Loading judgment…
Facts
The assessee deposited Rs. 55.01 lakhs in cash into bank accounts during AY 2013-14 and failed to file an Income Tax Return. The Assessing Officer reopened the assessment under Section 148 and issued notices, but the assessee remained non-compliant, leading to an assessment under Section 144/147 treating the deposits as unexplained income. The CIT(A) dismissed the assessee's first appeal, upholding the addition due to the failure to explain the sources of cash deposits with supporting documents.
Held
The Tribunal noted that the income computation was not determined on merits by the lower authorities. Considering the assessee's nature of business and recent submission of documents, the Tribunal set aside the CIT(A)'s order and remanded the case back to the AO. The AO is directed to pass a fresh order *de novo*, providing the assessee a full opportunity to explain the sources of cash deposits with documentary evidence, with an admonition for future compliance.
Key Issues
The key issues revolved around the validity of the assessment and first appellate order due to lack of merits-based consideration and failure to provide adequate opportunity to the assessee to explain cash deposits.
Sections Cited
253, 250, 144, 147, 148, 142(1), 246A, Rule 46A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, INDORE BENCH, INDORE
आदेश/ O R D E R
Per Paresh M Joshi, J.M.:
The assessee filed the present appeal under Section 253 of the Income Tax Act, 1961 (hereinafter referred to as the “Act” for sake of brevity) before this Tribunal as and by way of Second appeal under the Act. The assessee is aggrieved by the order bearing Number ITBA/NFAC/S/250/2024-25/11068759885(1) dated 18.08.2024 passed by Ld. CIT(A) u/s 250 of the Act which is hereinafter referred to as the “Impugned order”. The relevant
Page 1 of 10 Assessment Year is 2013-14 and the corresponding previous year period is from 01.04.2012 to 31.03.2013.
2. FACTUAL MATRIX 2.1 That as and by way of an assessment order u/s 144/147 of the Act the Ld. AO computed the total income of the assessee at Rs.55,01,000/-, which order is hereinafter referred to as the “impugned assessment order”. Before the “impugned assessment order” was passed notices) u/s 148, 142(1) were issued from time to time to the assessee but all remained non compliant by the assessee. The relevant details of such notice(s) are furnished as below in tabulated chart:-
S.No Date of issue Notice U/s Date of hearing Compliance date 1 24.01.2019 148 Within 30 days Non- compliance 2 21.06.2019 142(1) 26.06.2019 Non- compliance 3 01.11.2019 142(1) with 24.01.2019 Non- questionnaire compliance 4 09.12.2019 142(1) with 13.12.2019 Non- notice to compliance show cause 2.2 In the “impugned assessment order” it is recorded that the aforesaid notice(s) were issued by registered post for purpose
Page 2 of 10 of compliances by the assessee at his address. The assessee did not comply with any of the aforesaid notice(s) therefore a final notice dated 09.12.2019 (supra) was given as and by way of last opportunity for 13.12.2019 however even this last opportunity was not availed off by the assessee for compliances.
2.3 Basis material on record that the assessee had deposited with Bank of India Rs.32 lakh and with UBI Rs.23,01,000/- in cash aggregating to Rs.55,01,000/- the same was treated as unexplained income the sources of which were not disclosed.
2.4 That the assessee being aggrieved by the “impugned assessment order” prefers first appeal u/s 246A of the Act before Ld. CIT(A) who by the “impugned order” has dismissed the first appeal of the assessee on reasons and grounds specified therein. Few pertinent observation of Ld. CIT(A) in the “impugned order” are as follows:-
“6. This Remand Report was forwarded to the appellant and his rejoinder was called for on the reason that the appellant failed to provide any supporting documents other than self- serving affidavits. However, the appellant did not respond to Page 3 of 10 the notice issued. In the present case, the AO received AIR information that the appellant deposited cash of Rs 55,01,000/- and not filed any return of income. Hence, the assessment was reopened by issue of notice u/s 148 of the IT Act dated 24.01.2019. This notice was duly served on the appellant. However, there was no compliance to the notice issued. Later, the AO issued notices u/s 142(1) of the IT Act on 21.06.2019, 01.11.2019 and 09.12.2019. There was no response to the notices issued by the AO. Hence, the AO concluded that the cash deposited into the bank account was undisclosed income of the appellant for the AY 2013-14. This order was passed on 22.12.2019. The appellant received the order on 27.12.2019 and immediately filed the appeal. This shows that the appellant was very much aware of the assessment proceedings. This fact was even admitted in the statement of facts that "due to negligence and carelessness of the erstwhile Counsel, the appellant's case could not be represented."
At least, during the course of appeal proceedings, the appellant could have represented the case by explaining the sources of cash deposits. In the statement of facts, he stated that he was doing animal husbandry and milk production on the Govt. Land. However, source for the cash deposit has not been explained by the appellant in spite of availing sufficient opportunities. The appellant filed in the written submission that the cash deposit was belonging to various other relatives. This submission was objected by the AO that the appellant failed to respond to the notices issued and hence it cannot be admitted as per Rule 46A of the IT Rules 1962. When the Rejoinder called for, the appellant failed to give any reply. Hence, the addition made by the AO is upheld and the grounds taken are dismissed.
As a result, this appeal is dismissed.”
2.4 That the assessee being aggrieved by the “impugned order” has preferred the instant second appeal before this Tribunal and has raised following grounds in Form No.36 (which is a form of Page 4 of 10 appeal to this Tribunal) against the “impugned order” which are as under:-
“1. That the Ld. CIT (A) erred in law and facts of the case and Confirmed the reopening made by Assessing Officer, the assessment U/s 148 without considering the full facts and legal position. The reopening therefore is bad in law.
That the Ld. CIT (A) erred in law and facts of the case and confirmed the assessed total income at Rs. 5501000 as income being cash deposited in banks without considering the full facts of the case.
3. That the Ld. CIT (A) erred on facts of the case and confirmed the notice for Reopening of Assessment issued without considering the fact that Cash deposit in Bank Account was of all Family Members not of Assessee. The action therefore of Assessing Officer and confirmed by CIT (A) is wrong and illegal.
4. That the Ld. CIT (A) failed to consider the ground specifically raised for reasonable opportunity of hearing by Assessing Officer. 5. That the Ld. CIT (A) failed to allow opportunity to comply the demand report as no physical notice was issued through Assessing Officer which is a Basic Requirement.
That the appellant craves to leave, to add, to alter or to amend, to modify, to substitute, and/ or to delete all or any ground on or before hearing”.
Record of Hearing 3.1 The hearing in the matter took place before this Tribunal on 15.05.2025 when the Ld. AR for and on behalf of assessee appeared before this Tribunal and interalia contended that assessee is a small person in life. The assessee is engaged in the business of “broom” making besides animal husbandry. The Page 5 of 10 assessee in order to satisfy the Ld. CIT(A) on merits of the case had preferred an application under Rule 46A of the Income Tax Rules & to give justification for addition so made in the “impugned assessment order” but the said application too was rejected besides 1st appeal. The Ld. AR finally contended that there has to be meritorious disposal of appeal. Merits of the case unfortunately has not been considered even at 1st appellate stage.
Assessment must be done on merits and on real time basis. The Ld. DR for and on behalf of the Revenue has interalia contended that while it is true that assessee is a small time person in life and therefore the revenue has no serious objections if sources are explained properly for additions so made and for this purpose the “impugned order” may be set aside and matter be relegated back to the file of Ld. AO so that assessment of income of the assessee could be done on real time basis. The assessee must give plausible explanation with evidence in support of additions made. However small cost may be imposed. In rejoinder argument the Ld. AR contended that in so far as imposition of cost is considered he leaves it to this Tribunal to take appropriate decision as they deem fit. We also notice that the Ld. AR for and Page 6 of 10 on behalf of the assessee has placed on record of this Tribunal a paper book from pages 1 to 65 in support of second appeal. We also notice that on page 24 there is an application for additional evidence which was filed before Ld. CIT(A) in terms of Rule 46A of the Income Tax Rules. We find upon perusal of same that assessee had placed on record affidavit(s) of certain persons from Annexure “A” to “H” besides certificate of gram panchayat and identity proof of witnesses (Annexure I to J) therein. The Ld. AR basis his submissions made before CIT(A) (page 1-11 of PB) besides aforesaid documents like affidavits of certain persons with identity proof and bank statements of UBI & BOI desires fresh adjudication by Ld. AO on merits in his ultimate and final analysis and is willing to pay cost if imposed by this Tribunal as it thinks fit.
Observations,findings & conclusions.
4.1 We now have to adjudge and adjudicate the present appeal filed by the assessee on the basis of the records of the case and contentions canvassed before us during the course of hearing. In brief we have to decide the legality, validity and the proprietery of the “impugned order”.
Page 7 of 10 4.2 We have carefully perused the records of the case as presented to this tribunal by both Ld. AR and Ld. DR to determine the legality, validity of the “Impugned Order”.
4.3 We basis records of the case and after hearing and upon examining the contentions of both Ld. AR and Ld. DR are of the considered view that in so far as income of the assessee is concerned there is no determination of same on merits in both the orders of the lower authority. This Tribunal desires computation of correct income of the assessee on real time basis with sufficient and plausible explanation about sources of cash deposits made in to BOI & UBI accounts. Assessee must explain with help of documentary evidence the sources of cash deposit to enable the Ld.AO to compute income properly. We therefore set aside the “impugned order” and remand the case back to the file of Ld. AO to pass a fresh order after giving sufficient opportunity to assessee to present his case. Needless to state that the assessee must cooperate with the department and provide all information and documents which they desire for proper computation of assessee’s income.
Order 5.1 In the premises set out herein above, the impugned order is set aside and the matter is remanded to the file of Ld. AO for passing a fresh order on denovo basis. We refrain from imposing any cost but admonish the assessee that in future he must comply promptly all the notice(s) issued by the department within time specified therein, as that would be in the over all interest of tax administration.
5.2 In result appeal is allowed as and by way of remand on denovo basis back to Ld.AO.
5.3 Appeal of the assessee is allowed for statistical purpose.
Order pronounced in open court on 16.05.2025.