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Facts
During a survey u/s 133A of the IT Act, the assessee admitted to receiving cash for bogus sales bills and transferring it via RTGS. The assessee deposited a significant amount of cash during the demonetization period, which was not recorded in the books of account.
Held
The Tribunal held that the assessee's contention regarding the non-provision of impounded documents and the denial of cross-examination rights was valid. The Tribunal found it difficult for the assessee to prove their case without the necessary documents.
Key Issues
Whether the assessment order passed ex-parte without providing impounded documents and opportunity for cross-examination is valid. Whether the large cash deposits during demonetization are unexplained income under Section 69A.
Sections Cited
133A, 131, 69A, 144
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, PUNE BENCH “A”, PUNE
Before: SHRI R. K. PANDA & SHRI VINAY BHAMORE
Assessment Year : 2017-18 Samita Manoj Patane, Vs. ITO, Ward-2(1), Shop No.1 653/A, Kusum Kolhapur. Apartment, 2nd Lane, Shahupuri- 416001. PAN : AMYPP8375M Appellant Respondent Assessee by : Smt. Deepa Khare Revenue by : Shri Ramnath P. Murkunde Date of hearing 10.02.2025 : Date of pronouncement 05.05.2025 : आदेश / ORDER PER VINAY BHAMORE, JM: These appeals filed by two difference assessees are directed against the different order dated 16.01.2024 passed by Ld. CIT(A)/NFAC (in the case of Manoj Diwakar Patane) and order 21.03.2024 passed by Ld. CIT(A), Pune-11 (in the case of Smita Manoj Patane) for the assessment year 2017-18 respectively.
Since identical facts and common issues are involved in both the above captioned appeals of two different assessees, therefore, we proceed to dispose of the same by this common order.
First, we shall take up the appeal of the assessee in for assessment year 2017-18 (in the case of Manoj Diwakar Patane) as the lead case for adjudication. : 4. The appellant has raised the following grounds of appeal :-
1. The learned CIT(A) erred in law and on facts in confirming the action of the learned AO in passing the order of assessment in gross violation of the provision of natural justice and further erred in confirming the action of AO in passing ex-parte assessment ignoring the statements of assessee recorded during the course of survey u/s 133A of Income Tax Act and without considering the copies of books of account, sales bills, purchase bills etc. impounded during the course of survey and with AO at the time of assessment and without giving copies of impounded materials to appellant.
2. The Ld. CIT(A) erred in holding that the assessment made was in accordance with law when Assessment order was passed without giving the copy of Statement of Pravin Lunkad and without giving Opportunity to cross examine the Pravin Lunkad whose statements were relied upon in drawing the adverse inference.
3. The learned CIT(A) erred in confirming the addition of cash deposit in Demonetization period of Rs.1,89,02,000 made by AO totally ignoring the statement of assessee in survey u/s 133A in which assessee clearly admitted that the cash was given by Mr. Pravin Lunkad and RTGS was given to his company Nav Maharashtra Chakan Oil Mill Pvt. Ltd. and the transaction of sales & purchase being the part of accommodation entries.
The learned CIT(A) erred in confirming the addition of Rs.1,89,02,000 made by AO on the grounds that assesse is not proved his statement with supporting evidence. The supporting evidence was with department. When department is not given the copies of impounded material during survey u/s 133A then how the department expect from assessee supporting proof for his statement.
5. The learned CIT(A) erred in confirming the entire addition of cash deposit and RTGS sent in the hands of assessee when transactions being accommodation entries and appellant being accommodation entry provider instead of addition of commission as per settled principle of law. The case laws relied by CIT(A) are distinguishable on facts.
6. The learned CIT(A) failed to adjudicate on merits the alternative ground taken in submission by appellant that if sales of Nav Maharashtra Chankan Oil Mills Pvt. Ltd is considered as Genuine then the sale against said purchase bills recorded in impounded cash book are also genuine as no stock was found during survey and in such case only NP profit should have been added.
7. The learned CIT(A) erred in confirming addition made by AO without verifying the impounded cash book in survey u/s 133A in which all entries of cash deposits have been recorded for the period 1-4-2016 to 31-1-2017 and also supported by purchase bills and sales bills impounded in survey.
The appellant craves for reserving the right to amend, modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of the appeal.”
Facts of the case, in brief, are that the assessee is an individual. The original return of income was filed on 31-03-2018 declaring total income of Rs.NIL and claiming current year’s loss of Rs.86,95,669/-. The assessee is carrying business of trading Maize, Jawar, Soya DOC, rapeseed Doc (deoiled Cake), Cotton Doc. Huleer bran, Mango Doc etc under the name Shriram Trading Company as proprietary concern. There was survey action u/s 133A of IT Act on assessee on 02-03-2017. During the Demonetization period, the assessee has deposited cash of Rs.1,89,02,000/- into OD A/c No.4237000100128201 with Karnataka Bank Ltd and Rs.80,00,000/- in the bank accounts of wife Smita with Karnataka Bank Ltd A/c No.4237000600108601 and Rs.22,20,000/- in bank account of wife with Canara Bank Ltd A/c No.0304201002759. During the course of survey, the statement of assessee was recorded u/s 131 of IT Act and in the said statement the asseessee stated that the bogus sales bills was issued by Pranav Lunkad, director of company Nav Maharashtra Chakan Oil Mill Pvt. Ltd. in the name of Shriram Trading Company, the proprietary concern of assessee and Sarthak Trading Company, proprietary concern of wife Smita Manoj Patane and cash of Rs.2.70 crores was given by him. The assessee deposited cash of Rs.1,90,00,000/- in his bank account With Karnataka Bank Ltd and Rs.80,00,000/- in the bank a/c of his wife Smita with Karnataka Bank Ltd and sent RTGS to Nav Maharashtra Chakan Oil Mill Pvt. Ltd. against bogus sales bill issued by said company. The survey party also impounded the sales and purchase bills and other loose papers. The backup computer data is also taken by Survey Party in Pen drive. At the time of survey, the books of account was not complete and on the basis of incomplete books of account the assessee declared additional income of Rs.25,00,000/- under PRADAN MANTRI GARIB KALYAN YOJANA (PMGKY). However, after completion of books of account it came to his knowledge that he has sufficient cash balance to explain bank deposits and assessee has not declared any additional income under PMGKY. The Assessing Officer completed assessment u/s 144 of IT Act determining total income of Rs.1,02,06,330/- after making addition of Rs.1,89,02,000/- in respect of bank cash deposit u/s 69A of Income Tax Act.
After considering the reply furnished by the assessee, Ld. CIT(A)/NFAC dismissed the appeal filed by the assessee by observing as under :- “6. During appellate proceedings also response from the taxpayer was not sufficient. The nature and source of cash deposits need to be explained to the satisfaction of the assessing officer or the appellate authority. Despite posting the case several times, there was no sufficient response. I observe that the assessing officer had tangible material in his possession to form belief regarding income which had escaped assessment and there is complete lack of information/documentary evidence regarding these cash deposits from the appellant's side. It is understood that appellant had nothing to offer regarding these cash deposits. Considering these facts, the addition on account of cash deposits in the bank account stands confirmed.
7. Even otherwise on the merits of the case also, I do not see any reason to differ with the findings of the AO, since no attempt has been made by the appellant to discharge its onus. This case is also adjudicated on merits separately as follows. On the Ground of addition u/s section 69A "Section 69A of the Act deals with Money etc. owned by the assessee and found in possession including in the bank accounts of the assessee company which remained unexplained. Section 69A- Unexplained Money "Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year." In the present case, the appellant had a deposited Rs.1,89,02,000/- in his bank account during the demonetization period in demonetized currency as detailed in page 7 & 8 of the assessment order. The appellant is found to be the owner of the Money appearing in bank accounts, established through the Bank. The appellant was found owner of the Money but has not offered any acceptable arid cogent explanation regarding the source of such Money found in his bank account. The income earned during the year has not been offered and taxes due there upon has not been paid. The scheme of Section 69A of the Income-tax Act, 1961, would show that in cases where the nature and source of acquisition of money, bullion, etc., owned by the assessee is not explained at all, or not satisfactorily explained, then, the value of such investments and money or value of articles not recorded in the books of accounts may be deemed to be the income of such assessee. The provisions of section 69A of the Act treat unexplained money, bullion, etc., as deemed income where the nature and source of investment, acquisition as the case may be, have not been explained or satisfactorily explained. Therefore, in these cases, the source not being known, such deemed income is covered under the provisions of Section 69A of the Act in view of the scheme of those provisions. For application of Section 69A of the Act, two conditions are required to be satisfied. They are:
1. 1. Investment/expenditure are not recorded in the books of account of appellant.
2. The nature and source of acquisition of assets or expenditure are not explained or not explained The expression "nature and source" used in this section should be understood to mean requirement of identification of source and its genuineness. To explain "Nature" it would require the appellant to explain what is the description of investment or expenditure, period and the manner in which it was done. To explain the source, it would require the appellant to explain the corpus or fund from where investment or expenditure has been met. In the present case, the appellant has deposited Cash in his bank account, various Credit entries appearing in the bank account as narrated in the body of the assessment order, but such credits are not recorded in the books of account of the appellant. Further, the nature and source of such Deposits made in the bank accounts were not at all explained and no satisfactory explanation offered. Further, for invoking deeming provisions under Section 69A of the act, there should be clearly identifiable asset or unexplained Money. It is amply proved beyond doubt that the appellant has deposited Cash and other credits appearing in bank accounts stands unexplained, and the sum of Rs 8,35,500/- is identifiable as unexplained assets. All three limbs of Section 69A of the Act stands qualified in the case of the appellant, i.e. "the appellant was found to be owner of the Money; "such Money was not recorded in the books of accounts; and "its nature and source is not identifiable. xxxxx 17. Appellant has not submitted any source for the huge cash deposit of Rs 1,80.02,000/- (in old currency) during the demonetization period. The AO has clearly brought out vide Para 6.1 in Page 9 of the Assessment Order that "On verification of DD Account No 4237000100128201 (supra) for FY 2016-17, it is noted that from 02.04.2018 to 29.10.2016, there are absolutely no cash deposits. It is also noted that after demonetization period i.e from 01.07.2017 to 31.03.2017, there are again absolutely no cash deposits. All the credits are either by RTGS or transfer of funds. On verification of the above table, it is noted that there are multiple deposits on single days. However, it is only during the demonetization period that there are heavy cash deposits in old currency noted of Rs 500/- and Rs 1000/-. On verification of the above table, it is noted that there are multiple deposits on single days. The bank has also furnished a copy of OD Account No 4237000100128201 for FY 2015- 16. On verification of the same, it is noticed that there are not cash deposits except on very few occasions which are also found to be in the normal range of Rs 50,000/- to approximately Rs 6,00,000/-, Thus, the cash deposits during demonetization period are abnormal.
However, since till date the assessee did not respond to final show cause dtd 12.12.2019, the issue of source of cash deposits during demonetization period remained totally unexplained".
The statements given by the appellant during survey has not been proved by him with any evidence and the statements and the counterstatements by the parties Involved (Pravin Surajmal Lunkad, owner of M/s Pranav Agro Industries Ltd and owner of Nav Maharashtra Chakan Oil Mills Ltd, Pune) are without basis. Hence as appellant could not substantiate his own claims made during the statement recorded. AD has rightly chosen to ignore the unproven claims. Hence, the Assessment Order is upheld the grounds are noted as dismissed. In the end result, the appeal is DISMISSED.”
It is this order against which the assessee is in appeal before this Tribunal.
8. Ld. AR appearing from the side of the assessee submitted before us that the order passed by Ld. CIT(A)/NFAC is unjustified. Ld. AR further submitted before us that the assessment order was passed ex-parte and Ld. CIT(A)/NFAC also passed almost an ex- parte order wherein after considering the written submissions of the assessee he has not provided any further opportunity to the assessee to make further submission. It is evident that two effective notices were issued on 13.04.2022 and 08.01.2024 respectively and in response to notice dated 13.04.2022, the assessee furnished written submission before Ld. CIT(A)/NFAC and thereafter on 20.07.2022 also written submission was Ld. CIT(A)/NFAC. It was submitted before Ld. CIT(A)/NFAC that the copies of impounded material were not provided to the assessee by the ADIT (Inv.) for which written request was made by letter dated 06.12.2017, the copy of which is also enclosed in the paper book furnished before the Bench. However, Ld. CIT(A)/NFAC reiterated in the order that the assessee remained non-compliant before the Assessing Officer therefore he is confirming the order passed by the Assessing Officer. It was also submitted before the Bench that the request letter dated 04.01.2021 was also furnished before PDIT for providing copies of impounded material and thereafter grievance was also raised before CP Gram for copies of impounded material by letter dated 16.02.2021. It was further submitted by Ld. AR that again on 29.01.2024 grievance was raised before CP Gram but the copies of impounded material was not provided to the assessee. It was contended before the Bench that in the absence of copies of impounded material it was not possible for the assessee to appear before the Assessing Officer or before Ld. CIT(A)/NFAC. Ld. AR also submitted before the Bench that the Assessing Officer has relied on the statement of Pranav Lunkad but no opportunity was provided to the assessee to cross-examine the said person. Ld. AR Pranav Lunkad were recorded u/s 131 of the IT Act. The assessee in his statement accepted that the cash deposited during demonetization was given by Pranav Lunkad and the same amount was subsequently transferred to the bank accounts of Nav Maharashtra Chakan Oil Mill Pvt. Ltd. wherein Pranav Lunkad was director and bogus sale bills were issued by him against which the said amount was adjusted. Simultaneously, the statement of Pranav Lunkad was also recorded u/s 131 of the IT Act but it was relied on by the Assessing Officer whereas the statement of the assessee was treated as false. Ld. AR accordingly submitted before the Bench that the impounded material was never provided to the assessee with the help of which he could support his contentions/statements and secondly he was not provided any opportunity to cross-examine the person whose statements were used against him. Accordingly, it was requested by Ld. AR that the order passed by Ld. CIT(A)/NFAC may kindly be set-aside and the matter be remanded back to the file of the Assessing Officer to decide the issue afresh.
9. Ld. DR appearing from side of the Revenue relied on the orders passed by the subordinate authorities and requested to confirm the same.
We have heard Ld. Counsels from both the sides and perused the material available on record including the paper book furnished by the assessee. In this regard, we find that admittedly the assessee has deposited cash of Rs.1,89,02,000/- during demonetization period in his bank accounts and the assessment orders were passed ex-parte i.e. in the absence of the assessee and therefore the Assessing Officer made the addition u/s 69A of the IT Act treating the same as unexplained money. It was also the contention of Ld. AR that during survey certain loose papers and documents were impounded including sale and purchase bills and admittedly the copy of the same was not provided to the assessee even after so many requests. It was also demonstrated before the Bench that the assessee also raised grievance before CP Gram in this regard. Even till the date of hearing before us the assessee was not provided documents as desired by him. Accordingly, we find force in the contentions of Ld. Counsel for the assessee that in the absence of copy of impounded papers/documents it was not possible for the assessee to prove his statements recorded by the Survey Party u/s 131 of the IT Act. However, we also find that even if such documents were not provided to the assessee he could have appeared before the Assessing Officer and replied on the basis of material available with him. We further find that Ld. CIT(A)/NFAC has dismissed the appeal merely on the reasoning that the assessee did not cooperate during assessment proceedings but while doing so he did not consider the fact that the impounded material was not provided to the assessee. It was also the contention of Ld. AR of the assessee that if the sales bills issued by Pranav Lunkad were accepted as correct then the sale recorded in the books of the assessee on the basis of above purchase bills must also be treated as correct & therefore only the NP should have been added in the hands of the assessee. Considering the totality of the facts of the case and in the interest of justice and without going into merits of the case, we deem it appropriate to set-aside the order passed by Ld. CIT(A)/NFAC and remand the matter back to the file of the Assessing Officer to pass assessment order afresh (de novo) after providing reasonable opportunity of hearing to the assessee as per fact & law and also after providing copies of impounded material seized during the survey proceedings. The assessee is also hereby directed to respond to the notices issued by Ld. Assessing Officer in this regard and produce relevant documents/evidences, if any, in this regard without taking any adjournment under any pretext, otherwise Ld. Assessing Officer shall be at liberty to pass appropriate order as per law. The assesse has raised as many as 7 grounds in his appeal & mainly the assesse has challenged the order passed by Ld. CIT(A) wherein he confirmed the ex-parte order passed by the AO & has also challenged the ex-parte order passed by the AO & since both the orders have been set-aside by us & the matter is remanded back to the file of the Assessing Officer to pass assessment order afresh, therefore, all other grounds become infructuous hence not adjudicated separately. Thus, the grounds raised
by the assessee are partly allowed.
11. In the result, the appeal filed by the assessee in for A.Y. 2017-18 is partly allowed for statistical purposes.
Since the facts and issues involved in above appeal of the assessee are identical, therefore, our decision in for A.Y. 2017-18 shall apply mutatis mutandis