YATINBHAI PRAMUKHBHAI PATEL,AHMEDABAD vs. THE ACIT, CIRCLE-3(3), AHMEDABAD

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ITA 434/AHD/2024Status: DisposedITAT Ahmedabad09 January 2025AY 2017-18Bench: MS. SUCHITRA KAMBLE, JUDICIAL MEMBER\nAND\nSHRI MAKARAND V. MAHADEOKAR, ACCOUNTANT MEMBER\nआयकर अपील सं/ITA No.434/Ahd/2024\nनिर्धारण वर्ष / Assessment Year : 2017-18\nYatinbhai Pramukhbhai Patel\nThe ACIT\nबनाम /\nv/s.\nCircle-3(3)\n2, Parivar Society Part-2\nNear Premchand Nagar\nRow-House,\nAhmedabad – 380 015\nAhmedabad – 380 015\nस्थायी लेखा सं./PAN: ADRPP 8846 K\nअपीलार्थी/ (Appellant)\nप्रत्यर्थी/ (Respondent)\nAssessee by :\nShri Mehul Thakkar, AR\nRevenue by :\nShri Rignesh Das, Sr7 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal held that the case was selected for limited scrutiny solely to examine cash deposits during the demonetization period. The AO's addition of Rs. 36,88,500/- by treating declared agricultural income as undisclosed income was beyond the scope of limited scrutiny, as no prior approval from the Principal Commissioner of Income Tax (PCIT) was obtained, which is mandated by CBDT Instruction No. 20/2015. The Tribunal noted that judicial precedents consistently hold such unauthorized expansion of scope as invalid. The Tribunal also found merit in the assessee's submissions that the AO and CIT(A) failed to consider the evidence furnished, violating the principle of natural justice by passing ex-parte orders without providing a reasonable opportunity of hearing. Consequently, the order of the CIT(A) was set aside, and the matter was restored to the AO for fresh adjudication. The AO was directed to follow CBDT Instructions, not travel beyond the scope of limited scrutiny without prior approval, consider the assessee's submissions and documents, and provide a reasonable opportunity of hearing. The addition of Rs. 11,00,000/- was not explicitly decided upon but would be subject to fresh adjudication.

What were the facts?

The assessee, Yatinbhai Pramukhbhai Patel, filed an appeal against the order of the CIT(A) dated 09/01/2024, which upheld the AO's ex-parte assessment order under Section 144 for Assessment Year 2017-18. The AO had made additions of Rs. 11,00,000/- for unexplained cash credit and Rs. 36,88,500/- for agricultural income, treating it as undisclosed income. The case was selected for limited scrutiny concerning cash deposits during demonetization. The assessee failed to respond to notices from the AO and CIT(A), leading to ex-parte orders. The assessee, however, submitted that they had provided explanations and documents, and the CIT(A) did not consider them.

What were the issues?

1. Whether the addition of Rs. 11,00,000/- on account of cash deposit under Section 68 of the Income Tax Act, 1961, was justified, considering the assessee's contention that details were available and books of accounts were not required to be maintained. (Mixed law and fact) 2. Whether the addition of Rs. 36,88,500/- on account of agricultural income was justified, considering the assessee's claim that various details were available and the AO exceeded the scope of limited scrutiny. (Mixed law and fact) Assessee's arguments: - The case was selected for limited scrutiny only for cash deposits, and the AO exceeded jurisdiction by adding agricultural income without prior approval from the PCIT as per CBDT Instruction No. 20/2015. - Both AO and CIT(A) passed ex-parte orders without considering the assessee's replies and evidence submitted through e-portal and mail, including bank statements, land records, sales invoices, and expense bills. - The CIT(A) failed to provide a reasonable opportunity of being heard. Revenue's arguments: - Both AO and CIT(A) passed ex-parte orders because the assessee failed to appear despite repeated notices. - The matter should be restored to the AO for a fair opportunity for the assessee to present evidence.

Which sections of the Income-tax Act were involved?

Section 144,Section 143(2),Section 142(1),Section 68,Section 115BBE

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “C” BENCH, AHMEDABAD

Before: MS. SUCHITRA KAMBLE & SHRI MAKARAND V. MAHADEOKAR

For Appellant: Shri Mehul Thakkar, AR
For Respondent: Shri Rignesh Das, Sr.DR
Hearing: 07/01/2025Pronounced: 09/01/2025

This appeal by the assessee arises out of the order dated 09/01/2024 passed by the Commissioner of Income Tax (Appeal), National Faceless Appeal Centre, Delhi (NFAC) [hereinafter referred to as “CIT(A)”] confirming the order passed by the Assessing Officer (hereinafter referred to as "AO") under Section 144 of the Income Tax Act, 1961 (hereinafter referred to as "the Act") for the Assessment Year 2017-18.

Facts of the Case:

2.

The assessee filed the return of income on 13/01/2018 declaring a total income of Rs.25,44,020/-. The case was selected for limited scrutiny under CASS (Computer-Assisted Scrutiny Selection) with the specific issue of verifying cash deposits during the demonetization period. The AO issued a notice under Section 143(2) dated 13/08/2018 and subsequent notices under Section 142(1)of the Act for calling details regarding cash deposits. The assessee failed to respond to multiple notices and show-cause notices, leading to an ex-parte assessment under Section 144 of the Act. In the assessment order dated 09/12/2019, the AO made the following additions:

Unexplained Cash Deposits: 2.1. Rs.11,00,000/- was treated as unexplained cash credit under Section 68 r.w.s.115BBE of the Act on the ground that no valid explanation or documentary evidence regarding the cash deposits was provided.

Agricultural Income:

2.2. The AO noted that the assessee declared agricultural income of Rs.36,88,500/- but failed to furnish details of landholding, sale bills, and expenses.

2.3. Consequently, the AO treated the entire amount of Rs.36,88,500/- as undisclosed income under Section 68 of the Act.

3.

The assessee filed an appeal before the CIT(A). Despite notices issued by the CIT(A) through the ITBA portal on multiple occasions, the assessee failed to provide any submission or appear for hearings. The CIT(A) noted that sufficient opportunities were granted but went unheeded by the assessee. Consequently, the CIT(A) passed an ex-parte order on 09/01/2024, upholding the additions made by the AO, observing that the AO’s findings were based on the available information in the absence of compliance by the assessee.

4.

Aggrieved by the order of the CIT(A), the assessee is in appeal before us with following grounds of appeal:

1. Ld. Commissioner of Income Tax ( Appeals) grievously erred in law as well as facts while upholding the addition on account of cash deposit of Rs.11,00,000 made by Ld. Respondent without considering the cash details available with him.

2. Ld. Commissioner of Income Tax (Appeals) has erred in confirming the addition of Rs. 11,00,000 of cash deposited in bank u/s 68 of the Act in the absence of books of accounts which are not required to be maintained by Assessee.

3. Ld. Commissioner of Income Tax (Appeals) was not justified in upholding the addition of Rs. 36,88,500 of Agricultural Income without considering various details regarding agricultural income including Form no 7/12, Sale Bills, Expenses Bills which were available with Ld. Respondent as well as Ld. Commissioner of Income Tax (Appeals).

4. The Assessee prays to add, alter or delete any of the grounds at the time of hearing.

4.1. The assessee also filed following additional grounds of appeal:

4 In view of the facts and circumstances of the case, the learned CIT(A) has erred in confirming the addition of Rs.36,88,500/- towards agricultural income without appreciating that the Assessing Officer exceeded the scope of jurisdiction by making the said addition, as the appellant's case was selected for limited scrutiny specifically for the verification of cash deposits during the demonetization period.

5.

During the course of the hearing before us, the Authorized Representative (AR) submitted that the case was selected for limited scrutiny solely for examining cash deposits during the demonetization period and therefore the AO exceeded the jurisdiction by making an addition of Rs. 36,88,500/- towards agricultural income without obtaining prior approval from the Principal Commissioner of Income Tax (PCIT) as mandated by CBDT Instruction No. 20/2015. The AR further stated that the orders are passed by both AO and CIT(A) without considering the replies of the assessee. The AR presented detailed evidence before us regarding the submissions made by the assessee during the assessment and appellate proceedings as tabulated below:

Mode Date Details Provided e- Copy of return of income, computation of income, bank 27/11/2019 Portal statements. Form 7/12 (land records), sales invoices for agricultural Mail 07/12/2019 produce, expense bills for agricultural operations. e- Grounds of appeal, submissions to AO, supporting 08/01/2020 Portal documents.

5.1 The AR also stated that in response to the show cause notice dated 01/12/2019, the assessee explained the cash deposit of Rs.11,00,000/- and provided supporting documents, including land records, sales invoices, and expense vouchers to substantiate the agricultural income and the assessee requested a personal hearing and even offered to facilitate physical verification of the agricultural land if required. 5.2. The AR submitted that despite submitting the paper book on the e-portal, the CIT(A) did not consider the submissions or provide a reasonable opportunity of being heard.

6.

The Departmental Representative (DR) conceded that both the AO and CIT(A) passed ex-parte orders but contended that the assessee failed to appear despite repeated notices. However, the DR suggested that the matter be restored to the AO to ensure a fair opportunity for the assessee to present evidence.

7.

Considering the submissions, facts and circumstances, and contentions of the parties, we find that the case was selected for limited scrutiny solely to examine cash deposits during the demonetization period. The AO, however, proceeded to make an addition of Rs.36,88,500/- by treating the declared agricultural income as undisclosed income. As per CBDT Instruction No. 20/2015, the AO cannot expand the scope of scrutiny without obtaining prior approval from the Principal Commissioner of Income Tax (PCIT). Judicial precedents have consistently held that such unauthorized expansion is invalid.

7.1. We find that there was no material placed on record indicating that the AO obtained approval to expand the scope of scrutiny. Therefore, the addition of Rs.36,88,500/- was beyond the jurisdiction of the AO and cannot be sustained. The AR contended that the assessee had responded to the AO's notices through detailed submissions, including e-mails sent on 27/11/2019 and 07/12/2019 and a paper book filed before the CIT(A) on 08/01/2020. The contents of these submissions included:

• Return of income and computation of total income. • Bank statements explaining the cash deposits of Rs.11,00,000/-. • Form 7/12 (land records) substantiating the ownership of agricultural land. • Sales invoices for agricultural produce and expense vouchers for agricultural operations.

7.2. We find merit in the assessee's submissions that the AO and CIT(A) failed to consider the evidence furnished during the proceedings. We observe that both the AO and CIT(A) passed ex-parte orders despite the assessee’s attempts to furnish evidence and seek a personal hearing. The principle of natural justice mandates that a reasonable opportunity must be given before adverse conclusions are drawn. The failure to consider the submissions filed by the assessee constitutes a violation of this principle.

7.3. In light of the above findings, the order of the CIT(A) is set aside, and the matter is restored to the file of the AO for fresh adjudication. The AO shall follow the CBDT Instructions meticulously while passing the fresh order and shall not travel beyond the scope of limited scrutiny without obtaining prior approval as required. The AO shall consider the submissions and supporting documents furnished by the assessee and provide a reasonable opportunity of hearing.

8.

In the result, the appeal of the assessee is partly allowed for statistical purposes.

Order pronounced in the Open Court on January, 2025 at Ahmedabad.

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