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Facts
The assessee, a non-resident, deposited Rs. 10,75,000 in cash into his NRE account during demonetization. The AO treated this as unexplained income u/s 69A and added Rs. 18,232 as interest income, completing an ex-parte assessment u/s 144 after alleged non-service of notices. The CIT(A) confirmed the additions and dismissed the assessee's appeal ex-parte.
Held
The Tribunal found reasonable cause for the assessee's non-appearance before lower authorities due to claimed non-service of notices and inaccessibility to the tax portal. The assessment was set aside for a *de novo* assessment by the AO, providing the assessee an opportunity to present his case. The challenge to the penalty u/s 270A was rejected as it relates to separate proceedings.
Key Issues
Non-service of assessment notices, ex-parte assessment and appeal dismissal, validity of cash deposit and interest income additions, and the applicability of deductions under sections 80TTA/80TTB. Challenge to penalty u/s 270A.
Sections Cited
142(1), 143(2), 144, 69A, 80TTA, 80TTB, 274, 270A, 147, 148
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI “SMC” BENCH: NEW DELHI
Before: SHRI KUL BHARAT
ORDER PER KUL BHARAT, JM :
The present appeal filed by the assessee is directed against the order passed by Ld.CIT(A), National Faceless Appeal Centre (“NFAC”), Delhi dated 29.11.2023 for the assessment year 2017-18.
The assessee has raised following grounds of appeal:-
1. “That on the facts and in the circumstances of the case and in law, the learned CIT(A) erred in not deciding the issue on merits as the AO erred in initiating assessment proceedings u/s 142(1) of the Income Tax Act, 1961 and the same has been made arbitrarily and in contravention of the facts of the case and is bad in law.
2. That on the facts of the case and under the law, the Id CIT(A) had erred in sustaining the addition of Rs. 10,75,000/- as unexplained income of the appellant u/s 69A of the Income Tax Act, 1961 without appreciating the fact that the amount was available with the appellant withdrawn from his NRE Account for the purpose of construction of his house during the assessment year.
3. The AO has erred in law and on facts by making the addition of Rs. 10,75,000/- to the income of the appellant under Section 69A of the Income Tax Act, 1961("Act"), is based on non-application of mind over the exceptional circumstances created during the demonetization, which were beyond the control of the appellant.
4. That on the facts of the case and under the law, the Id CIT(A) had erred in sustaining the addition other sources of Rs. 18,232/- as income from without giving the benefit of deduction u/s 80TTA/ 80TTB of the Income Tax Act, 1961.
5. That on the facts and in the circumstances of the case and in law, the learned CIT(A) erred in dismissing the appeal of the appellant without observing the principal of natural justice.
6. That on the facts and in the circumstances of the case and in law, the learned CIT(A) erred in not deciding the issue on merits since the Ld AO has not provided reasonable opportunity to the appellant to prove his case.”
Facts giving rise to the present appeal are that the assessee was called upon by the Assessing Officer (“AO”) by issuing notice u/s 142(1) of the Income Tax Act, 1961 (“the Act”) on 31.08.2018 to prepare a thorough and correct return of income pertaining to Assessment Year 2017-18. Thereafter, the case was taken up for scrutiny u/s 143(2) of the Act. As there was no representation on behalf of the assessee, the amount deposited in the bank account amounting to INR 10,75,000/- in cash, the AO treated it as income of the assessee and the interest thereon, was also added to the income of the assessee. Hence, the assessing authority assessed the income u/s 144 of the Act at INR 10,93,232/-. Page | 2
Aggrieved by this, the assessee preferred appeal before Ld.CIT(A). As there was no compliance on behalf of the assessee therefore, Ld.CIT(A) confirmed the addition made by the AO and dismissed the appeal of the assessee.
Aggrieved against the order of Ld. CIT(A), the assessee is in appeal before this Tribunal.
Apropos to the grounds of appeal, Ld. Counsel for the assessee re-iterated the submissions as made in the written submissions. For the sake of clarity, the relevant contents of the written submissions are reproduced as under:-
“The Appellant is a non-resident since last so many years and residential status of the assessee was a non-resident during the assessment year 2017-18 relevant for F.Y 2016-17. As The appellant was not having income more than the maximum amount not taxable as per the provisions of Income Tax Act, 1961 and therefore no return was submitted by the appellant. The Ld. A.O is in receipt of information that the appellant had deposited a sum of Rs 1075000/- in his NRO account during the period 09.11.2016 to 30.12.2016 and a notice u/s 142(1) of the Income Tax Act, 1961 dated 31.03.2018 was issued to the appellant for filing the return which was never serviced on the appellant. The Ld. A.O alleged to issue further notices through speed post which were again not serviced on the appellant being out of India. No notice had ever been served on the appellant as the appellant had no registration on the Income Tax Portal for filing the return. The learned A.O proceeded to complete the assessment in spite of being aware of the fact that no notice has been served upon the assessee by making an addition of Rs 10,75,000/- to the income of the assessee Page | 3 treating the amount deposited in account as un-explained money u/s 69 of the Income Tax Act 1961. The appellant has never received any communication from the department in this matter. As the appellant had certain tax deducted at source during the A.Y 2021-22 for which return had been submitted on 16.03.2022 then the appellant came to know of the proceedings against him. Thereafter the certified copies of the assessment order were obtained from the Ld A.O. An order under section 144 of the Income Tax Act, 1961 dated 11.12.2018 was passed by the Id. A.O making an addition of Rs 10,75,000/-as unexplained deposit and a sum of Rs 18232/- being interest on saving account as income from other sources and created a huge demand of Rs. 13,45,285/-on the appellant. Notice u/s 274 of the Income Tax Act 1961 read with Section 270 A was issued on 24.12.2019 which was never served upon the assessee. The further notices dated 10.09.2021 and 04.01.2022 were alleged to be issued u/s 270 A of the Income Tax Act, 1961 which were never served on the appellant. The order u/s 270 A has been passed on 28.03.2022 on the appellant without giving any opportunity of being heard to the appellant. The penalty has been imposed not according to the provision of the Act. Being aggrieved by the order of the Ld. AO, the appellant has preferred an appeal before the commissioner of Income Tax (appeals), Income Tax department. Unfortunately, the appellant could not respond to the notices issued on him since, the appellant was outside India and commissioner appeals has passed an ex-parte order. The appellant has preferred the appeal before the Hon'ble ITAT for Justice on the following grounds:
Ground No.
1. That on the facts and in the circumstances of the case and in law, the learned CIT(A) erred in not deciding the issue on merits as the AO erred in initiating assessment proceedings u/s 142(1) of the Income Tax Act, 1961 and the same has been made arbitrarily and in contravention of the facts of the case and is bad in law. Ground No.
2. That on the facts of the case and under the law, the Id CIT(A) had erred in sustaining the addition of Rs. 10,75,000/- as unexplained income of the appellant u/s 69A of the Income Tax Act, 1961 without appreciating the fact that the amount was available with the appellant withdrawn from his NRE Account for Page | 4 the purpose of construction of his house during the assessment year. Ground No.3 The AO has erred in law and on facts by making the addition of Rs. 10,75,000/- to the income of the appellant under Section 69A of the Income Tax Act, 1961("Act"), is based on non-application of mind over the exceptional circumstances created during the demonetization, which were beyond the control of the appellant. Ground No. 4 That on the facts of the case and under the law, the Id CIT(A) had erred in sustaining the addition of Rs. 18,232/- as income from other sources without giving the benefit of deduction us 80TTA/80TTB of the Income Tax Act, 1961. Ground No. 5 That on the facts and in the circumstances of the case and in law, the learned CIT(A) erred in dismissing the appeal of the appellant without observing the principal of natural justice. Ground No. 6 That on the facts and in the circumstances of the case and in law, the learned CIT(A) erred in not deciding the issue on merits since the Ld AO has not provided reasonable opportunity to the appellant to prove his case. SUBMISSION GROUND No. 1: That on the facts and in the circumstances of the case and in law, the learned CIT(A) erred in not deciding the issue on merits as the AO erred in initiating assessment proceedings u/s 142(1) of the Income Tax Act, 1961 and the same has been made arbitrarily and in contravention of the facts of the case and is bad in law. Reply A.O passed order u/s 144 on 11.12.2018 by making an addition of Rs. 1075000/- on the appellant which has never being received by assessee as it was not served to assessee being non-resident and the assessee did not even have login id password on income tax portal. Since Notice U/s 148 remains unserved to assessee so proceedings u/s 147 and 144 should be void ab initio. Further, as per Section 274 of Income Tax Act, 1961, No order imposing a penalty under this Chapter shall be made (a) by the Income-tax Officer, where the penalty exceeds ten thousand rupees; Page | 5 (b) by the Assistant Commissioner or Deputy Commissioner, where the penalty exceeds twenty thousand rupees, except with the prior approval of the Joint Commissioner. However, Approval of Joint commissioner has not being taken by the A. O before passing the order Your lordship is therefore required to take into consideration the above matter and delete the above penalty u/s 270A. GROUND No. 2: That on the facts of the case and under the law, the Id CIT(A) had erred in sustaining the addition of Rs. 10,75,000/- as unexplained income of the appellant u/s 69A of the Income Tax Act, 1961 without appreciating the fact that the amount was available with the appellant withdrawn from his NRE Account for the purpose of construction of his house during the assessment year. Reply The LD. Assessing Officer has erred in law and Facts of the case in sustaining the addition of Rs. 10,75,000/- as unexplained income of the appellant u/s 69A of the Income Tax Act, 1961 without appreciating the fact that the amount was available with the appellant withdrawn from his NRE Account for the purpose of construction of his house during the assessment year. Assessee had withdrawn the money from his NRE account for the purpose of construction of his house and gave it to Shagufta Anjum (Proprietor of Capital Cement Agency). However, due to change in construction plan in October 2016 excess cash of Rupees 10,00,000/- (Rupees Ten Lakh Only.), which was already withdrawn and given to Shagufta Anjum (Proprietor of Capital Cement Agency), was returned to him and the same was deposited in the bank A/c by the assessee. Your lordship is therefore required to take into consideration the above matter and delete such addition. Page | 6 GROUND No. 3: The AO has erred in law and on facts by making the addition of Rs. 10,75,000/- to the income of the appellant under Section 69A of the Income Tax Act, 1961("Act"), is based on non-application of mind over the exceptional circumstances created during the demonetization, which were beyond the control of the appellant. Reply: The LD. Assessing officer has erred in making addition of Rs. 10,75,000/- without considering the exceptional conditions of demonetisation announced by the Government of India and the assessee had no option left other than depositing available cash (amount earlier withdrawn from his NRE A/c) Into his bank A/c. Your lordship is therefore required to take into consideration the above matter and delete such addition. GROUND No. 4: That on the facts of the case and under the law, the Id CIT(A) had erred in sustaining the addition of Rs. 18,232/- as income from other sources without giving the benefit of deduction us 80TTA/80TTB of the Income Tax Act, 1961. Reply The Ld. AO has erred in law and Facts of the case in adding Rs. 18,232/- as income from other sources without giving the benefit of deduction u/s 80TTA/80TTB of the Income Tax Act, 1961. As per the provisions of the Act, an assessee, is allowed to claim deduction u/s 80TTA/80TTB whether or not he has filed the return of income before or after the due date or in response to any notice under any relevant section of the Act. However, such interest should be interest from savings bank account maintained in India as per section 80 TTA.
Your Lordship is therefore required to please take into consideration the deduction available u/s 80TTA and not add the entire amount as income from other sources. GROUND No. 5: That on the facts and in the circumstances of the case and in law, the learned CIT(A) erred in dismissing the appeal of the appellant without observing the principal of natural justice. Reply That on the facts and in the circumstances of the case and in law, the learned CIT(A) erred in dismissing the appeal of the appellant without observing the principal of natural justice. Learned CIT(A) has not appreciated the fact that the assessee does not live in India and therefore, he could not attend the proceedings. The appellant craves leave to make any addition or alteration in any grounds of appeal
.”
7. On the other hand, Ld. Sr. DR for the Revenue opposed these submissions and supported the orders of the authorities below.
8. I have heard Ld. Authorized Representatives of the parties and perused the material available on record and gone through the orders of the authorities below. The contention of the assessee is that he could not login the User ID alongwith password in Income Tax Portal. There was no receipt of the notice by the assessee therefore, there was no representation on behalf of the assessee. It is stated that an opportunity be given to the assessee to represent his case. Considering the totality of the facts and reasons stated in the written synopsis, I am of the considered view that there was reasonable cause for not attending and representing his case before lower authorities. Therefore, to sub-serve the principal of substantial justice, the matter is remanded back to Page | 8 the Assessing Authority for verifying the correctness of the claim of the assessee and make assessment afresh thus the assessment is set aside to the file of AO for making denovo assessment. Grounds raised by the assessee are accordingly, partly allowed for statistical purposes. In his submission, the assessee has also challenged the correctness of levy of penalty imposed u/s 270A of the Act vide order dated 28.03.2022. The initiation and levy of penalty being separate proceedings. The assessee should challenge the same by filing separate appeal. Moreover, before us as per Form No.36, the assessment order passed u/s 143(3) of the Act is under challenge. Therefore, prayer as made in the written submissions cannot be entertained and same is hereby, rejected.
In the result, the appeal of the assessee is partly allowed for statistical purposes.