NAGESHWAR RAO ARRAVELLY,HYDERABAD vs. ITO, WARD -11(5), HYDERABAD

The brief facts of the case are that, the assessee is an individual, who filed his return of income for the A.Y. 2017–18 on 23.12.2017 declaring total income at Rs. NIL after claiming deduction under Chapter VI-A of the Income-tax Act, 1961. The return of income filed by the assessee was processed under Section 143(1) of the Act. Subsequently, the case was selected for scrutiny under CASS for the specific reason of verification of cash deposits made during the demonetization period from 09.11.2016 to 30.12.2016. Accordingly, notice under Section 143(2) of the Act dated 24.09.2018 was issued and served on the assessee calling for necessary details and information.

During the course of assessment proceedings, the Assessing Officer issued various statutory notices under Section 142(1) of the Act along with questionnaires and also issued show-cause notices from time to time requiring the assessee to furnish details with regard to cash deposits made in his bank accounts during the demonetization period. However, the assessee failed to comply with any of the notices issued by the A.O. and did not furnish the requisite details. In the absence of any compliance from the assessee, and considering that the assessment was getting time barred, the A.O. proceeded to complete the assessment under Section 144 of the Act, on ex parte basis. On verification of information available on record, the A.O. observed that the assessee has deposited cash amounting to Rs. 19,27,000/- in one bank account and Rs. 62,000/- in another bank account, aggregating to Rs. 19,89,000/- during the demonetization period. Since the assessee failed to explain the nature and source of such cash deposits, the A.O. treated the entire amount of Rs. 19,89,000/- as unexplained cash credits under Section 68 of the Act and added the same to the total income of the assessee, thereby determining the total income at Rs. 19,89,000/-.

Aggrieved by the assessment order, the assessee preferred an appeal before the Ld. CIT(A). During the course of appellate proceedings, the Ld. CIT(A) issued notices to the assessee through the e-proceedings facility, calling for written submissions and documentary evidences in support of the grounds of appeal raised by the assessee. The Ld. CIT(A) also provided adequate opportunities to the assessee to present his case and substantiate the sources of cash deposits. However, despite such opportunities, the assessee neither appeared before the Ld. CIT(A) nor furnished any written submissions or documentary evidences in support of his claim.

The Ld. CIT(A), after considering the facts of the case, assessment order, and remand report obtained from the Assessing Officer, observed that, the assessee failed to discharge the burden of proof cast upon him to explain the nature and source of cash deposits made during the demonetization period. The Ld. CIT(A) further observed that, the assessee did not establish the identity, genuineness and creditworthiness of the sources of such deposits and also failed to produce supporting evidences such as bank statements, cash book or other relevant documents. Therefore, the Ld. CIT(A) held that the Assessing Officer was justified in treating the cash deposits of Rs. 19,89,000/- as unexplained cash credits under Section 68 of the Act, and accordingly confirmed the addition made by the A.O. and dismissed the appeal of the assessee.

Aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before the Tribunal.

The learned counsel for the assessee, Shri T. Chaitanya Kumar, Advocate, submitted that the Ld. CIT(A) erred in dismissing the appeal ex parte without considering the facts and circumstances under which the assessee could not appear before the appellate authority. The learned counsel for the assessee further submitted that, the assessee could not properly represent his case before the lower authorities due to lack of proper assistance and negligence on the part of the authorised representative, and therefore, necessary details could not be furnished either before the A.O. or the Ld. CIT(A). The learned counsel further submitted that although certain confirmations were filed before the Ld. CIT(A), the same were not properly appreciated and were rejected without considering the surrounding facts. It was further submitted that the assessee is now in a position to furnish complete evidences to substantiate the source of cash deposits, which could not be filed earlier. Therefore, the learned counsel for the assessee requested that one more opportunity may be granted to the assessee and the issue may be restored to the file of the A.O. for fresh adjudication.

The learned Senior A.R. for the Revenue, Ms. Helen Ruby Jesindha, on the other hand, strongly supported the orders of the lower authorities and submitted that, the assessee failed to comply with the statutory notices issued during the course of assessment proceedings as well as appellate proceedings. It was further submitted that despite being provided with sufficient opportunities, the assessee did not furnish any details or evidences to explain the source of cash deposits. Therefore, the Assessing Officer was justified in completing the assessment under Section 144 of the Act, and making addition under Section 68 of the Act, and the Ld. CIT(A) has rightly confirmed the same. Hence, the orders of the lower authorities do not call for any interference.

I have heard both the parties, perused the material available on record and had gone through the orders of the authorities below. It is an admitted fact that the assessment in the present case has been completed under Section 144 of the Act, ex parte, since the assessee failed to comply with various statutory notices issued under Sections 143(2) and 142(1) of the Act during the course of assessment proceedings. The A.O., on the basis of information available on record, has treated cash deposits of Rs. 19,89,000/- made during the demonetisation period as unexplained cash credits under Section 68 of the Act. It is further evident from the record that even during the appellate proceedings before the Ld. CIT(A), the assessee did not effectively participate in the proceedings. Although certain confirmations were stated to have been filed, the Ld. CIT(A) has recorded a finding that the assessee failed to establish the identity, genuineness and creditworthiness in respect of the sources of cash deposits and also did not furnish necessary supporting evidences such as bank statements or other relevant records. It is also a matter of record that there was no response from the assessee during the remand proceedings conducted by the Assessing Officer. At the same time, the learned counsel for the assessee has submitted before me that the assessee is now in a position to furnish complete evidences to substantiate the source of cash deposits, which could not be filed before the lower authorities due to reasons explained.

Considering the totality of facts and circumstances of the case, and keeping in view the principles of natural justice, I am of the considered view that, the assessee should be provided with one more opportunity to explain the source of cash deposits on merits. Accordingly, in the interest of justice, I set aside the order of the Ld. CIT(A) and restore the issue to the file of the Assessing Officer. The A.O. is directed to consider the issue de novo and decide the same in accordance with law after providing reasonable opportunity of being heard to the assessee. The assessee is also directed to cooperate with the A.O. and furnish all necessary details and evidences in support of his claim without seeking unnecessary adjournments.

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

The Principal Commissioner of Income Tax, Hyderabad. 4. नवभधगीयप्रनतनिनर्, आयकर अपीलीय अनर्करण, हैदरधबधद / DR, ITAT, Hyderabad 5. गधर्ाफ़धईल / Guard file