Loading judgment…
Facts
The assessee filed an appeal against the order of the CIT(A) who dismissed the appeal ex-parte. The assessee contended that notices were not properly served, leading to non-compliance. The Assessing Officer (AO) made additions for unexplained cash deposits and unverified labour charges.
Held
The Tribunal held that the non-compliance by the assessee was not deliberate, as notices were not sent to the provided email addresses. Therefore, the matter was restored to the CIT(A) for fresh adjudication on merits, providing a proper opportunity to the assessee.
Key Issues
Whether the CIT(A) erred in dismissing the appeal ex-parte without proper service of notices, and whether the additions made by the AO were justified based on the available evidence and compliance by the assessee.
Sections Cited
250, 143(3), 143(2), 68, 115BBE, 144
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, LUCKNOW ‘A’ BENCH, LUCKNOW
O R D E R PER SUDHANSHU SRIVASTAVA, J.M.: This is an appeal filed by the assessee against the order passed by the ld. CIT(A) on 24.04.2024 under section 250 of the Income Tax Act, 1961. The grounds of appeal
1. preferred by the assesse are as under:- “1. The Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi (hereinafter referred to as the "Ld. CIT (A)") has erred on facts and in law in dismissing the appeal of the appellant ex-parte without appreciating the legal aspects pertaining to the case of the assessee and also without looking into the merit of the additions made by the Ld. A.O.
2. On the undemoted facts the Ld. CIT (A) was not justified at all in dismissing the appeal of the appellant. Because no notice of hearing was served on the appellant either on her postal address or on the ernail-id provided in the appeal memo.
A.Y. 2017-18 Priya Kant Singh Because the notice of hearing was provided on the login portal and the appellant was not versed in viewing the portal.
The Ld. CIT (A) has erred on facts and in law in not appreciating that the assessment order dated 16.12.2019 passed u/s 143(3) of the I.T. Act, 1961 by the ACIT, Range-1, Lucknow is bad in law and illegal as it has been passed in consequence of the notice issued u/s 143(2) of the Act by the ITO, Range 1(3), Lucknow, who was not having jurisdiction over the assessee to issue any such notice.
4. The Ld. CIT (A) has erred on facts and in law In confirming the addition of Rs.27,30,000/- made by Ld. A.O. In the hands of the appellant by treating the cash deposits made in bank account as unexplained cash credit u/s 68 of the Act by grossly ignoring the fact that the cash deposits made into the bank accounts were on account of sale proceeds received in cash which stood duly recorded in the books of the appellant and offered to tax.
5. The Ld. CIT (A) has erred on facts and in law in confirming the addition of Rs.27,97,338/- made by Ld. A.O. In the hands of the appellant by treating the 10% of the expenses claimed under the head 'labour charges' amounting to Rs.2,79,73,380/- debited to the P&L account as unvouched and unverified without specifying any specific defect in books of accounts and without bringing any adverse material on record.
6. The Ld. CIT(A) erred on fact and in law is not providing the appellant proper and adequate opportunity to make compliances of the reasons relied upon by him for making various additions and disallowances in its hands.
The appellant reserves its right to advance such other grounds before or at the hearing, which it may consider fit and appropriate, for which it craves leave to amend, alter or otherwise modify the grounds appearing hereinbefore with the kind permission of the Hon'ble Bench.”
The facts of the case are that the assessee filed a return of income for the A.Y. 2017-18 on 2.10.2018 declaring a total income of Rs.70,63,420/-. Subsequently, notices were issued to the assessee but the ld. AO records that proper compliance was not made. Therefore, the ld. AO issued a show cause notice to the assessee to explain the cash deposits amounting to Rs.27,30,000/- that were made in the assessee’s bank A/c No.6844290100002 with the Bank of India. In response, it was submitted that all the cash deposited was out of the opening cash balance of the month as on 1.10.2016 and cash withdrawals from the bank that had been made A.Y. 2017-18 Priya Kant Singh before the demonetization period, during the F.Y. 2016-17. It was submitted that on some occasions cash had been withdrawn from the bank for some business purpose but since it was unutilized later on the same amount was deposited back. In support of these arguments, a copy of the cash book extract for the period from 1.10.2016 to 31.12.2016 was filed, which showed opening cash in hand as on 1.10.2016 as Rs.69.04 Lacs. The ld. AO records that no other details or information had been filed and that specific queries raised by him vide his questionnaire dated 7.09.2019 had not been answered. Furthermore, the cash book filed in response also did not give the daily cash in hand, which was specifically asked for. Therefore, the ld. AO held that the assessee was in deliberate non-compliance of the notice issued by him and he therefore, proceeded to make the assessment under section 144 of the Income Tax Act, 1961 on the basis of material available on record. He observed that in the current year, the assessee was running a proprietary concern called M/s Maa Gayatri Traders, which was engaged in the work of civil construction. He had declared a total income of Rs.70,63,420/- but during the year, his gross receipts were declared at Rs.9,77,50,781/-. Since the assessee had only submitted an extract of the cash book for the period 1.10.2016 to 31.12.2016, the accumulation of opening cash in hand of Rs.69,04,192/- as on 1.10.2016 was held by the ld. AO to be not verifiable. Pointing to the reporting mechanism established by the CBDT for reporting cash transactions of more than Rs.12,50,000/- in a current account or Rs.2,50,000/- or more in a savings account, he pointed out that the assessee had failed to offer any satisfactory explanation with regard to the source of cash deposit in SBNs made by him during the demonetization period. Quoting from various case laws relating to section 68 of the I.T. Act, 1961, he held that the assessee had failed to discharge his legal obligation by furnishing any reasonable explanation with regard to the cash deposits and therefore, these cash deposits were unexplained. He debunked the claim of opening A.Y. 2017-18 Priya Kant Singh balance of Rs.69.04 Lacs as on 1.10.2016 by pointing to various cash withdrawals made by the assessee after that date. He held that these regular withdrawals clearly show that cash funds were required by the assessee to meet his regular cash expenses and had the opening balance of Rs.69.04 Lacs been available with the assessee, there would not have been any need for such regular withdrawals. He also observed discrepancies in the account of the assessee with regard to cost of materials and labour charges, to hold that the expenses under these heads had not been booked by the assessee only to show a higher amount of cash availability as on the date of demonetization. In the facts and circumstances of the case, he held the cash deposits of Rs.27,30,000/- as unexplained and he therefore, added him back as unexplained cash credits in his books of accounts under section 68 of the Act, and brought them to tax under section 115BBE of the Act. From the perusal of the ITR, the ld. AO also noted that the assessee had debited a sum of Rs.2,79,73,380/- on labour charges. Despite being asked specifically, the assessee had not furnished any reply with regard to these labour charges and no evidences in support of them had been presented before the ld. AO. He, therefore, proposed to disallow 10% of this amount as unverifiable and unsubstantiated and he issued a show cause notice in this regard. As the assessee did not furnish any response, the ld. AO presumed that he had nothing to say in this regard. He, therefore, made an addition of Rs.27,97,338/- by disallowing 10% of the claimed labour charges on the grounds of such charges being unvouched and unverifiable.
3. Aggrieved by the said assessment order, the assessee went in appeal to the ld. CIT(A). However, the ld. CIT(A) passed a cryptic order, in which he stated that the assessee was issued and served with various notices under section 250 of the Act from this office to present his contentions and any documents supporting them. He pointed out that the said notices (5 in number) were issued right from 2020 till 2024 A.Y. 2017-18 Priya Kant Singh and everyone of them remained uncomplied with. He pointed out that the National Faceless Appeal Centre (NFAC) had also enabled a communication window to facilitate filing of submissions by the assessee’s in November, 2022, but the assessee had not filed any response to the various notices issued by him. In view of this, the ld. CIT(A) presumed that the assessee was not interested in prosecuting the appeal and he therefore, dismissed it for non-prosecution.
Aggrieved by the said order of the ld. CIT(A), the assessee has come before us. Shri. B.P. Yadav, Advocate (hereinafter referred to as the ‘ld. AR’) appearing on behalf of the assessee submitted that the reason for non-compliance before the ld. CIT(A) was because the notices had been sent to a different email address from the email address entered in Form No.35 and the specific request that the notices may be sent to the email address bpyadav.co2014@gmail.com. Since the notices have been sent to another email address that belonged to a previous counsel, compliance could not be made by the assessee. It was submitted that the assessee had all the material available that was necessary for pursuing the appeal and therefore, the matter may be sent back to the lower authorities for enabling the production of this material before them for assessment purposes.
On the other hand, Sh. Sanjeev Krishna Sharma, ld. Addl CIT DR pointed out that the assessee had been given a number of opportunities and was deliberately non-compliant with the notices. Therefore, the additions made by the lower authorities should be confirmed.
We have duly considered the facts and circumstances of the case. The ld. AR has filed a copy of the notice sent under section 250 and we find that it has not been sent either to the email address mentioned in Form No. 35 or the email address that was entered in Form No.35 to which notices were requested to be sent to.
A.Y. 2017-18 Priya Kant Singh