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Facts
The assessee failed to file their income tax return for AY 2012-13. The Assessing Officer (AO) made additions of Rs. 28,82,200/- on account of cash deposits and Rs. 3,00,000/- for other credit entries in the bank account, treating them as unexplained income. The assessee challenged the ex-parte order, but the CIT(A) also dismissed the appeal ex-parte due to non-compliance.
Held
The Tribunal restored the matter to the file of the AO, directing the assessee to be given one final opportunity to submit requisite details regarding the source of cash deposits and other credit entries. The AO is to decide the issue afresh on merits.
Key Issues
Whether the additions made by the AO for unexplained cash deposits and credit entries are justified when the assessee was not afforded sufficient opportunity and claims the deposits were from business sources and opening balance. Whether the appeal should be remanded for proper verification of evidence.
Sections Cited
144, 147, 148, 142(1), 69A, 44AD
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “SMC” BENCH, PUNE
Before: SHRI R.K. PANDA & MS. ASTHA CHANDRA
The appeal filed by the assessee is directed against the order dated 27.08.2024 of the Ld. Commissioner of Income Tax (Appeals)/NFAC, Delhi [“CIT(A)”] pertaining to Assessment Year (“AY”) 2012-13.
The assessee has raised the following grounds of appeal :- “On facts and in law, 1] The Ld. CIT(A) has erred in confirming the taxable income of the appellant at Rs. 31,82,300/-. The additions made without considering the fact of the case are illegal and unsustainable in law and the same may please be deleted. 2] The Ld. CIT(A)/NFAC has erred in dismissing the case ex-parte without waiting for the appellant to furnish the submission and evidences. The Ld. CIT(A)/NFAC ought to have appreciated the appellant could not respond to notice as notice were sent on inoperative and old email ID of the appellant which was not frequently used. 2.1] The Ld. CIT(A)/NFAC erred in simply dismissing the contention of the appellant only the ground that no submission was made without appreciating the facts explained in statement of facts. The matter may therefore please be set aside at appropriate level as it involves verification of evidences etc.
3] The Ld. AO has erred in passing an ex-parte assessment order u/s. 144 r.w.s. 147 of the Act determining income at Rs. 31,82,300/- without giving sufficient & proper opportunity of being heard and thus the matter may please be remitted to the AO. 3.1] The Ld. AO erred in making addition of Rs. 28,82,300/- u/s. 69A of the Income Tax Act 1961 treating the amount of cash deposit during the year under consideration as unexplained money without appreciating that appellant is not found in possession of any money or bullion etc. as mentioned in the section 69A. 4] The Ld. AO has erred in making addition of Rs. 28,82,300/- u/s. 69A of the Act treating entire cash deposit amount during the year under consideration as unexplained income of the appellant without considering the facts of the case. 5] The Ld. AO failed to appreciate that part of these deposits were sourced out of opening cash balance and cash withdrawals from time to time. The Ld. AO therefore ought to have given set off for the same. 5.1] The Ld. AO ought to have appreciated that remaining cash deposits were sourced out of business receipts of the appellant and accordingly, only net income from business can be brought to tax and not entire cash deposits. 5.2] The Ld. AO ought to have alternatively restricted the addition to the extent of 8% of the business receipts as provided in section 44AD of the Act. 5.3] The Ld. AO has erred in making addition of Rs. 3,00,000/- on account of credits in bank A/c. without appreciating that the actual nature of transaction was that of advance money for land sold in subsequent year and therefore the same cannot be added as income for the year under consideration. 6] The appellant craves leave to add, alter, amend or delete any of the above grounds of appeal.”
It is the case of assessment framed u/s 144 r.w.s. 147 of the Income Tax Act, 1961 (the “Act”). As per AIR information available on ITS data, it is found that during the year under consideration, the assessee has made cash deposits of Rs.28,82,000/- in Wai Urban Co-operative Bank Ltd. Since, the assessee had not filed its return of income for AY 2012-13, notice u/s 148 of the Act was issued on 23.03.2019 which was duly served upon the assessee followed by notice(s) issued u/s 142(1) of the Act. For the lack of compliance in response thereto as also to the show cause notice requesting the assessee to submit the necessary details/explanations regarding the above transaction, the Ld. Assessing Officer (“AO”) added Rs.28,82,200/- on account of cash deposit in the bank account of the assessee and Rs.3,00,000/- on account of other credit entries in the bank account of the assessee, to the income of the assessee being Nil due to non-filing of ITR u/s 69A of the Act for the reason that the source of cash deposits in the bank account by the assessee remained unexplained and completed the assessment ex-parte on 07.12.2019 u/s 144 r.w.s. 147 of the Act.
The assessee challenged the ex-parte order of the Ld. AO before the Ld. CIT(A). The Ld. CIT(A) too decided the appeal of the assessee ex-parte for non-compliance of notice(s) of hearing dismissing the appeal of the assessee. The Ld. CIT(A) observed that the assessee failed to respond properly to the notices and questionnaire issued by the Ld. AO and further failed to file his ROI. The assessee has also not replied to any of the notice(s) and neither uploaded details and documents nor furnished ground-wise written submission in support of grounds of appeal
raised by him. He therefore proceeded to decide the appeal ex-parte based on the information available on record and upheld the order of Ld. AO by observing as under : “9. In grounds no. 2 and 3 the appellant has agitated against additions of Rs. 28,82,300/- made by the AO u/s 69A of the Act on account of cash deposited by the appellant in his bank account. With reference to the above grounds of appeal, I carefully perused the assessment order passed by the Id. AO. During the assessment proceedings, the AO afforded ample opportunities to the appellant for making compliance to the statutory notices/ questionnaire and show cause notices issued by him. But the appellant did not make any compliance to the notices issued by the AO. From the bank statement of the appellant it was evident that the appellant deposited cash amounting to Rs. 28,82,300/- in his bank account. The appellant neither filed his return of income nor replied the queries raised by the AO during the assessment proceedings. In such circumstances, the AD was left with no option accept making addition of entire amount of cash deposited by the appellant.
10. During the appellate proceedings, despite providing ample opportunities of being heard and furnishing details and documents in support of the above ground of appeal, the appellant did not make any compliance. However the appellant has furnished certain contentions against the addition made by the AO, in the statement of facts, being part of Form 35 filed by the appellant. The appellant has submitted that he was engaged in the business of purchase and sale of fodder etc. and the cash deposited in his account was out sale made in cash by him. The appellant argued that he did not maintained any books of account during the year and the cash deposited in his bank account cannot be treated as amount credited in the books of account of the appellant. Alternatively, the appellant has submitted that his income may be estimated on presumptive basis u/s 44AD of the Act, 18% of the cash deposited in the bank account.
11. I considered carefully the argoments of the appellant in view of the facts recorded by the AO in the impugned assessment order. It is now settled issue that the bank account of an assessee is also treated as a part of books of account of assessee, which is maintained by the bank on behalf of the assessee. Therefore, the addition made by the AO u/s 69A of the Act on account of cash deposit in the bank account of the appellant is technically and factually justified. The submission of the appellant to estimate his income on presumptive basis u/s 44AD of the Act could be considered, if the appellant would have furnished necessary documentary evidences proving his trading activities, But, neither during the assessment proceedings nor during the appellate proceedings, the appellant has filed any any reply detail or document to substantiate his claim. In such circumstances, any relief on the issue of cash deposit in his bank accoünt is not possible. Therefore, the addition of Rs. 28,82,300/- made by the AO u/s 69A of the Income Tax Act, 1961 is hereby confirmed and upheld. Accordingly, ground no. 2 and 3 of the appeal are dismissed and not allowed.
12. In ground no. 4 of the appeal, the appellant has agitated against the addition of Rs. 3,00,000/- made by the AO on account of receipts other than cash in bank account of the appellant. During the assessment proceedings or appellate prorceedings, the appellant did not furnish anything to explain and justify the source of such credit in his bank account. In abcense of any written submission or documentary evidence, I am not inclined to provide any relief to the appellant on the above issue. Accordingly, the ground no. 4 of the appeal is dismissed and not allowed.”
Dissatisfied, the assessee is in appeal before the Tribunal and the grounds of appeal relate thereto.
The Ld. AR submitted that the assessee could not respond to the notice(s) of hearing as these were sent on an inoperative and old email id of the assessee which was not frequently used. He submitted that no sufficient opportunity of being heard was granted to the assessee to present its case before the Ld. AO and that the assessee has all the requisite documentary evidence to explain the source of cash deposits given an opportunity. He further submitted that the Ld. CIT(A) has not taken into cognizance the assessee’s submission made before him in statement of facts filed along with Form 35 which duly explains the grounds on merits raised before the Ld. CIT(A). The Ld. AR, therefore, urged that the matter may be sent back to the file of Ld. AO as it involves verification of evidences etc. and an opportunity be granted to the assessee to present its case before him with all the requisite details/information available with the assessee in support of his claim.
The Ld. DR, however, relied on the order of Ld. CIT(A)/AO.
We have considered the submissions of the Ld. Representatives of the parties and perused the material available on records. It is an admitted fact that due to non-compliance of the statutory notice(s) issued by the Ld. AO, he proceeded to complete the assessment ex-parte. The Ld. CIT(A) has upheld the order of Ld. AO mainly for the reason that the assessee had failed to explain the source of cash deposits in the bank account with Wai Urban Co-operative Bank Ltd. Before the Ld. CIT(A) also the assessee failed to file the requisite compliance for the reasons stated above. It is the submission of Ld. AR that given an opportunity, the assessee is in a position to file all the requisite details to substantiate his case. However, the same needs verification and hence he has prayed for restoring the matter to the file of the Ld. AO to decide it afresh on merits as a result of such verification thereof. Considering the totality of the facts and in the circumstances of the case and in the interest of justice and fair play, we deem it proper to restore the matter back to the file of Ld. AO with a direction to grant one final opportunity to the assessee to substantiate its case by filing the requisite details regarding the source of cash deposits/ other credit entries in the bank account of the assessee and decide the issue afresh on merits as per the fact and law. The assessee is hereby directed to submit the details as called for by the Ld. AO on the appointed date without seeking any adjournment under any pretext failing which the Ld. AO is at liberty to pass appropriate order as per law. The assessee is also directed to file correct email id to the concerned department(s) so that the notice(s) of hearing are properly served on the assessee and also remain vigilant in responding to the same without any delay thereof. We hold and direct accordingly. Thus, the grounds raised by the assessee are allowed for statistical purposes.
In the result, the appeal of assessee is allowed for statistical purpose.
Order pronounced in the open court on 21st March, 2025.
Sd/- Sd/- (R.K. Panda) (Astha Chandra) JUDICIAL MEMBER VICE PRESIDENT पुणे / Pune; ददन ांक / Dated : 21st March, 2025. रदि आदेश की प्रनिनलनप अग्रेनर्ि / Copy of the Order forwarded to : अपील थी / The Appellant. 1. प्रत्यथी / The Respondent. 2. 3. The Pr. CIT concerned. धिभागीय प्रधिधिधि, आयकर अपीलीय अधिकरण, “एक सदस्य मामला” बेंच, 4. पुणे / DR, ITAT, “SMC” Bench, Pune. ग र्ड फ़ इल / Guard File. 5. //सत्य दपत प्रदत// True Copy// आदेश नुस र / BY ORDER,
िररष्ठ दनजी सदिि / Sr. Private Secretary आयकर अपीलीय अदधकरण ,पुणे / ITAT, Pune