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Facts
The assessee filed its return of income and was selected for scrutiny. During assessment, it was noticed that the assessee deposited a significant sum of cash during the demonetization period, which was claimed to be sourced from earlier withdrawals. However, the assessee failed to provide cogent documentary evidence to substantiate this claim.
Held
The Tribunal held that while the assessee failed to provide repeated opportunities, it demonstrated a reasonable cause for non-compliance due to a partner's illness. Therefore, the matter was restored to the Ld. CIT(A) for fresh adjudication, requiring the assessee to furnish documentary evidence.
Key Issues
Whether the Ld. CIT(A) erred in passing an ex-parte order without providing a reasonable opportunity, and whether the addition for unexplained cash deposits was justified without sufficient documentary evidence from the assessee.
Sections Cited
143(2), 142(1), 69A, 133(6), 115BBE
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Income Tax Appellate Tribunal, MUMBAI BENCH “A” MUMBAI
Before: SHRI OM PRAKASH KANT & SHRI RAJ KUMAR CHAUHAN
ORDER
PER OM PRAKASH KANT, AM
This appeal by the assessee is directed against order dated 26.12.2024 passed by the Ld. Commissioner of Income-tax (Appeals) – National Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for assessment year 2017-18, raising following grounds:
1. On the facts and circumstances of the Appellant's case and in law the Ld. CIT(A) erred in passing an ex-parte order without giving reasonable opportunity of being heard, for the reasons mentioned in the impugned order or otherwise.
2. On the facts and circumstances of the Appellant's case and in 2. On the facts and circumstances of the Appellant's case and in 2. On the facts and circumstances of the Appellant's case and in law the Ld. CIT(A) erred in invoking the provisions of section law the Ld. CIT(A) erred in invoking the provisions of section law the Ld. CIT(A) erred in invoking the provisions of section 69A of the Income Tax Act, 1961 in the Appellant's case, for 69A of the Income Tax Act, 1961 in the Appellant's case, for 69A of the Income Tax Act, 1961 in the Appellant's case, for reasons stated in t reasons stated in the impugned order or otherwise.
3. On the facts and circumstances of the Appellant's case and in 3. On the facts and circumstances of the Appellant's case and in 3. On the facts and circumstances of the Appellant's case and in law the Ld. CIT(A) erred in confirming the action of Ld. A.O. in law the Ld. CIT(A) erred in confirming the action of Ld. A.O. in law the Ld. CIT(A) erred in confirming the action of Ld. A.O. in making an addition of Rs. 72,40,000/ making an addition of Rs. 72,40,000/- being cash deposited in being cash deposited in Bank Account, by treating the sa Bank Account, by treating the same as unexplained money u/s me as unexplained money u/s 69A of the Income Tax Act, 1961, as per the reasons stated in 69A of the Income Tax Act, 1961, as per the reasons stated in 69A of the Income Tax Act, 1961, as per the reasons stated in the impugned order the impugned order or otherwise.
Briefly stated, the facts of the case are that the assessee filed Briefly stated, the facts of the case are that the assessee filed Briefly stated, the facts of the case are that the assessee filed its return of income on 29.03.2018 declaring total income of its return of income on 29.03.2018 declaring total income of its return of income on 29.03.2018 declaring total income of ₹7,45,010/-. The return of income filed by the assessee was The return of income filed by the assessee was The return of income filed by the assessee was selected for scrutiny and notice u/s 143(2) of the Income-tax Act, selected for scrutiny and notice u/s 143(2) of the Income selected for scrutiny and notice u/s 143(2) of the Income 1961 (in short ‘the Act’) was issued and served upon the assessee. 1961 (in short ‘the Act’) was issued and served upon the assessee 1961 (in short ‘the Act’) was issued and served upon the assessee Thereafter, the Assessing Officer issued multiple notices under Thereafter, the Assessing Officer issued multiple notices under Thereafter, the Assessing Officer issued multiple notices under section 142(1) of the Act on 20.07.2019, 05.10.2019, 15.11.2019, ection 142(1) of the Act on 20.07.2019, 05.10.2019, 15.11.2019, ection 142(1) of the Act on 20.07.2019, 05.10.2019, 15.11.2019, 29.11.2019, and 19.12.2019. However, the assessee failed to 29.11.2019, and 19.12.2019. However, the assessee failed to 29.11.2019, and 19.12.2019. However, the assessee failed to comply with the same. comply with the same.
2.1 During the course of assessment proceedings, it was noticed During the course of assessment proceedings, it was noticed During the course of assessment proceedings, it was noticed that the assessee had deposited a sum of ₹72,00,000/ that the assessee had deposited a sum of 72,00,000/- in his HDFC Bank Bank Bank account account account during during during the the the demonetisation demonetisation demonetisation period period period between between between 09.11.2016 to 31.12.2016. In an online response during cash 09.11.2016 to 31.12.2016. In an online response during cash 09.11.2016 to 31.12.2016. In an online response during cash transaction enquiries, the assessee claimed that the deposits were transaction enquiries, the assessee claimed that the deposits were transaction enquiries, the assessee claimed that the deposits were sourced out of withdrawals made during the period 01.04.2016 to sourced out of withdrawals made during the period 0 sourced out of withdrawals made during the period 0 07.11.2016. However, no cogent documentary evidence was placed 07.11.2016. However, no cogent documentary evidence was placed 07.11.2016. However, no cogent documentary evidence was placed on record to substantiate such claim. on record to substantiate such claim. The Assessing Officer, after The Assessing Officer, after analysing the details, recorded findings that: (i) cash deposits analysing the details, recorded findings that: (i) cash deposits analysing the details, recorded findings that: (i) cash deposits during demonetisation far exceeded earlier periods without proper during demonetisation far exceeded earlier periods without proper during demonetisation far exceeded earlier periods without proper explanation; (ii) no contemporaneous books of account or cash book explanation; (ii) no contemporaneous books of account or cash book explanation; (ii) no contemporaneous books of account or cash book were produced; (iii) no evidence of utilisation or purpose of earlier were produced; (iii) no evidence of utilisation or purpose of earlier were produced; (iii) no evidence of utilisation or purpose of earlier withdrawals was furnished; and (iv) a substantial increase in cash withdrawals was furnished; and (iv) a substantial inc withdrawals was furnished; and (iv) a substantial inc balance balance balance between between between 01.04.2015 01.04.2015 01.04.2015 and and and 01.04.2016 01.04.2016 01.04.2016 remained remained remained unexplained. In absence of corroborative material, the Assessing unexplained. In absence of corroborative material, the Assessing unexplained. In absence of corroborative material, the Assessing Officer invoked section 69A of the Act, treating the sum of Officer invoked section 69A of the Act, treating the sum of Officer invoked section 69A of the Act, treating the sum of ₹72,40,000/- as unexplained money, and applied tax under section as unexplained money, and applied tax under section as unexplained money, and applied tax under section 115BBE at the prescribed rate. 15BBE at the prescribed rate.
On appeal, the Ld. CIT(A) issued multiple notices granting On appeal, the Ld. CIT(A) issued multiple notices granting On appeal, the Ld. CIT(A) issued multiple notices granting opportunities on several dates, details of which stand recorded in opportunities on several dates, details of which stand recorded in opportunities on several dates, details of which stand recorded in para 5.1 of the impugned order. para 5.1 of the impugned order. For ready reference, said para is For ready reference, said para is reproduced as under: reproduced as under:
5.1 Background facts, AO’s order and grounds of appeal are perused. round facts, AO’s order and grounds of appeal are perused. round facts, AO’s order and grounds of appeal are perused. The appellant was asked to submit documentary evidences in support The appellant was asked to submit documentary evidences in support The appellant was asked to submit documentary evidences in support of the grounds of appeal. The case was posted on the following dates-: of the grounds of appeal. The case was posted on the following dates of the grounds of appeal. The case was posted on the following dates Date of hearing Time limit for Time limit for Remarks notice furnishing written furnishing written s submission 06.03.2020 23.03.2020 23.03.2020 Adjournment - Government Government restrictions for travel due to Covid- restrictions for travel due to Covid 19 15.02.2021 02.03.2021 02.03.2021 No reply 18.08.2021 02.09.2021 02.09.2021 No reply 14.05.2024 24.05.2024 24.05.2024 Adjournment- Partner of the Partner of the assessee’s firm is bedridden. assessee’s firm is bedridden. 04.06.2024 20.06.2024 20.06.2024 Adjournment- Partner of the Partner of the assessee’s firm is bedridden. assessee’s firm is bedridden.
03.07.2024 19.07.2024 19.07.2024 Adjournment- Partner of the Partner of the assessee’s firm is bedridden. assessee’s firm is bedridden. 01.08.2024 14.08.2024 14.08.2024 No reply 12.11.2024 18.11.2024 18.11.2024 No reply 02.12.2024 09.12.2024 09.12.2024 No reply 03.12.2024 11.12.2024 11.12.2024 Adjournment- Partner of the Partner of the assessee’s firm is bedridden. assessee’s firm is bedridden. 3.1 Despite such repeated opportunities, the assessee neither filed Despite such repeated opportunities, the assessee neither filed Despite such repeated opportunities, the assessee neither filed written submissions nor adduced any supporting evidence. written submissions nor adduced any supporting evidence. written submissions nor adduced any supporting evidence. Consequently, the Ld. CIT(A) upheld the Consequently, the Ld. CIT(A) upheld the assessment, observing that assessment, observing that unexplained cash deposits, duly confirmed by the bank under unexplained cash deposits, duly confirmed by the bank under unexplained cash deposits, duly confirmed by the bank under section 133(6) of the Act, fell within the ambit of section 69A, and section 133(6) of the Act, fell within the ambit of section 69A, and section 133(6) of the Act, fell within the ambit of section 69A, and thus, the action of the Assessing Officer was legally and factually thus, the action of the Assessing Officer was legally and factually thus, the action of the Assessing Officer was legally and factually justified. The relevant finding The relevant finding of ld CIT(A) is reproduced of ld CIT(A) is reproduced as under:
“6.1.6 Support of the above decision is taken only to emphasise the fact 6.1.6 Support of the above decision is taken only to emphasise the fact 6.1.6 Support of the above decision is taken only to emphasise the fact that in absence of any explanation, bank deposits can be taken as that in absence of any explanation, bank deposits can be taken as that in absence of any explanation, bank deposits can be taken as unexplained money under section 69A of the Income tax Act. Therefore, unexplained money under section 69A of the Income tax Act. Therefore, unexplained money under section 69A of the Income tax Act. Therefore, the Assessing Officer has not committed any error in treating the cash ing Officer has not committed any error in treating the cash ing Officer has not committed any error in treating the cash deposit as unexplained money under section 69A of the Act. It is also deposit as unexplained money under section 69A of the Act. It is also deposit as unexplained money under section 69A of the Act. It is also important to recall that the trigger for initiation of action in this case was important to recall that the trigger for initiation of action in this case was important to recall that the trigger for initiation of action in this case was the information about cash deposit of Rs.72,00 the information about cash deposit of Rs.72,00,000. The Assessing ,000. The Assessing Officer also got confirmation from the HDFC Bank about cash deposit of Officer also got confirmation from the HDFC Bank about cash deposit of Officer also got confirmation from the HDFC Bank about cash deposit of the same figure of money, after calling for information under section the same figure of money, after calling for information under section the same figure of money, after calling for information under section 133(6) of the Act. The assessee, in the online cash response, has 133(6) of the Act. The assessee, in the online cash response, has 133(6) of the Act. The assessee, in the online cash response, has attributed the source of cash attributed the source of cash deposits to be cash withdrawals during deposits to be cash withdrawals during the period 1.4.2016 to 7.11.2046. However, as mentioned in the the period 1.4.2016 to 7.11.2046. However, as mentioned in the the period 1.4.2016 to 7.11.2046. However, as mentioned in the assessment order; despite being specifically asked for, it has not given assessment order; despite being specifically asked for, it has not given assessment order; despite being specifically asked for, it has not given any documentary evidence regarding the same. Further, it has stated any documentary evidence regarding the same. Further, it has stated any documentary evidence regarding the same. Further, it has stated that the total cash deposited during the demonetisation period is al cash deposited during the demonetisation period is al cash deposited during the demonetisation period is Rs.72,40,000 (para 23 of the assessment order). Based on such a Rs.72,40,000 (para 23 of the assessment order). Based on such a Rs.72,40,000 (para 23 of the assessment order). Based on such a statement by the assessee, the Assessing Officer had to consider the statement by the assessee, the Assessing Officer had to consider the statement by the assessee, the Assessing Officer had to consider the higher figure of Rs.72,40,000 as unexplained money while completing higher figure of Rs.72,40,000 as unexplained money while completing higher figure of Rs.72,40,000 as unexplained money while completing the assessment. In absence of any explanation from the assessee, the he assessment. In absence of any explanation from the assessee, the he assessment. In absence of any explanation from the assessee, the action of the Assessing Officer in taking the admitted deposit figure has action of the Assessing Officer in taking the admitted deposit figure has action of the Assessing Officer in taking the admitted deposit figure has a strong legal and logical backing. Therefore, Ground No 1 of the appeal a strong legal and logical backing. Therefore, Ground No 1 of the appeal a strong legal and logical backing. Therefore, Ground No 1 of the appeal is being dismissed.” ”
Before us, the Ld Before us, the Ld. counsel for the assessee submitted that due . counsel for the assessee submitted that due to serious illness of the partner of the firm, who has been to serious illness of the partner of the firm, who has been to serious illness of the partner of the firm, who has been bedridden, bedridden, bedridden, the the the assessee assessee assessee could could could not not not effectively effectively effectively pursue pursue pursue the the the proceedings before the Ld. CIT(A). It was pleaded that the assessee proceedings before the Ld. CIT(A). It was pleaded that the assessee proceedings before the Ld. CIT(A). It was pleaded that the assessee now seeks to place releva now seeks to place relevant material to substantiate the source of nt material to substantiate the source of cash deposits and prayed for one more opportunity in the interest of cash deposits and prayed for one more opportunity in the interest of cash deposits and prayed for one more opportunity in the interest of justice.
4.1 We have heard the rival submissions and carefully perused the We have heard the rival submissions and carefully perused the We have heard the rival submissions and carefully perused the record. It is not in dispute that the assessee failed to avail repeated record. It is not in dispute that the assessee failed to avail repeate record. It is not in dispute that the assessee failed to avail repeate opportunities before the lower authorities. However, it is equally a opportunities before the lower authorities. However, it is equally a opportunities before the lower authorities. However, it is equally a settled proposition that technicalities should not come in the way of settled proposition that technicalities should not come in the way of settled proposition that technicalities should not come in the way of substantial justice. Where the assessee demonstrates a reasonable substantial justice. Where the assessee demonstrates a reasonable substantial justice. Where the assessee demonstrates a reasonable cause for non-compliance, and expresses readiness compliance, and expresses readiness compliance, and expresses readiness to adduce material evidence, one further opportunity ought to be afforded, material evidence, one further opportunity ought to be afforded, material evidence, one further opportunity ought to be afforded, particularly when the addition made is of a substantial amount. In particularly when the addition made is of a substantial amount. particularly when the addition made is of a substantial amount. this backdrop, and guided by the overarching principle that the this backdrop, and guided by the overarching principle that the this backdrop, and guided by the overarching principle that the rules of procedure are intended to advance the ca rules of procedure are intended to advance the cause of justice and use of justice and not to thwart it, we deem it appropriate to restore the matter to the not to thwart it, we deem it appropriate to restore the matter to the not to thwart it, we deem it appropriate to restore the matter to the file of the Ld. CIT(A) for fresh adjudication. The assessee shall be file of the Ld. CIT(A) for fresh adjudication. The assessee shall be file of the Ld. CIT(A) for fresh adjudication. The assessee shall be under an obligation to furnish all documentary evidence in support under an obligation to furnish all documentary evidence in support under an obligation to furnish all documentary evidence in support of its claim that cash deposits of its claim that cash deposits during the demonetisation period during the demonetisation period were sourced out of earlier withdrawals. The Ld. CIT(A) shall grant were sourced out of earlier withdrawals. The Ld. CIT(A) shall grant were sourced out of earlier withdrawals. The Ld. CIT(A) shall grant due opportunity to both parties and decide the matter in due opportunity to both parties and decide the matter in due opportunity to both parties and decide the matter in accordance with law. accordance with law. The ground No. 1 of the appeal of the assessee The ground No. 1 of the appeal of the assessee is accordingly allowed. is accordingly allowed.
Since we have already restored the appeal to the file of the Ld. nce we have already restored the appeal to the file of the Ld. nce we have already restored the appeal to the file of the Ld. CIT(A) for deciding afresh, the other grounds on merit are not CIT(A) for deciding afresh, the other grounds on merit are not CIT(A) for deciding afresh, the other grounds on merit are not required to be adjudicated upon at this stage and accordingly same required to be adjudicated upon at this stage and accordingly same required to be adjudicated upon at this stage and accordingly same are dismissed as infructuous. are dismissed as infructuous.
In the result, the appeal of the assessee is allowed for In the result, the appeal of the assessee is allowed for In the result, the appeal of the assessee is allowed for statistical purposes.