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Facts
The assessee deposited Rs.10,00,000/- in her bank account during demonetization period, claiming it was from the sale of agricultural land. The Assessing Officer (AO) treated this and other deposits as unexplained income. The assessee had also deposited Rs.3,08,517/- during the year, which was added to her total income. The assessee cited critical medical condition for non-response to notices.
Held
The Tribunal held that the notice under Section 142(1) of the Act was issued beyond the prescribed date as per departmental instructions, making the assessment proceedings void ab initio. Consequently, the assessment proceedings were quashed.
Key Issues
Whether the assessment proceedings are void ab initio due to the issuance of notice under Section 142(1) beyond the prescribed timeline as per departmental instructions?
Sections Cited
142(1), 144, 69A, 115BBE, 271F, 2(14)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, SMC BENCH, LUCKNOW
Before: SHRI. SUDHANSHU SRIVASTAVA
Assessment Year: 2017-18 Smt. Suraiya Begum v. The Income Tax Officer 93/94-B, Rajbi Road Ward 1(3)(4) [Now Ward 1(3)(5) Buchadkhana Kanpur Kanpur (U.P) TAN/PAN:CHWPB7290Q (Appellant) (Respondent) Appellant by: Shri Rakesh Garg, Advocate Respondent by: Shri Sanjeev Krishna Sharma, D.R. O R D E R
This appeal has been preferred by the Assessee against the order dated 28.12.2023, passed by the National Faceless appeal Centre, Delhi (NFAC) for Assessment Year 2017-18.
2.0 The brief facts of the case are that in the process of gathering the details of assessees who had deposited substantial cash in the bank account(s) during the demonetization period but had not filed the return of income, it was revealed that the assessee under appeal had deposited cash of Rs.10,00,000/- in his Bank Account No.13300100003674 maintained with Bank of Baroda during the period from 09.11.2016 to 30.12.2016. The Assessing Officer (AO) also noticed that the assessee had also deposited an amount of Rs.3,08,517/- during the year under consideration. The Assessing Officer (AO) issued statutory notices to the assessee. However, the assessee did not respond to the notices issued by the AO. The AO, therefore, proceeded to complete the assessment on the basis of Best Judgment Assessment, after issuing show cause notice to the assessee. While completing the assessment under section 144 of the Act, the AO treated the cash deposits, totaling to Rs.13,08,517/- (Rs.10,00,000 + Rs.3,08,517) made by the assessee in his bank account during the year under consideration as his unexplained income and added the same to the total income of the assessee under section 69A of the Act.
2.1 The AO also invoked the provisions of section 115BBE of the Act and initiated penalty proceedings under section 271F of the Act, separately.
2.2 Aggrieved, the Assessee preferred an appeal before the NFAC. The submissions on behalf of the assessee before the NFAC was that the assessee had sold her agricultural land on 19.05.2016 for a consideration of Rs.34,00,000/- and the amount of Rs.10,00,000/- deposited in her bank account in Specified Bank Notes (SBNs) during the demonetization period was out of this sale consideration. It was further submitted before the NFAC that as per section 2(14) of the Act, rural agricultural plot of land is not considered as capital asset and, therefore, no tax would be leviable on the agricultural land sold by the assessee. It was further submitted before the NFAC that due to assessee’s critical medical condition, she could not reply to certain notices issued by the Department. Not being satisfied with the explanations furnished by the assessee, the NFAC confirmed the order of the AO and dismissed the appeal of the assessee.
2.3 Now, the assessee has approached this Tribunal challenging the order of the NFAC by raising the following grounds of appeal:
1. That the Learned Commissioner of Income Tax (Appeals), NFAC, Delhi has been wrong in law and on facts in confirming the addition of Rs.1308517/- U/s 69A r.w.s. 1158BE of the I.T. Act, 1961as under: -
Rs.10,00,000/- being cash deposit in bank during demonetization period out of sale proceeds of agricultural land.
Rs.1,50,000/- being cash deposit in bank during the year out of sale proceeds of agricultural land.
Rs.1,50,000/- being transferred from her C/C account during the year. Rs.8,517/- being interest credited during the year. Rs.13,08,517/-
That the addition of Rs.13,08,517/- made by the Learned Assessing Officer, Ward 1(3)(4), Kanpur U/s 69A of the 1.T.Act, 1961 and confirmed by the Learned Commissioner of Income Tax (Appeals), NFAC, Delhi is without considering the real facts of the case and written submission submitted on 18.11.2023 vide Ack No. 517945841181123 and is unjustified and arbitrary.
That the Learned Commissioner of Income Tax (Appeals), NFAC, Delhi has confirmed the addition of Rs.13,08,517/- without considering the additional grounds of appeal
submitted on 30.08.2022 and is unjustified and arbitrary.
4. That the Learned Commissioner of Income Tax (Appeals), NFAC, Delhi has confirmed the addition of Rs.13,08,517/- including cash deposits of Rs. 10,00,000/- and Rs.1,50,000/- out of sale proceeds of agricultural land alleging that the cash deposits were deposited after 6 months from the date of sale of land and is unjustified and arbitrary.
5. That the order passed by the Learned Commissioner of Income Tax (Appeals), NFAC, Delhi is bad in law, on facts and against the principles of natural justice.
6. That the 'A' craves leave to amend any one or more of the grounds of appeal as stated above as and when need of doing so arise during the course of appellate proceedings before the Hon'ble Bench of Income Tax Appellate Tribunal.
3.0 The Ld. Authorized Representative for the assessee (Ld. A.R.) submitted that in this case, the notice under section 142(1) of the Act was issued on 09.03.2018, wherein the assessee was required to prepare the true and correct return of income for the captioned assessment year. The Ld. A.R. further submitted that, thereafter, the provisions of section 144 of the Act were invoked and the assessment of the assessee was completed after making an addition of Rs.13,08,517/- under section 69A of the Act being total credit entries (including cash deposits) during the demonetization period in the bank account of the assessee. The Ld. A.R. submitted that admittedly there was non-compliance on the part of the assessee due to her critical medical condition but the action of the Department in issuing notice under section 142(1) of the Act on 09.03.2018 was in direct contravention of the Instruction issued by the Department regarding “SOP for issuance of notice under section 142(1) of the Act in cases related to substantial cash deposits in bank accounts during the demonetization period”, vide letter F No.225/363/2017-ITA.II dated 15.11.2017. It was submitted that as per this Instruction, the process of service of notice under section 142(1) of the Act was to be completed by 31.12.2017 in those cases where the cases pertained to non-filer of income tax return. The Ld. A.R. submitted that, therefore, the issuance of notice beyond the prescribed date was violative of the above said Instruction which made the entire exercise right from the issuance of notice under section 142(1) of the Act void. The Ld. A.R. submitted that the assessee’s appeal be allowed on this legal ground.
3.1 On merits, the Ld. A.R. submitted that the assessment had been completed under section 144 of the Act. It was further submitted that the Ld. First Appellate Authority had not drawn any adverse inference on the explanation submitted by the assessee regarding the source of cash deposit. It was submitted that it was duly explained before the Ld. First Appellate Authority that the cash had been deposited out of sale proceeds of agricultural land, vide Sale Deed dated 19.05.2016. It was submitted that the only reason given by the Ld. First Appellate Authority for not accepting the assessee’s contention was that the cash was deposited nearly after six months of receiving sale proceeds and, therefore, the claim was not substantiated. Reliance was placed on the order of ITAT Ahmedabad Bench in the case of Sudhirbhai Pravinkant Thaker vs. Income-tax Officer, Ward 5(1), Ahmedabad reported in [2015] 44 ITR(Trib.) 135, wherein it was held that where the assessee had demonstrated that he had withdrawn cash from bank and there was no finding by the authorities below that this cash available with the assessee was invested or utilized for any other purpose, it was not open to the lower authorities to make addition on the basis that the assessee had failed to explain the source of deposits. Reliance was also placed on another order of the ITAT Jaipur Bench in the case of Shri Sunil Mathur, Kota vs. ITO, Ward 2(4), Kota in wherein, vide order dated 01.11.2011, the addition on account of alleged unexplained cash deposit was deleted. It was prayed that the appeal of the assessee be decided in favour of the assessee.
4.0 Per contra, the Ld. Sr. D.R. submitted that the issue of notice having been issued beyond the period of limitation was not ever raised before either of the authorities below and, therefore, raising this ground before the Tribunal should not be permitted. On merits, the Ld. Sr. D.R. submitted that the Ld. First Appellate Authority, in fact, has not accepted the source of cash and, further, since there was no representation by the assessee before the AO, the matter should be restored to the file of the AO, so that the interest of the Revenue is safeguarded. The Ld. Sr. D.R. prayed that the appeal of the assessee either be dismissed or should be set aside to the file of the AO.
5.0 I have heard the rival submissions and have also perused the material on record. The Ld. A.R. has drawn attention to letter F No.225/363/2017-ITA.II dated 15.11.2017 and it will be relevant, at this juncture, to reproduce the contents of the above said letter:
5.1 A perusal of the last paragraph, i.e., paragraph 4 in the above said letter, specifically lays down that the process of service of notice under section 142(1) of the Act should be completed by 31.12.2017. A perusal of the assessment order itself shows that the notice under section 142(1) of the Act in the case of the present assessee was issued on 09.03.2018 and, therefore, undisputedly, the statutory notice under section 142(1) of the Act has been issued beyond the date prescribed and, as such, the Instruction of the Department being binding on the Revenue Authorities, the issuance of notice beyond the prescribed date makes the proceedings itself void ab initio. Accordingly, I am of the considered view that in the present case the assessment proceedings deserve to be quashed. Accordingly, the assessment proceedings are hereby quashed, as notice under section 142(1) of the Act was issued beyond the prescribed limit.
5.2 Since the asseessee has already been granted relief on the legal ground, the arguments raised by both the parties on merits of the case become academic in nature and are being not adjudicated upon.
6.0 In the final result, the appeal of the assessee stands partly allowed.
Order pronounced in the open Court on 19/09/2025.