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Facts
The assessee, a Professor, filed an IT return for AY 2014-15 which was selected for scrutiny. Due to non-compliance with notices, the AO made a best judgment assessment under Section 144, adding Rs. 12,38,452/- for a car purchase. The assessee appealed, claiming illness prevented compliance and that the car was purchased from a loan, but the CIT(A) dismissed the appeal due to discrepancies in loan details and the time gap between withdrawal and purchase.
Held
The Tribunal noted that the loan claimed by the assessee was a home loan from HDFC, not a car loan from SBI as initially stated, and there was no evidence of its utilization for the car or non-utilization for a house. Given the lack of compliance before the AO and the need for factual verification regarding the loan's use, the Tribunal restored the matter to the AO for fresh inquiry to determine the utilization of the housing loan and pass a new order.
Key Issues
Whether the best judgment assessment under Section 144 was valid given the alleged lack of opportunity to be heard; and whether the addition for car purchase was justified when the assessee claimed it was from a home loan, considering the time gap and discrepancies in bank details.
Sections Cited
Section 250, Section 144, Section 139(1), Section 139(4), Section 139(5), Section 142(1), Section 142(2A), Section 143(2), Section 234A, Section 234B, Section 271(1)(c), Rule 34(4) of the ITAT Rules, 1963
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ALLAHABAD ‘SMC’ BENCH, ALLAHABAD
A.Y. 2014-15 Smt. Ranjana Bajpai, vs. DCIT / ACIT, 6-C, Bank Road, Allahabad- Circle-1(1), Allahabad 211002, U.P. PAN:AAPPB9960P (Appellant) (Respondent) Assessee by: Sh. Ajit Kumar, Advocate Revenue by: Sh. A.K. Singh, Sr. DR Date of hearing: 20.03.2025 Date of pronouncement: 21.05.2025 O R D E R PER NIKHIL CHOUDHARY, A.M.: [ This is an appeal filed by the assessee against the order of the ld. JCIT(A)-3, Bengaluru under section 250 of the Income Tax Act, 1961 dated 19.07.2024 dismissing the appeal of the assessee that was filed against the order of the DCIT- 1(1) dated 16.12.2016. The grounds of appeal are as under:-
1. BECAUSE the Ld. A.O. misapplied / misinterpreted the provisions of section 144 of the Act which has been affirmed by the Ld. CIT(A); which clearly reads as under: "Best judgment assessment. 144. (1) If any person- (a) fails to make the return required [under sub-section (1) of section 139 and has not made a return or a revised return under sub-section (4) or sub-section (5) of that section, or (b) fails to comply with all the terms of a notice issued under sub-section (1) of section 142 or fails to comply with a direction issued under sub-section (2-A) of that section, or Smt. Ranjana Bajpai A.Y. 2014-15 (c) having made a return, fails to comply with all the terms of a notice issued under sub- section (2) of section 143, the Assessing Officer, after taking into account all relevant material which the Assessing Officer has gathered, shall, after giving the assessee an opportunity of being heard, make the of the total income or loss to the best of his judgment and determine the sum payable by the assessee on the basis of such assessment: Provided that such opportunity shall be given by the Assessing Officer by serving a notice calling upon the assessee to show cause, on a date and time to be specified in the notice, why the assessment should not be completed to the best of his judgment: Provided further that it shall not be necessary to give such opportunity in a case where a notice under sub-section (1) of section 142 has been issued prior to the making of an assessment under this section. (2) The provisions of this section as they stood immediately before their amendment by the Direct Tax Laws (Amendment) Act, 1987 (4 of 1988), shall apply to and in relation to any assessment for the assessment year commencing on the 1st day of April, 1988, or any earlier assessment year and references in this section to the other provisions of this Act shall be construed as references to those provisions as for the time being in force and applicable to the relevant assessment year." That a bare perusal of the section reveals that the appellant was not given the reasonable opportunity of being heard, The Ld. A.O. has completely ignored the fact that the appellant was genuinely ill and even hospitalized, due to her illness she was not in the capacity to communicate to her Authorized Representative and the same has been ignored by the Ld. CIT(A) as he has not answered the Ground No. 4 raised by the appellant if Form-35.
2. Because the Hon'ble Madras High Court in case of "Dhanalakshmi Pictures Vs. CT 144 ITR 452 (Mad.), has held that notwithstanding the default committed by the assessee or the different kinds of defaults set out in clauses (a), (b) and (c) of sub-section (1) of the section 144, it is still the duty of the A.O. to make the assessment to the best of his judgment after taking into account all relevant material which he might have gathered; that the two processes, namely, the gathering of relevant material and the making of the assessment to the best judgement can never be dispensed with, even in a case where the assessment is made ex-parte following the default of the assessee; that it is only in this sense that the court have regarded the assessment order under section 144 as differing only in the degree of summariness as compared to the assessment u/s 143; and that excepting for the fact that the assessee is not present before the A.O. or has not furnished a return or where he has furnished a return has subsequently defaulted to produce material in support of his return, or has defaulted to cooperate with the A.O. in the task of adjudicating his tax liability, the position of the A.O. in no way differs from a case where he has to proceed under any other provision of the Act for the purpose of making the assessment.
2. BECAUSE the Ld. CIT(A) has completely ignored the facts of the case that the appellant had withdrawn cash from her Bank Account out of loan of Rs. 25,00,000/- taken in the month of February, 2012 and the Ld. CIT(A) cannot make a presumption in 2 Smt. Ranjana Bajpai A.Y. 2014-15 any manner that the cash withdrawn from the Bank has not been utilised for purchase of vehicle after an extended period. It is to be appreciated that the Ld. CIT(A) has acknowledged that "On perusal of the bank statement, it is observed that the appellant has deposited the cheque of Rs. 25,00,000/- into the SBI bank on 02/02/2012 and withdrawn the amount of Rs. 10,00,000/-on 03/02/2012 & Rs. 2,00,000/- on 04/02/2012."; meaning thereby that there is no denial by the Ld. CIT(A) that the appellant has taken loan and cash was withdrawn out of that loan; thus, any such addition of Rs. 12,38,452/ on account of unexplained income by the Ld. A.O. and affirmed by the Ld. CIT (A) is absolutely illegal and against the principles of natural justice.
3. BECAUSE the Ld. CIT(A) has failed to appreciate the facts of the case and position of law that when receipt of money is recorded in books of account [Bank Statement in the present case] for any source of income [i.e. loan in the present case] then such money cannot be treated as unexplained money and in the case in hands vehicle has been purchased after withdrawal of cash from Bank [out of loan] after waiting for the desired model in due course of time.
4. BECAUSE the CIT(A) is not justified in affirming the addition made by the Ld. A.O. on the ground that name of the Bank from which loan was taken has been wrongly transcribed as "State Bank of India" in the written submissions filed before the Ld. CIT(A) instead of "HDFC Bank"; that the Ld. CIT(A) instead of appreciating the facts that loan has been taken and cash withdrawn from the same; has formed a misconceived opinion that "The submissions made by the appellant is not factually correct and substantive.". Hence, affirmation of addition of Rs. 12,38,452/- by the Ld. CIT(A) on this ground is absolutely illegal and uncalled for.
5. BECAUSE the Ld. CIT(A) never ever gave an opportunity to the appellant to rectify her averments about misquoting of Bank name from which loan was taken.
6. BECAUSE the Hon'ble Supreme Court in the case of Varun Pahwa vs Renu Chaudhary [2019] has held that "It is well settled that amendment in the pleadings cannot be refused merely because of some mistake, negligence, inadvertence or even infraction of the Rules of Procedure”. Hence, any such allegation by the Ld. CIT(A) that submissions of the appellant are factually not correct & substantive and dismissing the appeal by making this as one of the grounds for dismissal is absolutely illegal and arbitrary exercise of power vested in the Authorities.
7. BECAUSE the Ld. CIT(A) is not justified on facts and in law to affirm charging of interest under section 234A & 234B of the Act.
8. BECAUSE the Ld. CIT(A) is not justified in not deciding the issue related to initiation of the proceedings under section 271(1)(c) of the Act.
9. BECAUSE the order appealed against is contrary to the facts, law, principles of natural justice and against the binding precedence and decisions of hon'ble high courts and tribunal.
Smt. Ranjana Bajpai A.Y. 2014-15 10. BECAUSE the addition so sustained by the CIT(A) in the impugned appellate order deserves to be set-aside and the return income disclosed by the appellant is liable to be sustained. 11. The appellant reserves the right to alter, amend or take any fresh ground before Your Honour at the time of the hearing of this Appeal.”
The facts of the case are that the assessee, who is Professor in history at Allahabad University filed her income tax return for the assessment year 2014-15 declaring a total income of Rs. 13,67,230/- and later revised it to Rs.13,90,410/-. The case was selected for limited scrutiny. In his order, the ld. AO records that the initial notice returned unserved and subsequently it was served through the notice server. In response, representation was made before the ld. AO and the assessee was asked to file hard copy of the return, audit report and computation chart. However, the ld. AO records that several notices were issued but none were complied with. Therefore, the ld. AO concluded the assessment under section 144 of the I.T. Act, 1961. He recorded the fact, that as per the information available with him on 2.09.2013, the assessee had purchased a car from M/s Sunny Motors Private Limited for Rs. 12,38,452/-. It was recorded that the assessee had repeatedly been asked to submit the details of the investment, but no response had been received from the assessee in this regard. Therefore, the ld. AO made an addition of Rs.12,38,452/- in this regard.
Aggrieved with the said order, the assessee went in appeal and her appeal was allotted to the JCIT(A)-3, Bengaluru. Before the ld. JCIT, the assessee submitted that she had been ill and advised by the Doctor to take bed rest therefore, she was hospitalized and was not able to contact her counsel. Hence, neither the assessee nor the counsel was able to attend the case on the dates on which the case was fixed to be heard and no other opportunity was granted and ex parte order was passed under section 144 of the Act, making an addition of Rs. 12,38,452/- on account of the Innova Car and thereby creating a demand against the assessee which was erroneous and bad in law. It was submitted that there was no undisclosed income of the Smt. Ranjana Bajpai A.Y. 2014-15 assessee, as she was a salaried person employed in Allahabad University as a Professor of History. Thus, the ex parte order passed by the ld. AO without proper opportunity was bad in law and deserved to be deleted. Before the ld. CIT(A), it was submitted that besides being a Professor in history, the assessee was also a Member of the Planning Commission / State Womens’ Commission and holding the post of the State Minister in the Government of Uttar Pradesh. She submitted that during the year under consideration, she had been accorded a loan of Rs.25 Lacs by SBI, University Branch and subsequently she had made cash withdrawals of Rs. 10 Lacs and Rs. 2 Lacs for the purchase of Innova Car (Registration No. UP 32 –TA- 1234). It was submitted that the Innova Car had been purchased out of this cash withdrawal from the bank, that was explained by the loans, and by adding Rs.38,452/- from savings made from withdrawals out of her salary. It was submitted that since the ld. AO had failed to appreciate that the new vehicle had been purchased by the appellant from the proceeds of loan granted by State Bank of India, the ld. DCIT was not justified in passing assessment order against the assessee under section 144. Several case laws were cited in favour of this. It was further submitted that there was no evidence with the ld. AO so as to cast aspersions with regard to non-disclosure of aforesaid income in the regular books of the assessee. The ld. AO had failed to appreciate that the assessee had salary income as an employee of Allahabad University and also had been sanctioned loan by the State Bank of India. It was submitted that as a person earning Rs.15 Lacs per annum, which was reflected in form 26AS, she was capable of buying an Innova Car from her earnings only, what to say for financing but in the present case, the assessee had bought the Innova Car out of money taken on loan from State Bank of India. It was submitted that the transactions entered into by the assessee were duly reflected in her passbook and the purchase of the Innova Car had been made by the assessee out of withdrawal of cash from State Bank of India. In view of the fact, it was submitted that since the assessee had not been given a proper opportunity of being heard and the addition had been 5 Smt. Ranjana Bajpai A.Y. 2014-15 made without any basis, the assessment may kindly be deleted. She submitted an RC Copy of the vehicle purchased, invoice copy of the vehicle purchased and the loan account statement of the relevant financial year before the ld. JCIT(A). The ld. CIT(A) went through the matter and noted that the assessee had withdrawn amounts of Rs. 10 Lacs on 3.02.2012 and Rs.2 Lacs on 4.02.2012 and booked the vehicle on 17.08.2013. Thus, there was a gap of 18 months before the booking of the vehicle. In view of the extended period of time between the withdrawal and the purchase, he held that while the assessee had submitted that she had taken loan from State Bank of India, she had actually submitted the amount statement of HDFC. Therefore, he held that there was no link between the withdrawals and the purchase and therefore, he dismissed the appeal of the assessee.
The assessee is aggrieved by this order of the ld. CIT(A) and has accordingly come before us in appeal. Before us, Sh. Ajit Kumar, Advocate (hereinafter referred to as the ‘ld. AR’) submitted that during the year under consideration, the assessee was accorded a loan of Rs.25 Lacs from HDFC Bank and the assessee had made cash withdrawals of Rs.10 Lacs and Rs. 2 Lacs for the purchase of an Innova Car from this loan account. Thus the Innova Car had been purchased out of the cash withdrawn from the bank amounting to Rs. 10 Lacs and savings of Rs. 38,452/- made by the assessee from her salary income. The reason for the non-compliance i.e. the illness of the assessee and the service of notice on an illiterate person, were reiterated before us and it was submitted that the assessee had not been able to get in touch with her counsel to brief him properly with regard to the matter. It was further submitted that the ld. CIT(A) had failed to consider that the assessee had made the booking much later, because she was awaiting the model of her choice. The ld. CIT(A) had failed to consider that the assessee had purchased, “Innova 2.5 G” which was newly launched during this period and therefore, was under waiting. It was further submitted that merely because the assessee had mentioned State Bank of India inadvertently, did Smt. Ranjana Bajpai A.Y. 2014-15 not make the details of the loan from HDFC or the withdrawals therefrom as inaccurate. Relying upon the judgment of the ITAT, Jaipur Bench in Shambhu Dayal vs. ITO, Ward-2(2), Kota in the assessee submitted that it had already been held that where cash deposits were preceded by cash withdrawals, the ld. AO could not make an addition merely on the basis of conjectures.
On the other hand, Sh. A.K. Singh, Sr. DR (hereinafter referred to as the ‘ld. DR’) arguing on behalf of the Revenue pointed out that the ld. AO had issued 12 notices to the assessee but the assessee did not turn up or reply or file any evidences in support of her case before the ld. AO. Therefore, the ld. AO had to do a best judgment assessment under section 144. Inviting our attention to page 45 of the assessee’s paper book, the ld. Sr. DR pointed out that the withdrawals had been made by the assessee on 3.02.2012 and 4.02.2012 and there was a long delay of 18 months before booking of the vehicle. It was submitted that the ld. CIT(A) had in his order considered this fact and come to the conclusion that one did not withdraw such a large amount of money for the purchase of the vehicle only to keep it in cash with him and later utilize the same after such an extended period of time, with the exception of any kind of emergency which was not evident in this case. The ld. Sr. DR pointed out, with reference to the decision of the Hon’ble Supreme Court in the case of Sumati Dayal vs. CIT (1995) 204 801 (SC), that the conduct of the assessee was against the test of human probabilities. Furthermore, it was pointed out that the assessee had not been sanctioned a car loan, but rather had been sanctioned a home loan, which she was claiming was diverted to the Innova Car. However, the ld. Sr. DR submitted that whenever bank sanctions a home loan, the assessee is required to submit completion / utilization certificate to the bank and since these evidences had not been placed before the ld. AO, the ld. AO was not able to verify as to whether such contentions of the assessee were true. He further pointed out that there were many inconsistencies in the stand of the assessee. The ld. Sr. DR pointed out that the Smt. Ranjana Bajpai A.Y. 2014-15 assessee stays at Allahabad but the vehicle had been purchased at Lucknow. Not only had the assessee not furnished a utilization certificate before the ld. AO for the loan, but she had also not furnished a cash flow statement from which it could be ascertained as to whether she had the cash in hand at that available time. He, therefore, prayed that the matter required greater examination at the level of the ld. AO and without such examination, relief ought not to be allowed to the assessee. Therefore, the addition may kindly be upheld or the matter remanded back to the ld. AO for fresh enquiry.
We have duly considered the facts and circumstances of the case. We have also gone through the judgment of the Jaipur Bench in the case of Shambhu Dayal vs. ITO, Ward-2(2), Kota (supra). We notice that the basic ratio that has been laid down in the said judgment and in so many other judgments that precede it, is that unless the Revenue can show that money withdrawn from a bank account was utilized for some other purpose, merely because there was a time lag between a withdrawal and re-deposit of that money, could not be a ground to make an addition in this regard. The Revenue must bring something on record to show that the cash that had been withdrawn by the assessee had been utilized elsewhere and was not available to the assessee at the time of depositing the same back or making an investment. We notice that in the instant case, since absolutely no compliance was made by the assessee before the ld. AO, the ld. AO did not have any occasion to examine as to whether the assessee actually had the funds available at the time of the purchase of the Innova Car or whether the funds had been utilized elsewhere. We notice from the record that the loan that was granted to the assessee by the HDFC, was not for the purpose of purchase of a car, but was for investment in a house (home loan). Therefore, before it can be said that the said money was available to the assessee, the assessee would be required to furnish the details of the utilization of the home loan (that were submitted to the bank) and the sources from which her house was constructed or