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Facts
The assessee had cash deposits totaling Rs. 36,13,600/- in their bank account during the assessment year 2011-12. The Assessing Officer (AO) reopened the case under Section 147, alleging the assessee failed to explain the source of these deposits and added the entire amount as undisclosed income. The assessee claimed these deposits were business income from acting as a collection agent and incurred a loss on these transactions.
Held
The Tribunal held that the additions made by the Assessing Officer were not liable to be sustained. They observed that the bank statement showed both deposits and corresponding withdrawals, and the AO erred by not allowing credit for these withdrawals against the cash deposits. The appeals were allowed.
Key Issues
Whether the AO correctly treated cash deposits as unexplained income without considering business transactions and withdrawals, and whether procedural lapses affected the assessment and penalty proceedings.
Sections Cited
147, 148, 133(6), 250, 142(1), 271(1)(b), 271(1)(c), 271F, 144, 234A, 23B, 23C, 127
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Income Tax Appellate Tribunal, “SMC” BENCH, AHMEDABAD
Before: DR. BRR KUMAR & SHRI SIDDHARTHA NAUTIYAL
O R D E R
PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER:
These are appeals have been filed by the Assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals), (in short “Ld. CIT(A)”), National Faceless Appeal Centre (in short “NFAC”), Delhi vide orders dated 20.12.2023 & 18.12.2023 passed for A.Y. 2011-12. 2. At the outset, we observe that there is delay of 129 days in and 131 days in . The assessee filed an affidavit for condoning the delay which are reproduced as under:
“1) I, Manas Kumar Das aged about 45 years, identified by PAN - AIGPD6407Q at present residing at Address: Flat No-1202,Bhoomi Orabelle, Opp SB Patil Public School Road, SB Patil School, Ravet, Po-Dehu Road Cantt, Pune, MAHARASHTRA, Pin-412101, do solemnly affirm and state on oath as under: 2) That Hon'ble CIT (A) has dismissed the appeal by passing order u/s 250 of the Income Tax Act, 1961 on 20/12/2023. Hon'ble CIT (A) dismissed the appeal without Manas Kumar Das vs. ITO Asst. Year –2011-12 - 2– deciding on the all Grounds of appeal mainly on jurisdiction and the appellant has not submitted the bank statement [mainly when the same was never asked by the CIT(A)] which was available with the AO as collected by the department u/s 133(6). Aggrieved by the order assessee wishes to file an appeal against the order passed u/s 250 of the Act. 3) In the meanwhile I had shifted to Pune due to my job requirement. Since I am not checking IT portal/email frequently, I was not aware of the order passed by CIT(A) due to which I could not file an appeal within the due date, i.e. 60 days from the date of receipt of the order. 4) I further confirm that I have not received the physical copy of the order passed u/s 250 of the Act till date by CIT(A). 5) Subsequently when I came to know about the CIT(A) order, I have contacted CA/consultant for an advice and further course of action. Since I could not travel to Ahmedabad, as a result, there was a further delay in filing of the appeal before IT AT, Ahmedabad. 6) That I was advised by the legal consultant to file an appeal before the Hon'ble ITAT for relief but the appeal has already become barred by time limitation. Nevertheless the appeal was filed before this Hon'ble ITAT on date 26/06/2024 accompanied by an application for condonation of delay.
7) That delay in filing the appeal is due to genuine reason and therefore requested to allow an appeal on the principle of natural justice. 8) That I had no intention to jeopardize the interest of the revenue by delaying the filing of the appeal.” 4. In view of the above submission filed by the assessee, we observe that there is no malafide intention in the present delay in the filing of the appeal and hence the same is hereby condoned.
5. The Assessee has taken the following grounds of appeal:- “Non-jurisdiction of AO 1) The case was re-opened by AO who never had jurisdiction over the assessee as the assessee was never residing or having any address in ALWAR i.e. the jurisdiction of ITO Alwer, Rajasthan. As the assessee has never filed an IT return with ITO ALWAR whole proceeding u/s 148 is void ab initio. Therefore, the whole proceeding u/s 148 should be treated as invalid. &1278/Ahd/2024 Manas Kumar Das vs. ITO Asst. Year –2011-12 - 3– 2) The CIT(A) has called for the remand report from the AO, which clearly indicate that the AO has never filled any ITR with the address at Alwar. The remand report also indicate that the notices were issued at different address. The CIT(A) has failed to consider the same. 3) Inspite the assessee has taken a ground of Jurisdiction in appeal (Form 35), CIT(A) failed to decide on the same and passed the order against the assessee. Without following the procedure u/s 148 4) That the notice issued u/s 148 dated 29.03.2018 and was served on the appellant on the e-filing portal is not a valid notice under the act and no physical notice was received by the assessee on or before 31.03.2018. Therefore, the same is time-barred and invalid. 5) AO through AL WER.ITO 1.2@ INCOMETAX.GOV.1N intimating about the issue of notice u/s 148 for 2011 -12 without giving any reason for reopening the case. The notice attached by him is not even signed by him therefore notice is to be treated as invalid and void ab initio. 6) Without following the procedure of re-opening u/s 148 and others, AO has issued the notice u/s 142(1) and others (which was never physically served to the assessee) and hence the whole process of assessement is to be treated illegal and set aside. 7) That the notice u/s 148 is itself defective as it did not specify the issue involved on which reopening of the case was initiated. The appellant demanded the reason for the re-opening of the case from AO but AO has never provided the same. Therefore, notice issued u/s 148 is void ab initio. 8) AO issued a show cause notice without considering the assesses's adjournment request. Therefore, issue of show cause is not valid. 9) The whole assessment proceeding is with bad intentions and based on the wrong presumptions and assumptions. 10) Cash deposit cannot be a reason to reopen the assessment proceedings, mainly when the 1TO does not have any jurisdiction over the assessee. 11) The AO has also not justified in not allowing the fair and proper opportunity for to appellant to explain the case by hiding the facts till the last minutes, not providing all the statements and reports, willfully mentioned the wrong facts that notices were issued (without mentioning by which mode it has been provided), assessee has not responded, giving very short notice to appear and then making allegation on the appellant for non-appearance etc. and hence the AO has passed the order with the biased mind for the reasons better known to him. &1278/Ahd/2024 Manas Kumar Das vs. ITO Asst. Year –2011-12 - 4– Not allowing payment made against the cash receipt: 12) Assessee has made certain payments to the persons on whose behalf he has collected the same, which has been transferred generally on the same day on deposit of cash, which was apparent in bank statement. 13) Cash deposit of Rs. 36,13,6007- (Instead for Rs. 36,17,600/-) in the bank during the year is towards business income as a collection Agent. Assessee has incurred a business loss of Rs.4,1927- against these transactions. Assessee has filed return u/s 148 on 19.12.2018 along with the reply. Copy of ITR acknowledgement is attached herewith. Ld. AO without considering the reply of the assesee has passed the order by adding the amount of Rs.36,17,6007- (instead of Rs. 36,13,6007-) is not valid. 14) The entire assessment proceeding u/s 144 rws 147 of the Act is based on, surmises, conjectures suspicions, and presumptions is unwarranted, illegal, bad-in-law, and against the principles of natural justice and sound consciousness. The assessment order deserves to be quashed. 15) The CIT(A) has passed the order against the assessee simply on the ground that the Assessee has not submitted the bank statement (the bank statement was called by the department) from bank, cannot be the reason to pass the order against the assessee. 16) That on the facts and in the circumstances of the case, the Id. Assessing Officer grossly erred in creating an illegal demand of Rs. 11,92,380/- against the assessee appellant. Interest U/s 234A,23B and 23C 17) That on the facts and in the circumstances of the case, the Id. Assessing Officer grossly erred in charging interest u/s 234A, 234B and 234C of the Income Tax Act. Penalty Proceeding U/s 271(l)(b): 18) Notice u/s 142(1) requires clarification of the source of the depositing amount in the bank account of Rs.3613600/-. for the same which is shown in the return of income filed in response to notice u/s 148 of Income Tax Act, 1961. Ld. AO has not consider the reply of the assessee and imposed a penalty u/s 271(l)(b) which is not valid. AO himself has stated in the order that the assessee has appeared personally and requested for transfer of the PAN to Ahmedabad, requested for adjournment and furnished the details as requested from time to time. Therefore, the Assessee has fully complied with the notices given by the AO and penalty proceedings u/s 271 (l)(b) is to be dropped. Penalty Proceeding U/s 271(l)(c): 19) Further assessee has provided all the details as and when required by AO even though Id. AO has issued notice u/s 271(l)(c) by stating that the assessee has concealed &1278/Ahd/2024 Manas Kumar Das vs. ITO Asst. Year –2011-12 - 5– the particulars of income which is not valid notice as the assessee has shown the same in his return filed under section 148 of the Act. Penalty Proceeding U/s 271F: 20) AO has initiated the penalty proceedings u/s 27IF for non-filling of return, it is to be appreciated that the Assessee has filed its return as requested by the AO on 19/12/2018 u/s 148 of the Act and hence penalty proceedings u/s 27 IF is to be dropped. 21) The appellant craves leave to add, alter, modify or amend any ground on or before the date of hearing.”
3. The brief facts of the case are that the assessee’s case was reopened for scrutiny under Section 147 of the Act for the reason that the assessee had deposited cash amounting to Rs. 36,13,600/- during the impugned year under consideration in his saving bank account, but had not filed return of income. During the course of assessment, the Assessing Officer was of the view that despite several opportunities, the assessee failed to explain the source of cash deposited in his bank account and accordingly, added the entire deposits of Rs. 36,17,600/- as undisclosed income of the Assessee.
4. In appeal, Ld. CIT(A) dismissed the appeal of the assessee with the following observations:
7.2.1 As appearing from the order of the AO, the appellant did not furnish any reply during the assessment proceedings. During the appellate proceedings, in his written submissions, the appellant argued that the Ld. AO did not allow the eligible deduction to him. The appellant also claimed that the copy of bank account is attached in annexure 5 to his reply but the same was not found attached with his reply, the appellant admitted that the bank account mentioned by the AO pertains to him only. Other argument of the appellant relates to legal and repetitive issues. The legal issues were raised in the appeal by the appellant before the AO. The Ld. AO duly disposed of the objections raised by the appellant in various paras of his order. I have noticed that the objections raised by the appellant are flimsy as the Ld. AO duly followed the procedure and the case was transferred by the Ld. Pr. CIT after passing the order u/s 127 of the Act. It is seen that the appellant was in constant touch with the A.O. and was keep pressuring the A.O. on procedural issues but has not given any explanation on the cash deposit. The behaviors of the appellant remain non-cooperative to the AO. Hence, the grounds related to procedure are dismissed. Since, the appellant has not Manas Kumar Das vs. ITO Asst. Year –2011-12 - 6– enclosed the bank statement, for examination so the contention of the appellant cannot be accepted and the additions made by the AO are confirmed. The grounds related to merit of the case are also dismissed.
5. The assessee is in appeal before us against the aforesaid order passed by Ld. CIT(A), confirming the additions made by the Assessing Officer. Before us, the Counsel for the assessee submitted that the assessee acts as a collecting agent and there were total cash deposits of Rs. 36,13,600/- in the bank account held by the assessee towards his business as a collection agent. The Counsel for the assessee submitted that the assessee had made payments to various persons on whose behalf the assessee had collected the cash and from the bank statement it is seen that similar amounts of withdrawal had been made, generally on the very same day on which the cash was deposited. Further, the assessee had incurred a business loss of Rs. 4,192/- against these transactions. The Counsel for the assessee also submitted before us a copy of bank statement for the impugned year under consideration to demonstrate that the cash deposited by the assessee had also been almost immediately withdrawn by the assessee, as part of the business of acting as a collection agent. Accordingly, the Counsel for the assessee submitted that while the entire deposits had been added as unexplained income of the assessee, however, the Department erred in facts and in law in not appreciating the business of the assessee and thereby not allowing credit of the cash withdrawals made by the assessee against such cash deposits, during the impugned year under consideration.
6. In response, Ld. D.R. placed reliance on the observations made by the Assessing Officer and Ld. CIT(A) in their respective orders. &1278/Ahd/2024 Manas Kumar Das vs. ITO Asst. Year –2011-12 - 7– 7. On going through the bank statement furnished by the assessee for the impugned year under consideration, we observe that while there are total deposits of Rs. 39,61,308/- in the bank account, and there are corresponding withdrawals amounting to Rs. 39,65,500/- from the same bank account, during the impugned year under consideration. Accordingly, on perusal of the bank statement of the assessee, it is seen that there are both deposits as well as corresponding withdrawals made by the assessee from the same bank account, during the impugned year under consideration. However, while entire deposits/credits have been added as unexplained income of the assessee, corresponding credit for withdrawals has not been given to the assessee. In light of the arguments of the Counsel for the assessee before us, and on perusal of the bank statement of the assessee for the impugned year under consideration, in our considered view, the additions made by the Assessing Officer are not liable to be sustained, looking into the assessee’s particular set of facts.
8. In the result, we direct the additions to be deleted.
In the result, the appeal of the assessee is allowed.
The assessee has raised the following grounds of appeal:
“1. Penalty order passed by the AO without considering the reply filed by the assessee.
Penalty order passed ignoring the fact that the assessee was in regular touch with the AO to get the case transferred and for the other details.
Not Providing Proper Opportunity in Penalty Proceeding U/s 271(1)(b) &1278/Ahd/2024 Manas Kumar Das vs. ITO Asst. Year –2011-12 - 8– 4. Assessee has subsequently complied with the other notices and submitted the required details of compliance and in the assessment proceedings the same was considered. Therefore, it is a good compliance of the earlier notices. Therefore, no penalty should be levied.
Later on aggrieved by the assessment order assessee filed an appeal with CIT(A). CIT(A) has dismissed the appeal without considering the facts of the case. CIT(A) has failed to consider that during the assessment assessee filed an adjournment against the notice issued on 06.12.2018 and later on replies were filed.”
This is an appeal filed against the order levying penalty of Rs. 10,000/- on account non-compliance with notice issued under Section 142(1) of the Act dated 06.12.2018. Before us, the Counsel for the assessee submitted that the assessee is an individual having salary income, business income and income from other sources. During the relevant Financial Year, the assessee was residing in Gurgaon, Haryana, at the time of assessment proceedings the assessee was residing in Ahmedabad, and presently the assessee is residing in Pune, Maharashtra. In this case, the Income Tax Officer, Ward-1(2), Alwer issued notice under Section 148 of the Act dated 29.03.2018 initiating proceedings under Section 148 of the Act. The assessee informed the concerned Assessing Officer at Alwer that he is residing in Ahmedabad and therefore, the file of the assessee should be transferred to Ahmedabad. The Assessing Officer was informed by the assessee that he would be unable to visit Alwer since he is residing in Ahmedabad for official work and would not be get to sanction of leaves for the purpose of participating in assessment proceedings at Alwer. After rigorous follow up, the case of the assessee was transferred to Ahmedabad on 06.12.2018. The concerned Assessing Officer, Ahmedabad issued notice dated 06.12.2018, asking the assessee to cause appearance on 07.12.2018, giving a period of only one day to cause appearance before him. In response, to the said notice, the assessee requested &1278/Ahd/2024 Manas Kumar Das vs. ITO Asst. Year –2011-12 - 9– for adjournment vide letter dated 07.12.2018 and the said letter was uploaded on the ITBA portal. The Assessing Officer without considering the request for adjournment issued a show-cause notice for imposition of penalty dated 11.12.2018 and fixed the next date of hearing on 14.12.2018. Accordingly, the Assessing Officer proceeded to impose penalty under Section 271(1)(b) of the Act for causing non-appearance in response to notice dated 06.12.2018 asking the assessee to cause appearance on 07.12.2018.
Before us, the Counsel for the assessee submitted that in the light of the above facts, wherein only a very short period of one day was granted by the Assessing Officer to cause appearance before him, in the interest, penalty under Section 271(1)(b) of the Act for a sum of Rs. 10,000/- is liable to be deleted. On going through the facts of the instant case, we are of the considered view that it is a fit case where penalty under Section 271(1)(b) for causing non-appearance is liable to be deleted, looking into the assessee’s facts as highlighted above.
In the result, the appeal of the assessee is allowed.