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Income Tax Appellate Tribunal, -SURAT-BENCH-SURAT
Before: SHRI SANDEEP GOSAIN & SHRI O.P.MEENA, ACCOUTANT MEMBER
आदेश /O R D E R
PER O. P. MEENA, AM:
This appeal by the Assessee is directed against the order of learned Commissioner of Income tax (Appeals)-1, Surat(in short “the CIT (A)”) dated 25.09.2017 pertaining to Assessment Year 2009-10, which in turn has arisen from the assessment order passed under section 143 (3) read with section 147 dated 16.08.2016 of Income Tax Act, 1961 (in short ‘the Act’) by the Income Tax Officer, Ward- 1(2)(2) Surat(in short “the AO”).
Ground no.1 against the reopening of assessment under section 147 and issue of notice under section 148 of the Act. 3. Brief facts are that the AIR information in the database of the AO revealed that the assessee has deposited cash of Rs.14, 82, 000 in his saving bank account maintained with the Bank of Baroda. However, it was Jyotiben Ketankumar Rana v. ITO-Wd-1(2)(2)Surat/I.T.A.No. 354/SRT/2017/A.Y. 09-10 Page 2 of 12 found that the assessee has not filed return of income for the assessment year under consideration and the source of the above cash deposits remained as unexplained due to the failure on the part of assessee to disclose the source of the above cash deposits. An opportunity was provided to the assessee by issuing letter dated 04. 03. 2016 at the address as provided by the assessee to the Dept. However, the assessee made no compliance. In view of these facts, the AO had reason to believe that cash deposits of the 14, 82, 000 is unexplained in the hands of the assessee, and thus, the said income chargeable to tax has escaped assessment for the assessment year 2009-10 by reason of the failure on the part of the assessee to make a return under section 139 of the Act. Therefore, a notice under section 148 of the Act was issued on 22. 03. 2016 and duly served upon the assessee on 23. 03. 2016. However, the assessee has not filed the return of income within time prescribed. Therefore, one more opportunity was given to the assessee. In response to notice under section 148 of the Act, the assessee had filed her return of income on 07. 07. 2016 declaring total income of the 75,000. Further, notice under section 143 (2) was issued to the assessee. The assessment was made by making addition of which 15, 11, 906 being cash deposits of Rs.14, 82, 000 and cheque deposits of Rs.29,906 in the said bank account.
Being, aggrieved, the assessee filed an appeal before the Ld. CIT (A). The assessee has filed an additional ground challenging the validity of reopening of assessment before the Ld. CIT (A). However, Ld. CIT (A)
Jyotiben Ketankumar Rana v. ITO-Wd-1(2)(2)Surat/I.T.A.No. 354/SRT/2017/A.Y. 09-10 Page 3 of 12 observed that the appellant has never raised any objection during the assessment proceedings regarding the reopening of the assessment. The appellant had filed the return of income in compliance to notice under section 148 of the Act and participated in the reassessment proceedings.
This issue of reopening being bad in law was raised for the first time during the appellate proceeding. Therefore, the objection raised by the appellant regarding the assumption of jurisdiction by the AO by issuance of notice under section 148 of the Act, is devoid of merits, and facts. The Ld. CIT(A) further observed that the appellant did not file any return of income in response to notice under section 148 within the statutory period of 30 days. The appellant did not file any objection on the reopening of the assessment proceedings before the AO and it was only during the appellate proceedings, the appellant has raised an objection on the reopening. It is a settled law that any return filed after the stipulated time as per the notice under section 148 of the Act is to be treated as nonest. The Ld. CIT(A) therefore, referred the conditions laid down in the provisions of section 124 (3) and of observed that the plain reading of clauses (b) of sub- section 3 of section 124 makes it evident that the persons will not be entitled to challenge the jurisdiction of the AO, where he has failed to file any return of income, incompliance to the notice under section 148. The notice under section 148 of the Act was issued on 22. 03. 2016, but no return was filed within 30 days as time provided in the notice under section 148 of the Act. The failure of the appellant to file the return of income Jyotiben Ketankumar Rana v. ITO-Wd-1(2)(2)Surat/I.T.A.No. 354/SRT/2017/A.Y. 09-10 Page 4 of 12 within time provided in the notice under section 148 of the IT Act makes the return filed subsequently (after the expiry of time limit) as nonest.
The Ld. CIT(A) has also supported his view by placing reliance on the decision of ITAT in the case of Mohd. Ayyub v. ITO 2004, (4) MTC 8179 (All- -Bench) wherein it was held that return filed after the time is specified in the notice under section 148 is to be treated as nonest. Hence, the failure of the appellant to file the return within 30 days debars him to question the jurisdiction of the AO as per the provisions of section 124 (3) (b) of the IT Act. Therefore, the Ld. CIT(A) held that above legal and factual position, makes it evident, that at this stage, the appellant is not in the position to challenge the assumption of jurisdiction. It has been held by various courts that if the objection to the jurisdiction has been made to the AO beyond the time limit fixed by section 124(3), then there is no legal obligation on the part of the AO to take up matter to the higher authority. Reliance was placed on following decisions: Vishvanath Gopal Oil Mills 32 ITR 344 (Bombay), Rasulji Buxji Kathwala 32 ITR 592 (Raj.), Dhrangadhra Trading Co (P) Ltd. 60 ITR 674 (Gujarat). The CIT (A) further relying on the decision in the case of Hindustan Transport Vo. 189 ITR 326 (Allahabad) of SLP dismissed 188 ITR (St.) 84 (SC) held that the right to call any dispute and jurisdiction of the assessee is lost as soon as the assessment has been completed in pursuance to the return furnished by the assessee. Further, no appeal lies against the jurisdiction after completion of assessment. In Jyotiben Ketankumar Rana v. ITO-Wd-1(2)(2)Surat/I.T.A.No. 354/SRT/2017/A.Y. 09-10 Page 5 of 12 view of these facts, the Ld. CIT(A) dismissed the appeal of the assessee on this count.
Being aggrieved, the assessee has filed this appeal before this Tribunal. The learned Counsel for the assessee. The reasons recorded for reopening of assessment and submitted that since the reopening of assessment has been made on account of cash deposits in saving bank account, but no return of income was filed by him. Therefore, placing reliance in the case of Bir Bahadur Singh Sijwali v. ITO [2015] 53 taxmann.com 366 (Delhi-Trib) and Gurpal Singh v. ITO [2016] 71 taxmann.com 108 (Amritsar-Trib) submitted that that the assessee made cash deposits in bank account, on the fallacy of presumption that bank deposits constructed undisclosed income or looking fact that source of deposits need not necessarily of income of the assessee, assessment proceedings sought to be initiated were to be set aside.
On the other hand, the learned Sr. D.R. submitted that the assessee has not made any compliance of the notice issued under section 148 of the Act within the statutory period, therefore, the assessee cannot take the this ground of jurisdiction as the Ld. CIT(A) has already held the return filed beyond due date as nonest. Further, while reopening of assessment prima-facie reason are to be looked into only. The case laws relied by the learned Counsel are distinguishable on facts and not binding for the assessee authorities, as these are pertains to non-Jurisdictional tribunals.
Jyotiben Ketankumar Rana v. ITO-Wd-1(2)(2)Surat/I.T.A.No. 354/SRT/2017/A.Y. 09-10 Page 6 of 12
We have heard the rival submissions and perused the material available on record. The perusal of the reasons recorded for reopening of assessment shows that the assessee has made cash deposits in her saving bank accounts, which was not disclosed to the Dept. The assessee has not made any compliance to the letter issued by the AO, which appears to be a simple letter for filing of return of income. We further find that the due date for filing of return of income in response to notice under section 148 of the Act was already expired, hence, the Ld. CIT(A) has rightly observed that as per provisions of section 124(3) that the person will not be entitled to challenge the jurisdiction of the AO, when he failed to file any return of income in compliance to the notice issued under section 148 of the Act.
In the instant case, the notice was issued on 22.03. 2016, but no return of income was filed within 30 days as provided in the notice under section 148 of the Act. Therefore, failure of the assessee to file the return of income within time provided in the notice under section 148 of the Act makes the return filed subsequently (after the expiry of time limit) as nonest. Considering these facts, we are inclined to agree with the finding of Ld. CIT (A) and various judgements relied by him as discussed above in his finding as well as in his appellate order. Therefore, we do not find any infirmity in the order of CIT (A), accordingly, same is upheld. So far, reliance on the decision in the case of Delhi and Amritsar benches of Tribunal, these are entirely distinguishable on facts and law, in the light of peculiar facts of the cases where no return of income was filed within Jyotiben Ketankumar Rana v. ITO-Wd-1(2)(2)Surat/I.T.A.No. 354/SRT/2017/A.Y. 09-10 Page 7 of 12 the statutory period of the issuance of notice under section 148 of the Act.
Further, in the case of Bir Bahadur Singh Sijwali (supra) the tribunal noted that reasons were recorded after issuance of notice under section 148 of the Act, whereas reasons to be recorded before issue of notice under section 148 of the Act. Therefore, tribunal has held that where no reasons recorded prior to issuance of notice, the reassessment proceeding must fail. Therefore, tribunal held that material must indicate the escapement of income on the basis of reasons recorded. Hence, this decision of Tribunal is distinguishable on facts, as in the case of the assessee notice under section 148 was issued after recording reasons for issuance of notice under section 148 of the Act. Similarly, in the case of Gurpal Singh (supra), the tribunal observed that inquiries made through notice under section 133(6) were not having valid sanction of competent authority and it can be resorted to only where no proceeding was pending after approval of Commissioner of income tax. Since, in that case proceeding were not pending hence, the issue of notice under section 133(6) and consequently, issue of notice under section 148 of the Act was found without jurisdiction.
In the present case, these facts are absent. Moreover, the assessee has not filed return of income within statutory period of notice under section 148 of the Act hence, the assessee was debarred from taking objection to issue of jurisdiction, specifically when she has not complied with proceeding and not raised any objection to issue of notice under section 148 of the Act during the course of assessment proceedings. In view of these facts and Jyotiben Ketankumar Rana v. ITO-Wd-1(2)(2)Surat/I.T.A.No. 354/SRT/2017/A.Y. 09-10 Page 8 of 12 circumstances, we uphold the reopening of assessment as valid and in accordance with law. In view of this matter, this ground of appeal is therefore, dismissed.
8. Ground No. 2 relates to confirming addition of Rs.15,11,906 of whole deposit in bank account.
9. Succinct facts are that the AO on the basis of AIR information found that the assessee had deposited Rs.15,11,906, which included cash deposits of Rs.14,82,000 in saving bank account with bank of Baroda, Surat. The assessee explained that she purchased jari from hawkers and subsequently made sale of the same jari through door-to-door sales.
However, the AO has observed that she was not having any sales tax number, registration with competent authority, no telephone, no business premises, no details of packing materials, any evidence of purchases, etc. to prove the business. The claim of the assessee that she was earning of income of Jari and made deposits the bank account of the bank of the were made at Farrukhabad out of sale proceeds received from the traders for whom the goods were sold. The assessee relied on the affidavit filed during the assessment proceedings and submitted that she was a small businessperson and therefore was not having any business establishment.
In view of this, the AO asked the assessee to furnish confirmation from the three persons from Farrukhabad, who were claimed to be have made cash deposit to the sales made of Jari. However, she could only submit Election ID Card of one Shri Ishahar claimed to be her customer but no other Jyotiben Ketankumar Rana v. ITO-Wd-1(2)(2)Surat/I.T.A.No. 354/SRT/2017/A.Y. 09-10 Page 9 of 12 supporting documents are filed apart from the ID proof. Therefore, the AO was not convinced with submissions, hence, accordingly, made addition of entire cash deposits including cheque deposit of Rs.15,11,906 as unaccounted income.
Being, aggrieved, the assessee filed an appeal before the Ld. CIT (A). However, CIT (A) held that the appellant has not been able to prove the source of the cash/credit deposits in the bank account. The submissions and evidences produced by the appellant have been found to be fabricated and manufactured for a make-believe arrangement.
Therefore, the addition made by the AO of Rs.15,11,906 was upheld. 11. Being, aggrieved the assessee filed this appeal before the Tribunal.
The learned Counsel for the assessee reiterated the submissions as made before the lower authorities. The learned Counsel submitted that the assessee has deposed in her affidavit that after the marriage, her husband had not worked anywhere, but for maintaining the family and source of income, they decided to procure readymade jari goods from the market and sell it in the open market. They opened the bank account with the bank of Baroda on 18. 01. 2007 as Surat. This was the saving bank account.
This account was in joint account with the name of the assessee as first and her husband as second joint holder. The assessee used to purchase Jari from PHERIYA who used to come to their house with full bag of Jaris. She sold the said jari same as style PHERIYA in Farrukhabad. As the assessee and her husband were illiterate and this business being economical and Jyotiben Ketankumar Rana v. ITO-Wd-1(2)(2)Surat/I.T.A.No. 354/SRT/2017/A.Y. 09-10 Page 10 of 12 started with on capital of Rs. 35,00 to Rs.40,000 lying with them. Thus, they used to deposit the money in bank account being sale of jari and purchase goods and then again sell the goods to as FHERIYA coming to their house. For these reasons, they did not have these documents of purchases and sales. However, the assessee has shown profit from the business by disclosing total income at Rs. 75,000, which is more than by 5% as per proviso of section 44AF of the Act. Therefore, the AO was not justified in making addition of total deposits appearing in their bank account. The learned Counsel further submitted that the bank accounts also shows cash deposits as well as cash withdrawals, which prove that the assessee was carrying on business. Without prejudice, the learned counsel for the assessee submitted that entire deposit in bank account should not be added and only peak addition could be made where the bank accounts showing cash deposits in cash withdrawals. The peak deposits as on 17.12.2008 were showing at Rs.1,43,570. Since the assessee is not maintaining in books of accounts. Therefore, her income may be assessed as business income under the provisions of section 44 AF of the Act.
Per contra, the ld. Sr. D.R. relied on lower authorities.
We have heard the rival submissions and perused the relevant material on record. We find that the assessee had provided explanation but same was not found acceptable as no evidence in support of the same was filed. The documentary evidences did not support the assertion in affidavit. However, it is discernible from bank statement that day-to-day Jyotiben Ketankumar Rana v. ITO-Wd-1(2)(2)Surat/I.T.A.No. 354/SRT/2017/A.Y. 09-10 Page 11 of 12 cash deposits as well as cash withdrawals and that bank deposits were made from out station as per claim made in her affidavit. She had filed identity of Ishahar in the shape of election ID Card. The assessee has also filed addresses of three person being her customer who have claimed to have deposited cash in her bank account from Farrukhabad Therefore, the contention raised in her affidavit may be true. It is also facts that saving bank account was not disclosed on in return of income. Therefore, considering circumstances and taking holistic view and approach, the entire cash deposits cannot be added as income of the assessee. The bank account also reflected cash withdrawals and re-deposit. The assessee has not maintained any books of accounts nor the bank account were disclosed in return of income. However, it is discernible from bank account that cash deposits were made for various out stations. Therefore, it is clearly apparent that cash deposits are linked with business transaction of the assessee. Since the assessee has not maintained any books of accounts, hence, in such situation only net profit as per provisions of section 44AF of the Act is required to be estimated as net profit and not entire turnover or cash deposits reflected in the bank account. Therefore, following the ratio laid down in the case of CIT V. Pradeep Shantilal Patel [2014] 42 taxmann.com 2 (Gujarat) wherein it was held that where assessee admitted that cash deposits pertained to his retail business but details and nature of business were not forthcoming from record, considering total turnover of assessee, net income to be determined under section 44AF of Jyotiben Ketankumar Rana v. ITO-Wd-1(2)(2)Surat/I.T.A.No. 354/SRT/2017/A.Y. 09-10 Page 12 of 12 the Act, the AO is directed to estimate net profit @ 5% of total turnover of Rs.15,11,906 being cash deposits in bank account. The AO will allow set off the amount of Rs. 75,000 disclosed in her income-tax return. In other way, the set off and telescoping would be allowed of Rs. 75,000 disclosed in return of income and considered by the AO in assessment order. This grounds of appeal
is therefore, partly allowed. 14. In the result, the appeal of the assessee is partly allowed. 15. The order pronounced in open court on 10.02.2020.