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Facts
The assessee's case for AY 2017-18 was selected for limited scrutiny due to large cash deposits during demonetization and abnormal sales. Despite multiple notices from the Assessing Officer (AO) and the First Appellate Authority (CIT(A)), the assessee failed to comply, leading to an ex-parte assessment under Section 144 with an addition of Rs. 1,73,11,900/- under Section 69A. The CIT(A) partly allowed the appeal, granting relief by directing tax at 30% with surcharge, instead of the 60% charged by the AO under Section 115BBE.
Held
The Income Tax Appellate Tribunal (ITAT) observed the assessee's persistent non-compliance before all lower authorities. Considering the lack of proper representation, the Tribunal set aside the orders of the lower authorities and remitted the matter back to the Assessing Officer for a de novo assessment, directing the AO to provide the assessee a proper opportunity of being heard and the assessee to cooperate by furnishing all relevant information.
Key Issues
Whether the addition under Section 69A was justified due to the assessee's non-compliance, and the correct application of Section 115BBE regarding the tax rate for unexplained cash deposits after the demonetization period amendment.
Sections Cited
115BBE, 69A, 143(2), 142(1), 144, 68, 69D
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH ‘F’: NEW DELHI
This appeal has been filed by the Revenue against the order of Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [“Ld. CIT(A)”, for short], dated 31/08/2023 for Assessment Year 2017-18. Whereas the Assessee has filed Cross Objection.
The grounds raised by the Revenue are as under:
“ Ld. 1 Ld. CIT(A) erred in allowing relief to the Assessee by directing to charge tax @ 30% with surcharge of 25% as against the tax charged by the AO at 60% with surcharge of 25%. The decision given by the Ld. CIT(A) is not acceptable. Although, it is correct that the provisions of section 115BBE of the Act as amended were brought into the Act by Taxation, Laws (Second Amendment) Act, 2016, however, the said amendment has been made effective from 01.04.2017 and hence applicable to the impugned assessment year i.e. AY. 2017-18. Therefore, the amendment in question is not retrospective as claimed by the assessee and allowed by Ld CIT(A). Though, the intention of the Legislature was to bring the amendment was to tax the unexplained assets after demonetization but the amendment covers all sections from 68 to 69D of the Act irrespective of whether the undisclosed assets found/taxed are prior to or after the demonetization period.” Grounds of Cross Objection filed by the assessee. “1. That the Learned Commissioner of Income Tax has erred in sustaining the entire addition of Rs. 1,73,11,900/- made by the Assessing Officer considering the deposit of cheque and cash for the full year as made during the demonetization period, though the same is for before | during | and post demonetization period of the year.
3 C.O. No.149/Del/2023 ITO vs. Rahul Pokhriyal 2. That the assessee craves indulgence to amend, alter, add or modify any or all the grounds of cross objection and/or take additional grounds of cross objection.” Additional Grounds of Cross Objection No.3 3. That the assessee has not been above to avail of the opportunities of hearing before the Ld. Authorities below, it is therefore, prayed that the assessee be given a chance to present its facts of the case before the AO, and hence the proceedings may please be restored before the AO.
At the time of hearing, it is brought to our notice that assessee has filed his return of income on 29/07/2017 declaring total income of Rs.3,54,540/-. The case was selected for limited scrutiny under CASS for the reason that large cash deposits during demonetization period and abnormal increase in sales with decrease in profitability as compared to preceding previous year.
The notices u/s 143(2) and 142(1) were issued and served along with specific questionnaire. In response, the assessee has not furnished any information after several notices issued to the assessee, since, there is no response, final show cause notice was issued u/s 144 of the Act and even then no compliance from the assessee. Accordingly, the assessment was completed u/s 144 of the Income Tax Act, 1961 (‘the Act’ for short) with the addition u/s 69A of the Act to the extent of Rs.1,73,11,900/-.
Aggrieved with the above order, the assessee preferred the appeal before the NFAC, Delhi. After filing the appeal, several notices were issued to the assessee from NFAC and even then assessee has not complied to the various notices. Since, non compliance from the assessee, the appeal was decided on the basis of information available on record and, accordingly, the same was partly allowed with certain relief u/s 115BBE of the Act.
Aggrieved with the above order, the Revenue is in appeal before us, raising issue u/s 115BBE to the extent of relief granted by the First Appellate Authority. At the same time, the assessee also filed Cross Objection before us against the additions made u/s 69A of the Act.
After considering the rival submissions and material placed on record, we observed that the assessee has not complied with the various notices issued by the Assessing Officer as well as First Appellate Authority. The conduct of the assessee in not complying to the various notices issued by the Lower Authorities and not appropriately. Even before us, the assessee has not filed the appeal but filed the ground only under Rule 27 of ITAT Rules. This shows the assessee is either ignorant or not having proper guidance. In our view, the assessee needs one more opportunity to meet the overall justice. Since, no representation was made before the Lower Authorities, this matter should go back to the Assessing Officer to reassess the income de novo. Accordingly, we direct the assessee to cooperate with the Assessing Officer by filing the relevant information as called for by the Assessing Officer as per original notices issued u/s 142(1) of the Act or as the case may be, the Assessing Officer may ask for the further information to reassess the income. The assessee is direct to submit the information without taking unnecessary adjournments. Accordingly, we remit this issue back to the file of Assessing Officer to reassess the income de novo with the direction to give proper opportunity of being heard to the assessee. Accordingly, the appeal filed by the Revenue and C.O. filed by the assessee are allowed for statistical purposes.
In the result, the appeal filed by the Revenue and C.O. filed by the assessee are allowed for statistical purposes.
Order pronounced in open Court on 03rd May, 2024.