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Facts
The assessee was selected for scrutiny due to substantial cash deposits during demonetization. Despite notices, the assessee failed to respond, leading to a best judgment assessment under Section 144. The Assessing Officer (AO) treated bank credits and cash deposits as unexplained and made additions. The CIT(A) dismissed the assessee's appeal.
Held
The Tribunal set aside the CIT(A)'s order and restored the matter to the AO. The assessee is granted a final opportunity to submit documentary evidence regarding bank deposits, PMGKY declaration, and business transactions. The AO is directed to verify these and ensure no double taxation.
Key Issues
Whether the AO correctly treated cash deposits and bank credits as unexplained income, and whether the additions made, including under Section 115BBE, were justified. Whether the assessee should be given a final opportunity to present evidence given alleged exceptional circumstances.
Sections Cited
144, 142(1), 133(6), 69A, 115BBE, 234A, 234B, 173
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Income Tax Appellate Tribunal, “D” BENCH, AHMEDABAD
Before: SHRI SIDDHARTHA NAUTIYAL & SHRI MAKARAND V. MAHADEOKAR
"ी िस"ाथ" नौिटयाल, "ाियक सद" एवं "ी मकरंद वसंत महादेवकर, लेखा सद" के सम%। ] ] BEFORE SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER AND SHRI MAKARAND V. MAHADEOKAR, ACCOUNTANT MEMBER आयकर अपील सं / Year : 2017-18 Vishal Vasudevbhai Modi The Income Tax Officer बनाम/ 128/3, Golwad Ward-1(3)(5) v/s. Ratanpole, Kalupur Ahmedabad – 380 015 Ahmedabaed – 380 0015 (Gujarat) "थायी लेखा सं./PAN: ANOPM 0228 K (अपीलाथ&/ Appellant) ('( यथ&/ Respondent) Assessee by : Shri P.F. Jain, AR Revenue by : Shri Prathvi Raj Meena, CIT-DR सुनवाई की तारीख/Date of Hearing : 13 /03/2025 घोषणा की तारीख /Date of Pronouncement: 19 /03/2025 आदेश/O R D E R PER MAKARAND V. MAHADEOKAR, AM:
This appeal has been filed by the assessee against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as “CIT(A)”], dated 22/09/2023, for Assessment Year (AY) 2017-18, confirming the additions made by the Assessing Officer [hereinafter referred to as “AO”] in the assessment order dated 27/12/2019, passed under Section 144 of the Income Tax Act, 1961[hereinafter referred to as “the Act”]. Vishal Vasudevbhai Modi vs. ITO Asst. Year : 2017-18 Facts of the Case:
The case was selected for scrutiny based on information that the assessee had deposited substantial cash in bank accounts during the demonetization period. The AO issued a notice under Section 142(1) of the Act on 21/12/2017, followed by subsequent notices on 19/06/2019, 05/08/2019, and 26/11/2019, seeking an explanation for the deposits. However, the assessee failed to respond to these notices, and the AO proceeded with best judgment assessment under Section 144 of the Act. The AO issued notices under Section 133(6) of the Act on 18/06/2019 to the banks, where the assessee had accounts, including State Bank of India (SBI), Bank of Baroda, Dena Bank, and ICICI Bank. Based on the responses received from these banks, it was observed that the assessee had total bank credits of Rs.92,70,76,592/-, which raised concerns about the source and nature of these transactions.
2.1. The AO further noted cash deposits totaling Rs.3,18,04,850/- during the demonetization period in the following bank accounts:
State Bank of India: Rs.9,37,400/-.
2. Bank of Baroda: Rs.64,54,590/-. 3. Dena Bank: Rs.2,44,12,860/-.
2.2. The assessee remained non-compliant with multiple notices. Subsequently, the assessee appeared before the AO on 09/12/2019 and submitted a charge- sheet filed under Section 173 of the CrPC, which had been initiated against him due to complaints filed by traders alleging non- fulfilment of mobile recharge services. The assessee was provided with the Vishal Vasudevbhai Modi vs. ITO Asst. Year : 2017-18 bank statements available with AO and was asked to prepare books of accounts to quantify the amount of interbank transfer. In absence of any books and response from the assessee, the AO treated the entire amount as turnover and applied an estimated profit rate of 8%, resulting in an addition of Rs.7,16,21,739/- as business income. Furthermore, cash deposits totalling Rs.3,18,04,850/- in the accounts of State Bank of India (Rs.9,37,400/-), Bank of Baroda (Rs.64,54,590/-), and Dena Bank (Rs.2,44,12,860/-) were treated as unexplained money under Section 69A of the Act and taxed at a higher rate under Section 115BBE. The total assessed income was determined at Rs.10,34,26,589/-, and a tax demand of Rs.8,06,96,619/- was raised, along with interest under Sections 234A and 234B of the Act.
The assessee filed an appeal before the CIT(A), who issued three notices, but the assessee failed to reply to the notices. Therefore, based on the material available on records and the statement of facts filed along with Form 35, the CIT(A) dismissed the appeal.
Aggrieved by the order of the CIT(A), the assessee has preferred this appeal raising following grounds of appeal:
1. The Learned CIT(A) has grievously erred in law and on facts in upholding the estimation of profit made by A.O. at the rate of 8% and estimating the turn over at Rs.89,52,71,742/- at Rs.7,16,21,739/- without appreciating the facts, surrounding circumstances, submission made before the A.O. and application made under PMGKY.
2. He has erred in law and on facts in upholding the treating of total credits in the Bank A/c. with Bank of Baroda, State Bank of India, Dena Bank ,ICICI Bank aggregating Rs.92,70,76,592/- as the amount on which income has been estimated by the A.O. without appreciating the facts, surrounding circumstances, submission made before the A.O. and application made under PMGKY. Vishal Vasudevbhai Modi vs. ITO Asst. Year : 2017-18 4
3. He has grievously erred in law and on facts in upholding addition u/s.69A made by A.O. read with section 115BBE at Rs.3,18,04,850/- as detailed below without properly appreciating the facts and nature of deposits in the bank as explained by the appellant to the A.O. a. State Bank of India, Ahmedabad Rs. 9,37,400/- b. Bank of Baroda, Ahmedabad Rs. 64,54,590/- c. Dena Bank, Ahmedabad Rs.2,44,12,860/- Total Rs.3,18,04,850/- ============
4. On the facts of the assessee, no such additions u/s.69A ought to have been made.
5. The addition of Rs.3,18,04,850/- u/s.69A is also submitted to bad in law and on facts inasmuch as that the profit has been estimated @ Rs.7,16,21,739/- which will cover the impugned cash deposits.
6. The addition u/s.69A is submitted to be double addition when profit has already been estimated not permitted by the Law. 6A. The learned CIT(A) has erred in law and on facts in upholding the computation of tax as per section 115BBE on alleged addition u/s. 69A of Rs.3,18,04,850 in as much as that the assessee is engaged in business of Re-charge and earning commission as per the facts already before the A.O. and wrongly applying the provision of section 115BBE to the facts of the assessee.
On the facts and considering the surrounding circumstances of the assessee, income ought not to have been assessed at Rs.10,34,26,589/- submitted to be erroneous and bad in law.
He has erred in levying interest u/s.234A of Rs.1,44,45,683/- and 234B of Rs.1,64,38,191/- of the I.T.Act, 1961 .
The appellant craves leave to add, to alter and/or to modify any grounds of appeal.
During the course of hearing before us, the Authorized Representative (AR) of the assessee submitted the facts, that the assessee is engaged in the business of mobile recharge distribution and provided services to sub- distributors, wherein funds were transferred to main distributors. The AR further stated that Due to business disputes, several criminal complaints were Vishal Vasudevbhai Modi vs. ITO Asst. Year : 2017-18 filed against him, and he was under arrest from July 2017 to November 2017 and therefore he could not comply with the notices due to ongoing legal proceedings and requested an opportunity to present his case. The AR also submitted that the bank deposits represented sale consideration and fund transfers, which were wrongly treated as unexplained cash deposits and the assessee had declared income under Pradhan Mantri Garib Kalyan Yojana (PMGKY), which was not considered by the AO or CIT(A). The AR prayed for remand of the matter to the AO so that he could present the necessary evidence.
The Departmental Representative (DR), on the other hand, stated that the assessee has been non-compliant throughout the assessment and appellate proceedings and there are inconsistencies in the dates of arrest and the dates of notices, raising doubts about the genuineness of the assessee’s claim of being unable to respond to the AO’s notices.
7. After considering the rival submissions and material on record, we observe that the assessment was completed ex-parte under Section 144 of the Act due to non-compliance by the assessee. Given the claimed exceptional circumstances (arrest, criminal complaints, and legal disputes), the assessee should be given one final opportunity to submit evidence. The dates of arrest and the dates of notices issued by the AO do not align, creating doubt over the credibility of the assessee’s explanation for non-compliance. The assessee has not provided any documentary evidence to substantiate his claim that the cash deposits were business receipts except the Form 2 under PMGKY. The issue of income declared under PMGKY has not been examined by the AO or CIT(A), and this requires verification. Vishal Vasudevbhai Modi vs. ITO Asst. Year : 2017-18 7.1. In view of the above, we set aside the order of the CIT(A) and restore the matter to the file of the AO with the directions that the assessee shall be given a final opportunity to submit documentary evidence regarding Nature of bank deposits and fund transfers, Proof of income declared under PMGKY, if applicable and Supporting documents related to business transactions. The AO shall verify the PMGKY declaration and ensure that no income already declared under the scheme is subjected to double taxation. If the assessee fails to comply, the AO shall proceed with the material available on record and finalize the assessment accordingly. The AO shall also analyze whether the separate addition under Section 69A of the Act results in double taxation, considering that business income has already been estimated at 8%.