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Facts
The Assessing Officer (AO) initiated assessment based on the assessee's cash deposits during the demonetization period, leading to additions as unexplained income and business receipts. The assessee contended that these deposits were from the sale of old vehicles and opening cash in hand. The assessment was completed ex-parte under section 144, and the CIT(A) upheld this order, also ex-parte, citing the assessee's non-compliance.
Held
The Tribunal found that the assessee was not given a proper and effective opportunity of being heard, especially given the ex-parte nature of both the original assessment and the first appeal. Therefore, the Tribunal set aside the CIT(A)'s order and remanded the case back to the Assessing Authority for a fresh assessment, instructing to provide the assessee with a reasonable opportunity to present their case.
Key Issues
Whether the ex-parte assessment under section 144 and the ex-parte order of CIT(A) were valid without providing adequate opportunity of being heard and proper service of notice under section 143(2) of the Income Tax Act. The key issues also include the correct classification of cash deposits (sale proceeds vs. unexplained income) and the applicability of various sections including 44AD, 69A, and 115BBE.
Sections Cited
144, 143(2), 143(3), 282, 142(1), 44AD, 145(3), 69A, 115BBE, 271AAC, 270A, 234A, 234B, Information Technology Act
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Income Tax Appellate Tribunal, DELHI “SMC” BENCH: NEW DELHI
Before: SHRI KUL BHARAT
ORDER
PER KUL BHARAT, JM :
1. The present appeal filed by the assessee is directed against the order passed by Ld.CIT(A), National Faceless Appeal Centre (“NFAC”), Delhi dated 09.01.2024 for the assessment year 2017-18.
The assessee has raised following grounds of appeal:-
“The Id CIT (Appeals) erred in rejecting the appeal summarily (non- speaking) without deciding each ground of appeal
separately and without considering the facts on the file of AO.
2. The Id CIT (A) posted notice for hearing only on ITBA portal and no notice as per old modes or by email was sent to the appellant. As per a decision of Delhi High Court reported as Suman Jeet Agarwal vs ITO 449 ITR 517 (Delhi), the posting of notice only on ITBA portal is not proper service as per Information Technology Act and thus non- est, in the light of provisions of sec 282 of Income Tax Act. So, no valid and effective opportunity as prescribed in law was given to the appellant to present his case. The order of CIT (A) be cancelled.
3. The assessment u/s 144 has been made without assuming valid jurisdiction as per law as after ITR being filed, no notice u/s 143 (2) has been issued by AO. To make as assessment u/s 143 (3) or 144, this is a necessary pre condition and for want of notice u/s 143 (2), the order under appeal is without jurisdiction and is thus invalid. ACIT vs. Hotel Blue Moon 321 ITR 362 (SC) and CIT vs Laxman Das Khandelwal 417 ITR 325 (SC) etc. Kindly annul the assessment order dt 13/11/2019.
The show cause notice and all earlier notices were only for cash deposited into bank during demonetisation period amounting to Rs 13,39,300/-. However beyond this, the AO in assessment order made another addition for Rs. 178,724 being 8% of Rs 22,34,050 (cash deposited into bank a/c other than in demonetisation period). It is not correct/justified as that part of income was never looked into/ enquired into by AO and no opportunity was given for explaining the same. 5. The ITR filed on 04/07/2019 disclosed income u/s 44 AD at Rs. 248600 and the reduction of this income must be made out of income as assessed by the AO. This income was @ 8% of turnover of Rs 2166200 and the cash deposit into bank a/c accepted as sale proceeds by AO must be reduced by already declared income/turnover.-CIT vs Surinder Pal Anand (2010) 6 taxmann.com7(P&H). ITR filed must be considered by AO which is missing. 6. As per assessment order, details etc. were field before AO and cash book was also shown to AO in support of cash in hand and deposit of cash into bank. The AO has not found any defect/ fault in cash book and is absence thereof rejection of books of accounts and not invoking proviso to sec 145 (3), the same is not correct nor legally valid. No opportunity was ever given for the same.
Cash deposit into bank a/c is out of opening cash in hand out of income in earlier years. It appears in cash book also and AO has not comment/rejected it in any manner. The cash deposit as adopted by AO, included the opening cash in hand and it cannot be income for the year under appeal. From turnover figure as adopted, opening cash in hand has to be reduced and only net balance turnover 8% may be applied. Further cash in hand at the beginning of demonetisation period had to be deposited into bank a/c.
Only the peak credit or a fixed percentage (sec 44AD) or so of total deposit may be taxed on the entire deposit in bank. Authorities and ITAT. have held that only net income is taxable and not the entire (100%) sale proceeds. Direction may be issued to lower authorities for the same. Kindly consider ITAT Amritsar Bench decision in Navdeep Sood vs. ITO in ITA 383/Asr/2019 order dt 30/06/2022 reported as 98 ITR (Trib)/(Asr ITAT). Etc. 9. Cash deposit all-round the year is out of sale of old cars and the business did not stop during demonetisation period. Deposit of cash during that period is not excessive nor unreasonable The separately 100% addition for cash deposited into bank a/c during demonetisation period, is not as per law and only 8% thereof must have been treated as business income and not 100% thereof as income. No business gives 100% profits when before and after demonetisation, profit has been found to be only 8% Income tax, I.T. law do not make separate provision to deal with cash deposited being sale proceeds during demonetisation period and before/after it. 10. The appellant denies invocation of sec 115 BBE whereas this is a case of sales and not of addition for u/s 69A. The deposit in bank a/c are out of sale proceeds of old vehicles and not undisclosed income and sale proceeds of cash collected earlier had to be deposited into bank a/c. Cash Book for the year was shown to AO during assessment (mentioned also in asst. order) and this fact was not denied by AO. So, addition u/s 69A and consequential invocation of sec 115BBE be kindly deleted.
The appellant objects to initiation of penalty proceeding u/s 271 AAC and 270A as is in not a case of unexplained income and only of deposit of sale proceeds into bank a/c.
The appellant prays that interest charged u/s 234A/2348 be also deleted as no addition is called for in this case and the asst. order is without assuming a valid jurisdiction.”
Facts giving rise to the present appeal are that Assessing Officer (“AO”) was having information regarding deposits of cash by the assessee amounting to INR 13,39,300/- held with Punjab National Bank, Karnal Spl SSI Branch during demonetization period i.e. 09.11.2016 to 30.12.2016. The AO called upon the assessee to file Income Tax Return (“ITR”) on 09.03.2018. But in response thereto, no ITR was filed by the assessee as per the AO. The case was taken up for scrutiny assessment. In response to the notice dated 27.05.2019 issued u/s 142(1) of the Income Tax Act, 1961 (“the Act”), Ld.AR for the assessee filed reply and other documents on behalf of the assessee. During the course of assessment proceedings, the AO asked the assessee to produce Shri Naveen Sharma, Shri Ankit, Shri Deepak Chadha and Shri Mukesh Jain to substantiate its claim that the assessee is engaged in the business of sale and purchase of old vehicles. The assessee failed to produce the aforesaid persons. Therefore, the AO proceeded to make addition of INR 13,39,300/- as unexplained income. Further, perusing the bank account statement of the assessee, it was noted by the AO that there was total credit of INR 35,73,350/- in the bank account of the assessee during the relevant Page | 4 Financial Year. After excluding the cash deposit of INR 13,39,300/-, the AO treated the amount as business receipt and applying the provision of section 44AD of the Act of the total turnover, made addition of INR 1,78,724/- and assessed the income of the assessee u/s 144 of the Act at INR 15,18,024/- vide order dated 13.11.2019.
4. Aggrieved against this, the assessee preferred appeal before Ld.CIT(A) who after considering the submissions, dismissed the appeal of the assessee and sustained the addition ex-parte to the assessee..
Aggrieved against the order of Ld.CIT(A), the assessee is in appeal before this Tribunal.
The assessee has assailed the correctness of the impugned ex-parte order on multiple grounds. Ld. Counsel for the assessee vehemently argued that Ld.CIT(A) failed to consider the submissions made by him and the material placed before him. He submitted that no meaningful opportunity was given to the assessee. Moreover, legal objection was taken about the issuance and service of notice u/s 143(2) of the Act. He prayed that the matter may be remanded to the Assessing Authority. The Assessing Authority has also passed order u/s 144 of the Act.
7. On the other hand, Ld. Sr. DR for the Revenue opposed these submissions and supported the orders of the authorities below. He submitted that Ld.CIT(A) had given sufficient opportunity to the assessee.
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. Ld.CIT(A) dismissed the appeal of the assessee by observing as under:-
3. “It is pertinent that in order to decide this appeal in a timely manner, a number of notices/communications/correspondences were made through ITBA portal to the appellant, viz., communications dated 13.01.2021,08.12.2023,,18.12.2023 and 27.12.2023. However, there has been no compliances from the part of the appellant till date. There is no gainsaying that once the appeal is filed by the appellant, it is obligatory on its part to purposefully and co- operatively pursue the same in a worthwhile manner, which the appellant has evidently failed to do. Hence, in view of the aforesaid total non-compliance of the instant appeal on the part of the appellant, the instant appeal is adjudicated and disposed of, as under, ex-parte, primarily on the basis of documentation available on record. The appellant has failed to avail the opportunity to file / furnish the submissions / documents in support of the grounds of appeal
though the appellant was offered for sufficient opportunity to file / furnish the submissions during the course of appellate proceedings. Furthermore, it is pertinent that the appellant has not sought any adjournment during the appellate proceedings.
4. In the result, the appeal of the appellant is dismissed.” 8.1. It is also noted that before the AO, the assessee had attended the proceedings through his AR. But due to non-compliance on behalf of the assessee, the AO made assessment u/s 144 of the Act. Therefore, considering the facts that the assessee had raised certain objections against the issuance of notice u/s 143(2) of the Act and also the order of the First Appellate Authority is ex-parte to the assessee. Further, it is noted that the AO also passed a best assessment order u/s 144 of the Act. Therefore, looking to the totality of the facts, I am of the considered view that in the interest of natural justice, the assessee should have been afforded adequate opportunity for effective representing his case. Therefore, the impugned order is hereby, set aside and the assessment is restored to the file of Assessing Authority to frame the assessment afresh after giving reasonable opportunity of being heard to the assessee. Grounds raised by the assessee are accordingly, allowed for statistical purposes.
In the result, the appeal of the assessee is allowed for statistical purposes.