RAJESH VISWANATHAN,NAVI MUMBAI vs. ACIT 35(2), MUMBAI

ORDER

PER N.K. PRADHAN, AM

2. We consider below the 1st, 2nd, 3rd and 4th ground of appeal together as they address a common issue. These grounds of appeal read as under :

1. On the facts and circumstances of the case and in law Ld. CIT(A) erred in confirming addition of Rs.69,02,000/- as cash credit u/s 68 of the IT Act.

Shri Rajesh Vishwanathan

2. On the facts and circumstances of the case and in law Ld. CIT(A) erred in not admitting the additional evidences filed before him under Rule 46A of IT Rules 1962 or u/s 250(5) of the IT Act, 1961.

3. On the facts and circumstances of the case and in law Ld. CIT(A) erred in confirming the addition of Rs.69,02,000/- as cash without appreciating the fact that part of deposits represents past savings etc. and part of deposits represents his business sales proceeds which appellant is doing as part time business so only profits of such turnover of Rs.4,30,756/- can be made u/s 44AD of the IT Act. 4. Without prejudice to the above, on the facts and circumstances of the case and in law Ld. CIT(A) erred in assuming withdrawals of Rs.10,55,700/- as expenditure towards personal expenses, medical expenses, education expenses travelling expenses etc. without brining on record any evidence, whereas the fact is that such withdrawals are used as redeposit in bank account in subsequent dates, in short the Ld. CIT(A) failed to give telescopic benefits of cash withdrawals of Rs.10,55,700/- against cash deposits in bank account without proper appreciation of facts of the case.

Sl. No. Name of Bank Total Cash deposit (Rs.)

3. HDFC Bank 13,38,000/-

Total 69,02,000/-

Shri Rajesh Vishwanathan During the course of assessment proceedings, the AO vide notice u/s 142(1) dated 20.01.2015, 13.02.2015, 02.03.2015 and 12.03.2015 and also vide order sheet noting dated 16.02.2015, 20.03.2015, 23.03.2015 and 24.03.2015 asked the assessee to explain why the above cash deposits should not be treated as unexplained cash credits u/s 68 of the Act. As the assessee failed to offer any explanation about the source and nature of the cash deposits, the AO made an addition of Rs.69,02,200/- u/s 68 of the Act. Further he held the cash withdrawals from the bank accounts to the extent of Rs.10,55,700/- as withdrawals towards household expenses, personal expenses, medical expenses, children education, travelling and other expenses for office tours for which reimbursements have been claimed.

The Ld. CIT(A), after verifying the assessment records, found that there was no submission whatsoever made by the assessee to explain the Shri Rajesh Vishwanathan source of cash deposits even though the chart of deposits/withdrawals was filed. As the AO had given sufficient opportunity to the assessee and the assessee failed to comply to the said notices, the Ld. CIT(A) dismissed the application of the assessee to admit the additional evidence under Rule 46A of the Income Tax Rules, 1962 (in short ‘the Rules’).

Further, the Ld. CIT(A) relying on the judgment of the Hon’ble Supreme Court in the case of Sumati Dayal v. CIT 1995 AIR 2109 and CIT v. Durga Prasad More AIR 1971 SC 3439 confirmed the addition of Rs.69,02,200/- made by the AO u/s 68 of the Act. Also he rejected the claim of set off of cash deposits out of withdrawals.

The Ld. counsel further submits that documents viz. (i) sales register, (ii) sales ledger (iii) monthly cash summary (iv) cash book (v) cash deposits and withdrawals were filed before the CIT(A) requesting for admission of additional evidence. Also it is stated by him that medical papers/documents were filed before the CIT(A) justifying the reasons for not submitting the above documents before the AO.

In Smt. Prabhavati S. Shah (supra), loans taken by the assessee were treated by the ITO as income from undisclosed sources because the summons could not be served on the creditors. Before the first appellate authority, the assessee wanted to prove the genuineness of the loan from one of the borrowers by relying upon the fact that the amount had been received by the assessee by cheque and repaid by cheque. For that purpose, the assessee wanted to produce photostat copies of the cheques, a certificate from the bank to show that the loan was received by the assessee by cheque and a copy of the account of the assessee with the bank. The first appellate authority refused to admit such additional evidence. The Hon’ble Bombay High Court held that the case of the assessee does fall under the exception as per clause (c) of Rule 46A(1). Such additional evidence should have been allowed to be produced by the assessee and the same was to be considered by the first appellate authority.

Having perused the relevant materials placed on record, we are of the considered view that the case of the assessee in the present appeal falls under the exception as per clause (c) of Rule 46A(1). It has been held in CIT v. Shree Kangra Steel Pvt. Ltd. (2010) 320 ITR 691 (HP) that Rule 46A(3) provides that no evidence produced under Rule 46A(1) shall be taken into account unless the AO has been given a reasonable opportunity of examining the evidence or documents produced or permitted to cross- examine the witnesses examined or permitted to produce any evidence or document in rebuttal to the additional evidence produced by the appellant.

Shri Rajesh Vishwanathan In view of the above reasons, we set aside the order of the Ld. CIT(A) and restore the matter to the file of the AO to make a de novo order after examining the evidence or document to be produced by the assessee. We direct the assessee to file the relevant documents/evidence before the AO. Needless to say, the AO would give reasonable opportunity of being heard to the assessee before finalizing the order.