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Facts
The assessee, an individual, did not file an income tax return for AY 2017-18. Cash deposits of Rs. 13 lakhs were observed during demonetization. The Assessing Officer made an addition of Rs. 1,21,51,939/- for cash deposits and other credits.
Held
The CIT(A) deleted the addition by admitting additional evidence due to the AO's failure to provide a remand report. The Tribunal found that both lower authorities failed to properly address the issue and restored the matter to the AO for a fresh decision.
Key Issues
Whether the deposits in the assessee's bank account, linked to his mother's business, were correctly treated as unexplained money in the assessee's hands and whether the CIT(A) erred in deleting the addition without proper verification.
Sections Cited
142(1), 144, 133(6), 46A, 69A, 250(4)
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Income Tax Appellate Tribunal, PUNE BENCH “B”, PUNE
Before: SHRI R. K. PANDA & MS. ASTHA CHANDRA
This appeal filed by the Revenue is directed against the order dated 19.03.2024 of the Ld. CIT(A) / NFAC, Delhi relating to assessment year 2017-18.
Facts of the case, in brief, are that the assessee is an individual and has not filed his return of income for the impugned assessment year. It was observed that during the period of demonetization, the assessee had deposited cash aggregating to Rs.13 lakhs in his bank account. Since the assessee has not filed his return of income for the relevant assessment year i.e. assessment year 2017-18, a notice u/s 142(1) of the Income Tax Act, 1961 (hereinafter referred to as „the Act‟) was issued and served on the assessee requiring the assessee to file the return of income in the prescribed form. The notice was served on the assessee on 15.03.2015 through registered speed post. Further, a notice u/s 142(1) of the Act was issued through the system on 09.03.20185 which was also duly served on the assessee. However, no compliance was made to the statutory notices. The Assessing Officer therefore, proceeded to complete the assessment u/s 144 of the Act. He obtained the statement of relevant bank accounts by issuing notice u/s 133(6) of the Act. After analyzing the bank statement, again a show cause notice was issued and served on the assessee. Since the assessee did not furnish any submission despite reminders, the Assessing Officer made addition of Rs.1,21,51,939/- being the cash deposits as well as other credits found in the bank account.
Before the Ld. CIT(A) / NFAC, the assessee made elaborate submissions and filed certain evidences, based on which the Ld. CIT(A) / NFAC called for a remand report from the Assessing Officer. However, despite number of opportunities granted, the Assessing Officer did not submit any remand report. The Ld. CIT(A) / NFAC thereafter deleted the addition made by the Assessing Officer by observing as under: “6.3 I have carefully considered the facts of the case, the submission of the appellant and evidences on record. During the course of assessment proceedings, the appellant submitted a request for admittance of additional evidence under Rule 46A of IT Rules, 1961 as the appellant could not submit before the AO the documentary evidences on ground that he was prevented by reasonable cause in submitting the above documents before the AO. In view of the above, a remand report was sought from the AO vide letter dated 14.11.2023, 19.12.2023, 05.01.2024 and 08.02.2024, but however, it is seen that till date no remand report has been received. Therefore it is presumed that the AO has no comments to offer on the additional evidences submitted by the appellant. I am of the considered view that the said evidences are crucial and of prime importance in determining the correct income of the appellant and therefore in the interest of Justice, the additional evidences submitted are admitted under the provisions of Rule 46A of the I.T Rules, 1962 and considered in deciding the present appeal on merits. 6.4 I find that the said bank account was solely used for banking transaction of Anand Hotel, owned by appellant's mother. It is submitted that appellant at the time of opening bank account in the name of his mother for the banking transactions of Hotel Anand had submitted his Power of Attorney dt. 08.05.2007 authorizing him to act on behalf of his mother to perform all the legal formalities and functions required for the smooth business operation of Hotel Anand. It is submitted that the bank staff inadvertently opened the bank, account in the name of the appellant instead of his mother and the appellant was under the bonafide belief that cited bank account was under the name of his mother as cheque books during that period have the name of account holders and owing to his power of attorney, he was authorized sign cheques. 6.5 I find that the mother of the appellant, Smt. Hansaben Dineshchandra Patel is the proprietor of Hotel Anand at Mhasala, Dist., Raigad engaged in the business of selling liquor and cold drink and the appellant helps her manage the said business as her power of attorney holder. The said business was originally carried on by the father of the appellant and on the death of his father on 06.01.2007, inherited by his mother who is presently the proprietor of the said business. I find that all licenses are in his mother's name. The above facts are established by the documentary evidence like copy of power of attorney dated 08.05.2007, copy of Form FL III I issued by Collector of Raigad being license for sale at a hotel of imported foreign liquors and Indian made foreign liquors, copy of Form II i.e. Certificate of Registration of an Eating House dated 05.10.2017 in the name of Smt. Hansaban Dineshchandra Patel, copy of Registration Form 102 dt 28.04.2008 issued by Sales Tax Officer, Navi Mumbai in the name of Smt. Hansaban Dineshchandra Patel, NOC dt 31.02.2022 issued by Raigad Zilla Parishad in the name of Smt. Hansaban Dineshchandra Patel permitting Hotel Anand to carry out business of bar, food etc, NOC dt 20.12.2017 issued by Nagarpanchayat, Mhasala, Form C issued by Govt. of Maharashtra being license under FSS Act, 2006 renewed on 14.10.2021 reflecting Smt. Hansaban Dineshchandra Patel as proprietor of Hotel Anand, copy of challan dt 20.03.2021 evidencing payment of Rs 2,59,900 being licence fees for the period 01.04.2021 to 31.03.2026 in the name of Smt. Hansaban Dinesh chandra Patel and copy of fire insurance policy document dt 21.03.2018 from the Oriental Insurance Co Ltd in the name of Smt. Hansaban Dineshchandra Patel. 6.6 I also find from the perusal of the copy of the impugned bank statement that the total cash deposit in the cited bank is Rs 99,09,500 only as against Rs 1,07,44,900 alleged by the AO. Therefore, addition to the extent of Rs. 8,35,400 (Rs 1,07,44,900 minus Rs 99,09,500) is factually incorrect. Further, the said bank account and the receipts therein form part of entries recorded in the books of accounts of Hotel Anand and is also reported as the bank account of the mother of the appellant in the ITR form filed by her for A.Y. 2017-18.
6.7 With regard to the addition of other deposits of Rs.13,37,409 as unexplained money u/s. 69A, I find that the said amount majorly represent maturity receipts of term deposits held with Shivkrupa Gramin Bigarsheti Pathsanstha Maryadit, Mhasala which fact is evidenced by certificate dt. 10.08.2021 tendered by the Manager of the cited Pathpedhi. I also find that a sum of Rs. 61,305 being deposit credited on 31.03.2017 is NEFT returned of the payment made to one of the vendors viz. National Liquors on 30.03.2017 which fact is evidenced by bank statement. It is also seen that the Sales Tax Department, Alibag had also issued notice dt. 26.12.2019 u/s. 33(1) of the Maharashtra Value Added Tax Act, 2002 to the Manager of Mahad Co-operative Urban Bank Limited, Mhasala branch, Raigad reflecting current account no as 0001134 and PAN number of Mrs. Hansaben Patel for recovery of sales tax dues of Rs.52,947 of Hotel Anand. 6.8 It is also submitted that Anand Hotel is a retail trader dealing majorly in liquor and the payments for purchases of liquor are primarily made through banking channels, whereas the sales are primarily in cash. The appellant has also relied on the decision of hon'ble Ahmedabad ITAT in the case of Bamkimbhai D. Patel v ITO (2021) ΙΤΑ 401/AHD/2009 wherein hon'ble Ahmedabad tribunal held that the assessee being a power of attorney holder cannot be treated as the rightful owner of the income which has been arisen on sale of property. He was only a representative capacity. Addition was deleted. The appellant further relied on the case of ITO vs. Vinod Chadha (2016) (73 taxmann.com 118) wherein hon'ble Delhi-tribunal concluded that cash deposited in assessee's saving 'bank account was sales of partnership firm in which assessee was partner and same was duly explained with help of sales receipt recorded in books of account of partnership firm, said amount could not be added in assessee's hands as unexplained money. 6.9 It is also seen that the AO has considered only credit entries i.e. the entries of deposits in the said bank account and not considered the debit entries in the same bank account, it is seen that a total purchases of Rs.81,06,427 were made through banking channels. Accordingly, the addition if any can be only of the profit earned by the Hotel Anand which in the relevant year. The AO at para 6/page 4 of the Asst. order has incorrectly stated that opening cash balance as on 01.04.2016 was Rs.5,83,832 and thereafter cash balance was rigged upto Rs.3,30,618 as on 31.03.2017. It is noted that opening cash in hand as on 01.04.2016 was Rs.48,760 and closing balance as on 31.03.2017 is Rs.78,730. The same is also supported with the fact that opening cash and bank balance as on 01.04.2016 is Rs 48,760 and closing cash & bank as on 31.03.2017 is Rs 78,730 as evidenced by the Balance Sheet as at 31.03.2016, and as at 31.03.2017. 6.10 In view of the above facts and discussion, I am of the considered view that addition of Rs.1,20,82,309 is not sustainable as the said deposits and credits represents the business receipts of Hotel Anand, proprietary firm of the mother of the appellant, Smt. Hansaben Dineshchandra Patel and maturity proceeds of fixed deposits and the same has been declared in her return of income for the AY 2017- 18. If the AO has any doubts as to the genuineness of such deposit, only the return of his mother Smt. Hansaben Dineshchandra Patel can be reopened. Thus, the addition of Rs.1,20,82,309 (Rs.94,44,900 plus Rs.13,37,409 plus Rs.13,00,000), made by the AO as unexplained money u/s 69A of the Act is directed to be deleted. The appeal on Ground No. 2 and 4 are thus allowed.”
Aggrieved with such order of the Ld. CIT(A) / NFAC, the Revenue is in appeal before the Tribunal by raising the following grounds:
1. On the facts & in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs.1,20,82,309/- (Rs.94,44,900/- plus Rs.13,37,409/- plus Rs.13,00,000/-) u/s.69A without exercising his co- terminus powers u/s. 250(4) to verify the fact that the Income Tax Portal does not allow the bank account of a separate person to be linked with a PAN of a different person.
2. On the facts & in the circumstances of the case and in law, the Ld.CIT(A) erred in deleting the addition of Rs. 1,20,82,309/- (Rs.94,44,900/- plus Rs.13,37,409/- plus Rs.13,00,000/-) on a week contention that the bank authorities opened the bank account inadvertently in the name of the assessee, instead of the account name of his mother.
3. The order of the CIT(A) may be vacated & and the matter may be restored to the table of the Assessing officer for de-novo consideration.
4. The appellant craves leave to add, amend, alter or delete any grounds of appeal.
The Ld. DR strongly opposed the order of the Ld. CIT(A) / NFAC in deleting the addition made by the Assessing Officer. He submitted that when the bank account stands in the name of the assessee, the Ld. CIT(A) / NFAC should not have deleted the addition merely on the basis of submissions made by the assessee that the said deposits and credits represent the business receipts of hotel Anand at Mhasala, proprietary firm of mother of the assessee Smt. Hansaben Dineshchandra Patel and the maturity proceeds of fixed deposits. Further, his observation that if the Assessing Officer has any doubt of genuineness of said deposits, only the return of mother can be reopened which is not correct. He submitted that the onus is on the assessee to substantiate with evidence as to how he has utilized his bank account by making deposits of his mother who regularly files her return of income. He submitted that since the order of the Ld. CIT(A) / NFAC is not in accordance with law, the same should be reversed and that of the Assessing Officer be restored.
The Ld. Counsel for the assessee on the other hand drew the attention of the Bench to the reminders given by the Ld. CIT(A) / NFAC to the Assessing Officer for giving the remand report. He submitted that despite four opportunities granted, the Assessing Officer failed to submit any remand report. Referring to the order of the Ld. CIT(A) / NFAC, he submitted that the assessee has explained the nature and source of the deposits in the bank account which is out of the sale proceeds of hotel Anand, proprietary firm of the mother of the assessee and where the assessee was the power of attorney holder. He further submitted that the addition made by the Assessing Officer is also incorrect since there are wrong totaling.
The Ld. Counsel for the assessee filed the following details and submitted that the assessee had filed sufficient evidences to explain the source of deposits which the Ld. CIT(A) / NFAC has examined and granted relief:
Sr. No. Nature of evidences 1 Copy of Power of Attorney dt. 08.05.2007 given by the respondent's mother in favour of the respondent alongwith English translation thereof 2 Copy of Form F L III issued by Collector of Raigad being license for sale at a hotel of imported foreign liquors and Indian made foreign liquors on which excise duty is paid at special rates in the name of respondent's father Late Shri Dineshchandra Arunbhai Patel and then renewed in the name of respondent's mother Mrs. Hansaben Dineshchandra Patel.
3 Copy of Form II i.e Certificate of Registration of an Eating House dt.05.10.2007 of Hotel Anand in the name of Smt. Hansaben Dineshchandra Patel. 4 Certificate of Registration Form 102 dt. 28.04.2008 issued by Sales Tax Officer, Navi Mumbai in the name of Mrs. Hansaben Dineshchandra Patel certifying that she is a registered dealer u/s. 16 of the Maharashtra Value Added Tax Act, 2002. 5 No Objection Certificate dt.31.03.2022 issued by Raigad Zilla Parishad in the name of respondent's mother permitting Hotel Anand to carry out the business of bar, food etc also enumerating terms and conditions for carrying on the said business. 6 No Objection Certificate dt.20.12.2017 issued by Nagarpanchayat, Mhasala 7 Form C issued by Government of Maharashtra being license under FSS Act, 2006 renewed on 14.10.2021 reflecting Mrs. Hansaben Dineshchandra Patel as Proprietor of Hotel Anand. 8 Copy of challan dt.20.03.2021 evidencing payment of Rs.2,59,900/- being license fees for the period 01.04.2021 to 31.03.2026 in the name of Mrs. Hansaben Dineshchandra Patel 9 Copy of fire insurance policy document dt. 21.03.2018 from The Oriental Insurance Company Limited in the name of Mrs. Hansaben Patel 10 Copy of impugned bank statement of Annasaheb Savant Co- operative Urban Bank Mahad Ltd (SB A/c no.005130100001134) Mhasala Branch, Dist. Raigad. In support of the argument that the deposits in the disputed bank account are of Hotel Anand and that such deposits and withdrawals are recorded by the mother of the respondent in her books of accounts, the following evidences were submitted.
Sr. No. Nature of evidences 1 Copy of Pan card and Aadhar card of Mrs. Hansaben Patel. 2 Computation of Income alongwith ITRV and financial statements of AY 2017-18 of respondent's mother Mrs. Hansaben Dineshchandra Patel reflecting net profit of Rs.6,64,197/- from the Hotel Anand 3 Computation of Income along with ITRV and financial statements of AY 2016-17 of respondent's mother Mrs. Hansaben Dineshchandra Patel reflecting net profit of Rs.7,04,017/- from the Hotel Anand 4 Relevant pages of ITR 4 Form of Mrs. Hansaben Dineshchandra Patel of AY 2017-18 reflecting bank account no. 1301/1134 of Annasaheb Sawant Co-operative Urban Bank Mahad Ltd, Mhasala Branch, Dist. Raigad
5 Copies of tax invoices of liquor purchased in the name of Hotel Anand bearing PAN of respondent's mother Mrs. Hansaben Patel 6 Copies of VAT challans of Hotel Anand for the year under appeal 7 Cash deposits summary of Hotel Anand for the year ended on 31.03.2017 - Date wise cash deposits - Statement giving source of cash deposit 8 Copy of notice dt. 26.12.2019 issued u/s. 33(1) of the Maharashtra Value Added Tax Act, 2002 for the recovery of VAT dues of Hotel Anand 9 Details of date wise cash deposit made in bank account no.005130100001134 with Annasaheb Savant Co-operative Urban Bank Mahad Ltd, Mhasala Branch, Dist. Raigad evidencing total cash deposits of Rs.99,09,500/- as against Rs.1,07,44,900/- alleged by the ld.AO. 10 Copy of certificate dt. 10.08.2021 granted by Shivkrupa Gramin Bigarsheti Pathsanstha Maryadit, Mhasala certifying bank credits as matured fixed deposit.
Referring to the decision of the Hon‟ble Delhi High Court in the case of CIT vs. Imperial Cables (P.) Ltd. (2007) 159 Taxman 328 (Del), he submitted that the Hon‟ble High Court in the said decision has held that where inspite of adequate opportunities the Assessing Officer does not respond to reminders, the CIT(A) has no option but to admit the additional evidences and decide the appeal on merit. Further, the CIT(A) is empowered by provisions of section 250(4) of the Act to exercise his powers which are co-terminus to that of the Assessing Officer. He submitted that since the Ld. CIT(A) / NFAC after examining the evidences in detail has given a finding of fact, therefore, no fault can be found with the decision of the Ld. CIT(A) / NFAC and therefore, the grounds raised by the Revenue should be dismissed.
We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and Ld. CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the Assessing Officer in the instant case made addition of Rs.1,21,51,939/- being cash deposited during demonetization period, other cash deposits and other credits found in the bank account in absence of any explanation filed by the assessee. We find the assessee before the Ld. CIT(A) / NFAC filed certain evidences which were forwarded to the Assessing Officer. Since, despite four reminders, the Assessing Officer did not give any remand report, the Ld. CIT(A) / NFAC deleted the addition, the reasons of which have already been reproduced in the preceding paragraphs. It is the submission of the Ld. DR that since the assessee did not respond to the various statutory notices issued by the Assessing Officer, the Assessing Officer passed the ex-parte order. Further, the Ld. CIT(A) / NFAC has not thoroughly examined the details and deleted the addition made by the Assessing Officer in the hands of the assessee merely on the ground that the said deposits and credits represent the business receipts of hotel Anand, proprietary firm of the mother of the assessee Smt. Hansaben Dineshchandra Patel and the maturity proceeds of fixed deposits which have been declared in her return for assessment year 2017-18. It is the submission of the Ld. DR that when the bank account stands in the name of the assessee, it is incomprehensible as to how the business proceeds of the mother can be deposited in the bank account of the assessee.
It is an admitted fact that the bank account stands in the name of the assessee Mr. Shaileshkumar Dineshbhai Patel whereas the “Hotel Anand” is owned by the mother of the assessee Smt. Hansaben Dineshchandra Patel. It is not understood as to how the business proceeds of the mother of the assessee have been deposited in the bank account maintained by the assessee. At the same time, it is also seen that the Assessing Officer has made addition of total credits in the bank account without allowing any benefit for the withdrawals which apparently shows purchase of various items such as wine, liquor, etc. At the same time the withdrawals also include LIC premium, payment to some surgical agency (Rs.2,00,017/- on 07.03.2017), payment to one Mr. Jayantbhai V Patel (Rs.5,00,029/- on 13.02.2017), payment to one Mr. Sanjay P Karnik (Rs.2,50,000/- on 11.08.2016). These are only some of the entries found on a cursory look at the bank statement. It is not understood as to whether these transactions were entered into by the assessee or his mother. It is not at all discernible. There is absolutely no explanation by the assessee on these withdrawals. If the deposits in the bank account are that of the mother of the assessee, then the payments cannot be of some other parties. In our opinion, both the lower authorities have failed in their duty to address the issue properly. Considering the totality of the facts of the case and in the interest of justice, we deem it proper to restore the matter to the file of the Assessing Officer with a direction to grant one final opportunity to the assessee to substantiate his case by establishing his case and decide the issue as per fact and law after giving due opportunity of being heard to the assessee. The assessee is also hereby directed to make his submissions, if any, before the Assessing Officer on the appointed date without seeking any adjournment under any pretext, failing which the Assessing Officer is at liberty to pass appropriate order as per law. We hold and direct accordingly. The grounds raised by the Revenue are accordingly allowed for statistical purposes.
In the result, the appeal filed by the Revenue is allowed for statistical purposes.
Order pronounced in the open Court on 29th January, 2025.
Sd/- Sd/- (ASTHA CHANDRA) (R. K. PANDA) JUDICIAL MEMBER VICE PRESIDENT पुणे Pune; दिन ांक Dated : 29th January, 2025 GCVSR आदेश की प्रतितिति अग्रेतिि/Copy of the Order is forwarded to: अपीलार्थी / The Appellant; 1. 2. प्रत्यर्थी / The Respondent 3. The concerned Pr.CIT, Pune 4. DR, ITAT, „B‟ Bench, Pune 5. गार्ड फाईल / Guard file. आदेशानुसार/ BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अधिकरण ,पुणे / ITAT, Pune
S.No. Details Date Initials Designation 1 Draft dictated on 28.01.2025 Sr. PS/PS 2 Draft placed before author 29.01.2025 Sr. PS/PS Draft proposed & placed before the 3 JM/AM Second Member Draft discussed/approved by Second 4 AM/AM Member 5 Approved Draft comes to the Sr. PS/PS Sr. PS/PS 6 Kept for pronouncement on Sr. PS/PS 7 Date of uploading of Order Sr. PS/PS 8 File sent to Bench Clerk Sr. PS/PS Date on which the file goes to the Head 9 Clerk 10 Date on which file goes to the A.R. 11 Date of Dispatch of order