NADUR SIDDAGANAGAIAH CHANDRAKANTH,BANGALORE vs. INCOME TAX OFFICER, WARD-5(2)(3), BANGALORE

The Learned Commissioner of Income Tax (Appeals) did not appreciate the submissions/explanation of the appellant in a prospective manner.

The order of the Learned Commissioner of Income (Appeals) is unjustified and not sustainable in law.

The first ground of appeal is that the ld. CIT(A) erred in deciding the appeal of the assessee ex parte and holding that assessee’s appeal is not maintainable on account of payment of taxes when the assessee has contested the entire assessment as not sustainable.

The facts of the case show that assessee did not file any return of income, information was received in respect of cash deposits during the demonetisation period wherein assessee deposited Rs.17,23,000 in his Current A/c with SBI and sum of Rs.1,32,33,150 in his Current A/c with Bank of India totalling to Rs.6,91,56,738. Accordingly notice u/s. 142(1) was issued on 28.11.2017 but there was no compliance. Subsequently u/s. 133(6) information was obtained from the bankers. Accordingly information was collated and it was found that assessee has deposited Rs.2,41,000 and Rs.40,71,650 in the above bank accounts respectively during the demonetisation period A further sum of Rs.1,06,43,500 was deposited in the same accounting year but beyond the demonetization period. The assessee was issued 3 notices and no reply was received. The ld. AO considered the addition of Rs.43,12,650 being the amount of cash deposit during the demonetisation period in the above 2 bank account as unexplained income u/s. 69A of the Act and charged the same to tax u/s. 115BBE of the Act. With respect to further cash deposit of Rs.1,06,43,500 the ld. AO considered 10% of such credits as income of assessee and considered Rs.10,64,350 as business income of the assessee. Accordingly total income of Rs.53,77,000 was assessed u/s. 144 of the Act by assessment order dated 16.12.2019.

It was further stated that assessee is an individual, dealer in Indian Oil Corporation, the reply to the several notices before the AO could not be provided on account of his mother’s health. Due to family circumstances the assessee could not get his accounts completed and therefore return could not be filed. Because of this reason, the assessment order was passed u/s. 144 of the Act. It was further stated that the amount of Rs.43,12,650 deposited during the demonetisation period was added to the total income of assessee u/s. 69A of the Act, whereas with respect to the balance sum deposited during the other period of financial year amounting to Rs.1,06,43,500 it was treated as turnover and only 10% addition was made. This itself shows that there is a dichotomy in the amount of cash deposited in the bank account in the demonetisation period as well as in other period. He even otherwise submitted that there cannot be 10% of profit in the case of business with Indian Oil Corporation. For this proposition he submitted the VAT returns filed by the assessee and submitted that for all the 4 quarters it was the claim of assessee that amount of cash deposited in the bank account is sale of petroleum products. He also submitted a copy of the account generated from Indian Oil Corporation. It was submitted that assessee has to obtain raw material from the Principal and the total turnover is reflected in the statement. He therefore submitted that there is no unaccounted income and even profit estimate @ 10% is not proper.

The ld. DR vehemently submitted that assessee has failed to submit any information before the lower authorities and as assessee is running an Oil depot it is unusual that his income would be below the taxable

We have carefully considered the rival contentions and perused the orders of the ld. lower authorities. We find that before the AO naturally assessee did not provide the complete information and assessment order was passed u/s. 144 of the Act. The assessee’s reason for not providing any information before the ld. AO was sickness of his mother as well as his family circumstances. This resulted into ex parte assessment order. The ld. AO considered the cash deposit during the demonetisation period as unexplained income and made addition to the extent of 100%. With respect to the balance cash deposit in the remaining part of the year, only 10% of such deposit was considered as income of the assessee.

Before the CIT(A), the assessee filed an appeal, but it was dismissed for the reason that assessee has not paid due amount on the assessed income. We find that assessee did not file any return of income and therefore there is no admitted tax involved. According to the provisions of section 249(4) of the Act, assessee is required to pay tax on the returned income or amount equivalent to the advance tax as per returned income. As assessee has not filed any return of income nor admitted any income, his appeal should have been admitted. Even otherwise, assessee has made application before the ld. CIT(A) u/s. 249(4)(b) of the Act wherein it was stated that assessee is carrying on business of retail outlet of Indian Oil Corporation Ltd. dealing with petrol & diesel at Village Nadur in Sira Taluk. He could not attend to notices of AO on account of death of his mother. He could not file his return of income due to ill-health of mother who later passed away. The assessment was completed u/s. 144 of the Act. The assessee has contested the whole addition and has stated that he does not have any taxable income and therefore assessee is not required to pay any admitted tax. It was prayed that the CIT(A) may admit the appeal and dispose it on the merits. The ld. CIT(A) did not consider this application at all and despite the power given to ld. CIT(A) to condone the payment of tax condition if good and sufficient reasons are shown to him, he dismissed the appeal of the assessee on this count. Further he held that assessee is not interested in prosecuting the appeal as no information is furnished. In view of the above facts, we restore the appeal of the assessee back to the file of ld. AO as no fruitful purpose would be served if the matter is restored back to the file of ld. CIT(A), because the order of the AO is also ex parte assessment order. Accordingly, we direct the assessee to submit all the necessary details supporting his income and also explain the course of cash deposit during the financial year. The ld. AO may examine the same and then decide the issue afresh in accordance with law after giving assessee opportunity of hearing. In view of the above facts, ground Nos.1 & 2 are allowed and merits of the addition are restored to the file of the ld.AO.

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