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Income Tax Appellate Tribunal, BENGALURU “B” BENCH, BENGALURU
IN THE INCOME TAX APPELLATE TRIBUNAL BENGALURU “B” BENCH, BENGALURU Before Shri N.V. Vasudevan, Vice President and Ms. Padmavathy S., Accountant Member ITA No. 696/Bang/2022 (Assessment Year: 2017-18)
Shri Syed Mohammed Rizwan vs The Income Tax Officer-2(2)(8) No. 193, 1st Main Road BMTC Depot Sheshadripuram Koramangala Bangalore 560020 Bengaluru 560095 PAN – AFVPR3337R (Appellant) (Respondent) Assessee by: Shri B.R. Sudheendra, CA Revenue by: Shri K.R. Narayan, Addl CIT-DR Date of hearing: 12/09/2022 Date of pronouncement: 20/09/2022 O R D E R Per: Padmavathy, A.M. This appeal is against the order of the Commissioner of Income Tax(Appeals)-11, Bangalore dated 22.07.2022 for AY 2017-18.
The assessee has raised the following grounds of appeal: - “1. General Ground 1.1 The order passed by the CIT(A) 11, Bangalore is bad in law and 'liable to be quashed. 2. Assessment order passed in violation of principles of natural justice 2.1 The learned AO erred in making the addition under section 68 amounting to Rs. 3,99,46,180, Rs. 33,69,742 and .the disallowance of interest under section 24(b) amounting to Rs. 2,00,000 in an undue, haste and mechanical manner without properly considering the details and documents filed during the assessment. 2.2 The learned AO erred in passing the assessment order and erred in making the impugned additions without issuing any show cause notice
2 ITA No. 696/Bang/2022 Shri Syed Mohammed Rizwan proposing to make the impugned additions and without providing any opportunity of hearing to the appellant as to why the impugned additions should not be made. 2.3 The learned CIT(A) erred in passing the appellate order without admitting the additional evidences filed by the appellant during the appellate proceedings. 2.4 On facts and circumstances of the case and law applicable, the assessment order passed in violation of principles of natural justice is bad in law and liable to be quashed. 3. Addition under section 68 — Rs. 3,99,46,180 3.1. The learned CIT(A) 11, Bangalore erred in confirming the addition under section 68 amounting to Rs. 3,99,46,180 in respect of cash deposits to bank account during the year. 3.2. The learned CIT(A) 11, Bangalore erred in not appreciating that the cash deposits to bank account were made out of cash sales from the business of the appellant which was duly accounted, disclosed in the audited financial statements and sales tax returns. 3.3. Without prejudice, cash deposits to bank account cannot be added under section 68 of the Act. 3.4. On facts and circumstances of the case and law applicable, the impugned addition madeunder section 68 amounting to Rs. 3,99,46,180 is bad in law and liable to be quashed. 4. Addition under section 68 — Rs. 3,89,742 4.1. The learned CIT(A) 11, Bangalore erred in confirming the addition under section 68 amounting to Rs. 33,89,742 in respect of unsecured loans taken by the appellant. 4.2 The learned CIT(A) 11, Bangalore erred in not appreciating that the name, address, PAN and confirmation letters of the lenders were submitted and the unsecured loans were taken through banking transactions. 4.3 The learned CIT(A) 11, Bangalore erred in not appreciating that the source of source is not required to be proved by the assessee and further some of the loan balances were carriedforward from earlier years for which no addition can be made in the year under consideration. 4.4. On facts and circumstances of the case and law applicable, the impugned addition made under section 68 amounting to Rs. 33,89,742 is bad in law and liable to be quashed. Disallowance of interest expenditure under section 24(b) — Rs. 5. 2,00,000 5.1. The learned CIT(A) 11, Bangalore erred in confirming the disallowance of interest expenditure under section 24(b) amounting to Rs. 2,00,000 without considering the certificate issued by the Bank that the interest
3 ITA No. 696/Bang/2022 Shri Syed Mohammed Rizwan expenditure was incurred in respect of the housing loan taken for construction of a building. 6. Levy of interest under section 234B 6.1 The learned CIT(A) erred in confirming the levy of interest under section 234B. On facts and circumstances of the case and law applicable, interest under section 234B is not leviable. The appellant denies its liability to pay interest under section 234B. 7. Prayer 7.1. In view of the above and other grounds to be adduced at the time of hearing, the appellant prays that the order passed by the learned CIT(A) be quashed or in the alternative, the aforesaid grounds and relief prayed for thereunder be allowed. The appellant prays accordingly.” 3. The assessee is an individual and is proprietor of the business concern M/s. Vee Pee Foods which is in the food product business of making ready to eat food. The assessee filed return of income on 07.11.2017 for AY 2017-18 declaring total income of Rs.37,25,120/-. The case was selected for scrutiny under CASS and notice under Section 143(2) of the Income Tax Act, 1961 (the Act) was issued and served on the assessee. During the course of assessment proceedings the AO called on the assessee to substantiate the source of cash deposits in its bank account during year under consideration. The AO also called on the assessee to furnish financial statements, audit report and computation of income, etc. From the bank statements produced by the assessee, the AO noticed that the assessee has deposited cash into the account maintained with Syndicate Bank for an of Rs.3,99,46,180/-. The AO asked the assessee to explain the source to which the assessee replied that the assessee is in the business of manufacturing Idli-Dosa batter, supplying the same on day- do-day basis to small shoppers on cash basis and the same cash was deposited to the bank and accounted in the bank account. The AO called on the assessee to furnish cash book, sales book, purchase register, sales register etc. to substantiate his claim. In the absence of documentary evidence the AO treated the cash deposit as unexplained income and added the same under Section 68 of the Act.
4 ITA No. 696/Bang/2022 Shri Syed Mohammed Rizwan 4. The AO also noticed that the assessee has shown unsecured loan amounting to Rs.1,04,40,701/- and in this regard asked the assessee to produce confirmation from the person from whom the loan was obtained. The assessee produced confirmation from one Smt. Najeema V for an amount of Rs.70,50,959/-. The assessee could not produce evidence for the balance amount and therefore the AO treated the balance amount of Rs.33,89,742/- as addition under Section 68 of the Act.
During the year under consideration the assessee has declared a loss from house property at Rs.2,00,000/- and the AO called on the assessee to produce bank certificate in this regard. Since the assessee could not produce bank certificate, the AO disallowed the claim of interest under Section 24(b) of the Act. The AO concluded the assessment by making the above disallowances/additions. Aggrieved assessee preferred appeal before the CIT(A).
The assessee furnished additional evidences before the CIT(A) and as per Rule 46 of the Income Tax Rules, the CIT(A) forwarded the additional evidences to the AO for his comments on admissibility of the same. In the remand report the AO stated that the assessee still could not produce the relevant details pertaining to the cash deposit. With regard to the loan confirmation submission on additional evidence the AO observed that the creditworthiness of the party was not substantiated by the assessee. Further with regard to the housing loan submission submitted by the assessee, the AO stated that the bank statement is for General and Agri Advances and not for housing loan. The AO therefore, in the remand report, concluded that all the additions/disallowances need to be sustained.
In the counter argument before the CIT(A) the assessee submitted that the details called for by the AO were filed electronically as the AO was not available to file take the physical copies of the documentary evidence. On
5 ITA No. 696/Bang/2022 Shri Syed Mohammed Rizwan merits the assessee submitted that the addition made towards cash deposits into the bank was substantiated by the audited statement of account and therefore cannot be treated as unexplained. Further with regard to the housing loan the assessee submitted that the bank statement is not for General and Agri advances as claimed by the AO but is for housing loan. With regard to the loan creditor the assessee submitted before the CIT(A) that the confirmation PAN details were submitted before the AO and the loans were raised by the assessee by bank transfers, It was further submitted that the responsibility to prove the source of the creditors in Section 68 of the Act was inserted by the Finance Act, 2022 w.e.f. 01.04.2022, which is not applicable in assessee’s case.
The learned CIT(A) did not agree with the contentions of the assessee and proceeded to confirm the disallowances/additions by observing as under: - “4.5 The additional evidences include a cash book, bank hook, purchase register and debtor ledger. In addition confirmation from 3 lenders and a bank statement stated to be procured during appellate proceedings were also tiled as additional evidences. The report of the AO, as reproduced supra, clearly shows that sufficient opportunities and time were given to the appellant to produce these documents. The appellant was given enough time to produce relevant documents to prove the genuineness of the loans and creditworthiness of the lenders. The appellant was given sufficient time to produce the bank statement for interest payment on housing loan and cash book, sales book, purchase register and sales register etc. to explain the cash deposits. However, despite that the appellant had failed to produce the requisite details. It kept on resorting to delaying tactics, as is evident from the various replies reproduced by the AO in his report. The claim of the appellant that on 24.12.2019 he was asked by the AO to upload the documents, is also just a story to gain sympathy and nothing else. This argument is anyhow unsubstantiated. Why the appellant kept on dragging the matter to the last date of hearing is not explained especially when the documents were the basic account books which the appellant would have maintained on computer, as the documents produced now are printouts from some accounting software. Non production of the same during assessment proceeding leads to the conclusion that the same have been cooked up later on. Anyhow, the size of the soft copies of such files taken from accounting software would have been very small and the appellant was not required to scan each and every page to upload it. It is also noted that during assessment proceedings there wasn't any instance that the appellant had asked for additional time but the same was not accepted by the AO. For admission of the additional evidence the appellant has to give explanation as to why the same could not be produced before AO during the assessment proceedings.
6 ITA No. 696/Bang/2022 Shri Syed Mohammed Rizwan The appellant has not given any details of bonafide reason for not furnishing these documents before the AO to reasonable explanation as to support his ease. The appellant has not given any reasonable explanation as to what prevented him from producing such documents before the AO at the time of assessment proceedings, especially when sufficient opportunity of being heard given to it by the AO. The appellant has not brought anything to record to show that the documents could not have been produced by him before AO despite his best efforts. Admission of the additional evidence cannot be claimed as a mallet of right and it is the duty of the assessee to explain the circumstances which prevented it froth submitting such document before the lower authorities. A perusal of the assessment order shows that the issue in relation to which addition had been made by the AO was duly confronted by the AO to the appellant during assessment proceedings. The appellant was repeatedly asked to explain the same. The details submitted by the appellant have duly been considered and taken into account by the AO while framing the assessment order. So the AO had given sufficient opportunity of being heard to the appellant to produce these documents. Since the appellant has failed to provide sufficient cause for his failure to furnish these documents before the AO, the same cannot be admitted at this stage. The ITAT, Bangalore in case of. Anupam Kothari, ITA No 837 (Bang) 2012 held that for admission of additional evidence, it is required for the assessee to show that authorities had decided its grounds without giving sufficient opportunity to adduce evidence. The ITAT Chandigarh vide order dated 22-05-2013 in the case of Rishi Sagar v. ITO, 36 tavnionn.com 508 had held that where assessee had failed to produce documents during assessment and failed to establish reasonable cause thereof, additional evidence could not be accepted in appeal. This decision was affirmed by the HC in the case of Rishi Sagar v. Commissioner of Income-tax, Ludhiana [2007] 88 taxmann.com 600)Punjab & Haryana). Considering above, the additional evidence is not admitted as the conditions laid down in Rule,46A of the I T Rulesare not satisfied in the case under consideration. So no cognizance of these documents can be taken at this stage. 4.6 As regards the merits of the additions/disallowance made by the AO, the appellant had failed to explain the source of cash deposits in his hank accounts. His claim that the same were his business receipts is totally unsubstantiated. So the action of the AO in treating the same as unexplained cash deposits in the bank account cannot be faulted with. In relation to unconfirmed unsecured loans considered by the AO as undisclosed income of the appellant, the onus was upon the appellant to prove the creditworthiness of the lenders, their identities and the genuineness of the transactions. This onus was not discharged by the appellant. So the action of the AO in treating the same as unexplained income of the appellant deserves to be upheld. Lastly, in relation to the claim of interest under Section 24(b) of the Act, since the necessary documentary evidence was not produced, the AO was right in allowing this deduction.”
Aggrieved, assessee is in appeal before the Tribunal.
7 ITA No. 696/Bang/2022 Shri Syed Mohammed Rizwan 10. Before us the learned A.R. submitted that the assessee is in the business of making ready to eat food products such as Idli/dosa batter which is sold by cash basis to small shoppers. The assessee collects cash from the vendors and deposit the same in the bank account on a daily basis. It is submitted that the assessee does not have any other income and cash sales being the source of cash deposits into the bank was submitted before the lower authorities. The learned A.R. also submitted that the assessee furnished details called for before the CIT(A) through e-filing. However, the CIT(A) has rejected the submissions by stating that the cash book, sales book, purchase register, sales register etc. were not produced to explain the cash deposits and that the documents were submitted electronically, since the AO was not available for take submission was only to gain sympathy and therefore did not consider the submissions of the assessee. Since the CIT(A) rejected the appeal on the ground that cash deposits and the loan were not substantiated without examining the details submitted by the assessee, the learned A.R. pleaded for remitting the issue back to the AO. It was also submitted that the books of account of the assessee including the ledger accounts with details cash sales, have not been rejected by the AO and therefore the same cannot be treated as unexplained under Section 68 of the Act. With regard to the interest on housing loan the learned A.R. the learned A.R. reiterated that the certificate is the interest on housing loan certificate and which has not been properly verified by the lower authorities.
We have heard the rival contentions and perused the material on record. We notice that the assessee did not produce various details such as cash book, sales book, purchase register etc. before the AO during the assessment proceedings but submitted the same as additional evidence before the CIT(A). The CIT(A) called for a remand report from the AO and during the remand proceedings some more details were called for by the AO from the assessee. It is the contention of the learned A.R. that during the remand proceedings the
8 ITA No. 696/Bang/2022 Shri Syed Mohammed Rizwan documents were submitted electronically, since the AO was not available for submission of the document physically. On the contrary revenue’s contention is that though sufficient opportunities were given the assessee did not submit the entire details as required to substantiate the claims. We notice from the CIT(A)’s order as extracted in the earlier part of this order, that the CIT(A) did not go into the merits of the case and has decided only on the basis that the assessee has not furnished all the relevant details. It is also noticed that the CIT(A) has recorded the submissions of that assessee that all documents could not be electronically filed due to volume. However the CIT(A) proceeded to confirm the additions/disallowances made by the AO on the ground that the assessee is giving excuses for non-submission of details before the AO and the additional evidences could not be accepted. In view of these factual circumstances it is clear that the documentary evidence with regard to the disallowances/additions have not been properly verified by the lower authorities. Therefore, we remit the matter back to the AO for de novo consideration of the details submitted by the assessee. The AO is directed to examine the relevant documents and evidences submitted by the assessee and decide the issues afresh in accordance with law. The assessee is directed to submit required documents and cooperate with the proceedings. It is ordered accordingly.
In the result, the appeal filed by the assessee is allowed for statistical purposes. Pronounced in the open Court on 20th September, 2022.
Sd/- Sd/- (N.V. Vasudevan) (Padmavathy S) Vice President Accountant Member Bengaluru, Dated: 20th September, 2022 Copy to:
9 ITA No. 696/Bang/2022 Shri Syed Mohammed Rizwan
The Appellant 2. The Respondent 3. The CIT(A) -II, Bengaluru 4. The CIT - (Central) Bengaluru 5. The DR, ITAT, Bengaluru 6. Guard File By Order //True Copy// Assistant Registrar ITAT, Bengaluru n.p.