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Facts
The assessee, an individual in the egg business, filed ITR for AY 2017-18. His case was selected for scrutiny due to cash deposits during demonetization and abnormal increase in sales. The AO made an addition of ₹.1,54,59,200/- under Section 69 for unexplained cash deposits and disallowed business expenses of ₹.35,78,051/-. The Ld. CIT(A) confirmed the Section 69 addition and partly confirmed the disallowance of expenses to ₹.14,78,051/-.
Held
The Tribunal noted that the assessee was not given a reasonable opportunity to be heard by the Assessing Officer before concluding the assessment, nor were details of the Ld. CIT(A)'s estimation brought on record. Therefore, the Tribunal set aside the Ld. CIT(A)'s order and remitted both issues back to the Assessing Officer for fresh consideration, directing the AO to provide adequate opportunity to the assessee.
Key Issues
Whether the addition for unexplained cash deposits under Section 69 and disallowance of business expenses were justified when the assessee claimed to have provided details, and whether the assessee was afforded a reasonable opportunity of being heard by the lower authorities.
Sections Cited
250, 69, 142(1), 143(3)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘B’ BENCH, CHENNAI
Before: SHRI DUVVURU RL REDDYAND SHRI S.R. RAGHUNATHA
O R D E R
PER S.R. RAGHUNATHA, ACCOUNTANT MEMBER:
This appeal filed by the assessee is directed against the order of the ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi dated 28.10.2024 passed under section 250 of the Income Tax Act, 1961 (hereinafter called ‘the Act’). The relevant Assessment Year is 2017-18.
The assessee has challenged the order of the ld. CIT(A) in confirming the addition of ₹.1,54,59,200/- made under section 69 of the Act and disallowance of business expenses to an extent of ₹.35,78,051/-.
3. Brief facts of the case are that the assessee is an individual and filed his return of income for the AY 2017-18 on 25.11.2017 admitting total income of ₹.7,26,750/-. The case of the assessee was selected for scrutiny under CASS to verify “cash deposit during demonetization period and abnormal increase in sales during the year”. Against statutory notices issued, the Assessing Officer observed that the assessee has not produced substantive evidences. After verifying the details obtained from the banks, the Assessing Officer noted that the assessee has deposited cash during demonetization period to an extent of ₹.1,54,59,200/- and the total credit balance available during the financial year is at ₹.10,08,82,723/-. Accordingly, the assessee was show-caused to furnish the details of sources for the above cash deposits made during demonetization period and details of payments made towards salary, rent and vehicle maintenance totalling to ₹.35,78,051/- under business income. Since the assessee could not furnish the above details against the show-cause notice issued, the Assessing Officer treated the cash deposits of ₹.1,54,59,200/- during demonetization period as unexplained investment under section 69 of the Act and disallowed the expenses towards payments made towards salary, rent and vehicle maintenance totalling to ₹.35,78,051/- and added to the total income of the assessee.
On appeal, after considering the submissions of the assessee, remand report and counter reply to the remand report of the assessee, the ld. CIT(A) confirmed the addition made under section 69 of the Act towards cash deposits of ₹.1,54,59,200/- being unexplained investments made during demonetization period for the reason that the assessee could not furnish corroborative evidences/documents, which is not sufficient to explain the source of cash deposits. Further, with regard to the disallowance of business expenses of ₹.35,78,051/-, the ld. CIT(A) estimated and allowed the expenses to an extent of ₹.21,00,000/- against the claim of ₹.35,78,051/- and confirmed the addition to an extent of ₹.14,78,051/-. On being aggrieved, the assessee preferred an appeal before the Tribunal.
Before us, the ld. Counsel for the assessee has submitted that the assessee is engaged in small time business of selling eggs both retail and wholesale. The assessment is for the AY 2017-18 relevant to the financial year 2016-17, which period is prior to the invent of UPI/digital mode of payments and being a small vendor, most of the receipts of the assessee are in cash as it is mainly retail sales of eggs. The ld. AR drew our attention to page 27 to 29 of the paper book, which reflects details of cash transactions in 2016 uploaded in the ITBA portal and the Assessing Officer has not considered the same. Further, the ld. AR has submitted that against the statutory notices, the assessee filed his reply dated 22.11.2019 to the notice under section 142(1) of the Act by furnishing cash deposits which is placed at pages 91 & 92 of the paper book and also filed reply dated 06.12.2019 against the show cause notice dated 02.12.2019 issued by the Assessing Officer, which is reflected at pages 95 & 96. By filing various details, which is required to be verified by the Assessing Officer, the ld. Counsel for the assessee prayed that the assessee may be afforded one more opportunity of being heard to substantiate his case before the Assessing Officer.
On the other hand, the ld. DR supported the order passed by the ld. CIT(A).
We have heard both the sides, perused the materials available on record and gone through the orders of authorities below. Before us, the ld. Counsel for the assessee filed various details in the form of paper book running into 160 pages containing bank statements of current account and savings bank account, audit report, etc. It is an undisputed fact that the assessee is engaged in small time business of selling eggs both retail and wholesale. On perusal of the assessment order, we note that the Assessing Officer issued show-cause notice on 02.12.2019 and without considering the reply of the assessee stated to have been uploaded on 06.12.2019, concluded the assessment under section 143(3) of the Act on 09.12.2019 and thus, it is quite apparent that the assessee was not afforded reasonable opportunity of being heard to substantiate his case before the Assessing Officer. Further, on perusal of the impugned order, we find that the ld. CIT(A) confirmed the addition made towards cash deposits on the ground that the assessee has not responded to the show-cause notice by the time allowed and also not furnished copy of purchase bills and sales bills, etc. Moreover, no details of estimating the expenditure by the ld. CIT(A) are brought on record. Under the above facts and circumstances of the case, we set aside the order of the ld. CIT(A) and remit both the issues to the file of the Assessing Officer for fresh consideration and decide the issues in accordance with law after considering the details as may be filed by the assessee. The assessee is also directed to furnish complete details before the Assessing Officer to substantiate his claims. It is needless to mention here that the Assessing Officer shall afford reasonable opportunities of being heard to the assessee for furnishing the details as may be required by the Assessing Officer. Thus, the grounds raised by the assessee are allowed for statistical purposes.
In the result the appeal of the assessee is allowed for statistical purposes. Order pronounced in the open court on 25th March, 2025 at Chennai.