SHRI SHAASHI RAKESH PATODIA,PUNE vs. INCOME TAX OFFICER, CIRCLE-4, PUNE, PUNE

This appeal by the assessee against the order dated 29-03-2023 passed by the National Faceless Appeal Centre, Delhi (“NFAC”) for assessment year 2017-18.

Ground No. 1 raised by the assessee challenging the action of CIT(A), NFAC, Delhi in confirming the addition made by the AO for violating the principle of natural justice in the facts and circumstances of the case.

We note that the assessee is an individual, derived income under the head salary and capital gain for the year under consideration. The assessee filed return of income declaring a total income of Rs.99,60,230/-. Notices u/s. 143(2) and 142(1) of the Act were issued and in response to the which the assessee replied electronically through e-proceedings facility. According to the AO, cash deposits to an extent of Rs.7,79,500/- were made during the demonetization period i.e. 09-11-2016 to 31-12-2016. The AO show caused the assessee to explain the source of such cash deposits. In order to understand the trend of cash deposits for the last three years notice u/s. 133(6) of the Act were issued to bank and received the details as such which are reproduced in page No. 3 of the assessment order. On an examination of such details as submitted by the banks, the AO opined there was no such trend in cash deposits from 9th November to 31st December in earlier years and doubted the cash deposits made during demonetization period as unaccounted cash. Accordingly, above said amount of Rs.7,79,500/- was disallowed, added u/s. 69A of the Act and charged the same u/s. 115BBE of the Act.

Before the CIT(A), it was stated that the deposit of Rs.7,79,500/- is out of the withdrawals from 07-04-2016 to 11-05-2016 amounts to Rs.9,60,000/-. It is noted that the assessee has given reasons for the said withdrawals for medical expenses that may have required for her aged parents in law. The CIT(A), NFAC, Delhi observed that the assessee is an individual of means and it is unlikely to hoard cash for medical expenses. She is in habit of electronic transfer of funds and also cash withdrawals are regular in nature, but however, the said withdrawals are not very large amounts. The assessee did not indicate as to where and how she had to spend cash for medical expenses for her in laws and her contention requiring cash for medical expenses does not pass muster. Further, the NFAC, Delhi opined hospitals and doctor do not insist on cash payments and appreciated the habit of assessee for electronic transfers which are quick and easy. The CIT(A) having opined above held that the assessee did not indicate the use of cash withdrawals, but however, given relief for the cash withdrawals from April to 5th November, 2016 to an extent of Rs.1,95,000/- and confirmed the addition of Rs.5,84,500/- (Rs.7,79,500/- - Rs.1,95,000/-).

Before us, the ld. AR drew our attention to paper book consisting of pages 1 to 14 and argued both the authorities below did not consider the cash withdrawals during preceding year and drew our attention to bank statement at pages 2 to 14. He also argued that there was no occasion to submit the explanation before the AO and the CIT(A) having explanation of the assessee regarding the cash withdrawals, no finding was given on the same. We note that as rightly pointed by the ld. AR, on perusal of the assessment order, we note that no explanation of the assessee whatsoever was referred by the AO in the assessment order which clearly establishes that there was no occasion to submit details rebutting the view of AO. Further, on perusal of impugned order, we note that the NFAC, Delhi discussed the cash withdrawals as submitted by the assessee, but however, no finding has been given to that effect whether the cash deposits as found by the AO are out of cash withdrawals or not, but however, the NFAC, Delhi made observations about the assessee no chance of hoarding cash having means to incur medical expenses through electronic transfer of funds. Further, the assessee did not indicate as to where and how to spend cash for medical expenses and hoarding cash for monthly expenses does not pass muster as the hospitals and doctor do not insist for cash payments. In our opinion, the NFAC, Delhi has to decide the issue on merits in accordance with law when the assessee contends that she has sufficient withdrawals which were deposited during the demonetization period. The NFAC, Delhi proceeded to discuss the issue out of context by stating the assessee has proper means and no need of hoarding cash for medical expenses. Further, the assessee in habit of electronic transfer of funds and did not indicate where and how that the assessee will spend the said cash withdrawals. Further, the hospitals and doctor does not insist for cash payments. Above said observations by NFAC, Delhi, which are, in our opinion out of context and not justified. Therefore, the order of NFAC, Delhi is to be regarded as passed without recording reasons on the issue and by assuming and presuming, held the assessee did not prove the use of cash as withdrawn. As discussed above, there was no opportunity for the assessee before the AO and having filing details before the NFAC, Delhi no reasons recorded on the issue, therefore, in our opinion, the assessee must be given one opportunity for the examination of the contention of assessee before the AO. Taking into consideration the facts and circumstances of the case and in the interest of justice, we deem it proper to remand the issue to the file of AO for its fresh examination. The assessee is liberty to file evidences, if any, in support of her claim. Thus, ground No. 1 raised by the assessee is allowed for statistical purpose.

In view of our decision in ground No. 1 in remanding the matter to the file of AO for fresh examination, the ground No. 2 raised by the assessee is allowed for statistical purpose, accordingly.

In the result, the appeal of assessee is allowed for statistical purpose.