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Facts
The assessee did not file her return of income for AY 2012-13. Information received indicated cash deposits of Rs. 15,48,200/- and contract income of Rs. 3,99,428/-. The Assessing Officer (AO) treated these as unexplained income, adding Rs. 15,80,200/- under section 69A and Rs. 59,914/- as estimated profit, determining total income at Rs. 16,08,814/-. The CIT(A) dismissed the assessee's appeal.
Held
The Tribunal noted that the assessee neither filed returns nor provided evidence to the AO or CIT(A). The claims about business receipts and profit rates remained unsubstantiated. However, the frequent deposits and withdrawals related to business activities were not examined by the AO due to non-compliance. The Tribunal also considered additional grounds related to the legality of reopening the case, which were raised for the first time.
Key Issues
Whether the additions made on account of cash deposits and contract income were justified, and whether the reopening of assessment was legally valid.
Sections Cited
69A, 147, 144, 148, 151, 142(1)
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Before: SHRI SANJAY GARG & SHRI BIJAYANANDA PRUSETH
आदेश / O R D E R
PER BIJAYANANDA PRUSETH, AM:
1. This appeal by the assessee emanates from order passed under section 250 of the Income-tax Act, 1961 (in short, ‘the Act’) dated 06.05.2024 by the Commissioner of Income-tax Appeals, NFAC, Delhi [in short, “CIT(A)”] for assessment year (AY) 2012-13, which in turn arises out of the assessment order passed by Assessing Officer (in short, “AO”) u/s 147 rws 144 of the Act on 22.11.2019.
The grounds of appeal raised by the assessee are as under:
The Ld. AO has added cash deposit of Rs.15,48,200/- under 69A as total income of the assessee. This income forms part of the business income of the assessee. So, the act of the Ld. AO of considering the gross receipts without considering the expenses is not appropriate.
The appellant has raised additional grounds of appeal
during the course of hearing which are as follows: On Legality: 1(a) The CIT(A) has erred both in law and in fact in upholding the assessment order dated 22.11.2019 passed u/s.144 rws 147 which was time barred and beyond limitation since the notice u/s.148 was issued on 27.03.2019. 1(b) On facts and circumstances of the case, the assessment being time barred the assessment order and demand raised thereunder requires to be cancelled.
2. With prejudice to the above, your appellant submitted that the AO has not issued copy of reasons recorded as well as copy of approval to PCIT u/s.151 which is obligatory particularly because the assessment was time barred.
3. Further your appellant submits the AO has blindly followed information gathered but has not indicated what information was gathered from what source and the AO failed to apply his mind to the validity of such information and whether the amount so mentioned in the information was in the nature of income or was part of sales of business of the appellant. On Merits :
1. Without prejudice, it is submitted that the entire amount of Rs.15,48,200/- deposited in ICICI Bank account is part and parcel of gross business income of your appellant, i.e., sale process and no expenditure is deducted which is contrary to provisions of law.
2. The entire amount is derived from business of your appellant and if at all any amount is liable to be included then it is only 2% of the net profit of business.
3. The CIT(A) has also erred in not dealing with the ground of addition as under: (a) Rs.59,914/- (15% of gross contract receipts of Rs.3,99,428/- under 26AS), for which your appellant submitted that 26AS does not apply and without prejudice if there is any case of addition then it should be net profit @ 2% as addition of business. It is therefore submitted that relief claimed above be allowed and the order of the Assessing Office be modified accordingly. Your appellant reserves right to add, alter, amend to withdraw any or all ground of appeal.”
4. Let us first decide as to whether the additional grounds raised
by the appellant could be admitted by us. The Rule regarding grounds of appeal to be considered by ITAT is Rule 11 of Income Tax (Appellate Tribunal) Rules, 1963. The same reads as under: “Grounds which may be taken in appeal. – A.Y 12-13 Sajitkumar Subi
11. The appellant shall not, except by leave of the Tribunal, urge or be heard in support of any ground not set forth in the memorandum of appeal, but the Tribunal, in deciding the appeal, shall not be confined to the grounds set forth in the memorandum of appeal or taken by leave of the Tribunal under this rule: Provided that the Tribunal shall not rest its decision on any other ground unless the party who may be affected thereby has had a sufficient opportunity of being heard on that ground.”
4.1 The Learned Sr. DR for the revenue has not raised any objection to admission of the additional ground raised by the assessee. 4.2 We note that the additional grounds primarily deal with legality of reopening of the case of the assessee u/s 147 of the Act. It is seen that no additional facts are necessary to adjudicate these additional grounds of appeal. These also goes to the root of the matter. The Hon’ble Supreme Court in case of National Thermal Power Co. Ltd. vs. CIT, 229 ITR 283 (SC) held that the power of the Tribunal in dealing with appeals is expressed in the widest possible terms. The Hon’ble Court did not find any reason as to why the assessee should be prevented from raising a question before the Tribunal for the first time so long as the relevant facts are on record in respect of that item. It further observed that the power of the Appellate Assistant Commissioner in permitting assessee to raise an additional ground in accordance with law, as held in case of Jute Corporation of India Ltd. vs. CIT, 187 ITR 688 (SC), is also available to ITAT in respect of appeals pending before it.
5. In light of the above facts and settled legal position, we are of the considered opinion that the additional grounds raised by the assessee deserves to be admitted for adjudication.
A.Y 12-13 Sajitkumar Subi 6. Brief facts of the case are that the assessee did not file her return of income for the AY 2012-13. In this case, information was received by the department that the assessee had deposited cash of Rs.15,48,200/- in her savings bank account maintained with Dena Bank and that the assessee also received contract income of Rs.3,99,428/- during the year under consideration. Since, the assessee did not file her return of income for the AY 2012-13, the source of cash deposits to the tune of Rs.15,48,200/- and contract income of Rs.3,99,428/- remained unexplained resulting in escapement of income. Therefore, case of the assessee was reopened u/s 147 of the Act and notice u/s.148 of the Act was issued on 27.03.2019. In response to the same, assessee neither filed her return of income for the relevant AY 2012-13 nor filed any explanation. During the assessment proceedings, notices u/s 142(1) of the Act and show cause notices were issued requesting the assessee to file relevant details. However, no compliance was made to any of such notices/show cause notices. The AO, therefore, finalized the assessment in the manner laid down in section 144 of the Act, i.e., best judgment assessment on the basis of material gathered/ available. He added Rs.15,80,200/- u/s 69A of the Act and Rs.59,914/- towards estimated profit on contract receipts of Rs.3,99,428/-. Accordingly, assessment order u/s.144 rws 147 of the Act was passed on 22.11.2019 wherein total income of the assessee was determined at Rs.16,08,814/-.
A.Y 12-13 Sajitkumar Subi 7. Aggrieved by the assessment order, assessee preferred appeal before CIT(A). The CIT(A) observed that the assessee has not provided any cogent reasons to deviate from the AO’s order regarding the additions of Rs.16,08,814/-. Accordingly, he dismissed the appeal of the assessee.
Further aggrieved, the assessee filed present appeal before the Tribunal. The Ld. AR of the assessee submitted that the cash deposits of Rs.15,48,200/- made by assessee is nothing but her labour contract business receipts. He also submitted that whenever the funds were deposited in the bank, these were immediately utilized for making various business payments. This is proved by the fact that total withdrawals amounted to Rs.21,48,149/-, which was almost equal to total cash and cheque deposits of Rs.21,48,487/-. The transactions of deposit and withdrawal had occurred throughout the year reflecting the ongoing nature of business operation leaving the bank balance of only Rs.337/- at the year end, which makes it clear that amount was not kept idle in bank account at any given point of time. He contended that considering the gross receipts as total income without considering the expenses is not appropriate.
8.1 Regarding the addition of Rs.59,914/- made on account of estimation of profits on contract receipts of Rs.3,99,428/- @ 15%, the Ld. AR submitted that estimation of profit @ 15% is unjustifiable because the net profit rate of the business was less than 8% of the gross turnover. He requested to adopt a reasonable profit percentage.
We have heard both sides and perused the materials placed on record. It is evident that the assessee neither filed any return of income nor furnished any details or documentary evidence at any stage, either before the AO or the CIT(A). The claim that the cash deposits represented business receipts remains unsubstantiated in the absence of books of accounts, bills, vouchers, confirmations or other supporting evidence. Similarly, the plea that the AO applied an excessive profit rate lacks any material to demonstrate the actual nature of business, expenses incurred or turnover achieved. At the same time, we find that the assessee’s claim that the deposits and withdrawals were frequent and correlated to her business activities requires factual verification from the underlying bank statements and business records. This aspect, which goes to the very heart of the addition made u/s.69A, has not been examined by the AO, primarily due to non-compliance by the assessee. 10.1 With regard to the additional grounds regarding validity of re-opening u/s 147 and notice u/s.148 of the Act, that the assessment order was time- barred and that the reasons recorded and sanction u/s 151 of the Act were not provided to the assessee, we find that these issues have been raised for the first time before us. No objection was raised before the AO or any such ground was taken up before the CIT(A). It is clear from the facts on record that the AO passed an ex parte order, which was confirmed by the CIT(A) by passing a non- A.Y 12-13 Sajitkumar Subi speaking order. Therefore, both on merit as well as on jurisdictional issue, the matter requires fresh examination by the lower authority. Hence, the order passed by the CIT(A) is set aside and the matter is restored to the file of AO for de novo assessment after providing reasonable and adequate opportunity of being heard to the assessee. The appellant is at liberty to raise the additional ground before the AO, who shall decide it in accordance with law. The grounds are accordingly allowed for statistical purposes.
In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in accordance with Rule 34 of ITAT Rules, 1963 on 10/11/2025 in the open court.