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Facts
The assessee, engaged in wholesale and retail trading of oil, pulses and oilseeds, filed a return declaring income. The AO selected the case for scrutiny and treated cash deposits of Rs.3,92,32,500/- as unexplained cash credit under Section 68. The AO also estimated business income at 8% on estimated sales, adding Rs.1,21,24,257/-. The appeal was dismissed by NFAC for non-compliance.
Held
The Tribunal noted that the assessee had non-compliance before the NFAC and AO. However, considering the prayer of the assessee's representative and the facts, the Tribunal decided to grant one more opportunity to the assessee to present their case. The appeal was restored to the Assessing Officer.
Key Issues
Whether the lower authorities were justified in treating cash deposits as unexplained and estimating business income without proper adjudication, and whether the appeal dismissal by NFAC for non-compliance was appropriate given the assessee's prayer for another opportunity.
Sections Cited
68, 144, 115BBE, 270A(1), 270A(9)(e), 271, 44AD, VIA, 271AAC
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Income Tax Appellate Tribunal, LUCKNOW BENCH “A”, LUCKNOW
Before: SHRI. SUDHANSHU SRIVASTAVA & SHRI NIKHIL CHOUDHARY
PER SUDHANSHU SRIVASTAVA, J.M.: This appeal has been preferred by the assessee against the order dated 08.08.2024, passed by the ld. Commissioner of Income Tax (Appeal), National Faceless Appeal Centre (NFAC), Delhi for Assessment Year 2017-18.
The brief facts of the case are that the assessee was engaged in wholesale and retail trading of refined oil, pulses and oilseeds, etc. under the proprietorship firm, M/s Yesh Traders. The assessee e-filed his return of income for the year under consideration on 14.11.2017, declaring a total income of Rs.10,59,570/- after claiming deduction of Rs.65,000/- under Chapter VI-A of the Income Tax Act, 1961 (hereinafter called “the Act’). Later on, the case of the assessee was selected for scrutiny under CASS. The Assessing Officer (AO) issued statutory notices, requiring the assessee to furnish the details of cash deposits during the year under consideration. None appeared on behalf of the assessee before the AO. However, a written reply along with supporting documents was filed on 27.11.2019. During the course of assessment proceedings, the assessee was required to substantiate the cash deposits, totaling to Rs.3,92,32,500/- in his Saving Bank account No.30830961193 and Current Account No.35203942748 maintained with State Bank of India, Hallaur. Since the assessee failed to given any explanation about the nature and source of the cash deposits made in the aforementioned bank accounts, the AO treated the cash deposits aggregating to Rs.3,92,32,500/- as unexplained cash credit and added the same to the income of the assessee under section 68 of the Act. The AO also noticed from the bank account statement of Account No.30830961193 maintained with Bank of India, Hallaur that the total credits were at Rs.19,06,89,224/- and the cash deposits made during the demonetization period were at Rs.3,91,36,000/-. After subtracting Rs.3,91,36,000/- from 19,06,89,224/-, which came to Rs.15,15,53,224/-, the same was treated as total receipts/sales for the year under consideration.
The AO estimated the net profit of 8% on Rs.15,15,53,224/-, which came to Rs.1,21,24,257/- and added the same to the income of the assessee under the head ‘income from business and profession’. The AO completed the assessment under section 144 of the Act, assessing the total income of the assessee at Rs.5,13,56,760/-.
2.1 The AO invoked the provisions of section 115BBE of the Act and also initiated penalty proceedings under section 270A(1) read with section 270A(9)(e) and 271 of the Act, separately.
Aggrieved, the Assessee preferred an appeal before the Ld. First Appellate Authority. Later on, the case of the assessee was migrated to NFAC, which dismissed the appeal of the assessee for the reason of non-compliance by the Assessee.
Now, the Assessee has approached this Tribunal challenging the order of the NFAC by raising the following grounds of appeal:
1. BECAUSE the authorities below were not justified in passing the respective orders ex-parte without affording due and effective opportunity of being heard to the "appellant" and consequently the impugned order deserves to be set- aside and matter restored to the Assessing Officer for passing the assessment order a-fresh after affording proper/reasonable opportunity of being heard to the "appellant". WITHOUT PREJUDICE TO THE AFORESAID 2. BECAUSE the notices of hearing issued by ld. "CIT(A)" were not issued and served on the address of the assessee, as per mandate given in Form 35, the notices stated to have been issued by " CIT(A)" could not be complied with and as such the impugned order passed by the ld. "CIT(A)" is in violation of principles of natural justice, hence deserves to be set aside and matter restored to his file for passing the order afresh after affording reasonable opportunity of being heard to the assessee. 3 BECAUSE even in the ex-parte order, irrespective of non- appearance of the assessee before the "CIT(A)", the ld. "CIT(A)" ought to have dealt with the issues raised by the assessee in the grounds of appeal on merit by way of passing a speaking order after taking into consideration the material and information available on record, as per provisions contained in sub-section (6) Section 250 of the Act.
4. BECAUSE Id. "CIT(A)" has erred in law and on facts in confirming the action of the Assessing Officer by holding that "Therefore, in the absence of any reasonable, cogent and valid evidences advanced by the appellant in the instant appeal, I am unable to interfere with the action of the Assessing Officer. Therefore, all the grounds raised by the appellant in the present appeal are dismissed" and thereby in impliedly confirming the following additions, aggregating to Rs.5,02,32,192/- made by the Id. AO:
(i) Addition of Rs.3,92,32,500/- made by the Assessing Officer by deeming the said sum as un-explained cash credit u/s 68 of the Act on the ground that the assessee failed to give any explanation about the nature and the source of cash deposits made in his savings bank account and current account maintained with State Bank of India; (ii) Addition of Rs.1,09,99,692/- (Rs.1,21,24,257/- (-) Rs.11,24,565/-declared by the assesse) made by the Assessing Officer on account of income from business by estimating the sales of the assessee and applying net profit @ 8% on the estimated sales by applying provisions of section 44AD of the Act. (iii) Non consideration of deduction of Rs.65,000/- claimed under chapter VIA.
BECAUSE as per the material and information on record, the "appellant" was engaged in the business of whole sale of refined oil, pluses and oil seeds etc. and the sum of Rs.3,91,36,000/- stated to have been deposited in the current account in State Bank of India is part of total sales of Rs.18,62,51,285/-shown in the audited books of account and other genuine transactions duly accounted for in the audited books of account, consequently the authorities below were not correct in holding the sum of Rs. 3,91,36,000/- as un-disclosed income of the assessee from un-disclosed sources.
BECAUSE during the course of assessment proceedings the "appellant" had furnished requisite details alongwith supporting documents which clearly shows that the sum of Rs.3,91,36,000/-, alleged by the Id. Assessing Officer to be the un-disclosed income of the assessee from un-disclosed source deposited in the current account in State Bank of India, is from well-defined sources as reflected in the audited books of account.
7. BECAUSE the addition of Rs.3,91,36,000/- made by the AO u/s 68 of the Act is based on presumption, surmises and conjectures, on a mis-reading/mis-conception of the information available on record and without properly considering/appreciating the submission made by the "appellant" during the course of assessment proceedings, consequently, the ld. "CIT(A)" should have deleted the addition of Rs.3,91,36,000/-.
8. BECAUSE on the facts and in the circumstances of the case, the provisions of section 68 of the Act are not attracted and, therefore, the addition of Rs.3,91,36,000/-impliedly confirmed by the ld. "CIT(A)" is wholly illegal, bad in law and contrary to facts on record, hence the said addition is liable to be deleted.
BECAUSE in any case in computing the addition of Rs.3,92,32,500/- the Id. A.O. had added Rs.96,500/- twice resulting in double addition to the tune of Rs.96,500/-.
BECAUE the Id. "CIT(A)" has erred in law and on facts in confirming the action of the Assessing Officer in making the addition of Rs.1,09,99,692/- by erroneously computing income from business at Rs.1,21,24,257/- by estimating the net profit @ 8% of total sales erroneously estimated by the Id. AO at Rs.15,15,53,224/- on the basis of his own working, which is contrary to the material and information on record and consequently the entire addition of Rs.1,09,99,692/- is un-sustainable either on facts or in law.
BECAUSE in computing the income from business at Rs.1,21,24,257/- the ld. AO has grossly erred in applying the provisions of section 44AD of the Act which provision is not applicable to the case of the "appellant" since the turnover of the assessee exceeded the limit specified u/s 44AD of the Act.
BECAUSE the authorities below have erred in law and on fac in not allowing the deduction of Rs.65,000/- claimed under chapter VIA of the Act.
BECAUSE the Id "CIT(A)" was not correct in confirming the action of the Assessing Officer in making various additions even though no discrepancy was found in the audited books of account and such books of accounts have been duly accepted by the authorities below.
BECAUSE on the facts and in the circumstances of the case and in law, provisions of section 115BBE did not get attracted and the authorities below have erred in charging/confirming the charging of tax at the rate specified in section 115BBE of the Act.
BECAUSE on the facts and in the circumstances of the case and in law the penal provisions of section 271AAC of the Act on the alleged unexplained income are not attracted.
BECAUSE on the facts and in the circumstances of the case, the penal provisions contained in section 270A(1) r.w.s. 270A(9) (e) of the Act are not attracted as the assessee could not have been held to have under reported his income, that too as a consequence of mis-reporting.
BECAUSE the order appealed against is contrary to facts, law and principles of natural justice.
BECAUSE each ground taken in appeal is mutually exclusive and without prejudice to each other.
The "appellant" craves leave to add, delete or modify any of the grounds before hearing of appeal. 5. During the course of hearing before us, the Ld. Authorized Representative for the assessee (Ld. A.R.) submitted that the NFAC erred on facts and in law in dismissing the appeal of the assessee by passing an ex-parte order, without adjudicating the issues involved in the appeal of the assessee on merit. The Ld. A.R. further submitted that the assessee could not be represented either before the NFAC or before the AO. The Ld. A.R. also submitted that certain details and documents relating to the transactions entered into by the assessee during the year under consideration could not be filed before the AO. The Ld. A.R. prayed that the matter may be restored to the file of the AO and if an opportunity is given, the assessee will produce all the relevant documents in support of his claim before the AO.
6. The Ld. CIT (D.R.) had no objection to the restoration of appeal to the file of the Assessing Officer as requested by the Ld. A.R.
We have heard both the parties and have also perused the material on record. We find that there was non-compliance on behalf of the assessee before the NFAC as well as before the AO. However, looking into the facts of this case and the prayer of the Ld. A.R., we are of the considered view that the assessee deserves one more opportunity to present his case and, therefore, we restore this file to the Office of the Assessing Officer with the direction to provide an opportunity to the assessee to present his case and to produce the necessary evidences in support of the impugned transactions entered into by the assessee during the year under consideration. We also caution the assessee to fully comply with the directions of the Assessing Officer in the set- aside proceedings when called upon to do so, failing which, the Assessing Officer would be at complete liberty to pass the order in accordance with law, based on the material available on record even if it is ex-parte qua the assessee.
In the result, the appeal of the assessee stands allowed for statistical purposes.
Order pronounced in the open Court on 22/05/2025.