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Facts
The assessee, an individual and non-filer, had their assessment reopened under Section 147 based on cash deposits of Rs. 12,26,000 and other credit entries totaling Rs. 1,06,58,125. The assessee failed to respond to statutory notices, leading to a best judgment assessment under Section 144. The CIT(A) upheld the assessment order on grounds of non-compliance.
Held
The Tribunal held that the assessee's failure to respond to notices was due to reliance on a consultant, which constitutes a genuine reason. The Tribunal set aside the CIT(A)'s order and restored the matter to the AO for fresh adjudication on merits, imposing a cost of Rs. 10,000 on the assessee.
Key Issues
Whether the reopening of assessment and the subsequent ex-parte assessment order were valid, considering the assessee's non-compliance due to reliance on a consultant, and whether the addition made under Section 69A was justified.
Sections Cited
147, 69A, 144, 148, 142(1), 250, 271(1)(c), 271(1)(b), 234A, 234B, 234C, 234D, 143(2), 115BBE
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Income Tax Appellate Tribunal, “C” 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 : 2012-13 Jamilhusen Abdullatif The ITO बनाम/ Vijapura S.K. Ward-3 v/s. At Lalpur, PO Savgadh, Himatnagar – 383 001 Himatnagar – 383 001 (Gujarat) Sabarkantha (Gujarat) "थायी लेखा सं./PAN: AHEPV 6442 J (अपीलाथ%/ Appellant) (&' यथ%/ Respondent) Assessee by : Shri Varis Isani, Advocate Revenue by : Shri Rignesh Das, Sr. DR सुनवाई की तारीख/Date of Hearing : 11 /03/2025 घोषणा की तारीख /Date of Pronouncement: 13 /03/2025 आदेश/O R D E R PER MAKARAND V. MAHADEOKAR, AM:
This appeal by the assessee is directed against the order of the Commissioner of Income Tax (Appeals), NFAC, Delhi [hereinafter referred to as “CIT(A)”], dated 07.11.2024, confirming the assessment order dated 23.12.2019 passed under Section 147 r.w.s. 144 of the Income Tax Act, 1961 [hereinafter referred to as “AO”] for Assessment Year (AY) 2012-13 by the Assessing Officer [hereinafter referred to as “AO”]. Jamilhusen Abdullatif Vijapura Asst. Year : 2012-13 Facts in brief: 2. The assessee is an individual and a non-filer of income tax returns. The assessment in this case was reopened under Section 147 of the Act based on information that the assessee had deposited Rs.12,26,000/- in cash in his HDFC Bank account, which was treated as unexplained money under Section 69A of the Act. During the assessment, it was further noticed that the assessee had other credit entries amounting to Rs.94,32,125/-, leading to a total addition of Rs.1,06,58,125/- under Section 69A of the Act. The assessee did not respond to notices issued under Sections 148, 142(1), and 144 of the Act during the course of assessment proceedings. Consequently, the AO framed a best judgment assessment under Section 144 of the Act.
The CIT(A), upheld the assessment order, dismissing the appeal of the assessee without adjudicating on merits and solely on the ground of non- compliance with notices issued under Section 250 of the Act.
Aggrieved by the order of the CIT(A), the assessee preferred an appeal before us with following grounds of appeal:
1. The Hon. CIT Appeals National Faceless Appeal Center (NFAC) -Delhi (Hereinafter referred to as "appellate authority ") has erred in law in dismissing the Appeal of the Appellant and confirming the addition made by ITO- Ward-3 Himmatnagar (for short "Assessing Authority"). The appeal order passed confirming the assessment order deserves to be quashed and set aside.
2. The Ld. Appellate Authority erred in upholding the action of the assessing authority in making an addition of Rs.10658125/- (Rs. 1226000/- cash deposited, Rs.9435125/- credit entry) u/s. 69A of the Income Tax Act as alleged unexplained money in the bank account.
3. The appellant contends that on the facts and in the circumstances of the case and in law the appellate authority ought not to have upheld the action of the Lrd. AO in as much as the appellant is having proof and source of cash deposited in the bank account and amount credited in the bank account. hence, the impugned addition of Rs.1,06,58,125/- ought to be deleted. Jamilhusen Abdullatif Vijapura Asst. Year : 2012-13
4. The Ld. Appellate Authority has grievously erred in law in confirming the addition as entire reopening of the assessment was without jurisdiction, time barred, on borrowed satisfaction, without independent application of mind, beyond period of 4 years and based on cash deposited of Rs.12,26,000/- in the bank account. Credit entry in the bank account was not the base for reopening of the assessment. The Ld. AO has travelled beyond jurisdiction and scope of the reopening of the assessment. Hence, reopening of the assessment is time barred, without jurisdiction and contrary to the provisions of section 147/148 of the Income Tax Act.
The appeal order and assessment order is passed in gross violation of principle of natural justice as appellant was not aware about such proceedings and relied on accountant and the then consultant. Hence, in the interest of justice the appeal order deserves to be quashed and set aside as it was passed in gross violation of principle of natural justice.
In the case of appellant, the Ld. ITO Ward S.K.-3 Himmatnagar issued reassessment order u/s 148 on 27/03/2019 for A. Y. 2012-13 is time-barred and without jurisdiction. The Ld. ITO has issued notice beyond the period of 4 years. Hence entire reopening of the assessment is highly unjustifiable, unwarranted and bad in law.
7. The Ld. Appellate Authority has grievously erred in law in confirming the addition of Rs.1,06,58,125/- (Rs.12,26,000/- cash deposited and Rs.94,32,125/- credited in the bank) whereas in 148 reason there was a reference of only cash deposited of Rs.12,26,000/-. The action is highly unjustifiable and unlawful, and addition was made without giving benefit of peak entry and verifying the debit and credit side of the bank statement. Hence addition made and assessment order passed deserves to be quashed and set aside as it is beyond the scope of section 148 of the Income Tax Act.
8. The Ld. Assessing Officer has made addition solely on the basis of credit side in the bank account while finalising the assessment order u/s. 147 r.w.s.144 of the Income Tax Act. In fact, the bank account is not to be considered as books of account. Therefore, the addition made is highly unwarranted, unlawful and bad in law.
The Ld. Appellate Authority has grievously erred in law in not considering the initiation of penalty proceedings by the Ld. AO u/s. 271(1)(c) and 271(1)(b) of the Income Tax Act while passing the assessment order. In fact there is no suppression of transactions or concealment of income. Hence, penalty proceedings initiated in absence of mens rea, contumacious conduct and guilty mind is highly unjustifiable and unlawful. Jamilhusen Abdullatif Vijapura Asst. Year : 2012-13
The Ld. Assessing Officer has charged interest u/s. 234A-B-C-D of the Income Tax and the consequential demand raised in the assessment order.
The Ld. Assessing Officer has not issued and served any notice u/s. 143(2) of the Income Tax Act therefore, the entire assessment order passed u/s. 147 r.w.s 144 of the IT Act is bad in law and deserves to be quashed and set aside. 12. The appellant craves leave to add, alter or amend any of the grounds of appeal
either before or at the time of hearing of the appeal. Prayer: It is therefore prayed that,
1. Ex- Party Assessment order passed u/s. 147 r.w.s 144 of the Income Tax Act deserves to be quashed and set aside.
2. Additions made of Rs.1,06,58,125/- u/s. 69A of the Income Tax Act may kindly be deleted.
3. Assessment order passed u/s. 147 r.w.s 144 without issuing notice u/s.143(2) of the Income Tax Act may kindly considered as bad in law.
4. The ex-parte assessment order may kindly be considered as passed on account of gross violation of principle of natural justice.
5. Stay against recovery of demand may please be granted.
6. Applying of provision of section 115BBE while calculating tax liability may be held as bad in law.
7. Entire amount of credit side of bank account added in the assessment order may kindly be deleted.
8. Interest charged on consequential demand raised in the assessment order may kindly be reduced / deleted.
9. Penalty proceedings may kindly be directed to be dropped Peak credit entry may please be considered.
5. Before us, the learned Authorized Representative (AR) submitted that the assessee is not technologically savvy and was unaware of the proceedings Jamilhusen Abdullatif Vijapura Asst. Year : 2012-13 as the registered e-mail ID was that of his accountant/consultant, who neither informed him nor responded to the notices. The AR further stated that the assessee was under the bona fide belief that the compliance was duly made, as he was assured by his consultant that nothing was pending, and he came to know about the non-compliance only after receiving an intimation from the Income Tax Department regarding the dismissal of the appeal. The AR also stated that the assessee expressed willingness to fully cooperate and explain the sources of deposits if granted another opportunity. It was further argued that the entire addition was made without considering the peak credit method.
6. The learned Departmental Representative (DR) raised no objection to restoring the matter to the AO, provided a cost is imposed for non- compliance during earlier proceedings.
We have carefully considered the rival submissions, and the material placed on record. It is an admitted fact that the assessee failed to respond to statutory notices issued by the AO and CIT(A). However, the reason cited by the assessee—his reliance on an accountant/consultant who failed to inform or respond on his behalf—requires consideration under the principles of natural justice.
7.1. It is settled principle of law that a party should not suffer due to the mistake of their legal representative if there is no deliberate default on their part. In the present case, the assessee has demonstrated a genuine reason for non-compliance and has now expressed his willingness to provide the necessary explanations regarding cash deposits and bank transactions. Jamilhusen Abdullatif Vijapura Asst. Year : 2012-13 Therefore, in the interest of justice, we deem it fit to restore the matter back to the AO for a fresh adjudication.
7.2. However, considering the repeated non-compliance by the assessee, we find merit in the DR’s submission that a nominal cost should be imposed. Accordingly, we direct the assessee to pay a cost of Rs.10,000/- to the Income Tax Department before the next hearing before the AO.
7.3. In view of the above discussion, the order of the CIT(A) is set aside, and the matter is restored to the file of the AO for fresh adjudication on merits, after granting the assessee a reasonable opportunity of being heard. The assessee shall pay a cost of Rs.10,000/- to the Income Tax Department before the next hearing. The assessee is directed to fully co-operate in the proceedings before the AO and provide all necessary details and evidence.
In the result, the appeal of the assessee is allowed for statistical purposes.