VENKATA SUNIL BATTARUSHETTY,BANGALORE vs. DCIT., CIRCLE- 1, NELLORE

Without prejudice to the above the Ld. CIT(A) failed to take into account the telescoping effect, and subsequently again made the addition on the same which has been derived from the Agricultural Income as Cash Deposits.

The Ld. CIT(A) erred in initiating the penalty proceedings u/s 271AAC and 272A without appreciating the facts of the case.

The appellant may, add or alter or amend or modify or substitute or delete and/or rescind all or any of the grounds of appeal at any time before or at the time of hearing of the appeal.”

The brief facts of the case are that the assessee is an individual, filed his return of income for A.Y. 2017-18 on 31.03.2018 admitting total income of Rs.12,82,050/- and agricultural income of Rs.25,00,022/-. The case of the assessee was selected for scrutiny and various notices were issued by the learned Assessing Officer (“Ld. AO") during the assessment proceedings. However, the assessee could not respond to the notices issued by the Ld. AO. Consequently, the Ld. AO observed that the assessee had deposited cash of Rs.13,05,000/- during the demonetization period, the sources which remained 4 unexplained. The same was added to the total income of the assessee u/s 69A of the Act, as unexplained money. Further, the Ld. AO disbelieved the claim of the assessee of agricultural income of Rs.25,00,022/- and treated the same as unexplained cash credit u/s 68 of the Act. Accordingly, the Ld. AO computed the total income at Rs.50,87,070/-.

Aggrieved with order of Ld. AO, the assessee preferred appeal before Ld. CIT(A). However, due to non-compliance, the Ld. CIT(A) dismissed the appeal of the assessee and confirmed both the additions made by the Ld. AO. While confirming the addition of Rs.25,00,022/-, the Ld. CIT(A) observed that no ground had been raised by the assessee regarding such addition while filing the appeal.

Aggrieved with the order of Ld. CIT(A), the assessee is in appeal before us.

The Ld. AR submitted that, the assessee had deposited only Rs. 1,75,000/- in cash during the demonetization period and not 5 Rs.13,05,000/- as alleged by the Ld. AO. In support, the Ld. AR placed on record the copy of the bank statement. The Ld. AR further pointed out that the assessment order does not disclose any break-up or specific details as to how the Ld. AO arrived at the figure of Rs.13,05,000/- as unexplained cash deposits. This, according to Ld. AR, is a matter requiring factual verification. With regards to the addition of Rs.25,00,022/- u/s 68 of the Act, the Ld. AR submitted that the assessee is engaged in agriculture and holds Ac.37.00 gts of land. In support of his claim, the Ld. AR placed on record a Land Holding Certificate issued by the Senior Assistant Director of Horticulture, Government of Karnataka. The Ld. AR further submitted that, the income of Rs.25,00,022/- is from agricultural sources only, however, both the revenue authorities treated it as unexplained credit. The Ld. AR also submitted that the Ld. CIT(A) erred in stating that no ground has been raised in respect of addition of Rs.25,00,022/-. In support of their claim, the Ld. AR invited our attention to Page No.2 of the order of Ld. CIT(A) wherein ground no.1 as reproduced by the Ld. AR clearly show that the assessee had raised a separate ground with regard to the addition made by 6 the Ld.AO on account of agricultural income. Hence, the Ld. AR contended that the Ld. CIT(A) failed to adjudicate this ground on merit resulting in miscarriage of justice. Finally, the Ld. AR prayed before the Bench to set aside the issue to the file of Ld. AO for fresh adjudication of the issue on the basis of the documents / information to be submitted by the assessee before the Ld. AO.

Per contra, the Ld.DR objected to the request of the assessee for setting aside the issue to the file of Ld. AO. The Ld.DR submitted that proper opportunity has already been given to the assessee, therefore, no further opportunity is required to be given.

We have considered the rival contentions and perused the material available on record in view of the submissions made by either side. We have gone through the order of the Ld. AO and found that the assessment order did not contain any details or reference as to how the amount of Rs.13,05,000/- was determined as a cash deposit. Further, as contended by the 7 assessee, the assessee has deposited only Rs.1,75,000/- during the demonetization period. Therefore, the actual amount of cash deposited in the bank is required to be verified. Further, the Land Holding Certificate submitted by the assessee supports the assessee's claim of holding Ac.37.00 gts of agricultural land. However, the ld.CIT(A), despite reproducing ground no.1 in his order, which is related to the addition made by the Ld. AO on account of agricultural income, failed to adjudicate the same on merits, holding erroneously that no such ground has been raised. Therefore, in our considered opinion, the issue raised by the assessee is factual in nature and requires verification at the level of the Ld. AO. Therefore, considering the principle of natural justice, we are of the view that one more opportunity may be given to the assessee to prosecute the case on merits. Accordingly, we set aside the assessment order as well as the order of the Ld. CIT(A) and restore the matter to the file of Ld. AO for fresh adjudication. Needless to mention that Ld. AO shall afford a reasonable opportunity of being heard to the assessee before deciding the issue.