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Facts
The assessee filed his return of income and his case was selected for limited scrutiny regarding cash deposits during demonetisation. The AO made an addition of Rs. 47,03,560 for cash deposits during the whole year, which was upheld by the CIT(A) who dismissed the appeal for non-prosecution. The CIT(A) noted that the assessee was given opportunities but failed to make submissions.
Held
The Tribunal held that the AO's addition was beyond the scope of limited scrutiny, which was only for the demonetisation period (Rs. 5,76,020). The CIT(A)'s order dismissing the appeal for non-prosecution was not sustainable, as the appeal should have been decided on merits.
Key Issues
Whether the addition made by the AO was beyond the scope of limited scrutiny, and whether the CIT(A) was justified in dismissing the appeal for non-prosecution instead of deciding on merits.
Sections Cited
144
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Income Tax Appellate Tribunal, “SMC” BENCH : BANGALORE
Before: SHRI PRASHANT MAHARISHI
This appeal is filed by Ramakrishna Kishor (the assessee/appellant) for the assessment year 2017-18 against the appellate order passed by the National Faceless Appeal Centre, Delhi (NFAC) [ld. CIT(A)] dated 18.11.2024 wherein the appeal filed by the assessee against the assessment order passed u/s. 144 of the Income-tax Act, 1961 [the Act] dated 16.12.2019 by the ITO, Ward 6(3)(2), Bengaluru [ld. AO] was dismissed. The dismissal of the appeal was on account that assessee
was given several opportunities, but assessee did not make any submission and sought adjournment for 15 days. Therefore he applying the decision of the Coordinate Bench in 38 ITD 320 dismissed the appeal of the assessee for non-prosecution.
The assessee is in appeal before us raising the following grounds of appeal:-
“1. Learned CIT (A) was not dismissing the Appeal without giving sufficient opportunity to the Appellant for making submissions.
2. The Learned CIT (A) was not correct in not giving sufficient opportunity to the Appellant as the CIT (A) has not given hearing date after taking adjournment during December 2023, though the CIT (A) has passed an order after one year i.e. November 2024.
3. The A.O. was not correct in treating entire cash deposits of Rs..47,03,560/- as unexplained money, without doing telescoping of Bank Account Statement obtained from the respective Bankers.
The Appellant relies on the Grounds raised
before CIT (A) in respect of merits of the Case and the same may be admitted.
5. The Appellant craves leave to add, to alter, to amend or to delete any of the grounds that may be urged at the time of hearing of the Appeal. Wherefore on the above grounds and on such other grounds the Appellant prays the Appellate Authority to set aside the Assessment order and may pass such other as the Appellate Authority deems fit.”
The brief facts of the case show that assessee is an individual, who filed his return of income for Rs. 2,90,240. The case of assessee was taken up for limited scrutiny to examine the issue of cash deposits during the demonetisation period. According to the information
available, the assessee has deposited cash of Rs. 17,13,340 in his bank account with Yes Bank and Rs. 1,10,100 with HDFC Bank. The assessee was issued several notices, but same remained unresponded. From the analysis of the bank account obtained, it was found that assessee has deposited Rs.1,10,100 in cash during the demonetisation period, however for the whole year assessee has deposited Rs.10,63,800. Similarly in Yes Bank, though in demonetisation period assessee has deposited cash of Rs.4,65,920, but for the whole year amount of cash deposit is Rs.36,39,760.
4. According to the AO, considering the gross total income offered by the assessee in the return of income, the cash deposit in the bank account is disproportionate and therefore he made total addition of Rs. 47,03,560 being all cash deposits during the year in both the A/cs. The assessment order was passed on 6.12.2019 u/s. 144 of the Act.
The assessee preferred an appeal before the ld. CIT(A). Before the ld. CIT(A) though several opportunities were granted, on 22.12.2023 the assessee submitted written submissions and also sought an adjournment for 15 days. It was recorded by the ld. CIT(A) that assessee demands telescoping of the bank transactions to be given among various bank Accounts. The ld. CIT(A) rejected the same. He held that telescoping can be made only if both the banks are located in the same station and if there is proximity between the withdrawal and deposits in the bank accounts. He held that assessee has not submitted any documentary evidences and relying on the decision of Hon’ble Supreme Court in the case of CIT v. B.N. Bhattacharjee, 10 CTR 354 (SC) and the Hon’ble Madhya Pradesh High Court judgment in the case of Estate of Late Tukojirao Holkar v. CWT, 223 IR 480 (MP) as well as decision of the Coordinate Bench in the case of CIT v. Multiplan India Pvt. Ltd., 38 ITD 320, he dismissed the appeal filed by the assessee for want of prosecution.
The ld. AR has two-fold arguments. He submits that the addition made by the ld. AO of Rs.47,03,560 is beyond the scope of limited scrutiny as the case was selected for examination of cash deposit during the demonetisation period only which is Rs.5,76,020. Thus, addition could not have been exceeded this sum of Rs.5,76,020. The second argument is that assessee should have been granted credit for the amount of cash withdrawal from one bank and deposit in another bank and therefore at least double addition should not have been made.
Coming to the order of the ld. CIT(A), he submits that the CIT(A) should not have dismissed the appeal of the assessee for non- prosecution because assessee has made written submissions which should have been considered and the credit for withdrawal in cash should have been granted to the assessee to the extent of cash deposit. He otherwise submitted that the CIT(A) has to decide the appeal on the merits and does not have to authority to dispose of the appeal for non- prosecution.
The ld. DR vehemently supported the orders of ld. lower authorities.
We have carefully considered the rival contentions and perused the orders of ld. lower authorities. In this case, the return of income of assessee was picked up for examination of cash deposit during demonetisation period by issuing notice under limited scrutiny criteria. The assessee has deposited cash during the demonetisation as per the assessment order itself of Rs. 5,76,020. The ld. AO has made the total addition of Rs. 47,03,560 of cash deposit by the assessee during the whole year. The ld. AO did not have the mandate under limited scrutiny provision to make the addition of cash deposit during the whole year. He was mandated to examine only the cash deposit during the demonetisation period as compared to the return of income. Thus, he should have only made the addition of Rs. 5,76,020 and not of Rs.47,03,560. If he wanted to make the addition of cash deposit during whole year, he should have converted Limited scrutiny case in to complete scrutiny case after obtaining necessary approval. No such efforts were made. Thus, the order of the AO making the addition of Rs. 47,03,560/- is not sustainable as addition to the extent of only Rs.5,76,020 could have been made. Therefore addition to the extent of Rs.41,21,540 is devoid of any merit and deserves to be deleted, hence deleted.
Even on the balance sum of Rs.5,76,020, the assessee has made submission before the ld. CIT(A) that telescoping may be given to cash withdrawal and cash deposit. We find that the above explanation is available to the assessee, provided the Revenue does not have any evidence that cash deposits from the bank account has been utilized for