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Facts
The assessee, a civil contractor, filed an appeal against the order of the ADDL/JCIT(A) confirming an addition of Rs. 2,00,000/- made by the AO under section 69A of the Income Tax Act, 1961. The addition was based on cash withdrawals made by the assessee during the demonetization period which were claimed to be unverified.
Held
The Tribunal held that the AO was not justified in making the addition of Rs. 2,00,000/-. The assessee had made substantial withdrawals before demonetization and deposited a significant amount, and the entire amount of Rs. 2,00,000/- could not be considered unverifiable. Furthermore, the CIT(A) was also not justified in dismissing the appeal ex-parte.
Key Issues
Whether the addition of Rs. 2,00,000/- as unexplained income based on alleged unverified cash withdrawals during the demonetization period is justified, and whether the CIT(A) erred in dismissing the appeal ex-parte.
Sections Cited
250, 143(3), 69A, 143(2), 142(1)
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Income Tax Appellate Tribunal, PATNA BENCH AT KOLKATA
Before: SHRI SONJOY SARMA & SHRI RAKESH MISHRA
PER RAKESH MISHRA, ACCOUNTANT MEMBER:
This appeal filed by the assessee is against the order of the ADDL/JCIT(A)- 2, Kolkata. [hereinafter referred to as the ‘Ld. Addl./Joint CIT(A)’] passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for AY 2017-18 dated 21.03.2024, I.T.A. No.: 438/PAT/2024 Assessment Year: 2017-18 Lalbabu Prasad. which has been passed against the assessment order u/s 143(3) of the Act, dated 11.12.2019. 1. 1. The Registry has informed that the appeal filed by the assessee is barred by limitation by 10 days. An application seeking condonation of delay has been filed by the assessee stating as follows:
“1. That the above appeal against the order passed u/s 250 on 21/03/2024 is being filed today.
That there is a small delay of 6 days in filing the appeal on account of non-availability of the appellant at Sitamarhi due to a family function.
That the appellant humbly prays that the delay may kindly be condoned and the appeal may kindly be admitted for hearing on merits.”
Considering the condonation application and the reasons stated therein, we are satisfied that the assessee had a reasonable and sufficient cause and was prevented from filing the instant appeal within the statutory time limit. We, therefore, condone the delay and admit the appeal for adjudication on merits.
The assessee is in appeal before the Tribunal raising the following grounds of appeal:
“1. For that the order passed by the authorities below are bad in law and fact.
For that the learned Addl. CIT(Appeal) is not justified in dismissing the appeal ex-parte only after issuing two notices after enabling communication window on e-portal on 04/11/2022. 3. For that efforts would have been made to serve the notice physically in case of non-compliance of the notice uploaded on e-portal.
For that the appellant is a senior citizen and not very well versed with faceless appeal procedure. Under the circumstances, the appellate authorities should have taken attempt to serve the notice of hearing through JAO or Verification Unit, before passing the ex-parte order.
For that the learned A.O is not justified in making addition of Rs.2,00,000/- u/s 69A of the IT Act. I.T.A. No.: 438/PAT/2024 Assessment Year: 2017-18 Lalbabu Prasad.
For that the addition of Rs.2,00,000/- has been made on the sole ground the cash book for the whole year was not produced and as such the withdrawals of Rs.2,00,000/- on 24/10/2016 remain unverified. Since the withdrawals of cash on 24/10/2016 is reflecting in the bank statement produced, question of unverifiability does not arise.
For that the learned A.O. has himself admitted that the assessee has made cash withdrawals as mentioned in the cash book. Thus, the findings of learned A.O. is itself contradictory.
For that considering the turnover the contract business as more than Rs.3.5 crores and mere deposit of the Rs.5,97,500/- out of unutilised cash from the withdrawals made few days back should have been accepted and the addition of Rs.2,00,000/- on flimsy grounds is unwarranted and liable to be deleted.
For that, the appellant, therefore, humbly prays for setting aside the addition of Rs.2,00,000/- u/s 69A of the I.T. Act.
For that, other grounds, if any will be urged at the time of hearing.”
Brief facts of the case are that the assessee is an individual and engaged in civil contract business of Rural Work Division and is also one of the directors of Mahamaya Telecom Pvt. Ltd. The assessee had filed the return of income on 24.03.2018 declaring total income of Rs. 39,15,920/-. The case was selected for scrutiny through CASS and statutory notice u/s 143(2) of the Act was issued and duly served upon the assessee. The Pr. CIT, Muzaffarpur transferred the case from the ACIT, Circle-2, Muzaffarpur to DCIT, Circle-3, Darbhanga due to juri ictional issue and the case of the assessee was selected for limited scrutiny under CASS. The reason for the selection was large cash deposit in the bank account during the year. Thereafter, a notice u/s 142(1) of the Act was issued and served upon the assessee but the notice was not complied with by the assessee on the due date. On a later date, the Ld. AR of the assessee submitted written submission along with the bank statement, details of SBNs and reason of cash deposit. The Ld. AO found that a sum of Rs. 5,97,500/- was deposited I.T.A. No.: 438/PAT/2024 Assessment Year: 2017-18 Lalbabu Prasad. during the demonetization period and Rs. 20,000/- before the demonetization period in the bank account bearing A/c No. 2312201001495 maintained in Canara Bank. On verification of the details furnished by the assessee, the Ld. AO found a sum of Rs. 2,00,000/- shown as withdrawn on 24.10.2016 as unverified and treating the same as undisclosed income added the same to the total income of the assessee u/s 69A of the Act and assessed the total income at Rs. 41,15,920/- u/s 143(3) of the Act. Aggrieved with the assessment order the assessee filed an appeal before the Ld. CIT(A) who dismissed the appeal of the assessee after observing as follows: “The appellant was given fresh opportunity of being heard vide letters dated 13.10.23 and 12.03. 24. The submission of the appellant has been considered and the appeal is decided below. Ground No. 1 to 6: All grounds pertain to single addition of Rs 2,00,000/- u/s 69 A of the IT act and therefore all are adjudicated together. On going through the grounds of appeal and the observations made by the Assessing Officer it is held that the Ld. AO has rightly made an addition of Rs 2,00,000/- Under Section 69Aof the Income Tax Act, 1961. The AO had asked the appellant to submit supporting documentary evidences to prove the source of cash deposits as it was the duty of the appellant to furnish the truth of the facts stated and the genuineness of cash deposits but the appellant failed to furnish complete cash book before the AO. Moreover, the appellant has neither filed any satisfactory explanation on the issue nor he filed any satisfactory documentary evidence in this regard during the appellate proceedings. Therefore, the Grounds of appeal No 01 to Ground No 06 are dismissed.
Ground No 07: General in nature. Appeal is dismissed.”
Aggrieved with the order of the Ld. CIT(A) the assessee has filed the appeal before this Tribunal.
Rival submissions were heard and the record and the submissions made have been examined. Before the Ld. AO it was submitted that the I.T.A. No.: 438/PAT/2024 Assessment Year: 2017-18 Lalbabu Prasad. cash of Rs. 2 Lakh was deposited out of the money withdrawn on 24.10.2016. The assessee is a civil contractor and he had not sold any commodity. The Ld. AO has mentioned in the assessment order that on perusal of the cash book, it appeared that the assessee had made cash withdrawal as mentioned and on page 2 para 4 of the assessment order details of withdrawal from 24.10.2016 to 08.11.2016 amounting to Rs. 8 Lakh are mentioned. The assessee contends that the Ld. AO accepted the cash withdrawal but did not accept the deposit made out of the withdrawal on account of demonetization. The Ld. AO has mentioned that the assessee produced part cash book which does not reflect the trend of cash withdrawal and expenses as regards the turnover of the business and before the Ld. AO the assessee had argued that the bank statement and cash book was supported by the cash withdrawal made on various dates. Merely on the basis of absence of the cash book of the whole financial year, the Ld. AO did not accept the argument that the Specified Bank Notes belonged to the bank withdrawals made in the past and a sum of Rs. 2 Lakh shown as withdrawn on 24.10.2016 was held to be unverified and added to the income of the assessee. While totalsum of Rs. 5,97,500/- was deposited in the bank account on 12.11.2016, the Ld. AO has treated only the withdrawal of Rs. 2 Lakh made on 24.10.2016 as unverifiable. However, the fact remains that the assessee had made withdrawals of Rs. 4 Lakh on 01.11.2016, Rs. 1 Lakh on 03.11.2016, Rs. 50,000/- on 04.11.2016 and Rs. 50,000/- on 08.11.2016, the details of which are mentioned on pages 2 and 3 of the assessment order. Therefore, on 12.11.2016, the assessee had sufficient cash to deposit in the bank account. Since the assessee is a contractor and had turnover of more than Rs. 3.5 Crore, there was no justification for addition of Rs. 2 Lakh and accepting the rest of the I.T.A. No.: 438/PAT/2024 Assessment Year: 2017-18 Lalbabu Prasad. deposits of Rs. 3,97,500/- which were deposited in old currency notes on 12.11.2016 when the assessee had also made withdrawal of Rs. 8 Lakh before the demonetization was announced and the unutilized cash was deposited in the bank account. The assessee also submits that the Ld. CIT(A) was not justified in dismissing the appeal ex parte only after issuing two notices after enabling communication window on e-portal on 04.11.2022. Therefore, the Ld. AO was not justified in making the addition as well as the Ld. CIT(A) was not justified in upholding the same for an amount of Rs. 2 Lakh when the assessee had made withdrawals of Rs. 8 Lakh and had claimed deposit of Rs. 5,97,500/- out of the withdrawals without the Ld. AO specifying or bringing anything to the contrary to disbelieve that the deposit was out of the withdrawals made immediately before the demonetization. Hence, all the grounds of appeal raised by the assessee relating to the addition of Rs. 2,00,000/- are allowed.
In the result, the appeal filed by the assessee is allowed. Order pronounced in the open Court on 4th April, 2025. [Sonjoy Sarma] [Rakesh Mishra] Judicial Member Accountant Member Dated: 04.04.2025 Bidhan (P.S.) I.T.A. No.: 438/PAT/2024 Assessment Year: 2017-18 Lalbabu Prasad. Copy of the order forwarded to:
Lalbabu Prasad, Prop- Lalbabu Prasad, Marwari Bazar, Sitamarhi, Bihar, 843302. 2. DCIT, Cir-3, Darbhanga.
ADDL/JCIT(A)-2, Kolkata.
CIT-
CIT(DR), Patna Bench, Patna.
Guard File. //// By order