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Facts
The assessee deposited Rs. 10.90 lakhs in cash during the demonetization period, leading to an ex-parte assessment under Section 144 of the Income Tax Act, 1961, by the AO, who made additions totaling Rs. 18.18 lakhs. The CIT(A) confirmed the assessment without providing a proper opportunity of hearing, despite the assessee's claims of internet issues in J&K impacting compliance.
Held
The tribunal noted the assessee's prayer for a proper opportunity to explain the source of cash deposits through maintained books. Accepting this, the tribunal remanded the case back to the CIT(A) for fresh consideration of all submissions and evidence, emphasizing that the assessee must be allowed a reasonable opportunity of being heard.
Key Issues
Whether the ex-parte assessment under Section 144 was valid without proper notice under Section 142(1) and adequate opportunity of hearing, especially considering the prevailing internet issues in Jammu & Kashmir; Whether the source of cash deposits made during the demonetization period was satisfactorily explained.
Sections Cited
Section 250 of Income Tax Act, 1961, Section 144 of Income Tax Act, 1961, Section 142(1) of Income Tax Act, 1961, Section 69A of Income Tax Act, 1961, Rule 34(4) of Income Tax Appellate Tribunal Rules, 1963
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Income Tax Appellate Tribunal, AMRITSAR BENCH, AMRITSAR.
Before: SH. MANOJ KUMAR AGGARWAL & SH. UDAYAN DASGUPTA
ORDER Per: Udayan Dasgupta, J.M.: This appeal is filed by assessee against order of Ld. CIT (A), NFAC, Delhi, passed u/s 250 of the Act 1961, dated 22.01.2025 which has emanated from the order of the AO, Udhampur, dated 18/11/2019, passed u/s 144 of the Act. 2. The grounds of appeal in Form No. 36 are as under:
1. That the assessment order passed by the Assessing Officer as well as the order of the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi 2 Assessment Year: 2017-18 thereby confirming the order of the Assessing Officer are both against the facts of this case and are untenable under the law.
2. That no reasonable and proper opportunity of being heard was allowed by the Assessing Officer before passing the said order. As such the assessment order passed is bad in the eyes of law and the same is liable to be cancelled and similarly the Ld. CIT(A) has confirmed the order of the AO without application of mind and as such the order passed by the worthy CIT(A) is also bad in the eyes of law and the same is liable to be cancelled.
3. That the AO has decided the case ex-parte u/s 144 therein assessing the total income at Rs.18,18,513/-. The AO while deciding the case u/s 144 has not applied his mind and has made the addition for the sake of addition. Similarly, the worthy CIT(A) has also grossly erred in confirming the addition made by the AO. As such the order of the worthy CIT(A) is bad in the eyes of law and the same may kindly be cancelled and the addition made may be deleted.
4. That the AO while making the addition has divided the addition into two parts i.e. addition of Rs.7,28,013/- on account of cash deposits in bank @ 8% and 6% on non-cash deposits in the bank and addition of Rs.10,90,500/- on account of deposits made in the bank during demonetization period i.e. from 09/11/2016 to 30/12/2016. The C1T(A) has confirmed the said addition in a summary manner without appreciating the facts of the case. As such the order of the worthy CIT(A) is bad in the eyes of law and the same may kindly be cancelled and the addition made may be deleted.
3 Assessment Year: 2017-18
5. That the ex-parte order passed u/s 144 is bad in the eyes of law as no notice u/s 142(1) was ever served on the assessee and as such the provisions of section 144 are not at all applicable to the present facts and circumstances of this case. The CIT(A) further did not appreciate that the AO has not followed the CBDT Circular F.No. 225/363/2017- ITA.II dated 15/11/2017 in which it was also directed that the notice u/s 142(1) shall be issued electronically as well as through Postal Services. As such the assessment order passed is bad in the eyes of law and the same deserves to be cancelled.
6. That the authorities below did not appreciate that in those days in Jammu & Kashmir, there was grave problem in the working of internet in J&K. The Parliament of India voted in favour of resolution tabled by Home Minister Amit Shah to revoke the temporary special status granted in Article 370 of Indian Constitution to Jammu & Kashmir. It may be submitted that as a result of this amendment, the whole J&K was disturbed and even the normal life was paralyzed. There was no regular working in Jammu & Kashmir. As a result thereof the whole business working of J&K was completely disturbed. As a result of this the notices could not be received and could not be complied. As such there was no justification in deciding the case ex-parte by invoking the provisions of section 144. As such, the Ld. CIT(A) was not justified in confirming the order of the AO and the addition made may be deleted. Alternatively, without prejudice to the above, the addition made is very high & excessive.
4 Assessment Year: 2017-18
That any other ground of appeal which may be argued at the time of hearing of the appeal.”
3. The brief facts emerging from record are that the assessee has deposited cash totalling to Rs.10.90 lakhs (Ten Lakhs Ninety thousand five hundred ) in his bank accounts during demonetisation period, with State Bank of India A/c No. xxxxxx26873 and in J & K Bank account no. xxxxx00165. Notice u/s 142(1) issued calling for return and in absence of any compliance to such notice, the assessment has been completed on a total income of Rs.18.18 lakhs (including an addition of Rs.10.90 lakhs u/s 69A of the Act being cash deposited during demonetisation period and addition of Rs.7.28 lakhs @ 8% of the remaining bank deposits ).
The matter was carried in appeal and the ld first appellate authority dismissed the appeal as non-maintainable, by observing that the assessee is a non filer , even though he has regular business activity under the trade name of M/s Tariq General Stores, at Banihal, Jammu and Kashmir and has been non responsive in assessment proceedings and as also evident from para – 4 of the appeal order, there has been no response to various notices issued by the first appeal authority on four separate occasion , even though a submission has been filed on the last date on 15th October, 2024 , but has not been able to explain the source of cash deposit in bank account during the demonetization period, to the satisfaction of the appellate authority.
5 Assessment Year: 2017-18
Now the assessee is in appeal before the tribunal on the ground contained in the memorandum of appeal.
The ld. AR of the assessee in course of hearing, submitted a short paper book and stated that the assessee is engaged in the business as a retailer of general goods and has filed copies of bank statements , trading and profit and loss account, balance sheet for the year, disclosing a turnover of Rs.82. 02 lakhs, and filed details of cash and non cash deposits in bank account, and submitted that cash deposits in bank accounts are sourced out of regular sale proceeds and also out of re deposit of earlier withdrawals and contented that proper opportunity of hearing has never been allowed and prayed for an opportunity to explain the source of his SBN deposits from his books as maintained by him and also stated that all requisite papers and evidences filed before the first appellate authority on 15th October, 2024, by his CA Raj Sain and Associates , has not been considered in its proper perspective.
7. The ld. DR relied on the order of the ld. CIT(A).
We have considered the materials on record and the rival submissions and are of the opinion that the source of cash deposit of SBN during demonetization needs to be satisfactorily explained through regular books as maintained by the assessee and accepting the prayer of the Ld AR of the assessee , we remand the matter back to the Ld first appellate authority , for considering all submissions , evidence and explanation of the assessee afresh , and to decide all the grounds contained in memo 6 Assessment Year: 2017-18 in form 35 on merits of the case and the assessee is also directed to file all necessary supporting documents in support of his contention and to fully cooperate in appellate proceedings. 9. The assessee will be allowed reasonable opportunity of being heard. 10. We have not expressed any opinion on merits. 11. In the result, the appeal of the assessee is allowed for statistical purposes.