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Facts
The assessee's appeal is against an order confirming an addition of Rs. 1,61,69,485/- under Section 69A of the Income Tax Act for AY 2016-17. The Assessing Officer made additions on account of cash deposits and other credits in the assessee's bank account, totaling Rs. 2.45 Crores. The assessee contended that these were business receipts and not from undisclosed sources, and that the Assessing Officer did not consider periodical withdrawals or the business's nature.
Held
The Tribunal condoned the 5-day delay in filing the appeal. It acknowledged that the assessee's revised financial statement, showing total sales of Rs. 2.45 crores, was accepted for the first time for consideration. Relying on various judicial precedents, the Tribunal held that entire cash deposits cannot always be treated as income, and peak balance might be a better criterion in certain cases.
Key Issues
Whether cash deposits and other credits in the bank account can be treated as unexplained income, and if additional evidence should be admitted for proper adjudication of the issue.
Sections Cited
144, 69A, 44AD, 46A
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िनधा�रती की ओर से /Assessee by Shri Kamlesh Bhatt, CA राज� की ओर से /Revenue by Shri Mukesh Jain, Sr-DR सुनवाई की तारीख/Date of hearing 08.01.2025 उद्घोषणा की तारीख/Date of 04.03.2025 pronouncement Order under section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by assessee is directed against the order of National Faceless Appeal Centre, Delhi [for short to as “NFAC/Ld.CIT(A)] dated 06.08.2024 for assessment year (AY) 2016-17, which in turn arises out of assessment order passed by Assessing Officer under section 144 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 20.11.2018. The assessee has raised following grounds of appeal: “1. In view of the facts and circumstances of the case the Ld. CIT(A), NFAC, New Delhi erred in law and in facts, in not appreciating the facts of the case and the evidence & thereby confirming the addition of Rs.1,61,69,485/- u/s 69A and hence your appellant prays that the addition being unfair, illegal and in total disregard of the facts, be deleted.”
2. Rival submissions of both the parties have been heard and record perused. At the outset of hearing, the learned Authorised Representative (ld. AR) of the (A.Y.16-17) Vipul L Kukadiya assessee submits that there is delay of 5 days in filing appeal before the Tribunal. The delay is neither intentional nor deliberate. The assessee has filed his affidavit in explaining the reasonable and sufficient cause for condonation of delay. The Ld. AR of the assessee submits that impugned order was passed by Ld. CIT(A) on 06.08.2024. The assessee was out of station and came back Surat on 09.08.2024 and opened his e-mail on 10.08.2024. On opening e- mail, the assessee found copy of impugned order in his e-mail thus, the order was communicated to the assessee only on 10.08.2024. The assessee paid required appeal fees on 08.10.2024 i.e., well within time from the date of communication of order. From 08.10.2024, the assessee was not feeling well and could not attend his routine activities thus, he could not sign appeal paper, which were ultimately signed on 12.10.2024 and this appeal was filed thereafter. The delay was neither intentional nor deliberate on the part of assessee. The assessee is interested in pursuing his appeal. Otherwise, the delay very small and may be condoned in the interest of justice.
3. On merit, the ld. AR of the assessee submits that assessment was completed under section 144 of the Act on 20.11.2018. The Assessing Officer made addition on account of cash deposit of Rs.79,94,600/- as well as other credit by way of cheque/NEFT of Rs.1.65 crores in his bank account with ICIC bank aggregating of Rs. 2.45 Crore. The Ld. AR of the assessee submits that in response to notice dated 10.11.2018, assessee sought adjournment for 10 days, which was not allowed. The Assessing Officer passed assessment order on 20.11.2018. The Assessing Officer made addition of entire cash deposit and other credit in the bank account of assessee. The entire cash deposit and (A.Y.16-17) Vipul L Kukadiya other credit can never be treated as income of assessee under Income-tax proceedings. The assesse was engaged in trading of mobile phones and accessories thereof. The assessee has declared total turnover as per his return of income at Rs.83.43 lakhs and offered income under section 44AD of the Act. The cash deposit and other credit were out of business receipt and not from undisclosed source. The assessee is maintaining only one bank account. There is regular deposit and withdrawal of amount in his bank account, which clearly shows regular business transaction. The Assessing Officer has not considered periodical withdrawal. Before Ld. CIT(A) assessee filed application for admission of additional evidence in support of various contention, in the statement of fact as well as submission made before Ld. CIT(A). The assessee also filed revised computation of income showing higher turnover of his business. The additional evidence was forwarded to the Assessing Officer for his remand report. The Assessing Officer furnished his remand report on 06.06.2024. The contents of remand report are recorded in para-5.2 of impugned order. In the remand report, Assessing Officer objected for admission of additional evidence by taking plea that assessee has not given any reason for non-compliance of notice during the course of assessment proceedings. And that the assessee does not fulfil the condition prescribed in Rule 46A of Income Tax Rules, 1962, for admission of additional evidence. On merit, the Assessing Officer in his remand report submitted that assessee has under reported business transaction recorded in the bank account at the time of filing return of income. The assessee is now submitted revised financial statement which is actual business transaction of assessee i.e. total sales at (A.Y.16-17) Vipul L Kukadiya Rs.2.45 crores. As per earlier stand, the assessee reported sales to the tune of Rs.1.61 crores. Thus, assessee under reported his sales, the assessee took excuse that wrong has been done by his accountant without his knowledge. On the contention of assessee that maximum peak balance in his account during the year as on 19.09.2015 was received Rs.8,57,004/- only, the Assessing Officer not accepted such contentions by holding that credit entries has not been explained fully. However, no comments were given of peak balance during the year. The ld. AR of the assessee submits that on the remand report, assessee has filed his objection/rejoinder and he stated that entire business receipt can never be income of assessee. The Appellate Authority are empowered to admit such additional evidence. Additional evidence was not accepted by ld. CIT(A) and he upheld the addition to the extent of Rs.1.16 crores by taking view that assessee has disclosed certain turnover to the extent of Rs.84.43 lakhs. The Ld. AR of the assessee submits that neither the Assessing Officer allowed opportunity to the assessee nor the ld. CIT(A) considered the facts of the case in a proper perspective. The assessee was in the business of selling of mobile and their accessories and lower authorities have not considered the fact in a proper way. The transaction in bank account can never be considered as a sole criterion for determining income of the assessee. The Ld.AR of assessee submits that additional evidence was relevant for the purpose of determination of issue involved in the present appeal, therefore, additional evidence may be admitted for proper adjudication of the issue and matter may be restored back to the file of Assessing Officer to pass order afresh in accordance with law.
(A.Y.16-17) Vipul L Kukadiya 4. On the other hand, the learned Senior Departmental Representative (ld. Sr. DR) for the revenue, on the plea of condonation of delay that the Bench may take appropriate view in accordance with law. However, on the merit of case, Ld. Sr-DR for the Revenue submits that assessee was given ample opportunities by Assessing Officer to explain the nature of cash deposit as well as other credit in the bank account. The assessee failed to explain such nature of cash and other credit. Even before Ld. CIT(A) when assessee filed additional evidence, the matter was remitted back to the file of Assessing Officer. Before Assessing Officer, assessee again failed to discharge his onus. There was clear discrepancy, in the total turnover declared by assessee while filing return of income as well as while filing submission before Ld. CIT(A). The Ld. CIT(A) submits that ld. CIT(A) passed order by confirming the addition made by Assessing Officer.
We have considered the rival submission of both parties and have gone through the orders of lower authorities carefully. First we are considering the plea of assessee for condonation of delay in filing appeal. Before us, the ld AR of the assessee that delay was neither intentional nor deliberate, rather the delay is very small and that the assessee is interested in perusing the matter. Considering the aforesaid facts and circumstances of the case, we find that the delay in filing appeal is only of five days, which is otherwise not intentional or malafide, therefore, in the interest of justice, the delay of 5 days in filing appeal before the Tribunal is condoned. Now adverting to the merit of the case.
We find that there is no dispute that Assessing Officer passed assessment order under section 144 and made addition of Rs.2.45 crores as unexplained money (A.Y.16-17) Vipul L Kukadiya under section 69A of the Act. We find that Assessing Officer has issued number of show cause notice as recorded in para-5 on page-3 of assessment order. We find that assessee asked for adjournment only against the show cause notice issued in November, 2018 as recorded in para-6 of assessment order. We further find that before ld. CIT(A) the assessee filed detailed statement of fact explain the nature of business activities and modus operandi of the business of assessee. The assessee also filed revised financial statement in accepting the fact that sales of assessee during the year was of Rs.2.45 crores. The assessee also relied on various case including the decisions of Jurisdictional High Court in PCIT Vs Inderjeet Zandusing Tomar (Tax Appeal No. 908 of 2015), wherein in it was held that when the assessee was having two bank account, which were not disclosed to the department, only peak amount in such type of cases could be added. In case of CIT Vs Tirupati Construction Company (2015) 55 taxmann.com 308 (Gujarat), wherein the direction of Tribunal in directing to determine income on the basis of highest peak. The assessee also relied on the decision of Surat bench in Semadri Bhagwan Pradhan Vs ITO in and on various other cases wherein it was held that entire cash deposits can never be income of the assessee.
We find that on filing submission and application under Rule 46A, the submission of assessee was forwarded to Assessing Officer for obtaining his remand report. The Assessing Officer objected against the admission of additional evidence though the Assessing Officer also made his comment on merit of the case point out the discrepancy in total turnover declared by assessee while filing return of income and filed during First Appellate stage.
(A.Y.16-17) Vipul L Kukadiya The assessee filed his rejoinder to the remand report of the Assessing Officer. In the rejoinder, the assessee explained that out of total deposits of Rs. 2.45 Crore, the cash component is Rs. 79,94,600/- which only 32.60% and cheque component if of Rs. 1,65,27,257/- which is 67.40%. We find that despite seeking remand report from Assessing Officer Ld. CIT(A) not admitted additional evidence by taking view that assessee failed to establish as to why Rule 46A is applicable in the case or not. We find that the ld CIT(A) rejected the application for admission of additional evidence on technical reasons without considering the veracity/ relevancy of such evidences. Rules are framed to substantiate the procedure and to facilitate the assessee and the Income Tax Authorities, and it should always be interpreted in harmonious way, instead of using as weapon to punish the assessee.
We find that Hon’ble jurisdictional High Court in PCIT Vs Inderjeet Zandusing Tomar (supra) held that when the assessee was having two bank account, which were not disclosed to the department, only peak amount in such type of cases could be added. Further in CIT Vs Tirupati Construction Company (supra) Hon’ble High Court upheld the direction of Tribunal in directing to determine income on the basis of highest peak. Coordinate bench of Tribunal of Surat bench in Semadri Bhagwan Pradhan Vs ITO (Supra) also held that entire cash deposits can never be income of the assessee.
We are conscious of the fact that the assessee has filed revised computation of income during the first appellate stage. It is settled land that Assessing Officer cannot be accept revised claim in absence of revised return of income, however, such restriction is not applicable on the power of appellate authorities (A.Y.16-17) Vipul L Kukadiya as has been held by the Hon’ble Jurisdictional High court in CIT Vs Mitesh Impex (2014) 46 taxmann.com 30 (Guj). Hence, considering overall facts and circumstances of the case in hand, the additional/ revised computation income and additional evidences filed by the assessee are allowed and same are taken on record. Further considering the facts that the assessees revised financial statement is accepted for the first time for consideration, therefore, the matter is remanded to the file of Assessing Officer to verify facts and the evidences and allow relief to the assessee by considering the ratio of decisions mentioned in para-8 above. Needless to direct, that before passing the assessment order afresh, the Assessing Officer shall allow reasonable opportunity to the assessee. The assessee is also directed to make timely compliance before Assessing Officer. In the result, the grounds of appeal
raised by the assessee is allowed for statistical purposes.
10. In the result, the appeal of the assessee is allowed for statistical purpose. Order pronounced in the open court on 04/03/2025.