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Facts
A survey under Section 133A revealed significant cash deposits in the assessee's bank account for AY 2011-12 (Rs.26,58,74,399/-) and AY 2012-13 (Rs.30,29,95,171/-). The assessee disowned the deposits, claiming the account was operated by Shri Prateek Omar, who admitted to making deposits and providing accommodation entries. The Assessing Officer made protective additions under Section 68 and for commission income, which were upheld ex-parte by the CIT(A).
Held
The Tribunal restored both appeals to the Ld. CIT(A) for fresh adjudication on merits, emphasizing that the assessee must be given a proper opportunity. The assessee is cautioned to comply with the CIT(A)'s directions, failing which, the CIT(A) is at liberty to pass an ex-parte order based on available material.
Key Issues
The key legal issues included the validity of the re-assessment proceedings due to alleged procedural lapses (lack of material, defective/belated notices under Sections 143(2) and 148), and the sustainability of protective additions for unexplained cash deposits under Section 68 and commission income, particularly when a third party claimed responsibility for the transactions.
Sections Cited
133A, 68, 147, 143(3), 143(2), 148, 44AB
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Income Tax Appellate Tribunal, LUCKNOW BENCH “A”, LUCKNOW
Before: SHRI. SUDHANSHU SRIVASTAVA & SHRI ANADEE NATH MISSHRA
1. These appeals have been preferred by the assessee against separate orders, both dated 20.03.2018, passed by the Ld. Commissioner of Income Tax (Appeals)-I, Kanpur for Assessment Years 2011-12 and 2012-13.
The brief facts of the case in assessment year 2011-12 are that a survey under section 133A of the Income Tax Act, 1961 (hereinafter called “the Act’) was carried out in the premises of the assessee on 06.03.2013, in which it was found that the assessee had deposited cash amounting to Rs.26,58,74,399/- in her Bank Account No. 20763917010 maintained with Allahabad Bank, Kahoo Kothi Branch, Kanpur. The statement on oath of the assessee was recorded. The assessee disowned the cash deposited in the bank and stated that the said bank account was being operated by one Shri Prateek Omar. Shri Prateek Omar was examined on oath, and he admitted that he had been depositing cash in the said Bank account and had been operating the same. Shri Prateek Omar further explained that after depositing cash in the said Bank account, he issued cheques in favour of M/s PCS Traders, in which one Smt. Sudha Gupta and Shri Prateek Omar were the authorized signatories, and he also issued cheques to different beneficiaries. The Assessing Officer (AO) did not dispute the statement of Shri Prateek Omar. However, he added the amount of Rs.26,58,74,399/- under section 68 of the Act in the hands of the assessee on protective basis. The AO also made an addition of Rs.1,45,495/- being the difference of commission calculated and commission (Settlement account) shown by the assessee in the profit and loss account. The AO completed the assessment under section 147 read with 143(3) of the Act, computing the total income of the assessee at Rs.26,62,06,170/-.
2.1 For assessment year 2012-13 also on similar reason and grounds, the addition of Rs.30,29,95,171/- was made under section 68 of the Act on protective basis and addition of Rs.80,452/- was made being the difference of commission calculated and commission (Settlement account) shown by the assessee in the profit and loss account. The AO completed the assessment for assessment year 2012-13 under section 147 read with 143(3) of the Act, computing the total income of the assessee at Rs.30,32,08,380/-.
3. Aggrieved, the assessee preferred appeals before the Ld. First Appellate Authority, who dismissed the appeals of the assessee by passing orders ex-parte qua the assessee.
4. Now, the assessee has approached this Tribunal challenging the orders passed by the AO as well as the ld. CIT(A) by raising the following grounds of appeal:
GROUNDS OF APPEAL FOR A.Y. 2011-12:
1. Because there existed no "material", which could provide a live link and nexus between the "formation of reason to believe and escapement of income" and view to the contrary as has been expressed by the Authorities below is erroneous as being inconsistent with the settled position of law.
2. Because the Authorities below has failed to appreciate and omitted to consider that; a. No notice U/s. 143(2), has been issued for verification of Return of income/letter dt.26.11.2015 filed, incompliance to notice dt.27.10.2015 issued U/s.148. b. Notice issued U/s.143 (2) dated 26-08-2016, have been issued for verification of Return of income filed on 29.09.2011, which is beyond the limitation period. c. The "reason recorded" (so called) cannot be said to have met the requirement of law as substance of recorded reason is based upon conjectures, surmises and of general nature not specific.
3. Because the assessment order dt.21.11.2016, is liable to be declared as null & void on the ground and the reason that same had been passed without issuing mandatory notice U/s. 143(2). As notice U/s.143 (2), dt.26.08.2016 was issued for verification of return(original) filed on29.09.2011 which is beyond the period of limitation.
4. BECAUSE the "appellant" was maintaining books of account, which were subject to Tax Audit U/s.44AB. The bank statement/pass book could not be construed to be an accounts book maintained by the assessee, provisions of section 68 of the "Act" were not applicable in the instant case, and consequently the addition of Rs.26,58,74,399/- made by the assessing officer, even on protective basis, was not sustainable and the same deserved to be deleted, WITHOUT PREJUDICE TO THE AFORESAID
1. BECAUSE "the authorities below" has erred in law and on facts in sustaining the addition of Rs.26,58,74,399/- made under section 68 of the "Act" on protective basis, on account of unexplained cash deposit found in bank account no. 20763917010 in Allahabad Bank, owned by the "appellant", merely because she was the title owner of the said bank account.
2. BECAUSE looking to the material and information on record, "the authorities below "was not correct in observing that the "appellant" was indulging in illegal activities in money laundering through her bank account in connivance with her close relative Mr. Pratik Gupta and that the "appellant" had admitted to the activity of money laundering.
3. BECAUSE looking to the material and information on record, undisputedly Shri Pratik Gupta (Prateek Omar), who was authorised to operate the bank account in question, had actually conducted all the transactions of deposits and withdrawals amounting to Rs. 26,58,74,399/-, and had admitted before the D.I. Wing and the Assessing Officer that he was providing accommodation entries and deposited the cash in the said bank account and had transferred the amount there-from to the account of M/s. PCS Traders, consequently the Id. "the authorities below "should have deleted the addition of Rs. 26,58,74,399/- by holding that neither deposit nor withdrawal belonged to the "appellant".
4. BECAUSE without prejudice to the grounds here-in-fore the appellant had discharged the onus that lied upon her by furnishing complete details of the depositor and the ultimate beneficiary/s, and in the absence of anything to the contrary found by the authorities below, no addition under section 68 could have legitimately been made/sustained in the hands of "appellant" even on protective basis.
5. BECAUSE the "the authorities below" has erred in law and on facts in not only sustaining the addition of Rs.1,45,495/- on account of commission income but in further enhancing it from Rs.6,52,128/- (as per Audited B. sheet) to Rs.7,97,623/-, estimated by the Assessing Officer) by applying his own estimate of 0.3% of cash deposited in the bank.
6. BECAUSE the authorities below have erred in making addition/enhancement by applying increased percentage on an arbitrary basis by mis-reading the information provided by the "appellant" and Shri Prateek Omar in the statement recorded before the D.I. Wing & the Assessing Officer.
7. BECAUSE the addition of Rs. 1,45,495/- in commission income by the Assessing Officer, have been made merely on presumptions and surmises on wrongful assumption of facts, consequently the same are not sustainable.
8. BECAUSE the order appealed against is contrary to the law, facts and principle of natural justice.
GROUNDS OF APPEAL FOR A.Y. 2012-13:
Because there existed no "material", which could provide a live link and nexus between the "formation of reason to believe and escapement of income" and view to the contrary as has been expressed by the Authorities below is erroneous as being inconsistent with the settled position of law.
2. Because the Authorities below has failed to appreciate and omitted to consider that; a. No notice U/s. 143(2), has been issued for verification of Return of income/letter dt.26.11.2015 filed, incompliance to notice dt.27.10.2015 issued U/s.148. b. Notice issued U/s.143 (2) dated 26-08-2016, have been issued for verification of Return of income filed on 29.09.2012, which is beyond the limitation period. e. The "reason recorded" (so called) cannot be said to have met the requirement of law as substance of recorded reason is based upon conjectures, surmises and of general nature not specific.
Because the assessment order dt.21.11.2016, is liable to be declared as null & void on the ground and the reason that same had been passed without issuing mandatory notice U/s.143(2). As notice U/s.143 (2), dt.26.08.2016 was issued for verification of return(original) filed on 29.09.2012, which is beyond the period of limitation.
4. BECAUSE the "appellant" was maintaining books of account, which were subject to Tax Audit U/s.44AB. The bank statement/pass book could not be construed to be an accounts book maintained by the assessee, provisions of section 68 of the "Act" were not applicable in the instant case, and consequently the addition of Rs.30,29,95,171/- made by the assessing officer, even on protective basis, was not sustainable and the same deserved to be deleted.
WITHOUT PREJUDICE TO THE AFORESAID
1. BECAUSE "the authorities below" has erred in law and on facts in sustaining the addition of Rs.30,29,95,171/- made under section 68 of the "Act" on protective basis, on account of unexplained cash deposit found in bank account no. 20763917010 in Allahabad Bank, owned by the "appellant", merely because she was the title owner of the said bank account.
2. BECAUSE looking to the material and information on record, "the authorities below "was not correct in observing that the "appellant" was indulging in illegal activities in money laundering through her bank account in connivance with her close relative Mr. Pratik Gupta and that the "appellant" had admitted to the activity of money laundering.
3. BECAUSE looking to the material and information on record, undisputedly Shri Pratik Gupta (Prateek Omar), who was authorised to operate the bank account in question, had actually conducted all the transactions of deposits and withdrawals amounting to Rs.30,29,95,171/-, and had admitted before the D.I. Wing and the Assessing Officer that he was providing accommodation entries and deposited the cash in the said bank account and had transferred the amount there-from to the account of M/s. PCS Traders, consequently the ld. "the authorities below "should have deleted the addition of Rs.30,29,95,171/- by holding that neither deposit nor withdrawal belonged to the "appellant".
BECAUSE without prejudice to the grounds here-in-fore the appellant had discharged the onus that lied upon her by furnishing complete details of the depositor and the ultimate beneficiary/s, and in the absence of anything to the contrary found by the authorities below, no addition under section 68 could have legitimately been made/sustained in the hands of "appellant" even on protective basis.
5. BECAUSE the "the authorities below "has erred in law and on facts in not only sustaining the addition of Rs.80,452/- on account of commission income but in further enhancing it from Rs.8,28,534/- (as per Audited B. sheet) to Rs.9,08,986/-, estimated by the Assessing Officer) by applying his own estimate of 0.3% of cash deposited in the bank.
6. BECAUSE the authorities below have erred in making addition/enhancement by applying increased percentage on an arbitrary basis by mis-reading the information provided by the "appellant" and Shri Prateek Omar in the statement recorded before the D.I. Wing & the Assessing Officer.
BECAUSE the addition of Rs. 80,452/- in commission income by the Assessing Officer, have been made merely on presumptions and surmises on wrongful assumption of facts, consequently the same are not sustainable.
8. BECAUSE the order appealed against is contrary to the law, facts and principle of natural justice.
The Ld. Authorized Representative for the assessee (Ld. A.R.) submitted that both the orders under appeal were passed ex-parte qua the assessee. It was submitted that the observation of the ld. CIT(A) that there was no compliance by the assessee before him was, however, incorrect. He drew our attention to affidavit of Shri Satya Prakash Bajpai in this regard and placed at pages 58 to 59 of the paper book, wherein it has been stated on oath that he had personally attended the first appellate proceedings in both the years under appeal. The Ld. A.R. also drew our attention to the paper book filed on behalf of the assessee and submitted that documents at Sl. Nos. 17 to 21 were filed before the ld. CIT(A). That Ld. A.R. prayed for restoration of appeals to the Assessing Officer (AO) so that the issues could be decided on merits.
The Ld. Sr. D.R. submitted that the AO had duly considered the submissions of the assessee and, therefore, the files should be restored to the Office of the ld. CIT(A).
7. Having heard both the parties and after having gone through the records, we agree with the submission of the ld. D.R. and restore both the appeals to the Office of the ld. CIT(A) with a direction to decide both the appeals on merits and thereafter pass a speaking order in accordance with law after giving a proper opportunity to the assessee. We also caution the assessee to fully comply with the directions of the ld. CIT(A) in the set- aside proceedings when called upon to do so, failing which, the ld. CIT(A) would be at complete liberty to pass the order in accordance with law, based on material available on record even if it is ex-parte qua the assessee.
In the result, both the appeals of the assessee are allowed for statistical purposes.
Order pronounced in the open Court on 24/03/2025.