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Facts
The assessee declared a commission income of Rs. 1,69,862/- on a net income of Rs. 1,53,740/- for AY 2017-18. The case was selected for limited scrutiny due to large cash deposits of Rs. 4,09,46,000/- in the assessee's bank account. The Assessing Officer (AO) made a best judgment assessment under section 144 of the Act, adding the entire cash deposit as income and levying tax under section 115BBE.
Held
The Tribunal held that the CIT(A) failed to follow the mandatory requirement of giving an opportunity of hearing to the AO before passing the appellate order, especially when additional evidence was submitted by the assessee. The Tribunal noted the assessee's non-cooperation during the assessment proceedings but also acknowledged the procedural lapse by the CIT(A).
Key Issues
Whether the CIT(A) erred in not providing the AO an opportunity to present a remand report before passing the appellate order, and whether the addition of 10% of the cash deposit as commission income was justified.
Sections Cited
250, 144, 69A, 115BBE, 253(3), 143(2), 142(1), 129, 46A(3)
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Before: SHRI PAWAN SINGH & SHRI BIJAYANANDA PRUSETH
आदेश / O R D E R
PER BIJAYANANDA PRUSETH, AM:
This appeal by the assessee emanates from the order passed under section 250 of the Income-tax Act, 1961 (in short, ‘the Act’) dated 03.07.2024 by the National Faceless Appeal Centre, Delhi /Commissioner of Income-tax (Appeals) [in short ‘CIT(A)’] for the Assessment Year (AY) 2017-18.
Grounds of appeal
raised by the assessee are as under: “1. The Ld. CIT(A)-NFAC has erred and was not just and proper on the facts of the case and in law in fixing the commission @ 10% on the total receipts of Rs.4,09,46,000/- as against 0.41% declared by the assessee.
3. Prayer 3.1 The additions confirmed by the Ld. CIT(A)-NFAC may be kindly deleted. 3.2 Personal hearing may be granted. 3.3 Any other relief that your honours may deem fit may be granted.
4. The assessee craves leave to add, amend, modify alter or delete any of the grounds at the time of hearing.”
/AY.2017-18 Jayesh Jadavji Thakkar 3. The appeal filed by assessee is late by 1 day in terms of provisions of section 253(3) of the Act. The learned Authorized Representative (ld. AR) submitted that the CIT(A) has passed order u/s 250 of the Act on 03.07.2024. The appeal before this Tribunal was required to be filed within 60 days, i.e. on or before 02.09.2024. However, the assessee filed the appeal on 03.09.2024. Therefore, there is a delay of 1 day. The ld. AR submitted that delay was neither inordinate nor intentional. He requested to condone the delay in the interest of justice.
On the other hand, learned Senior Departmental Representative (ld. Sr. DR) for the revenue submitted that the Bench may decide the matter as deemed proper.
We have heard both the parties on this preliminary issue of delay of 1 day. We find that delay was only 1 day and it was not deliberate or intentional. Hence, we condone the delay of 1 day and admit the appeal for hearing.
Facts of the case in brief are that assessee filed his return of income on 04.12.2017 for AY.2017-18, declaring commission income of Rs.1,69,862/- and net income of Rs.1,53,740/-. The case was selected for limited scrutiny through CASS for ‘Large cash deposits during the year’. The assessee deposited cash of Rs.4,09,46,000/- in his bank account No.33849598828, maintained with State Bank of India (SBI). Various notices were issued u/s 143(2), 142(1), 142(1) r.w.s. 129 and served upon the assessee electronically /AY.2017-18 Jayesh Jadavji Thakkar through ITBA portal. The assessee replied on 07.06.2019 and 26.08.2019 against such notices and submitted only chart of business cycle regarding cash received from retailers and summery of debit/credit entries and copy of computation of income for AY.2017-18. The Assessing Officer (in short, ‘AO’) issued show cause notice on 24.11.2019. In response to the notice, the assessee stated that cash deposited in his account belongs to cash received from retailers and the same was transferred to company. The assessee failed to file documentary evidence of cash deposited in the bank and did not file any explanation with the source of total cash deposits. In absence of proper details and explanation, the AO had passed ‘best judgment assessment’ u/s 144 of the Act. The AO also relied on the decision in cases of (i) Pawan Kumar Pareek vs. ITO, 2010-TIOL-718-HC-RAJ-IT, (ii) CWT vs. Moor and General Finance Ltd. (Del), 332 ITR 1, (iii) CIT vs. P. P. Khader Haji (Ker), 234 ITR 461 and (iv) CIT vs. Rayala corporation (P) Ltd. (Mad), 215 ITR 883. The AO also relied on the decision of Hon’ble Supreme Court in case of Smt. Srilekha Banerjee & Ors. vs. CIT, reported in 1964 AIR 697 where it was held that receipt of money or conversion of notes is itself prima facie evidence against the assessee on which the Department can proceed in absence of good explanation. Further, the AO found that the sources of cash deposited in the bank account were neither explained nor offered for taxation. The onus was on the assessee to prove that the cash deposits made did not bear the character of income. The AO concluded that the assessee has not filed any /AY.2017-18 Jayesh Jadavji Thakkar submission / details of cash deposit declared its true income and has not paid taxes due thereon. Hence, the AO added Rs.4,09,46,000/- u/s 69A of the Act and levied tax @ 60% u/s 115BBE of the Act. The AO determined the total income of Rs.4,10,99,740/- against the return income of Rs.1,53,740/-.
Aggrieved by the addition made by AO, assessee filed appeal before the CIT(A). The CIT(A) issued five notices, fixing the date on 29.12.2020, 07.04.2022, 22.04.2022, 12.05.2022 and 11.07.2023. The assessee did not comply with four notices but replied to the notice dated 22.04.2022 on 25.04.2022 and 04.05.2022. The appellant filed written submissions and furnished copy of agreement with M/s Interactive Financial & Trading Services Pvt. Ltd., Mumbai and Hermes I. Tickets Pvt. Ltd., Chennai. The CIT(A) found that there was no mention about the amount of commission given to the assessee by the above parties. Further, appellant had deposited total cash of Rs.4,09,46,000/- in his bank account and declared commission of Rs.1,69,862/- in the return of income for AY.2017-18, which was only 0.41% of cash deposited. The CIT(A) held that the appellant was clearly engaged in the business of commission activity. The CIT(A) directed the AO to take 10% of the total deposit as commission income instead of 0.41% offered by the assessee in the return of income. Hence, he dismissed the appeal of appellant.
Aggrieved by the order of CIT(A), the assessee filed appeal before the Tribunal. The learned Authorized Representative (ld. AR) of the assessee filed /AY.2017-18 Jayesh Jadavji Thakkar a paper book including copies of ITZ Cash Cards agreement, Hermes I. Tickets Pvt. Ltd. agreement, bank statement of SBI, transaction details prepared in Excel sheet and ITR/computation of total income. He has also enclosed copies of written submissions dated 25.04.2022 and 04.05.2022 to the CIT(A). He also relied on the decision of ACIT vs. Hirapanna Jewellers, 128 taxmann.com 291 (Vizak – ITAT). He submits that during the assessment proceedings, the assessee could not appear before the AO, due to lack of guidance by his CA and circumstances beyond his control. Adequate opportunity of hearing was not given to the assessee by the AO. He also submitted that the CIT(A) is not correct in directing AO to consider commission income @ 10% of the amount deposited by the appellant in his bank account. He submitted that the appellant is prepared to submit all the details to justify the income offered by him in his return.
On the other hand, the learned Senior Departmental Representative (ld. Sr. DR) for the revenue supported the order of lower authorities. He submitted that assessee was negligent and non-cooperative during the assessment and appellate proceedings. He is not filed complete details despite various opportunities granted to him, which compelled the AO to invoke provisions of section 144 of the Act. The assessee submitted various details and written submissions before CIT(A), which have been filed in the form of a paper book by the ld. AR before the Tribunal. The written submission and the details were not forwarded by the CIT(A) to the AO for /AY.2017-18 Jayesh Jadavji Thakkar remand report before passing the appellate order. This is in clear violation of Rule 46A(3) of the Income-tax Rules, 1962. He, therefore, requested that the order of CIT(A) may be set aside and the matter may be remanded to AO for fresh adjudication.
We have heard both the parties and perused the material available on record. We have also deliberated on the decisions relied upon by the parties. It is an undisputed fact that the assessee has been totally non-cooperative to the statutory notices and the show cause notice issued to him by the AO. The compliance before the CIT(A) was also partial. The appellant had submitted various details including the agreements with M/s Interactive Financial & Trading Services Pvt. Ltd., Mumbai and Hermes I. Tickets Pvt. Ltd., Chennai. The ld. Sr. DR submitted that the agreement includes various activities to be undertaken by the appellant including promotion, marketing and distribution of the Smart Cards and TSS (the Smart Shops). Hence, the nature of income from such agreement would be different and not only commission income. The appellant had also filed written submission on 25.04.2022 and 04.05.2022 before the CIT(A) along with various details, which were not forwarded to the AO for remand report. This fact has not been controverted by the ld. AR. It is also seen from the appellate order that no remand report was called from the AO, which the CIT(A) was statutorily required to obtain in view of sub-Rule (3) of Rule 46A of the Income-tax Rule, 1962. It is well- settled that the CIT(A) is vested with co-terminus power that the AO has in /AY.2017-18 Jayesh Jadavji Thakkar making an assessment order. The Hon’ble Bombay High Court in the case of Smt. Prabhavati S. Shah vs. CIT, (1998) 100 Taxman 404 (Bombay) held that on a plain reading Rule 46A, it is clear that the same is intended to put fetters on the right of the appellant to produce before the AAC, any evidence, whether oral or documentary, other than evidence produced by him during the course of proceedings before the ITO except in the circumstances set out therein. The Hon’ble Gujarat High Court in case of CIT vs. Valimohmad Ahmadbhai, 134 ITR 214 (Gujarat) held that mere fact that notice of hearing of appeal was given to the AO would not meet the requirements of Rule 46A(3) where assessee produced additional evidence in his appeal to the AAC. Since something adverse to the ITO was sought to be done in the course of appeal by way of augmenting the record, the ITO ought to have been heard and given an opportunity to meet the additional material by way of cross-examination, counter evidence and urging submissions in the context of the augmented record. We find that the CIT(A) has not followed the mandatory requirement of giving opportunity of hearing to the AO before passing the appellate order, where addition of entire cash deposit was restricted to 10% of the deposit. In view of the clear statutory provisions discussed above and decision cited supra, we set aside the order of the CIT(A) and remit the matter to the AO for de novo assessment order after considering the explanation and evidence produced by the appellant. The AO shall be at liberty to call for further details and evidence, if the details given