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Facts
The assessee filed a return declaring an income of Rs. 81,870/-. The case was selected for limited scrutiny, focusing on cash deposits. Several notices u/s 142(1) were issued, but the assessee failed to comply or provide necessary documentation. The Assessing Officer (AO) proceeded with a best judgment assessment under Section 144 of the Income Tax Act, making significant additions.
Held
The Tribunal noted the assessee's consistent non-compliance throughout the assessment and appellate stages. While acknowledging the grounds of appeal related to lack of opportunity, the Tribunal found that the assessee could not dictate terms to the AO. Ultimately, to meet the ends of justice, the Tribunal set aside the impugned order and remanded the matter back to the AO for a de novo assessment, granting the assessee one last opportunity.
Key Issues
Whether the AO erred in making additions without providing adequate opportunity to the assessee, especially when the case was selected for limited scrutiny and the assessee consistently failed to comply with notices.
Sections Cited
253, 143(2), 142(1), 144, 68, 115BBE, 246A
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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI BHAGIRATH MAL BIYANI & SHRI PARESH M JOSHI
आदेश / O R D E R
Per Paresh M Joshi, J.M.:
This is an appeal filed by the Assessee 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 second appeal. The assessee is aggrieved by order bearing Number ITBA/NFAC/S/ 250/2023-24/1060873597(1) dated 13.02.2024 of Ld. CIT(A), passed U/s 250 of the Act which is hereinafter referred to as the “impugned order”. The relevant Assessment Page 1 of 14 from 01.04.2016 to 31.03.2017.
FACTUAL MATRIX 2.1 That the assessee filed return of income electronically declaring total income of Rs.81,870/-.
2.2 That the case of the assessee was selected for scrutiny and that notice u/s 143(2) was issued on 16.08.2018. It was a case of limited scrutiny and the solitary issue identified for scrutiny examination was “cash deposited during the year”. (page 21 of PB).
2.3 That subsequently a notice u/s 142(1) was issued on 04.06.2019 in which the preliminary information and final accounts of the assessee were called for. In response to this notice, one Shri Bhupendra Shroff, CA attended the assessment proceedings and filed part reply which was placed on record.
2.4 That thereafter once again a notice u/s 142(1) was issued on 19.08.2019 in which Ld. AO called for some specific information and so also called upon the assessee to produce
Page 2 of 14 attend the proceedings nor any submission was filed.
2.5 That thereafter once again a notice u/s 142(1) was issued to the assessee on 06.12.2019 in which it was clearly and expressly stated that the assessee has not been making any compliance to the notices hence the assessee was called upon as to why the assessment should not be completed as per the provision of section 144 of the Act even then this notice was not complied by the assessee under these tiring facts and the circumstances of the case, the Ld. AO was left with no other option but to proceed u/s 144 of the Act.
2.6 That the assessee is engaged in the business of Gukta and PANMASALA trading under the name and style of M/s Prince Enterprises.
2.7 The Ld. AO assessed the total income of the assessee as under captionwise:-
(1) Unexplained unsecured loan u/s 68:
Page 3 of 14 report that the assessee had accepted loan of Rs.10,00,000/- from one Shri Vijay Tillani, and despite opportunity to establish identity, genuineness and creditworthiness no explanation was offered by the assessee nor any document in support of unsecured loan of Rs.10 lakhs were ever furnished accordingly the same were held as unexplained by the Ld. AO, as unexplained cash credit and added to the total income of the assessee r.w.s 115BBE of the Act.
(2) Unexplained Sundry Creditors:
That the balance sheet of the assesee showed and reflected outstanding creditors for the aggregate amount of Rs.6,68,100/- in the name of “Vishnu Pouch Packaging P.
Ltd.” (Rs.1,03,020/-) and “Vishnu Tobacco Product”
(Rs.5,65,080/-). Despite opportunity by Ld. AO to the assessee to furnish duly confirmed copy of his account- in the books of “Vishnu Pouch Packaging P. Ltd.” and ‘Vishnu
Tobacco Product” no such confirmation copy of his account
Page 4 of 14 despite opportunity leading to unexplanation. The Ld. AO was therefore, left with no other option but to add aggregate amount of Rs.6,68,100/- to the total income of the assessee by treating the same as unexplained.
(3) Undisclosed Cash Credited in Capital Account-
The Ld. AO basis capital account of the assessee in his propitiatory concern noticed that the ‘capital account’ was credited by Rs.17,20,000/- on account of “Cash declared
(under PMGKY 2016). It was further observed that this account was debited by Rs.8,58,280/- under “It paid under IDS(PMGKY 2016)” however no fixed deposit was made under this scheme, was appearing in balance sheet of the assessee. That the assessee failed to file the evidence i.e.
FDR under the “Income declaration scheme” and by considering the fact that the assessee himself admitted his undisclosed cash to the tax of Rs.17,20,000/- declared under the scheme without furnishing any better and material particulars, the Ld. AO despite opportunity Page 5 of 14 unexplained & added Rs.17,20,000/- to the income of the assessee. (4) Unexplained Cash deposits during demonitization Period:-
There was deposit of Rs.52,97,500/- in specified bank notes (total cash aggregating to Rs.77,07,500/-. No explanation offered despite opportunity since assessee had declared Rs.17,20,000/- under “income declaration scheme” on account of unexplained cash balance cash of Rs.35,77,500/- was considered unexplained and added to the income of the assessee (Rs.52,97,500-Rs.17,20,000).
2.8 The Ld. AO in his assessment order had given number of opportunity to the assessee to given explanation but assessee offered no explanation and therefore, Ld. AO in exercise of power conferred upon him by virtue of section 144 of the Act carried out best judgment assessment and computed total income of the assessee as Rs.70,47,470/- u/s 68 r.w.s 115BBE of the Act. That the assessment order of Ld. AO bears number :
Page 6 of 14 11/12/2019 which is hereinafter referred to as the “Impugned Assessment Order”.
2.9 That the assessee being aggrieved by the “Impugned Assessment Order” prefers first Appeal u/s 246A of the Act before Ld. CIT(A) and the Ld. CIT(A) by the “Impugned Order” has dimissed the appeal of the assessee on the grounds specified therein.
2.10 That the assessee being aggrieved by the “Impugned Order” has filed the present appeal before us on the following grounds which are specified in form no.36 which are as under including additional grounds:-
“1. That, the learned CIT(A) as well as the Id. AO grossly erred, both on facts and in law, in passing the ex-parte orders without giving proper and effective opportunity of being heard to the appellant.
2. That, without prejudice to the above, the learned CIT(A) grossly erred, both on facts and in law, in confirming the action of the AO for determining the income of the appellant at Rs.70,47,470/- as against the returned income of Rs.81,870/- for the relevant assessment year by framing an Assessment Order under s. 144 of the Income-Tax Act, 1961, without affording proper opportunity of being heard to the appellant, which is quite illegal, bad-in-law and void-ab-initio.
3. That, without prejudice to the above, the learned CIT(A) grossly erred, both on facts and in law, in confirming the action of the Id. AO for making an addition of Rs.10,00,000/-, by invoking the provisions
Page 7 of 14 A.Y. 2017-18 of s. 68 of the Act, on the allegation of unexplained unsecured loans appearing in the audited financial statements of the appellant.
4. That, without prejudice to the above, the learned CIT(A) grossly erred, both on facts and in law, in confirming the action of the Id. AO for making an addition of Rs.6,68,100/- in the appellant's income, by invoking the provisions of s. 68 of the Act, on the allegation of unexplained sundry creditors appearing in the audited financial statements of the appellant.
5. That, without prejudice to the above, the learned CIT(A) grossly erred, both on facts and in law, in confirming the action of the Id. AO for making an addition of Rs.17,20,000/- in the appellant's income, by invoking the provisions of s. 68 of the Act, on the allegation of unexplained cash introduced in the Capital Account.
That, without prejudice to the above, the learned CIT(A) grossly erred, both on facts and in law, in confirming the action of the Id. AO for making an addition of Rs.35,77,500/- in the appellant's income, by invoking the provisions of s. 68 of the Act, on the allegation of unexplained cash deposits in bank account during the demonetization period.
That, the appellant further craves leave to add, alter or amend the foregoing ground of appeal as and when considered necessary.” Additonal Grounds: 1. "That, the learned CIT(A) grossly erred in confirming the action of the learned AO in converting the limited scrutiny case of the appellant, impliedly, into complete scrutiny without obtaining the necessary approval from the concerning Pr. CIT and without intimating such fact to the appellant." 2(a). "That, the learned CIT(A) grossly erred in confirming the addition of Rs.10,00,000/- made by the AO in the appellant's income on the allegation of unexplained unsecured loans by invoking the provisions of s. 68 of the Act without properly considering and appreciating the material fact that the case of the appellant was selected for scrutiny for limited purpose of verifying the cash deposits in bank accounts and without first converting the case into complete scrutiny, no addition could have been made in the hands of the appellant on any other ground." 2(b). "That, the learned CIT(A) grossly erred in confirming the addition of Rs.6,68,100/- made by the AO in the appellant's income on the allegation of unexplained sundry creditors by invoking the provisions
Page 8 of 14 A.Y. 2017-18 of s. 68 of the Act without properly considering and appreciating the material fact that the case of the appellant was selected for scrutiny for limited purpose of verifying the cash deposits in bank accounts and without first converting the case into complete scrutiny, no addition could have been made in the hands of the appellant on any other ground." 2(c). "That, the learned CIT(A) grossly erred in confirming the addition of Rs.17,20,000/- måde by the AO in the appellant's income on the allegation of unexplained cash introduced in proprietor's capital account by invoking the provisions of s. 68 of the Act without properly considering and appreciating the material fact that the case of the appellant was selected for scrutiny for limited purpose of verifying the cash deposits in bank accounts and without first converting the case into complete scrutiny, no addition could have been made in the hands of the appellant on any other ground."
Record of Hearing 3.1 That the hearing in the matter took place before this Tribunal on 24.03.2025 when Ld. AR for and on behalf of the assessee appeared before us and interalia bought to our notice application dated 3.01.2025 filed in terms and Rule 11 of the Income tax Tribunal Rules 1963 to raise additional grounds & also brought to our attention yet another application for being additional evidence in terms of Rule 29 r.w.r. 18(4) of the Rules.
We then heard patiently Ld. AR on various issues which he canvassed basis above two applications. Thereafter, we heard Ld. DR for and on behalf of the revenue who interalia opposed two applications (supra) and contended that since orders of lower
Page 9 of 14 application as and by way additional grounds and additional evidence should be entertained by this Tribunal. Further all required opportunities were given to the assessee. The sheet anchor of argument of Ld. DR was that Impugned assessment order of Ld. AO is well within the four corners of law. The Ld.
AO has correctly invoked section 144 of the Act which speaks of best judgment assessment. The Ld. AR has failed to bring out any concrete material that Ld. AO erroneously exercised Power u/s 144. Further on 1st Appeal the Ld. CIT(A) in the impugned order has rightly rejected the 1st Appeal of the assessee by giving a detailed explanation on page 12 of his Impugned order. The Ld. CIT(A) has rightly observed as under:_
“8. Adjudication and decision: On due consideration of the statement of facts and grounds of appeal with the observations of the AO in the assessment order, this order is passed. All the grounds relate to the lack of opportunity to present the case and the AO was in a hurry to pass an exparte assessment even though the time barring date permitted sufficient time to the AO to complete the assessment. Form 35 filed did not show any additional evidence to support the grounds taken assailing the additions made.
Page 10 of 14 A.Y. 2017-18 Under these circumstances, the grounds relating to the lack of opportunity of being heard is decided against the appellant for the reasons set out in the assessment order as under: The assessee filed his return of income electronically declaring total income of Rs. 81,870/-. The case was selected for scrutiny, hence notice u/s 143(2) was issued on 16.08.2018. Subsequently, notice u/s 142(1) was issued on 04.06.2019 in which preliminary information and final accounts of the assessee were called for. In response to this notice, Shri Bhupendra Shroff, CA attended and filed part reply which is placed on record. Thereafter, notice u/s 142(1) was issued on 19.08.2019 in which some specific information were called for and also asked to produce complete set of books of accounts. However, the assessee did not attend the proceedings, nor any submission was filed in response to this notice. Again, notice u/s 142(1) was issued on 06.12.2019, in which the assessee was clearly stated that he had not been making compliance to the notices, hence please explain as to why assessment should not be completed ex-parte as per the provisions of section 144 of the Income-tax Act. Even after this, the assessee did not make any compliance. In the light of the above, the assessment of the assessee is being completed u/s 144 of the Income-tax Act on merit of the case on the basis of information available on record. Decision: These grounds are dismissed for the appellant cannot dictate terms to the AO as to when he should complete the assessment and why he should not wait until the time barring date. On merits, the appellant did not raise any grounds and did not file any evidence towards the unsecured loans, sundry creditors, Cash Declared under PMGKY 2016 and Cash deposited during the demonetization period. Therefore, no interference is called for on the quantum addition made. In the result, the appeal is dismissed.”
3.2 Ld. AR then coming to the merits of the case inter alia contended that in case of limited scrutiny it is not permissible for Page 11 of 14 case Ld. AO ought to have restricted himself only to cash deposit made during demonetization period and ought not to have decided other issues/additions. Per contra Ld. DR for Revenue brought to our attention that assessment was for scrutiny under caption “cash deposit during the year” meaning thereby that all the cash deposit for A.Y.2017-18 and entire computation of income for the year under consideration falls under this broad caption. The Ld. AR is speaking of cash deposit made during demonetization only which fact is wrong and is not borne out of records. Records of the case speaks of all gamuts of cash transactions during the year under consideration including as made out by Ld. AO in his Impugned assessment order. At the end of hearing after much debates there was near unanimity that the matter be remanded back to Ld. AO to re-look the entire gamut of case afresh denovo basis.
Observations & findings & conclusions
Page 12 of 14 the “impugned order” basis records of the case and the rival submission canvassed before us.
4.2 We have carefully perused the records of the case and have heard rival submissions minutely.
4.3 We are of the considered view that the assessee is making out a totally new case before us which was not in existence either at the original stage nor at 1st Appellate Stage. The assessee is giving legal cover to his case by raising legal contentions when admittedly both at original stage as well as at First Appellate Stage he has remained totally non-compliant. Needless to state law helps those who are diligent and vigilant and not negligent.
Law does not help those who sleep over on their rights. The assessee admittedly was in slumber mode with regard to his rights.
4.4 In the premises, we in order to meet ends of justice give one last opportunity to assessee to present his case before Ld. AO and direct assessee to cooperate with the department. Assessee shall not seek any adjournment. Hence the impugned order is set
Page 13 of 14 fresh order on denovo basis as and by way of exception due to peculiar facts and circumstances of present case.
Order 5.1 In result-Impugned order is set aside as and by way of remand with directions as aforesaid.
5.2. In result, appeal is allowed for statistical purpose.
Order pronounced in open court on 26.03.2025.