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Facts
The assessee filed its return of income for AY 2017-18. The case was selected for scrutiny due to high value cash receipts and deposits during demonetization. The Assessing Officer made additions based on alleged unexplained cash and directed to tax under Section 115BBE. The CIT(A) dismissed the assessee's appeal.
Held
The Tribunal noted that opportunities were not properly given to the assessee and additional evidence was filed. It was found appropriate to remand the matter to the Assessing Officer for proper adjudication, ensuring the assessee is given an opportunity of hearing as per natural justice.
Key Issues
Whether the additions made by the AO and upheld by the CIT(A) are valid, considering the assessee's plea of violation of natural justice and lack of opportunity.
Sections Cited
143(2), 142(1), 69A, 115BBE, 271AAC, 250
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Income Tax Appellate Tribunal, AHMEDABAD “C” BENCH
Before: Ms. Annapurna Gupta & Ms. Suchitra Kamble
आदेश/ORDER Per Suchitra Kamble, Judicial Member:
This is an appeal filed against the order dated 01-02- 2024 passed by National Faceless Appeal Centre, Delhi for assessment year 2017-18
The grounds of appeal
are as under:- “1. The impugned assessment order is bad in law against rule of natural justice and is passed by the Ld AD without issuing the valid notice(s) Us. 143(2) & 142(1) of the Act and without serving the same on the appellant as required by the law and is against rule of natural justice which is liable to be quashed and we pray for the same.
2. The impugned order passed by the Ld. CIT(A), NFAC upholding the impugned order of assessment dtd. 30/12/2019 passed by the Ld. ITO, Wd 3(3)(7), Ahmedabad, is bad in law, against rule of natural justice and is Karm Gas Service, A.Y. 2017-18 passed without issuing the valid notice(s) for hearing of appeal and without ensuring proper and valid serving of the same on the appellant as required by the law and the order(s) passed based on such notices be held as not tenable in law and may kindly be quashed and we pray for the same.
The Ld. AO has erred in law and on facts in impugned making addition of Rs 1,16,69,000 and of Rs 1,11,64,290, both U/s.69A and taxing the same U/s 115BBE of the Act without appreciating facts of the case and without appreciating cash book entries in proper perspective and also by not considering the entire cash book & fact that, the firm had cash receipts from sales on various dates which were recorded at the end of almost every month having direct effect on the day to day cash balances of the firm and considering the same, all the entries in cash book were properly explained and there was no case for addition. Both the authorities below erred in law and facts in not appreciating this aspect and facts proper while making/upholding the addition and taxing the same U/s.115BBE of the Act.
While making the impugned addition of Rs. 1,16,69,000 U/s. 69A of the Act, the Ld AO have erred in law and on facts in working out the peak and in observing that, Since there were multiple violation of the said principle, to ascertain the exact amount of such undisclosed cash, the method of finding the peak cash balance was adopted and it was determined that as per Peak Balance the cash of Rs 1,16,69,000/- were not recorded in the books of account. In view of the above, such unaccounted cash of Rs 1,16,69,000/- is added to the total income of the assessee u/s 69A of the IT Act.
5. The Ld. AO has erred in law and on facts in making addition of Rs. 1,16,69,000 U/s.69A of the Act and taxing the same U/s. 115BBE of the Act by determining that the cash of said Rs. 1,16,69,000 were not recorded in the books of accounts, and upholding the same by the Ld. CIT(A), NFAC is liable to be quashed and we pray for the same.
6. The Ld. AO has erred in law and on facts in making addition of Rs 1,11,64,290 U/s. 69A of the Act and taxing the same U/s 115BBE of the Act by observing that, in the instant case the op. balance as on 1.6.2016 was Rs 1,16,05,628. The assessee has only submitted the dissolution deed and has not submitted any realization account on dissolution of the partnership firm. Therefore, out of total introduction of Rs 1,16,05,658, the source of the amount of Rs 1,11,64,290 has not been proved by the assessee and the same is required to be added U/s 69A of the IT Act and the LD CIT(A)- NFAC has erred in law and on facts in upholding the same and we pray to kindly quash the impugned addition.
7. Inspite of the fact that, the appellant firm had produced the dissolution deed, the Ld. AO has ignored the fact that, the appellant firm was dissolved w.e.f 17.05.2016 and thereby Ld. AO has erred in law and on facts in making the impugned addition for the amounts related to the period even after the period of dissolution & existence of the appellant firm and without prejudice to our plea & prayer to delete the entire impugned addition, we also pray to kindly order to delete the addition made for the period beyond the firm was in existence viz. 17.05.2016.
8. The Ld. CIT (A) NFAC, Delhi has erred in law and on facts in dismissing the appeal ex-parte stating to have disposed off on merits without considering and disposing off an application for adjournment letter dtd. 19.09.22 uploaded vide ack. No. 507697651190922 in response to the notice bearing DIN: ITBA/NFAC/F/APL_1/2022-3/1046171435(1) Dated 04/10/2022 issued Us.250 of the Act in Appeal No: CIT (A), Ahmedabad- 2/10317/2018-19 for A.Y 2017-18 and we pray the Hon'ble Tribunal to held the Order as passed against the rule of natural justice, bad in law and not tenable and quash the Order.
The Ld AO have erred in law and on facts raising demand of Rs.2,34,61,988 by invoking Sec 115BBE of the Act incl. of tax of Rs. 1,76,38,721 Int. charged of Rs. 58,23,267 Us 234B and we pray the Hon'ble Tribunal to delete the said demand.
The Ld. AO have erred in law and on facts in directing to initiating penalty proceedings U/s 271AAC of the Act and the Ld. CIT(A), NFAC has erred in law and on facts in confirming the said action of the Ld. AO and we pray the Hon'ble Tribunal to quash the action of initiating of penalty proceedings by the Ld. AO and upheld by the Ld. CIT(A).
The grounds of appeal
are without prejudice to each other
12. Your appellant craves a leave to add, alter or delete the grounds of appeal where ever the occasion demand.”
3. Return of income for assessment year 2017-18 was filed on 07-11-2017 declaring income of Rs. 25,390/- by the assessee. The return was processed u/s. 143(2) of the Act. The case was selected for scrutiny and accordingly notice u/s. 143(2) of the Income Tax Act, 1961 was issued on 09-08-2018 and served to the assessee. The main reason for scrutiny was (i) high value receipt of cash shown from third parties in response data and (ii) large value cash deposit during demonetization period reported. Notice u/s. 143(2) of the Act was issued on various dates and in response to the same, the assessee did not file any details. Further, notice u/s. 142(1) of the Act dated 24-06-2019 was issued and the assessee was asked to furnish various details in respect of business conducted by the assessee more than the bank accounts statement for the relevant year, balance sheet, profit and loss account, cash book and audit report. The assessee did not respond and the Assessing Officer issued show cause notices dated 04-11-2019 as well as 14-11-2019 and the assessee responded the show cause notice dated 14-11-2011 thereby requesting adjournment. On 25-12-2019 the A.R. of the assessee attended the assessment proceedings and submitted the details of cash book. The Assessing Officer observed that in the demontization period beginning on 08-11-2016, assessee Karm Gas Service, A.Y. 2017-18 had a cash balance of Rs. 1,30,11,967/-. The assessee maintained cash book for two periods (i) 01-04-2016 to 31-05- 2016 and another cash book from 01-06-2016 to 31-03-2017. On verification of the same, the Assessing Officer noticed that assessee’s opening balance of cash shown at Rs. 2,06,589/- as on 01-04-2016 and this balance tallies it with the audit report of the previous year. The Assessing Officer further observed that subsequently the assessee has been withdrawing huge amount of cash from the cash book and depositing it in the bank which was on far greater value than cash available with it. The Assessing Officer therefore made addition of Rs. 1,11,64,290/- on account of unaccounted cash and added the same u/s. 69A and directed to tax u/s. 115BEE of the Act.
4. Being aggrieved by the assessment order, the assessee filed appeal before the CIT(A). The CIT(A) dismissed the appeal of the assessee.
There is a delay of 79 days in filing the present appeal for which the assessee has filed the affidavit explaining therein the reasons for delay. The reason appears to be genuine hence the delay of 79 days in filing the present appeal is condoned. The assessee has also filed additional evidences under Rule 29 of the Income Tax Appellate Tribunals Rules,1963. The ld. A.R. submitted that the revenue authorities as well as the CIT(A) passed the order without giving sufficient opportunity to the assessee since several notices were issued fixing the hearing during the Corona period and even the firm was registered w.e.f. 17-05-2016 and the firm was prevented from the evidence said to be produced which are relevant to the grounds of appeal before the CIT(A). The ld. A.R. submitted that the matter may
The ld. D.R. relied upon the assessment order and the order of the CIT(A). The ld. D.R. further submitted that the assessee was given ample opportunity to file the relevant documents before the Assessing Officer as well as before the CIT(A).
We have heard both the parties and perused all the relevant materials available on record. It is pertinent to note that the Assessing Officer as well as the CIT(A) has given opportunity to the assessee yet the documents which are filed before us as additional evidence required to be taken on record while deciding the matter on merit. Therefore, it will be appropriate to remand this matter to the file of the Assessing Officer for proper adjudication of the issues and decide the same on merits as per income tax law. Needless to say, the assessee be given opportunity of hearing by following principles of natural justice.
In the result, the appeal of the assessee is partly allowed for statistical purposes.
Order pronounced in the open court on 01-05-2025 Sd/- Sd/- (Annapurna Gupta) (Suchitra Kamble) Accountant Member Judicial Member Ahmedabad : Dated 01/05/2025 Karm Gas Service, A.Y. 2017-18 आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से,
उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद