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Facts
The Assessing Officer added Rs. 17,35,500 under Section 68 for unexplained cash deposits made during the demonetization period. The CIT(A) upheld this addition, refusing to admit additional evidence from the assessee due to a procedural issue (failure to file a Rule 46A petition and an erroneous 'Yes' marking in Form 35), thus not adjudicating the case on merits.
Held
The ITAT found that the CIT(A) erred by overly relying on a procedural lapse and not deciding the case on its merits. The Tribunal set aside the CIT(A)'s order and remanded the matter back for fresh adjudication, allowing the assessee to submit all relevant documents, provided new documents are accompanied by a Rule 46A application.
Key Issues
Whether the CIT(A) was justified in refusing to admit additional evidence and confirming an addition of unexplained cash credit without adjudicating on merits, based on a procedural error related to Rule 46A of the IT Rules.
Sections Cited
68, 115BBE, 143(1), 143(3), 234A, 234C, 250
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “SMC” BENCH KOLKATA
Mahesh Kumar Choudhary, 291/30, Armenian Street, Kolkata - 700001 [PAN: ABYPC3563B] .....................…...…………….... Appellant vs. Income Tax Officer, Ward-36(1), Kolkata, Aayakar Bhawan Poorva, 110, Shantipally E M Byepass, Kolkata - 700107 ...............…..….................... Respondent Appearances by: Assessee represented by : A.K. Tiwaribal, AR Department represented by : Anindya Kumar Bandopadhyay, Addl. CIT, SR. DR Date of concluding the hearing : 17.02.2025 Date of pronouncing the order : 03.03.2025 O R D E R
PER SANJAY AWASTHI, ACCOUNTANT MEMBER:
The present appeal arises from order of Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereafter “the Ld. CIT(A)”], passed u/s 250 of the Income Tax Act, 1961 (hereafter ‘the Act’).
1.1 In this case, the Ld. AO is seen to have passed an order u/s 143(3) of the Act dated 26.12.2019. Through this order, the Ld. AO added an amount of Rs. 17,35,500/- u/s 68 of the Act, on account of allegedly unexplained deposits in bank account. Admittedly, the Ld. AO was not satisfied with the explanation filed by the assessee before him and therefore, it is mentioned 1.2 The impugned addition was carried in appeal before the Ld. CIT(A), where the relevant findings deserve to be extracted as under:
“7.1 The appellant has filed written submissions during the course of appellate proceedings alongwith certain documents as mentioned above which is essentially an additional evidence not submitted before the AO. In form No.35, row no.12, against whether any documentary evidence other then the evidence produced during the course of proceedings before Income-tax Authority has been filed in terms of Rule 46A" the assessee has mentioned "Yes". The additional evidence filed is incomplete and haphazard. I find that in this case, the assessee furnished his return of income for the A.Y 2017-18 on 11.11.2017 showing total income at Rs. 2,99,490/- . The Return was duly processed u/s 143(1) of the Act. The return of income was selected under Scrutiny through CASS. The AO issued the statutory notices and examined the details. It was seen by the AO that the assessee had deposited Rs. 17,35,500/- in his bank account with the Kotak Mahindra Bank, Burrabazar Branch, Kolkata. The assessee did not file complete details before the AO. Therefore, the said amount of Rs. 17,35,500/- was held by the AO as unexplained Cash Credit u/s 68 of the Act r.w.s. 115BBE of the Act for the A.Y. 2017-18. 7.2 The assessee has filed additional evidence during the course of appellate proceedings which does not explain the case of the assessee. However, no petition has been filed by the assessee for admission of additional evidence justifying and explaining as to under which Clause of Rule 46A(1), the assessee's case is covered and as to why the additional evidence should be admitted. Therefore, I am of the considered view that the additional evidence filed by the assessee is not admissible. Accordingly, the same is not admitted. Moreover, the additional evidence filed is incomplete and does not in way buttress the grounds of appeal filed by the assessee. In the circumstances, I do not see any reason to interfere with the well reasoned and speaking order of the AO. Therefore the addition of Rs. 17,35,500/- made by the AO as unexplained Cash Credit u/s.68 of the Act r.w.s 115BBE of the Act for the A.Y.2017-18 is confirmed. Hence, the grounds of appeal are Dismissed.”
2. Since, the action of Ld. AO was upheld at the level of Ld. CIT(A), the assessee has filed the present appeal before the ITAT and has ventilated his grievance through the following grounds of appeal:
“1. That the impugned order passed by Ld. Commissioner of Income Tax (Appeals), NFAC dismissing the appeal of the Appellant Assessee Company is against law and facts of the case without allowing proper and reasonable opportunity of hearing violating the principles of natural justice.
That on the facts and in the circumstances of the case, the Ld. CIT(A), NFAC erred in dismissing the appeal on the allegation that the Assessee did not file Rule 46A petition for accepting the additional evidences filed in the course of Appellate proceedings when the appellant assessee did not file any additional evidences and that the details and documents were all filed before the Assessing officer in the course of Assessment Proceedings.
Mahesh Kumar Chaudhary 2.1 That on the facts and in the circumstances of the case, the Ld. CIT(A), NFAC erred in coming to the aforesaid conclusion only because the Appellant Assessee while filing the Form 35 had mentioned "Yes" at row no. 12, against "whether any documentary evidence other than the evidence produced during the course of proceedings before Income-tax Authority has been filed in terms of Rule 46A" 2.2 That on the facts and in the circumstances of the case, the Assessee had mentioned "Yes" at row no. 12, against "whether any documentary evidence other than the evidence produced during the course of proceedings before Income-tax Authority has been filed in terms of Rule 46A only as a precaution so that in case any additional evidence if required to be filed could be filed in the course of Appellate Proceedings.
3. That on the facts and in the circumstances of the case, the Ld. CIT(A), NFAC erred in confirming the addition of Rs. 17,35,500 which was made on the arbitrary allegation that the cash deposited in bank during Demonetisation Period was unexplained cash credit u/s 68 of the Income Tax Act, 1961.
4. That on the facts and in the circumstances of the case, the Ld. CIT(A), NFAC erred in confirming the action of the Assessing Officer in assessing the aforesaid sum of Rs. 17,35,000 as unexplained cash credit under section 68 of the Act although admittedly the assessee was not maintaining any books of accounts during the previous year relevant to the Assessment Year 2017-18.
That on the facts and in the circumstances of the case, the Ld. CIT(A), NFAC erred in confirming addition without accepting the fact that the aforesaid cash deposits of Rs.17,35,000 inter alia included a cash deposits of Rs. 14,40,500 made by the Assessee in specified currency notes/demonetized notes during the demonetization period i.e. 9th November, 2016 to 30th December, 2016 and the balance sum of Rs.2,95,000 was made in New Currency / non-demonetized notes during the period from 9th November, 2016 to 30th December, 2016.
That on the facts and in the circumstances of the case, the Ld. CIT(A) NFAC erred in in treating the sum of Rs. 17,35,000 as unexplained cash credit under section 68 of the Act chargeable to tax at special rate of the tax prescribed under section 115BBE of the said Act 7. That the Ld. CIT(A), NFAC erred in confirming the action of the Assessing Officer in charging interest of Rs.53,828 under section 234A which is otherwise not chargeable and / or excessive and/or unreasonable 8. That the Ld. CIT(A), NFAC erred in confirming the action of the Assessing Officer in charging interest of Rs.4,44,081 under section 234C of the Act which is not chargeable in this case as the assessee was not liable to pay any advance tax.
That the appellant craves leave to amend, alter, modify, substitute, add to, abridge and/or rescind any or all of the above grounds.” 2.1 Before us, the Ld. AR has filed a paper book running into 230 pages, consisting of documents purportedly filed before both the Ld. AO and the Ld. CIT(A). Before us, the Ld. AR vehemently stated that the Ld. CIT(A) has not adjudicated on the merit since he has been overly persuaded by the fact that the assessee mentioned by mistake that he was filing new evidence Mahesh Kumar Chaudhary under Rule 46A of the IT Rules. The Ld. AR averred that “Yes” was mentioned in the relevant column due to an oversight, because of which the Ld. CIT(A) has dwelt on this technical aspect and not really adjudicated on the facts before him. The Ld. AR also assailed the action of Ld. AO in as much as even when considerable documents were filed before him, he has not chosen to take an adverse view in the matter.
2.2 The Ld. DR relied on the orders of authorities below.
We have carefully considered the documents before us and the arguments of Ld. AR/DR. There is considerable merit in the arguments of the Ld. AR that the Ld. CIT(A) should not have overly relied on the mentioning of “Yes” against the column meant for filing new evidence. However, it is felt that the Ld. CIT(A) has not gone into the facts or even the merit of the case. Merely because, he felt that the documents before him were new evidence. In light of this, we remand this matter back to the file of Ld. CIT(A) for fresh adjudication on the basis of whatever documents will be filed by the assessee to prove his bonafides. To this extent the order of Ld. CIT(A) is set aside. We hasten to add that the assessee would be at liberty to file any kind of documents that he deems necessary to prove the transaction. In case, new documents are filed then the same shall be accompanied by an application under Rule 46A of IT Rules. Needless to say, the Ld. CIT(A) would consider all such documents as per law and pass a speaking order.
In result, the appeal filed by the assessee is allowed for statistical purposes.
Order pronounced in the court on 03.03.2025