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Facts
The assessee's case was reopened due to cash withdrawals, but the AO subsequently added Rs.1,10,24,177 under Section 68/69A, alleging failure to establish the source of credit in the Federal Bank account. The assessee contended that the withdrawals were from existing credits, and the CIT(A) affirmed the AO's order.
Held
The Tribunal found that the AO granted insufficient time for the assessee to explain the source of credits and that notices issued by CIT(A) via ITBA Portal were not valid. It remitted the matter back to the AO for fresh examination on merits, instructing to provide a meaningful opportunity of hearing and noting that no addition is warranted if credits sufficiently cover withdrawals.
Key Issues
Whether the AO provided adequate opportunity to explain the source of credits, the validity of notice service by CIT(A), and the merits of the addition under Section 68/69A when withdrawals were allegedly from existing bank credits.
Sections Cited
148A(d), 68, 69A, 148, 148A, 69
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, COCHIN BENCH, COCHIN
Before: Shri Inturi Rama Rao & Shri Prakash Chand Yadav
Asst.Year 2018-2019 Discovery The Assessment Unit Shreeshylam v. Income Tax Department Kuthuparamba, Thalassery Kannur – 670 702 PAN : AAMFD7291C. (Appellant) (Respondent) Appellant by : Sri.R.Krishnan, CA Respondent by : Smt.Leena Lal, Senior AR Date of Pronouncement : 30.05.2025 Date of Hearing : 27.05.2025. O R D E R
Per Prakash Chand Yadav, JM :
The present appeal of the assessee is arising from the order of the National Faceless Appeal Centre / learned Commissioner of Income-tax (Appeals [“CIT(A)” for short] dated 27th June, 2024, having DIN & Order No.ITBA/NFAC/S/250/ 2024-25/1066154057(1) and relates to the assessment year 2018-2019.
The assessee has raised eight grounds of appeal, out of which ground Nos. 1 to 5 are related to the invocation of the provisions of sec.148A(d) of the Income-tax Act and in Ground Nos.6, 7 and 8, the assessee has challenged the merits of the case.
. Discovery.
At the outset, it is the case of the Revenue that the assessee failed to establish the source of the amount of Rs.1,10,24,177. It is pertinent to note here that initially the case of the assessee was reopened on the ground that there was cash withdrawals of Rs.1,08,20,000. When this question was raised with the assessee, the assessee explained that the that the withdrawals were out of the credits in the Federal Bank account of Rs.1,10,24,177. The Assessing Officer also accepted that there was credit of Rs.1,10,24,177 in the Federal Bank account of the assessee and the cash withdrawals are made from this account only. However, the AO added the entire credits u/s.68 / 69A of the Act, for the reason that nobody appeared from the side of the assessee to explain the source of the credit. The CIT(A) affirmed the order of the AO.
Aggrieved with the order of the CIT(A), the assessee has come up in appeal before the CIT(A). At the outset, the learned Counsel for the assessee argued that when withdrawals were admittedly made from the credits available in the Federal Bank, then no addition is warranted in this case.
The learned DR relied upon the orders of the authorities below.
After considering the rival submissions, we observe that in this case effective hearing with respect to the explanation of the source of credit was commenced on 15th January, 2024 and the final assessment order has been passed on 19th January, 2024, which means within five days the AO has passed the order. In our view, the time granted by the AO was . Discovery. not enough for explaining the source of the credits. Similarly, the CIT(A) has also issued notices via ITBA Portal, which is not a valid service of notice. Since the assessee has not filed the return of income for the impugned assessment year, and the only return was filed in pursuance of notice u/s.148 of the Act, we do not find any merits in the objections of the assessee with respect to the jurisdiction of the AO u/s.148A of the Act. Therefore, in the interest of justice, we remit the matter back to the file of the AO for examining afresh vis-à-vis merits of the addition, in accordance with law. Before parting we would like to observe that in case the credits were sufficient enough to meet the withdrawals then no addition is called for under section 69 of the Act. Needless to say, the AO shall afford meaningful opportunity of being heard to the assessee.
In the result, the appeal filed by the assessee is allowed for statistical purposes. Order pronounced on this 30th day of May, 2025.