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Facts
The assessee, engaged in an agency business, filed its return of income. The Assessing Officer (AO) selected the case for scrutiny due to substantial cash deposits in bank accounts compared to the disclosed turnover. The AO noted a significant difference between the cash deposits as per bank statements (Rs. 112,06,39,571/-) and the cash book (Rs. 89,89,17,527/-), leading to an addition of Rs. 22,17,22,044/- under Section 68 of the Income Tax Act.
Held
The Tribunal noted that the CIT(A)/NFAC had deleted the addition without a detailed speaking order, and the AO failed to provide a remand report despite reminders. The Tribunal found that the CIT(A)/NFAC's order was cryptic and did not adequately address the discrepancy. Therefore, the Tribunal restored the issue to the AO for adjudication afresh, ensuring a fair opportunity for both parties.
Key Issues
Whether the CIT(A)/NFAC erred in deleting the addition made by the AO without a detailed speaking order, and whether the AO's failure to provide a remand report prejudiced the Revenue's case.
Sections Cited
143(2), 142(1), 133(6), 68
AI-generated summary — verify with the full judgment below
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 10.04.2024 of the Ld. CIT(A) / NFAC, Delhi relating to assessment year 2018-19.
Facts of the case, in brief, are that the assessee is an individual engaged in agency business in the name of “Om Online Communications” majorly with Fino Payment Bank Limited, Hermes I Tickets Private Limited and Vodafone M-pesa Limited for transfer of money to distant places or for payment of various utility bills viz. recharges of phones, recharges of Direct-to-Home (DTH) connection, booking of railway or bus tickets, etc. It filed its return of income on 17.01.2019 declaring total income of Rs.14,48,200/-. The case was selected for limited scrutiny for the reason “Substantial cash deposits in bank account(s) during the year as compared to opening cash balance and turnover disclosed”. Accordingly statutory notices u/s 143(2) ands 142(1) of the Income Tax Act, 1961 (hereinafter referred to as „the Act‟) were issued and served on the assessee, in response to which the AR of the assessee appeared before the Assessing Officer and filed the relevant details.
During the course of assessment proceedings the Assessing Officer noted that the total cash deposits made during the period from 01.04.2017 to 31.03.2018 as per the SFT information available in insights portal is amounting to Rs.109,94,15,371/-. On being asked by the Assessing Officer the assessee submitted his cash book for the period 01.04.2017 to 31.03.2018 furnishing only the month wise opening balances and closing balances. The Assessing Officer noted that as per the return of income the assessee is holding the following bank accounts:
S.No. Bank name A/C No 1 Bank of Maharashtra 60066410083 2 State Bank of India 32076802919 3 Bank of Maharashtra 6012755475 4 Syndicate Bank 53353050000020 5 Saraswat Bank 380100100000291
However, during scrutiny proceedings, apart from the aforesaid bank accounts disclosed in the return of income, the assessee added two more accounts maintained with Axis Bank. The Assessing Officer further noted that as per the SFT information, apart from the above bank accounts disclosed by the assessee, the assessee has also accounts maintained with Yes Bank Limited and another account with Axis Bank Limited. He therefore, issued notice u/s 133(6) of the Act to all the banks in which the cash deposits were made by the assessee as per the SFT information and also to the Axis Bank, the details of which were submitted by the assessee. The respective banks submitted the details in response to the notices issued u/s 133(6) of the Act. The Assessing Officer noted that the total cash deposits made in all the 9 bank accounts held by the assessee are Rs.112,06,39,571/-, the details of which are as under:
S.No. Bank name A/C No Cash deposits during the relevant period 1 State Bank of India 32076802919 2,06,49,300 2 Saraswat Bank 380100100000291 12,78,80,100 3 Axis Bank 916020060065486 8,57,36,150 4 Axis Bank (not disclosed 91602000549842 NIL (Inactive in SFT but disclosed by account) assessee) 5 Axis Bank (not disclosed 91602000549842 2,73,45,200 in SFT but disclosed by assessee) 6 Yes Bank 039763000000262 12,19,84,900 7 Bank of Maharashtra 60066410083 58,28,06,121 8 SYNDICATE BANK (Now 53353050000020 12,09,08,600 amalgamated with Canara Bank) 9 Indusind Bank 201001065559 3,33,29,200 112,06,39,571
However, as per the Cash Book submitted by the assessee, the total cash deposits amount to Rs.89,89,17,527/-. He, therefore, asked the assessee to explain as to why the amount of Rs.22,17,22,044/- should not be added to the total income of the assessee. In absence of any proper explanation to his satisfaction, the Assessing Officer made addition of Rs.22,17,22,044/- to the total income of the assessee u/s 68 of the Act and determined the total income at Rs.22,31,70,244/-.
Before the Ld. CIT(A) / NFAC the assessee filed detailed submissions and also filed certain additional evidences. The Ld. CIT(A) / NFAC forwarded those additional evidences to the file of the Assessing Officer calling for a remand report. However, despite number of reminders, the Assessing Officer failed to submit any remand report. Therefore, based on the arguments advanced by the assessee and in absence of any remand report from the Assessing Officer, the Ld. CIT(A) / NFAC deleted the addition by observing as under: “8. Upon perusal of the written submission, Cash Book, Bank Account statements and nature of business, it is evident that there were no such unexplained cash deposits noticed to invoke Sec 68 of the IT Act. Every cash deposited into the bank account of the appellant by the retailers were immediately transferred to the intermediate account of the Big Organizations. The claim of the appellant and the ground-wise submission clearly demonstrated the nature of the business. 9. In view of the above, the AO is directed to delete the addition made u/s 68 of the IT Act. Hence, the grounds taken by the appellant are 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 and circumstances of the case and in law, the ld. CIT(A) has erred in deleting the addition made by the AO of Rs.22,17,22,044/- u/s 68 of the Act ignoring the fact that there was huge difference in the amount of cash deposit as per cash book and bank account of the assessee, which the assessee had failed to reconcile during the assessment proceedings. The Ld. CIT(A) has given relief to the assessee by merely holding that every cash deposited into the bank account of the assessee by the retailers were immediately transferred to the intermediate account of the Big Organizations, without actually verifying the nature and source of the transactions.
2. On the facts and circumstances of the case and in law, the ld. CIT(A) has erred in not appreciating that sufficient opportunity was granted by the AO to the assessee to furnish the supporting evidences to back her claims during the assessment proceedings and the assessee had also failed to show any circumstances which prevented her from furnishing the additional evidences before the AO. Therefore, the ld. CIT(A) is clearly not justified in admitting the additional evidences and relying on the same to give relief to the assessee, that too, without giving sufficient opportunity to the AO to furnish his report, thereby disregarding the mandate provided in Rule 46A of the I.T. Rules.
3. The appellant craves leave to add to, amend, alter any of the above grounds of appeal.
The Ld. DR strongly challenged the order of the Ld. CIT(A) / NFAC in deleting the addition of Rs.22,17,22,044/- made by the Assessing Officer. He submitted that before the Assessing Officer the assessee produced the cash book, according to which total cash deposits are Rs.89,89,17,527/- whereas the actual cash deposits in the bank accounts as per the information obtained by the Assessing Officer is Rs.112,06,39,571/- and the assessee failed to explain the nature and source of difference amount of Rs.22,17,22,044/-. Although the Ld. CIT(A) / NFAC called for a remand report from the Assessing Officer who failed to submit the same for the reasons best known to him, however, the Ld. CIT(A) / NFAC deleted the addition merely on the basis of written submissions filed by the assessee and the cash book and bank statements and nature of business. He has not thoroughly discussed as to the nature of source of the deposit of cash. Further, the Ld. CIT(A) / NFAC has also not given any reason as to why he is accepting the additional evidences filed before him. He accordingly submitted that the order of the Ld. CIT(A) / NFAC be reversed and that of the Assessing Officer be restored.
Alternatively, he submitted that the matter may be restored to the file of the Ld. CIT(A) / NFAC or the Assessing Officer, as the case may be.
The Ld. Counsel for the assessee on the other hand strongly supported the order of the Ld. CIT(A) / NFAC. He submitted that due to the then prevailing Covid period the assessee could not produce certain details before the Assessing Officer which were filed before the Ld. CIT(A) / NFAC with an application under Rule 46A of IT Rules for accepting the additional evidences. The Ld. CIT(A) / NFAC forwarded all those details to the file of the Assessing Officer for his comments. However, despite five reminders by the Ld. CIT(A) / NFAC, the Assessing Officer did not send any remand report for which the Ld. CIT(A) / NFAC passed the order and deleted the addition on the basis of written submissions filed and the various other details filed. Further, the powers of the CIT(A) are coterminous with that of the powers of the Assessing Officer. Therefore, there is nothing wrong in accepting the evidences filed before him and appraisal of the facts properly. He submitted that since the order of the Ld. CIT(A)/ NFAC is in consonance with law the same should be upheld and the grounds raised by the Revenue be dismissed.
We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and Ld. CIT(A) / NFAC and the paper book filed on behalf of the assessee. We have also considered various decisions cited before us. We find the Assessing Officer in the instant case made addition of Rs.22,17,22,044/- being the difference between cash deposits as per the bank statement and the cash book submitted before the Assessing Officer. We find while doing so the Assessing Officer noted that the assessee had given initially five bank accounts in the return of income filed. Subsequently, during the assessment proceedings two more bank accounts were disclosed, then again one more bank account was disclosed and finally the Assessing Officer on the basis of various details furnished by the assessee noted that the assessee is maintaining total 9 bank accounts and the total deposits as per the said bank accounts comes to Rs.112,06,39,571/-. He further noted that the assessee failed to explain the nature and source of cash deposited of Rs.22,17,22,044/-. We find the assessee filed certain additional evidences before the Ld. CIT(A) / NFAC who called for a remand report from the Assessing Officer. However, the Assessing Officer for the reasons best known to him, failed to submit any remand report despite five reminders. It is also an admitted fact that the Ld. CIT(A) / NFAC in the order passed by him has not given any reason whatsoever for admitting the additional evidences which were not filed before the Assessing Officer during the course of assessment proceedings. Since during the course of assessment proceedings the assessee did not explain the nature and source of cash deposits of Rs.22,17,22,044/- which according to the assessee was prepared in a hurried manner and the difference could not be explained, therefore, the Ld. CIT(A) / NFAC in our opinion should have passed a detailed speaking order as to how this discrepancy occurred. We find the assessee in the written submissions filed before the Tribunal in the prayer has mentioned as under:
“MY PRAYER In view of the above-mentioned legal submissions and based on the facts and circumstances of the Assessee's case, the Assessee humbly submit that there is no dispute about genuineness of funds deposited by the Assessee. The dispute is mainly on account of difference of Rs.22,17,22,044/- in cash deposits as per cash book and bank statements as cash book was prepared by the Assessee in hurried manner and the said difference could not be explained to the learned Assessing Officer due to prevailing circumstances. Subsequently, the Ld. CIT(A) had conducted the inquiry and after considering the submissions made by the Assessee and applying his mind, has rightly concluded that there were no such unexplained cash deposits noticed to him to invoke section 68 of the Act. With regard to Revenue's request of restoring back the matter to Ld CIT(A)/Assessing Officer, it is reiterated that the Ld. CIT(A) has conducted proper inquiry and following the provisions of Rule 46A of the Income Tax Rules, 1962. Thus, the contention of the Revenue about disregarding the mandate provided in Rule 46A by the Ld. CIT(A) is erroneous, devoid of any merit and also bad in law. Without prejudice to anything stated above, in case your Honour differ in view and hold that sub-rule (1) to (3) of Rule 46A of the Income Tax Rules, 1962 applies in Assessee's case, the Ld. CIT(A) has duly followed the provisions of Rule 46A and confronted the Assessing Officer by forwarding the Assessee's submission along with evidence and thereafter, disposed of the appeal on merits. In view of the above, the Assessee request you Honour to not to accept the Revenue's request of restoring back the matter to Ld. CIT(A)/Assessing Officer de- novo verification and decide the matter at your level.”
From the above it is noted that may be due to the then prevailing Covid circumstances the assessee had hurriedly prepared the cash book but how and when he rectified the cash book is not known. It is also not known as to whether the original cash book which was filed before the Assessing Officer or the recasted cash book rectifying the defects was produced before the Ld. CIT(A) / NFAC since nothing is coming out clearly in the order of the Ld. CIT(A) / NFAC. Since the order of the Ld. CIT(A) / NFAC is very cryptic one and does not address the issue in the manner in which it should have been, therefore, considering the totality of the facts of the case and in the interest of justice, we deem it proper to restore the issue to the file of the Assessing Officer with a direction to adjudicate the issue afresh. Needless to say, the Assessing Officer shall provide reasonable opportunity of being heard to the assessee and decide the issue as per fact and 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 13th January, 2025.