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Facts
The assessee firm, despite not filing an Income Tax Return for AY 2017-18, had high-value cash deposits of Rs. 3,35,25,792/- in its bank account. The Assessing Officer treated these as unexplained money under Section 69A and passed an assessment under Section 144, which was upheld by the CIT(A). The assessee argued that the firm never commenced business and the transactions belonged to an individual partner due to a PAN tagging error by the bank.
Held
Recognizing the assessee's inability to properly represent its case before lower authorities and the contention of incorrect PAN tagging, the Tribunal decided to remit the entire issue to the Assessing Officer for a fresh de-novo consideration. This allows the assessee another opportunity to substantiate its claims and cooperate with the proceedings in accordance with law.
Key Issues
Whether cash deposits in a firm's bank account, claimed by an individual partner due to PAN tagging error, constitute unexplained money under Section 69A, and if sufficient opportunity was given to the assessee.
Sections Cited
250, 69A, 115BBE, 142(1), 144
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, COCHINBENCH:COCHIN
Before: SHRI INTURI RAMA RAO & SHRI KESHAV DUBEY
Appellant by : Shri R. Krishnan, A.R. Respondent by : Shri Sanjit Kumar Das, D.R. Date of Hearing : 06.01.2025 Date of Pronouncement : 28.01.2025 O R D E R PERKESHAV DUBEY, JUDICIAL MEMBER: This appeal at the instance of the assessee is directed against the order of ld. CIT(A)/NFAC dated 19.6.2023vide DIN & Order No. ITBA/NFAC/S/250/2023-24/1053793992(1) for the Assessment Year (in short “AY”) 2017-18 passed u/s 250 of the Income Tax Act, 1961 (in short “The Act”).
The assessee has raised following grounds of appeal:
ITANo. 578/Coch/2023 Quadisiyya Hajj Cell, Kollam Page 2 of 6
Brief facts of the case are that although the assessee firm had entered into a high value financial transaction during the financial year 2016-17 but it had not filed any income tax return for the assessment year 2017-18. Accordingly, notice u/s 142(1) of the Income Tax Act, 1961 (in short “The Act”) issued requiring the assessee firm to furnish return of income. The assessee had not ITANo. 578/Coch/2023 Quadisiyya Hajj Cell, Kollam Page 3 of 6 responded to said notice and accordingly the AO has taken up for scrutiny and show cause u/s 144 r.w.s. 142(1) of the Act was issued requiring to explain and to show cause in writing as to why the scrutiny assessment should not be finalized u/s 144 of the Act and to explain the show cause in writing as to why the cash deposited in bank accounts during the year should not be treated as unexplained income. During the course of assessment proceedings, the assessee has stated that the nature and source of various cash amounts deposited in the bank accounts from 1.4.2016 to 31.3.2017 including the cash deposited during the demonetization period were related to the service of providing arrangements for Haj pilgrims. However, as the assessee has not submitted books of accounts of the partnership firm and also not explained the source of all amounts credited in the bank account by cash and other credits, the entire amount deposited by cash and by other credits during the financial year 2016-17 amounting to Rs.3,35,25,792/- was treated as unexplained money from undisclosed sources of the partnership firm as provided in section 69A of the Act.
3.1 Aggrieved by the assessment completed u/s 144 of the Act, the assessee has preferred an appeal before ld. CIT(A).
3.2 The ld. CIT(A) also dismissed the appeal on the ground that assessee has not furnished explanation/evidences in support of grounds of appeal inspite of several opportunities provided to them. As the assessee has not furnished any explanation for the cash deposited in the bank accounts amounting to Rs.3,35,25,792/-, the ld. CIT(A) concluded that the assessee failed to discharge the onus and therefore, he did not find any reason to interfere with the findings/observation of the AO made in the assessment order and accordingly addition of Rs.3,35,25,792/- made by AO was ITANo. 578/Coch/2023 Quadisiyya Hajj Cell, Kollam Page 4 of 6 confirmed. Aggrieved by the order of ld. CIT(A)/NFAC, the assessee has filed the present appeal before us.
3.3 Before us, ld. A.R. of the assessee submitted that assessee could neither represent their case before AO nor before the ld. CIT(A). The ld. A.R. submitted that the assessee is a partnership firm that was constituted with an intention of carrying on business facilitating pilgrimage to Mecca (Haj & Umrah). PAN was also applied and was also allotted in the name of partnership firm. However, the firm never commenced its business. The assessee firm was actually constituted to take over the business carried on by the individual Muhammed Unju when the government changing its policy of allowing pilgrimage services by persons other than individuals or proprietors. However, the change did not materialized and therefore, there was no necessity to carry on partnership business and accordingly, the firm never commenced its business.
3.4 The ld. A.R. of the assessee further submitted that the transaction in Canara Bank account was in fact accounted for in his individual case filed under PAN BGXPP8105M. During the course of assessment proceedings, the partner also submitted a copy of audit report in his name along with name of Quadisiyya Hajj Cell. Further, the PAN of the firm was wrongly tagged to the individual account and the person who was assessed in his individual capacity. Further, ld. A.R. submitted that a correction request had been given to the bank to correct the PAN, which is already been done by the bank after the end of the yar. Lastly, the ld. A.R. of the assessee submitted that as before both the lower authorities, the assessee could not represent his case properly by submitting explanation/submission/information, therefore,
ITANo. 578/Coch/2023 Quadisiyya Hajj Cell, Kollam Page 5 of 6 requested to provide one more opportunity to substantiate their claims.
The ld. D.R. on the other hand, supported the order of the authorities below and submitted that the assessee did not avail the opportunities of being heard granted by both the authorities below.
We have heard the rival submissions and perused the materials available on record. On going through the assessment order, we find that the assessment order has been passed u/s 144 of the Act. The AO has observed that assessee has not produced any books of accounts of the firm for verification. Further, no other details of assets, liabilities, expenses made available for verification. Further, interest and remuneration to partners and depreciation etc., are also not allowed as not claimed. Before ld. CIT(A) also we find that as the assessee could not furnish any explanation/evidences in support of the grounds of appeal, the ld. CIT(A) concluded that assessee failed to discharge the onus and accordingly dismissed the appeal. We also take a note of the fact that the AO did not accept the contention that PAN of the firm was wrongly tagged to the individual account. The ld. A.R. of the assessee submitted that bank has already corrected the PAN. We are of the view that these things need to be examined afresh. Being so, in the interest of justice and fair play, and as requested by the ld. A.R. of the assessee, we are of the opinion that one more opportunity may be granted to the assessee to substantiate their claim and accordingly, we remit the entire issue in dispute to the file of AO for de-novo consideration and to decide in accordance with law. The assessee is directed to cooperate with the proceedings and file all the documents/records before the AO to substantiate their claim. Needless to say, a reasonable opportunity of being heard must be granted to the assessee. In case of further
ITANo. 578/Coch/2023 Quadisiyya Hajj Cell, Kollam Page 6 of 6 default on the part of the assessee, they shall not be entitled for any leniency. Ordered accordingly.