JIGNESH SHAH,SURAT vs. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 1 , BHAVNAGAR

The cash deposits of Rs.64,25,000/- in Mehsana Urban Co-op Bank Ltd.\nwere claimed to have originated from earlier withdrawals, but no clear\nreconciliation was provided, leading the AO to treat them as unexplained\nmoney under Section 69A of the Act. Similarly, the credit card payments of\nRs.3,74,148/- were initially proposed for addition at Rs.21,54,879/- based on\ninsight portal data, but later corrected, and in the absence of any proper\nexplanation regarding the source of funds, the expenditure was treated as\nunexplained under Section 69C of the Act. Further, the assessee failed to\nprovide confirmations for unsecured loans amounting to Rs.17,20,96,112/-\nciting financial constraints and strained relations with creditors, but made no\nefforts to substantiate the transactions. Given the lack of identity,\ncreditworthiness, and genuineness of the loan creditors, the AO treated the\nentire amount as unexplained money under Section 69A of the Act.\nConsequently, the assessed income was determined at Rs.18,53,82,870/-.\n \nJignesh vs. The Asst.CIT\nAsst. Year: 2022-23\n3\nincorporating these additions. Interest was levied under Sections 234A,\n234B, 234C, and 234D of the Act, and penalty proceedings under Section\n271AAC of the Act were initiated separately for the additions under Sections\n69A and 69C of the Act. Due to the assessee's non-compliance and failure to\ndischarge the burden of proof, the AO concluded the assessment accordingly.\n3. The assessee preferred appeal before CIT(A), who dismissed the appeal\nex-parte, citing non-compliance by the assessee and failure to provide\nsupporting documentary evidence despite multiple opportunities. The\nassessee contended that the cash deposits of Rs.64,25,000/- were sourced\nfrom earlier bank withdrawals, as reflected in the bank statements and books\nof accounts, but the CIT(A) upheld the AO's addition under Section 69A of\nthe Act, stating that no proper reconciliation was provided. Regarding credit\ncard payments of Rs.3,74,148/-, the assessee argued that the AO had initially\nmisstated the amount in the SCN and that the source of funds was never\nquestioned earlier, depriving him of a reasonable opportunity to explain, but\nthe CIT(A) rejected this contention and sustained the addition under Section\n69C of the Act. On the unsecured loans of Rs.17,20,96,112/-, the assessee\nclaimed financial distress prevented the timely collection of confirmations,\nbut since no efforts were made to substantiate the identity, creditworthiness,\nand genuineness of creditors, the CIT(A) upheld the AO's addition under\nSection 69A of the Act. The CIT(A) observed that the assessee had merely\nsought repeated adjournments, including requests to keep the appeal in\nabeyance under the proposed Vivad Se Vishwas Scheme 2024, without\nproviding substantive explanations. Citing Supreme Court and High Court\njudgments, the CIT(A) concluded that the burden of proof rested on the\nassessee, which remained unfulfilled, and accordingly, all additions made by\nthe AO were confirmed, and the appeal was dismissed.\n4.\nAggrieved by the order of CIT(A), the assessee is in appeal before us\nwith following grounds of appeal:\n1. On the facts and circumstances of the case as well as law on the subject, the learned\nCIT(A) has erred in passing ex-parte order without giving reasonable and sufficient\nopportunity of being heard.\n2. On the facts and circumstances of the case as well as law on the subject, the learned\nCIT(A) has erred in dismissing the appeal without passing speaking order.\n3. On the facts and circumstances of the case as well as law on the subject, the learned\nCIT(A) has erred in confirming the action of assessing officer in making addition of\ncash deposits in bank account amounting to\nRs.64,25,000/- by\ntreating the same as unexplained investment u/s.69A of the Act.\n4. On the facts and circumstances of the case as well as law on the subject, the learned\nCIT(A) has erred in confirming the action of assessing officer in making addition of\ncredit card payments amounting to Rs.3,74,148/- by treating the same as\nunexplained payments u/s.69C of the Act.\n5. On the facts and circumstances of the case as well as law on the subject, the learned\nCIT(A) has erred in confirming the action of assessing officer in making addition of\nunsecured loans amounting to Rs.17,20,96,112/ - by treating the same as\nunexplained money u/s.69A of the Act.\n6. It is therefore prayed that the above addition/(s) made by the Assessing Officer and\nconfirmed by learned CIT(A) may please be deleted.\n7. Appellant craves leave to add, alter or delete any ground(s) either before or in the\ncourse of hearing of the appeal.\n5.\nDuring the course of haring before us, the Authorized Representative\n(AR) contended that the addition of Rs.64,25,000/- u/s 69A of the Act as\nunexplained cash deposits was erroneous, as the bank book and bank\nstatements clearly showed that the deposits were sourced from earlier bank\nwithdrawals, and the balance sheet in ITR-3 reflected cash on hand and bank\nbalances, which the AO ignored. The AR further stated that in case of\naddition of Rs.3,74,148/- u/s.69C of the Act for unexplained credit card\npayments, the AO initially misstated the amount as Rs.21,54,879/- in the\nShow Cause Notice (SCN), creating confusion, and only corrected it at the\nfinal stage, depriving the assessee of a reasonable opportunity to explain.\nFurther, AR stated that the addition of Rs.17,20,96,112/- u/s.69A of the Act\nas unexplained unsecured loans was made arbitrarily, as the assessee had\nexplained financial distress and strained relations with lenders, which\ndelayed obtaining confirmations. Despite seeking additional time and a\nvirtual hearing, the AR stated that, the AO ignored the request and added the\nentire outstanding loan balance, failing to verify whether these loans were\nfrom prior years or received during the year under consideration. The AR\nargued that the AO's approach violated the principles of natural justice, as\ngenuine explanations and documentary evidence were not properly\nconsidered, and the high-pitched additions were made without adequate\njustification.\n6.\nThe AR contended that the CIT(A) failed to apply independent\nreasoning and merely reproduced the order of the AO without addressing\nthe submissions and contentions of the assessee. It was further argued that\nthe CIT(A) denied the assessee a fair opportunity of being heard, despite a\nspecific request for adjournment made vide response dated 17.08.2024,\nwherein the assessee had requested that the appeal hearing be kept in\nabeyance pending the implementation of the proposed Vivad Se\nVishwas Scheme 2024. Instead of considering this request, the CIT(A)\nproceeded to dismiss the appeal ex-parte, without granting a reasonable\nhearing or passing a speaking order, thereby violating the principles of\nnatural justice. The AR emphasized that both the AO and CIT(A) ignored\ngenuine explanations and supporting evidence, leading to high-pitched\nadditions, and therefore prayed that the entire assessment be set aside for\nfresh adjudication after granting the assessee a fair and reasonable\nopportunity.\n7.\nThe Departmental Representative (DR), on the other hand, relied on\nthe order of lower authorities and reiterated that the assessee was\nnoncompliant.\n8.\nWe have carefully considered the submissions made by the AR and the\nDR, as well as the materials available on record. It is evident that the CIT(A)\npassed an ex-parte order without adequately addressing the contentions of\nthe assessee and merely reproduced the findings of the AO. The assessee had\nmade a specific request for adjournment vide its response dated 17.08.2024,\nseeking time due to the potential implementation of the Direct Tax Vivad Se\nVishwas Scheme 2024, which was not considered by the CIT(A). This, in our\nview, amounts to a denial of a fair opportunity to be heard, thereby violating\nthe principles of natural justice.\n8.