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Facts
The assessee, engaged in plying goods carriages, had cash deposits in bank accounts during demonetization. The assessee filed a return belatedly, which the Assessing Officer (AO) treated as invalid and made additions under Section 69A. The CIT(A) confirmed a part of the addition.
Held
The Tribunal partly allowed the appeal on merits. It reduced the addition for unexplained cash credits and directed that the addition should be taxed under normal provisions, not under Section 115BBE, as the transactions were prior to the effective date of Section 115BBE.
Key Issues
The validity of the assessment proceedings initiated under Section 144 without issuing a notice under Section 143(2) and the justification for the addition made under Section 69A, as well as the applicability of Section 115BBE.
Sections Cited
69A, 44AE, 115BBE, 144, 142(1), 143(2)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI ‘A’ BENCH, NEW DELHI
Before: MS. MADHUMITA ROY, & SHRI NAVEEN CHANDRA
PER NAVEEN CHANDRA, ACCOUNTANT MEMBER:- This appeal by the assessee is preferred against the order of the NFAC, Delhi dated 22.05.2024 pertaining to A.Y. 2017-18. 2. The assessee has raised the following grounds of appeal:
1. 1. 1. 1. Page 1 of TUFEL Vs. ITO “1. That on the facts, and in the circumstances of the case and in law, the CIT(A), NFAC, Delhi [here in after referred as CIT(A)] erred in confirming the addition of Rs.22,87,991/-made u/s.69A being amount credited and cash deposited in the bank account without considering the fact that the assessee is declaring income under presumptive basis u/s.44AE and the amount was received from plying of goods carriage, accordingly the assessee prays that the addition of Rs.22,87,991/-confirmed by the CIT(A) may kindly be deleted in full.
2. That on the facts, and in the circumstances of the case and in law, the CIT(A) erred in confirming the application of higher rate of tax u/s.115BBE without appreciating the fact that the assessee is engaged in plying of goods carriage and not have multiple source of income, accordingly it is prayed that the addition u/s.69A may kindly be held as income from plying of goods carriage, thus the addition of Rs.22,87,991/-confirmed by the CIT(A) may kindly be taxed under normal provisions and not as unexplained money u/s.69A.
That the assessee craves the right to amend, add, delete, replace, all or any of the grounds of appeal
either during the course of hearing or at any time before hearing of this appeal.”
3. In addition to the above grounds of appeal
, the assessee has raised additional legal jurisdictional grounds of appeal which read as under:
1. That on facts, and in the circumstances of the case and in law, the ITO, Ward 4(4), Gurgaon [AO] erred in assuming jurisdiction for initiation and completion of assessment u/s.144 without appreciating the fact that in absence of transfer order of the case Page 2 of TUFEL Vs. ITO u/s.127(2) r.w.s 127(3) passed by the appropriate authority for transfer of the case from the ITO, Ward -1, Rohtak to the AO, the impugned assessment order passed by the AO is without jurisdiction and thus deserves to quashed.
That on facts, and in the circumstances of the case and in law, the AO initiated and concluded the assessment relying upon the notice issued u/s.142(1), dated 13/03/2018 without considering the fact that the time for completion of the assessment year was up to 31/03/2018,accordingly the notice issued u/s.142(1), dated 13/03/2018 issued before the completion of the assessment year is premature and not valid, thus the jurisdiction assumed by the AO for initiation and completion of the assessment is bad in law, accordingly the assessment order deserves to be held as null and void.
That on facts, and in the circumstances of the case and in law, the AO initiated and concluded the assessment relying upon the notice issued u/s.142(1), dated 13/03/2018 posted in the ITBA system without quoting any Email Id and the said notice came to the knowledge of the CA on 25/06/2019, therefore the date of issuance of notice u/s.142(1) shall be held as 25/06/2019 accordingly the return of income filed on 27/06/2019 shall be held as return of income filed in compliance to notice issued u/s.142(1), thus the assessment concluded u/s.144 without issuing notice u/s.143(2) and ignoring written submissions and documentary evidences filed by the assessee is without authority of law which makes the impugned assessment order as null and void.
Page 3 of TUFEL Vs. ITO 4. That on facts, and in the circumstances of the case and in law, the AO initiated and concluded the assessment u/s.144 relying upon the notice issued u/s.142(1), dated 13/03/2018 ignoring the return of income filed on 27/06/2019 and without considering the written submissions including documentary evidences filed by the assessee, thus the assessment concluded u/s.144 without issuing notice u/s.143(2) is against the provisions of the Act, 1961, thus the impugned assessment order deserves to be quashed. (B).Additional legal jurisdictional grounds of appeal raised above by the assessee are purely legal in nature goes to the root of the matter can be taken as additional grounds at any stage of proceeding and even before the Hon'ble ITAT for the 1st time and are emanating from the records available before the Tribunal. The legal grounds do not require any investigation and all materials are already on record before the Tribunal. (C). That no prejudice will cause to revenue by admitting these legal grounds, since, the revenue will be having a proper and reasonable opportunity of being heard on these issues. ('D). That in the absence of admission of above legal grounds, the assessee may suffer irreparable loss. (E).It is there humbly prayed before your honour to admit and adjudicate the additional legal jurisdictional grounds of appeal raised above. Reliance in this regard is placed upon the decisions in the cases of "National Thermal Power Corporation vs. CIT (1998) 229 ITR 383 (SC)", "VMT Spinning Co. Ltd Vs. CIT (2016) 389 ITR 326 (P&H)", "Siksa O Anusadhan Vs. CIT (2011) 336 ITR 112) [Orissa.HC)", "CIT Vs. Mohd. Ayyub Agency (1992) 197 ITR '637
Page 4 of TUFEL Vs. ITO (All.HC)". "CIT Vs. Cellulose Products of India Ltd [1985] 151 ITR 499 (Guj.HC)- (FB)", "P.V.Doshi Vs.CIT [1978] 113 ITR 22 (Guj.HC)","CIT Vs. Mahalaxmi Sugar Mills Co. Ltd [1993] 200 ITR 275 (Del.HC)',"Taylor Instrument Co. (India) Ltd Vs.CIT [1992] 198 ITR 1 (Del.HC)".
Briefly stated, the facts of the case are that the assessee is an individual residing in a rural village and engaged in operating his own three Trucks for transportation business. The AO received an information that the assessee had credits in Bank account of Rs 65,69,191/- including cash deposit in HDFC and ICICI Bank of Rs. 12,40,000/- during the demonetization period and that the assessee had not file any return of income u/s.139(1) for the A.Y 2017-18. Thereafter notice u/s 142(1) of the Act dated 13/03/2018 was issued for filing the return of income. The assessee filed its return of income on 27/06/2019 declaring total income of Rs.2,70,000/- on presumptive basis u/s 44AE of the Act.
The Assessing Officer treated the return of income filed on 27/06/2019 as invalid as the same was filed belatedly and made an addition of Rs. 65,29,190/- on account of unexplained cash and other credits in the bank u/s 69A of the Act. On appeal, the CIT (A), considering the cash withdrawal and business income, allowed relief of Rs. 42,41,200/- and confirmed addition of Rs.22,87,991/-.
Page 5 of TUFEL Vs. ITO 6. Aggrieved further, the assessee is in appeal before us raising four additional legal jurisdictional grounds of appeal
.
7. First, we take up the additional grounds of appeal. In the course of hearing before us, the additional ground Nos. 1 and 2 were not pressed and same are dismissed as withdrawn.
8. Regarding additional ground No. 3, we find that the hon’ble Supreme Court in the case of National Thermal Power Corporation vs. CIT (supra) has laid down the jurisprudence that the assessee should not be prevented from raising that question before the tribunal for the first time, so long as the relevant facts are on record in respect of that item. In the instant additional ground, we find that the issue of date of service of notice u/s 142(1) has been raised for the first time before us. It is claimed that the notice u/s 142(1), though uploaded in the Income Tax e-Portal, but was not electronically transmitted to any E-Mail nor sent physically by post to the assessee. To determine the legality of the ground regarding service of notice, the relevant facts relating to the service of notice through ITBA/email/post is not on record. In absence of the relevant facts, the additional ground raised before the ITAT for the first time, is rejected.
Page 6 of TUFEL Vs. ITO 9. The ld. counsel for the assessee in the additional ground 4, regarding framing assessment u/s 144 without issuing notice u/s 143(2) is admitted.
The ld counsel of the assessee argued that notice u/s 142(1) was not transmitted electronically and was not in knowledge of the assessee. Only while logging into the Income-tax site, the assessee came to know the status of the CIT(A)’s order for the A.Y 2011-12 and immediately filed its return of income on 27/06/2019 declaring total income of Rs.2,70,000/- on presumptive basis u/s 44AE of the Act. It is submitted that the Assessing Officer treated the return of income filed on 27/06/2019 as invalid because it was filed late and not filed on or before 31/03/2018, which is the time allowed in the notice u/s 142(1) of the Act dated 13/03/2018. The AO thereafter framed assessment u/s 144 without issuing notice u/s 143(2) which is invalid. For the above proposition, the ld AR relied on the Ahmedabad Tribunal in the case of "Jivarajbhai Ramabhai Chaudhary Vs.ITO.ITA No.1024/Ahd/2023; in the case of "PCIT Vs. Kamala Devi Sharma, dated 10/07/2018 (Raj.HC); decision of the Hon'ble Delhi High Court in the case of Pr.CIT Vs. M/S. Dart Infrabuild (P) Ltd, dated 17/11/2023 (Del.HC).
Page 7 of TUFEL Vs. ITO 11. Per contra, the ld. DR relied upon the order of the authorities below. The ld DR submitted that the AO treated the return of income as invalid because it was filed more than 1 year 3 months late and in absence of explanation, the Assessing Officer relied upon the provisions of section 144(1)(b) of the Act and completed the assessment u/s 144 of the Act. The ld DR further distinguished the cases of "PCIT Vs. Kamala Devi Sharma, and Pr.CIT Vs. M/S. Dart Infrabuild (P) Ltd, relied upon by the ld AR, stating that those cases pertain to assessment of returns filed u/s 148 of the Act where issuance of notice u/s 143(2) becomes mandatory, whereas in the instant case, the return was belatedly filed in response to notice u/s 142(1) of the Act. The ld DR submitted that the AO, even issued two show cause notices dated 17.09.2019 and 23.09.2019 u/s 144 of the Act before completing the assessment u/s 144 of the Act thereby asserting that the AO followed the law as provided u/s 144 of the Act in concluding the assessment.
We have heard the rival submissions and have perused the relevant material on record. The undisputed fact is that the Assessing Officer initiated and concluded the assessment u/s 144 relying upon the notice issued u/s 142(1) dated 13/03/2018 which was complied only on 25/06/2019. The assessee has not been able to provide any cogent evidence to show that notice was not posted in the ITBA system and was Page 8 of TUFEL Vs. ITO not served through any Email Id or it came to the notice of the assessee only on 25/06/2019. Further, we are of the view that the decision of hon’ble Rajasthan High Court in "PCIT Vs. Kamala Devi Sharma, and Hon’ble Delhi High Court Pr.CIT Vs. M/S. Dart Infrabuild (P) Ltd are distinguishable as they dealt with issuance of notice u/s 143(2) for making reassessment of return filed u/s 148 of the Act whereas the issue involved in the instant case is requirement of notice u/s 143(2) for framing assessment u/s 144 on a return filed belatedly in response to notice u/s 142(1). We further find that the AO has issued show cause notices clearly making aware the assessee regarding the additions proposed and indicating that the assessment would be completed u/s 144 of the Act, in absence of any explanation from the assessee. In such circumstances therefore, we are of the considered view that once the AO has treated the belated return filed against notice u/s 142(1) as invalid, there was no requirement to issue notice u/s 143(2) of the Act and the assessment completed u/s 144 is valid. The additional ground 4 is dismissed.
On merits, in the instant case, we find that the assessee has attempted to prove the entire source of cash deposit during demonetization as cash received from the operation of Trucks and withdrawals. Although the assessee, prima facie, appears to have Page 9 of TUFEL Vs. ITO discharged its onus of explaining source of cash deposit, it’s contentions to prove the source, hardly deserves to be accepted in entirety especially when the cash deposit vis a vis the business income was not justified. On the other hand, the Revenue’s endeavour to disbelieve the assessee’s contention that cash deposit has been made out of operation from trucks and cash withdrawals, cannot be fully justified. In this factual matrix, there is some element of failure to explain some of the cash deposit, cannot be ruled out. Be that as it may, it is deemed appropriate, in larger interest of justice, that a lump-sum addition of ₹ 2 lakh only would be just and proper with a rider that the same shall not be treated as a precedent, so as to cover all loopholes. The ground of appeal
no 1 is partly allowed.
14. In so far as assessee's levy of tax at a higher rate under section 115BBE of the Act is concerned, we find that the Madras High Court in the Writ petition in the case of S.M.I.L.E. Microfinance Ltd. Vs. ACIT, W.P. (MD) No.2078 of 2020 & 1742 of 2020, dated 19.11.2024 (Madras) has held that the impugned statutory provision would come into effect on the transaction done on or after 01.04.2017 only. Accordingly, we direct the AO to tax the addition under normal provisions of tax and not under the provisions of 115BBE. The ground 2 is allowed.
Sd/- Sd/- [MADHUMITA ROY] [NAVEEN CHANDRA] JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 4th February, 2026. VL/ Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi Sl No. PARTICULARS DATES 1. Date of dictation of Tribunal Order 2. Date on which the typed draft Tribunal Order is placed before the Dictation Member 3. Date on which the typed draft Tribunal Order is placed before the other Member 4. Date on which the approved draft Tribunal Order comes to the Sr. P.S./P.S.
Date on which the fair Tribunal Order is placed before the Dictating Member for pronouncement 6. Date on which the signed order comes back to the Sr. P.S./P.S 7. Date on which the final Tribunal Order is uploaded by the Sr. P.S./P.S. on official website 8. Date on which the file goes to the Bench Clerk alongwith Tribunal Order 9. Date of killing off the disposed of files on the judiSIS portal of ITAT by the Bench Clerks 10. Date on which the file goes to the Supervisor (Judicial) 11. The date on which the file goes for xerox 12. The date on which the file goes for endorsement 13. The date on which the file goes to the Superintendent for checking 14. The date on which the file goes to the Assistant Registrar for signature on the Tribunal order 15. Date on which the file goes to the dispatch section 16. Date of Dispatch of the Order
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