SH. GAURANG AGARWAL,JAIPUR vs. ITO, WARD-3(3), JAIPUR, JAIPUR

fu/kZkj.k o"kZ@Assessment Years : 2017-18 cuke Sh. Gaurang Agarwal The ITO, Plot No. 194, Chelon Ka Rasta Vs. Ward-3(3), Jaleb Chowk, Tripolia Bazaar, Jaipur. Jaipur. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AOXPA0971P vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Shri P. C. Parwal, C.A. (Thr. V.C) jktLo dh vksj ls@ Revenue by : Shri Gautam Singh Choudhary (JCIT-VH) lquokbZ dh rkjh[k@ Date of Hearing : 30/01/2025 mn?kks"k.kk dh rkjh[k@Date of Pronouncement :18/02/2025 vkns'k@ ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM This appeal is filed by the assessee aggrieved from the order of the National Faceless Appeal Centre, Delhi [for short “CIT(A)/NFAC”] dated 14.10.2024 for the assessment year 2017- 18, which in turn arise from the order dated 09.10.2019 passed under section 144 of the Income Tax Act,1961 [ for short “Act” ] by the ITO, Ward-3(3), Jaipur [ for short AO].

“1. The Ld. CIT(A), NFAC has erred on facts and in law in not providing adequate opportunity of hearing before deciding the appeal in as much as 3 notices issued on 04.06.2024, 14.06.2024 and 10.08.2024 could not be responded as these notices did not came to the notice of assessee.

2. The Ld. CIT(A), NFAC has erred on facts and in law in dismissing the appeal by holding that assessee has failed to prove the source of cash deposit of Rs. 19,30,000/- in the bank account.

3. The assessee craves to amend, alter and modify any of the grounds of appeal

4. The appropriate cost be awarded to the assessee.”

S. No. Name of Bank Branch Account No. Cash deposited 1. HDFC Bank Ashok Marg, 5010008305878 3,26,000 Jaipur 2. Kotak Mahindra Bank Sardar Patel 7511791410 9,90,000 Marg, Jaipur. Total 13,16,000 During assessment proceeding the assessee was asked to furnish the source of cash deposits in the bank account of HDFC Bank maintained with Ashok Marg, C-Scheme, Jaipur and Kotak Mahindra Bank, Sardar Patel Marg, Jaipur total amounting to Rs. 13,16,000/- But assessee has failed to furnish the requisite details/documents. In these circumstances a show cause notice was issued to the assessee on 06.08.2019.

3.1 On the given date neither any written submission furnished on ITBA nor furnished any documentary evidence of source of the cash deposits during the demonetization period. This shows that the assessee is not interested to furnish the source of cash deposits and explanation of query letter issued. Therefore, ld. AO left with no option left but to complete the assessment on the basis of material available on record.

3.2 Meanwhile a notice u/s 133(6) was issued to the Branch Manager HDFC Bank Ashok Marg, C-Scheme, Jaipur and Branch Manager Kotak Mahindra Bank, Sardar Patel Marg, Jaipur for providing the bank statement for the F.Y. 2016-17. The Branch Manager has provided the same. On perusal of Both Bank statement, it was noticed that assessee has deposited the following cash during 01.04.2016 to 31.03.2017.

Particular Date HDFC Bank, Date Kotak Mahindra A/c No. Bank A/c No. 5010008305878 7511791410 Cash Deposit 29.04.2019 10,000 11.11.2016 5,00,000 Cash Deposit 19.05.2016 5,00,000 18.11.2016 4,90,000 Cash Deposit 22.06.2016 50,000 Cash Deposit 08.09.2016 50,000 Cash Deposit 25.10.2016 4,000 Cash Deposit 28.12.2016 3,26,000 Total 9,40,000 9,90,000 On perusal of bank accounts as well as information available on ITBA, the assessee has deposited cash during the financial year 2016-17 amounting to Rs. 9,40,000/- in the bank account no. 50100083058783 of HDFC Bank maintained with Ashok Marg, C- Scheme, Jaipur and amounting to Rs. 9,90,000/- cash deposits in the bank account no. 7511791410 of Kotak Mahindra Bank, Sardar Patel Marg, Jaipur. In this regard, the notices and show cause were issued to the assessee to furnish the source of these cash deposits but assessee has not made any compliance.

3.3 Considering the non compliance and the facts stated here in above the cash deposited in the bank accounts during the year under consideration amounting to Rs. 19,30,000/- (9,40,000 + 990000) was treated as unexplained cash deposits earned from undisclosed sources and added to the total income of the assessee on account of undisclosed income u/s 69A of the Act and tax has been charged as per provisions of section 115BBE of the Act as substituted by the Taxation Laws (Second Amendment) Act, 2016 which is applicable from 01-04-2017. As per this section, where the total income includes any income referred to in section 69A of the IT Act, the income tax payable shall be charged 60% plus surcharge @ 25% of such tax. The penalty proceedings u/s 271AAC of the IT Act has been initiated separately on this issue.

“7. Decision:

(1) As per records appellant was issued hearing notices on05/01/2021, 22/03/2024, 15/05/2024, 27/05/2024, 04/06/2024, 14/06/2024 and 10/08/2024 requesting to submit details supporting his contention in the grounds of appeal. (ii) Thus, there is an abject failure at the end of the appellant to submit relevant evidences in support of his grounds of appeal, and also, submit relevant evidences to controvert the findings and conclusions of AO in the assessment order. It is a settled jurisprudence that mere pleadings are not evidence. It is the duty of the appellant to substantiate the grounds of appeal. As such the appeal is being dismissed. (iii) On merits, the assessment order mentions that the assessee, an employee of m/S Bharati Axa Life Insurance and receiving salary was found to have deposited cash of Rs. 1316000/- in his two bank account nos. viz. HDFC, Ashok Marg, Jaipur a/c no. ending 5878 (Rs. 326000/-) and Kotak Mahindra, Sardar Patel Marg, Jaipur ( 990000/-). The assessee did not respond to the notices of the department. The AO made enquiries with both banks and found that in HDFC bank account, during FY 2016-17 the assessee has deposited an amount of Rs. 940000/- and in Kotak Mahindra an amount of Rs 990000/-. The AO thereafter show caused the assessee to explain the source of cash deposits. Due to non response on the side of the assessee, the AO made additions u/s 69A r.w.s 115BBE of the IT Act of the sum of Rs. 1930000/-. Demand notice of Rs. 2062267/- was also issued to the assessee. (iv) Before me the assessee filed appeal on 24/12/2019 and prayed for condonation of delay. In his condonation the assessee cited personal issues, illiteracy in viewing online proceedings and in not obtaining proper advice in the matter as the cause of delay in filing the appeal. The delay has been condoned considering the submissions of the assessee. (v) However, despite multiple hearing notices from the year 2021 onwards the assessee has failed to respond properly. Though adjournment has been sought in response to few hearing notices, the assessee has not been able to submit necessary details to substantiate his grounds of appeal or to controvert the opinion of assessing officer holding the cash deposits as unexplained money of the appellant.

(vi) The provisions of Section 69A are amongst the deeming provisions of the Act from S. 68 to S. 69D. The jurisprudence of S. 68 is more or less equally applicable to section 69A. The first onus is on the AO to 'find any credits which in his opinion is an unexplained credit. When the AO raises a query to the assessee, the onus to explain 'nature and source' of such credit shifts on the assessee. It is a settled jurisprudence that the appellant has to discharge the onus of satisfactorily explaining the identity of the creditors, creditworthiness of the creditors and genuineness of the transactions The Act provides that in the absence of satisfactory explanation by the assessee, the AO is entitled to form an opinion that such unexplained credits are deemed income of the assessee and thereafter consider the same as taxable income of the assessee during the year. (vii) In the case of CIT Vs P. Mohankala (2007) 161 Taxman 169 (SC), Hon'ble Supreme Court has held that such opinion of the Assessing Officer is evidence against the assessee'. The relevant extract from the decision is as follows: "The Assessing Officer found that the gifts were not real in nature. Various surrounding circumstances had been relied upon by the Assessing Officer to reject the explanation offered by the Assessees. The Commissioner (Appeals) confirmed the findings and conclusion drawn by the Assessing Officer. The Tribunal concurred with the findings of fact. The findings were based on the maternal available on record and not on any conjectures and surmises. They were not imaginary as sought to be contended. (Para 221) The findings of fact arrived at by the authorities below were based on proper appreciation of the facts, the material available on record and surrounding circumstances. The doubtful nature of the transaction and the manner in which the sums were found credited in the books of account maintained by the Assessees had been duly taken into consideration by the authorities below. The transactions though apparent were held to be not real one. May be the money came by way of bank cheques and paid through the process of banking transaction but that itself is of no consequence. [Para 23] It is true that even after rejecting the explanation given by the Assessees, if found unacceptable, the crucial aspect, whether on the facts and circumstances of the case it should be inferred that the sums credited in the books of the Assessees constituted income of the previous year, must receive the consideration of the authorities provided that the Assessees rebut the evidence and the inference drawn to reject the explanation offered as unsatisfactory. Section 68 itself provides that where any sum is found credited in the books of the Assessees for any previous year, the same may be charged to income tax as the income of the Assessees of the previous year, if the explanation offered by the Assessees about the nature and source of such sums found credited in the books of the Assessees is in the opinion of the Assessing Officer not satisfactory. Such opinion found itself constitutes prima facie evidence against the Assessees, viz., the receipt of money, and if the Assessees fail to rebut the said evidence, the same can be used against the Assessees by holding that it was a receipt of an income nature. In the instant case, the authorities concurrently found the explanation offered by the Assessees unacceptable. The authorities upheld the opinion formed by the Assessing Officer that the explanation offered was not satisfactory. The Assessees did not take the plea that even if the explanation was not acceptable, the material and attending circumstances available on record did not justify the sum found credited in the books to be treated as a receipt of an income nature. The burden in this regard was on the Assessees. No such attempt had been made before any authority [Para 21] (viii) It can be seen from the above decision that Hon'ble Supreme Court has attached sufficient weightage to the opinion of Ld. Assessing Officer Such opinion of Assessing Officer carries evidentiary weight before Ld. CIT(A). Ld. ITAT, Hon'ble HC and even Hon'ble SC. In the instant case the assessee has not even attempted to submit necessary details before the AO. Even in the appellate proceedings before the undersigned the appellant has made no effort to provide books of accounts or other evidences to support his ground of appeal or to controvert the findings of AO, and/or the opinion of the AO as per which the AO has held that the deposits in the bank account of the assessee stand unexplained within the meaning of Section 69A of the IT Act. (ix) In a recent decision on interpretation of Section 68. Hon'ble Supreme Court has approved the interpretation of Hon’ble Allahabad High Court and held that even if source of credit is proved but the nature of credit is not proved, provisions of Section 68 are applicable and AO is justified in making additions. This has been held in the case of Mrs. Rupal Jain Vs CIT (2023) 152 taxmann.com 345 (Allahabad), SLP dismissed in (2023) 152 taxmann.com 346 (SC)

The head note of the judgement is as follows: "Section 68 of the Income-tax Act, 1961-Cash credit (Bank deposit) – High Court by impugned order held that where assessee though had disclosed source of deposit but could not establish nature thereof, three conditions required to be proved by assessee as per section 68 could not be proved and thus, such deposit was rightly treated as unexplained credit under section 68-Whether SLP was to be dismissed against impugned order of High Court Held, yes [Para 2]" [In favour of revenue] (x) In the instant case, the abject failure of the appellant in discharging the onus cast upon it by the legislature is evident. As such, I am inclined to accept the opinion of Ld. AO that the unexplained cash deposits in the bank account of the assessee are required to be added under the deeming provisions of the Income Tax Act, under Section 69A, and special rates of taxation u/s 115BBE is consequently applicable. The addition of Rs. 1930000/- is upheld. The appeal of the assessee is dismissed. The ground wise adjudication is as follows: 7.1 Ground No. 1 of appeal:- "Under the facts and the circumstances of the case and in law, the order dated 09.10.2019 passed by the Ld AO under section 144 of the Income Tax Act, 1961, by making addition of Rs 19,30,000/- is perverse, arbitrary, without jurisdiction and therefore bad in law." Decision on Ground No. 1: -The appellant has not been able to show as to under which facts and circumstances passing of order u/s 144 by the AO in making addition of Rs. 1930000/- is perverse or arbitrary or without jurisdiction or bad in law. Detailed discussion has been made in this regard in para 7 in this regard. în consideration of the discussions the contentions of the appellant are rejected being devoid of merit and the ground of appeal is dismissed. 7.2 Ground No. 2 of appeal:-"Under the facts and the circumstances of the case and in law, the Ld. AO has erred in making additions of Rs 19,30,000/- to the total income of the Appellant as unexplained cash deposit." Decision on Ground No. 2: The appellant has not been able to show as to under which facts and circumstances the order of AO in making addition of Rs. 1930000 is erroneous Detailed discussion has been made in this regard in para 7 in this regard in consideration of the discussions the contentions of the appellant are rejected being devoid of merit and the ground of appeal is dismissed. 7.3 Ground No. 3 of appeal:-"Under the facts and the circumstances of the case and in law, the Ld. AO has erred in levying interest u/s 234A, 234B and 234C of the Act." Decision on Ground No. 3: -Levy of interest u/s 234A, 234B and 234C is a compulsory levy as held by Hon. Supreme Court Constitution Bench in Anjum MH Ghaswala (2001) 252 ITR

1. (SC). As such there is no merit in the contention of the appellant which are rejected. The ground of appeal is dismissed. 7.4 Ground No. 4 of appeal:-"The Appellant craves leave to add, amend and modify all or any ground of appeal on or before the date of hearing." Decision on Ground No. 4: This ground, being general in nature, does not require adjudication.

8. For statistical purpose, the appeal of the appellant is to be treated as Dismissed.”

5. As is evident that the ld. CIT(A) has dismissed the appeal of the assessee. The ld. AR of the assessee submitted that the assessee has complied the four notices issued by ld. CIT(A) out of seven. The ld. AR of the assessee prayed that the assessee being small taxpayer and working as salaried employee in private sector and not aware about the technical compliance and thereby submitted that the bench may decide his mercy petition allowing him one more chance before the ld. AO to support his case on merits of the dispute.

DR submitted that seven opportunities were sufficient after filing the appeal by the assessee. He should be vigilant and cannot remain dependent merely on the counsel. Based on these arguments ld. DR relied upon the orders of the lower authority but at the same did not object to the prayer of the ld. AR of the assessee.

The bench noted that Principles of natural justice are soul of an administration of justice and need to be adhered to in order to make the order as a just and fair order. We are also of the view that lis between the parties has to be decided on merits so that nobody’s rights could be scuttled down without providing opportunity of being heard to the assessee. Thus, the bench noted that considering the overall facts of the case the assessee given a chance to represent their case before the ld. AO as the order passed in both proceedings are ex-parte and ld. AR of the Considering that peculiar aspect of the matter we deem it fit to remand the matter to the file of the ld. AO who will consider the factual aspect of the matter as raised by the assessee after due verification of the facts and charge the correct income in hands of the assessee if so to be taxed in accordance with law after affording due opportunity to the assessee. However, the assessee will not seek any adjournment on frivolous ground and remain cooperative during proceedings before the ld. AO.

In the result, the appeal filed by the assessee is allowed for statistical purposes.

Order pronounced in the open Court on 18/02/2025.