JITUDAN RAVATDAN GADHVI,PATAN vs. THE ITO, WARD-3, PATAN

The assessee has raised the following grounds of appeal:

In law and on the facts and in the circumstances of the case, the Ld. CIT(A) has grossly erred in dismissing the appeal not adjudicating the merits of the case on ground of limitation when appellant has sufficient cause for not filing appeal within the time. Asst.Year –2012-13 - 2–

In law and on the facts and in the circumstances of the case, the Ld. CIT(A) has grossly erred in upholding addition on Rs. 4,19,093/- being 8% on contract receipt shown in Form 26AS of Rs. 52,38,658/-.

In law and on the facts and in the circumstances of the case, the Ld. CIT(A) has grossly erred in upholding addition on Rs. 12,44,754/- being cash deposit and Interest Income into bank accounts when no such addition is called for.

The appellant craves leave to add to alter, amend and/or withdraw any ground or grounds of appeal either before or during the course of hearing of the appeal.”

At the outset, the Counsel for the assessee submitted that he shall not be pressing for Ground No. 3 and accordingly, Ground No. 3 of assessee’s appeal is dismissed as not pressed.

The brief facts relating to this ground of appeal are that the assessee failed to file his return of income for the Assessment Year (AY) 2012–13. The Assessing Officer observed that during the impugned assessment year, the assessee had deposited a total of ₹11,94,000/- in cash into his bank account with Axis Bank Ltd., Radhanpur Branch, Patan. On the basis of this information, the Assessing Officer initiated re-assessment proceedings under section 148 of the Income Tax Act (Act). Despite issuance of notice, the assessee did not file a return and neither did the assessee respond to multiple notices under section 142(1) of the Act. In view of the repeated non-compliance by the assessee and in the absence of any response or evidence, the AO proceeded to complete the assessment under section 144 of the Act on a best judgment basis. Accordingly, the entire amount deposits were treated as unexplained cash credit and added to the total income. Consequently, penalty proceedings under section 271(1)(c) were also initiated for concealment of income.

In appeal, Ld. CIT(A) dismissed the appeal of the assessee on account of delay of 477 days in filing of appeal before him. The Ld. CIT(A) made the following observations while dismissing the appeal of the assessee: Asst.Year –2012-13 - 3–

In the result, the present appeal is dismissed in limine.”

Before us, the Counsel for the assessee submitted that the assessee belongs from a small village of Palanpur and he is neither aware regarding Income Tax proceedings and nor has he faced such proceedings at any earlier point in time. The assessee’s registered address as per official records is situated at Kalyanpur Santalpur, Patan. However, due to present personal circumstances, relating to education of his child, the assessee was constrained to shift to Palanpur. Further, in the assessment proceedings, the notices were sent to psassociates@yahoo.com. However, the Counsel for the assessee submitted that the assessee did not own such email id and is also not aware about any such email. Accordingly, it was for these reasons that the assessee could not comply during the assessment proceedings and became aware of the passing of assessment order only when the Income Tax Department initiated recovery proceedings and a sum of Rs. 10,09,130/- was debited from the Axis Bank Account of the assessee in 2020. Further, since the period was coinciding with the Covid pandemic period, it was due to these reasons that there was a delay in filing of appeal by the assessee before CIT(A). However, CIT(A) without going into the merits of the case, summarily dismissed the appeal of the assessee on account of delay in filing of appeal before him.

On merits, the ld. counsel for the assessee submitted that the addition of ₹12,44,754/- made on account of cash deposits and bank interest was not Jitudan Ravatdan Gadhvi vs. ITO Asst.Year –2012-13 - 4–

We have heard the rival contentions and perused the material on record.

In response, Ld. DR placed reliance on the observations made by Assessing Officer and Ld. CIT(A) in their respective orders.

We observe that the addition of ₹12,44,754/- made by the Assessing Officer on account of alleged unexplained cash deposits and bank interest was primarily based on the absence of compliance by the assessee during the assessment proceedings, which concluded in a best judgment assessment under section 144 of the Act. However, before us, the assessee has furnished a detailed explanation substantiating the source of cash deposits in question. The ld. counsel for the assessee has demonstrated before us that the assessee was engaged in the construction business, and the contract receipts were directly credited to his savings account with Axis Bank. The assessee had withdrawn substantial amounts from the same account to meet site-level operational expenses, including payment of labour charges. It is the assessee’s case that any surplus cash, after incurring such expenses, was re-deposited into the same bank account, and hence the deposits were not unexplained in the present facts. The reconciliation submitted by the assessee in our considered view shows that while cash deposits during the year amounted to ₹14,01,835/-, cash withdrawals stood at ₹38,75,500/-, thereby resulting in a net withdrawal of ₹24,73,665/-. Furthermore, out of the total labour expenses of ₹45,40,718/- incurred during the year, ₹24,00,000/- was paid in cash. This in our view establishes the availability of sufficient funds with the assessee to justify the cash deposits made. In support of this contention, the assessee has also drawn our attention to Jitudan Ravatdan Gadhvi vs. ITO Asst.Year –2012-13 - 6–

In the result, the appeal of the assesse is partly allowed.