SRI MEENATCHI FRIED GRAM MILLS,SALEM vs. THE ITO, WARD(16), SALEM

This appeal filed by the assessee is directed against the order of the ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, dated 26.07.2022 relevant to the assessment year 2017-18.

Brief facts of the case are that the assessee filed his return of income for the assessment year 2017-18 on 11.11.2017 admitting total income of ₹.2,85,640/-. The case was selected for scrutiny by CASS and a notice under section 143(2) of the Income Tax Act, 1961 [“Act” in short] dated 13.08.2018 has been e-served on the assessee. Further notice under section 142(1) of the Act calling or details have been served on the assessee by e-mail. There was no response from assessee. Subsequently, a show cause notice was issued on 23.10.2019 asking about sources for cash deposits during demonetization. However, there was no response from the assessee. After considering the details and available on record, the Assessing Officer has completed the assessment under section 143(3) of the Act dated 12.12.2019 assessing total income of the assessee at ₹.41,20,640/- by treating the cash deposits made in “Specified Bank Notes” (SBNs) of ₹.38,35,000/- during demonetization period as unexplained and unaccounted income in the hand of the assessee under section 69A of the Act and taxed the same at the rate specified under section 115BBE of the Act. On appeal, the ld. CIT(A) confirmed the assessment order by dismissing the appeal as the assessee could not put his appearance or furnished any written submissions before the ld. CIT(A).

On being aggrieved, the assessee is in appeal before the Tribunal. The ld. Counsel for the assessee has submitted that the account of the assessee are subject to audit under section 44AB of the Act and all the above deposits have been duly reflected in the books of account and therefore, the Assessing Officer was not justified in making the above addition without rejecting the books of accounts. It was further submission that when the books of accounts are maintained and have been duly audited in terms of section 44AB of the Act, no addition can be made under the above sections. It was prayed that none appeared on behalf of the assessee before the ld. CIT(A) was neither wilful nor wanton and the ld. CIT(A) was not correct in passing the exparte order.

On the other hand, the ld. DR strongly supported the orders of authorities below.

We have heard both the sides, perused the materials available on record and gone through the orders of authorities below including written submissions of the assessee. In this case, the assessee had made total cash deposits of ₹.43,93,500/- during the demonetization period (i.e. from 9th November, 2016 to 30th December, 2016), out of which ₹.38,35,000/- was deposited in SNBs (demonetized currency) during demonetization. Since there was no response from the assessee against the various notices issued, the Assessing Officer treated the cash deposits made in “Specified Bank Notes” (SBNs) of ₹.38,35,000/- during demonetization period as unexplained and unaccounted income in the hand of the assessee under section 69A of the Act and taxed the same at the rate specified under section 115BBE of the Act.

The ld. Counsel for the assessee has vehemently contended that when the cash deposits in bank account have been duly entered in the books of accounts maintained and the books of accounts were not rejected by the Assessing Officer, no addition under section 69A of the Act can be made and all the credits in the bank account including the cash deposits made during demonetization period is out of receipts from the business of the assessee and the income from the same were offered to tax. In the assessment order, the Assessing Officer has examined the statement of bank account maintained by the assessee during the year under consideration i.e., prior to demonetization period (01.04.2016 to 07.11.2016), during demonetization period (09.11.2016 to 30.12.2016) and post demonetization period from 31.12.2016 to 312.03.2017. However, evidence towards receipts from the business was not furnished by the assessee during the course of assessment proceedings or during the course of appellate proceedings. Since there was no response from the assessee to the notices issued, the ld. CIT(A) concluded the exparte appellate order. Before us, the ld. Counsel for the assessee has submitted that the assessee was having sufficient business receipts. In order to meet the ends of natural justice, we are of the considered opinion that the assessee shall be given one more opportunity to furnish the details of receipts from the business before the Assessing Officer and after considering the same, the Assessing Officer shall decide the issue afresh in accordance with law by affording an opportunity of being heard to the assessee.

In the result, the appeal filed by the assessee is allowed for statistical purposes. Order pronounced on 15th February, 2023 at Chennai.