 22.01.2020 and cash was handed over to the income tax department. The assessee had stated in the statement recorded under section 131 of the Act that he had visited Chirala to buy silk as he and his wife are in the business of purchase and sales of raw silk. Further, it was stated that assessee did not maintain books of accounts as its turnover was below the prescribed limit. However, it was stated that assessee’s wife was maintaining books of accounts and the source of the cash seized was out of the available cash balance in assessee’s wife’s proprietary concern. Notice under section 143(2) of the Act was issued on 25.06.2021. Further, another notice dated 19.07.2021 was issued under section 142(1) of the Act along with a questionnaire. Not satisfied with the explanation filed by the assessee during the course of assessment proceedings, cash seized amounting to Rs.10,35,000/- was brought to tax as unexplained money under section 69A of the Act, vide order dated 15.09.2021 passed under section 143(3) r.w.s. 153D of the Act.
Aggrieved, assessee filed appeal before the First Appellate Authority. The CIT(A) dismissed the appeal of the assessee and confirmed the addition made under section 69A of the Act.
Aggrieved by the order of the CIT(A), assessee has filed the present appeal before the Tribunal raising the following grounds:
The assessment order passed u/s. 143(3) r.w.s. 153D of the Income Tax Act, 1961 dated 15/09/2021 by the Dy. Commissioner of Income Tax, Central-1(2), Bangalore is bad in law and against the principle of natural justice and the Commissioner of Income Tax (Appeals)-
11 Bangalore has erred in not adjudicating these grounds of appeal raised by the assessee.
2. The learned Commissioner of Income Tax (Appeals)-11, Bangalore erred in facts and law in not adjudicating the following grounds; (a) The learned Dy. Commissioner of Income Tax, Central Circle-1(2), Bangalore has erred in assumption of jurisdiction as the copy of centralization notification passed u/s. 127 of the Income Tax Act, 1961 by the Pr. Commissioner of Income Tax, Bengaluru-2, Bengaluru in F.No. ITBA/COM/F/ 17/2020-21/ 1029464083(1) dated 04/01/2021, as mentioned in the assessment order, has not been provided or served to the assessee prior to or during the course of assessment proceedings. (b) The centralization notification u/s. 127 of the Income Tax Act, 1961 has been passed without providing opportunity of being heard to the assessee.
3. The learned Dy. Commissioner of Income Tax, Central Circle-1(2), Bangalore has erred in treating the cash of Rs. 10,35,000/ - as unexplained money u/s. 69A of the Income Tax Act, 1961 and making additions of the same to the income of the assessee. The learned Commissioner of Income Tax (Appeals)-11, Bangalore has erred in law and facts in confirming the additions.
4. The orders passed by the lower authorities are contrary to the law and facts by not considering that the seized cash of Rs. 10,35,000/- belongs to M/s. Neelu Silks (Prop. Mrs. Neelufar) and disregarding the material evidences furnished with regards to the nature and sources of cash seized and passed the orders without making proper and independent enquiries.
5. The Commissioner of Income Tax (Appeals)-11, Bangalore has erred in law and facts by not adjudicating that the assessment order passed by the learned Dy. Commissioner of Income Tax, Central Circle-1(2), Bangalore is bad in law so far, the mechanical approval granted without considering the material evidences by the Addl. Commissioner of Income Tax, Central Range-1, Bangalore.
5. Assessee has filed two sets of Paper Books enclosing therein case laws relied on, the sworn statement recorded before the Sub-Inspector of Police, statement recorded under section 131 of the Act on 25.11.2019, copy of the income tax returns and the financials for the relevant year in the case of the assessee’s wife, copy of the audit report of the proprietary concern of the assessee’s wife, etc. The learned AR submitted that if the issue on merits is adjudicated by the Tribunal, the other legal contentions raised may be left open. The learned AR reiterated the submissions made before the CIT(A).
The learned Standing Counsel, on the other hand, relied on the findings of the CIT(A).
I have heard the rival submissions and perused the material on record. During the course of enquiry by the Chirala Police, the Investigation Wing of Vijayawada and the AO, the assessee had stated and deposed an oath that cash of Rs.10,35,000/- belongs to business concern of M/s. Neelu Silks (the proprietary concern of assessee’s wife). M/s. Neelu Silks had cash in hand of Rs.24,301/- as on 01.04.2019 and aggregate cash withdrawals of Rs.15 lakhs on various dates prior to cash being seized. These withdrawals were from the assessee’s wife’s SB account with Andhra Bank. The assessee had furnished copies of the statement of bank account and cash withdrawal for the relevant period of the proprietary concern of the assessee’s wife. The fact of cash withdrawals and having cash in hand of Rs.15 lakhs as on the date of the seizure is also noticed in the Order of the CIT(A) [refer para 8.3 of the impugned order of the CIT(A)]. During the course of assessment proceedings and the appellate proceedings, the assessee had furnished the audit report, balance sheet, the P & L account with its schedules of the proprietary concern, etc.
In the instant case, the AO had issued only two notices i.e., notice under section 143(2) of the Act on 25.06.2021 and under section 142(1) of the Act on 19.07.2021. It is also noticed that assessee has not been provided with an opportunity of being heard before the addition was made by the AO. On the facts of the instant case, I am of the view that there is no adequate opportunity provided to the assessee and there is violation of principles of nature justice. Therefore, I am of the view that the matter needs to be examined afresh by the AO. The AO is directed to give a reasonable opportunity of being heard to the assessee. The assessee is directed to furnish evidence as regards the source of cash that was seized on 14.11.2019. It is ordered accordingly.
Since I have decided the legal issue and remanded the same to the files of the AO, the other grounds raised are not adjudicated and are left open as desired by the learned AR.
In the result, appeal filed by the assessee is partly allowed for statistical purposes.
Pronounced in the open court on the date mentioned on the caption page.