INCOME TAX OFFICER, BANGALORE vs. SHRI.NHOLAYIL ASHRAF, BANGALORE

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ITA 2236/BANG/2016Status: DisposedITAT Bangalore27 September 2017AY 2011-125 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal held that the CIT(A) considered additional evidence without giving the AO an opportunity to rebut, violating Rule 46A and principles of natural justice. Therefore, the order of the CIT(A) could not be sustained.

What were the facts?

The Assessing Officer (AO) made an ex-parte assessment and added unexplained cash deposits in bank accounts to the assessee's income. The CIT(A) confirmed a portion of the addition, treating it as business receipts and estimating profit at 10%.

What were the issues?

Whether the CIT(A) erred by admitting additional evidence without providing the AO with an opportunity to respond, thereby violating principles of natural justice and Rule 46A of the IT Rules.

Which sections of the Income-tax Act were involved?

Section 144

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘C’ BENCH, BENGALURU

Before: SHRI VIJAY PAL RAO & SHRI INTURI RAMA RAOShri Nholayil Ashraf,

For Appellant: Shri R.N.Prabhat, CIT(DR)
Hearing: 25/09/2017Pronounced: 27/09/2017

This is an appeal filed by the revenue directed against the order of the Commissioner of Income-tax (Appeals)-7 [CIT(A)], Bengaluru for the assessment year 2011-12.

2.

The revenue raised the following grounds of appeal:

3. Briefly,facts of the case are that the respondent-assessee is an individual and is engaged in the business of civil contracts. Return of income for the assessment year 2011-12 was filed on 28/10/2011 disclosing total income of Rs.2,76,150/-. Against said return of income, assessment was completed by the ITO, Ward-2, Kannur Range, Kannur vide order dated 30/3/2014 passed u/s 144 of the Income-tax Act, 1961 [hereinafter referred to as 'the Act' for short] at total income of Rs.60,26,900/-. While doing so, the AO made addition on account of unexplained cash deposits in the following three bank accounts: UCO bank, Bengaluru : Rs.29,56,250 ICICI Bank, Mumbai : Rs.13,70,100 ICICI Bank, Mumbai : Rs.13,00,400 ---------------- Total: Rs.56,26,750/- ========= During the course of assessment proceedings, despite granting several opportunities to the respondent-assessee, no explanation was tendered explaining sources for the above deposits. Therefore, the AO proceeded Page 3 of 5 with framing of assessment u/s 144 of the Act by making the above addition.

4. Aggrieved by the above assessment order, the respondent- assessee preferred an appeal before the CIT(A) who, vide impugned order confirmed addition only to the extent of Rs.19,61920/- and deleted the balance additions. However, even on Rs.19,61,920/-, the CIT(A) directed the AO to compute net profit at 10% treating the same receipts from business of contracts.

5.

Being aggrieved, revenue is in appeal before us. Despite due service of notice on the respondent-assessee, none appeared on behalf of the respondent-assessee. Ld.CIT(DR) vehemently contended that the CIT(A), while passing the impugned order, had considered additional evidence without giving proper opportunity to the AO thereby violating provisions of rule 46A of the IT Rules, 1962. In support of this contention, he drawn our attention to pars.7.1, 7.2, 7.3 and 7.5 of the CIT(A) order wherein the CIT(A) had considered additional evidence in the form of cash book prepared by the respondent-assessee showing receipts from contract business. Therefore, it was submitted that the order of the CIT(A) be cancelled.

6.

We heard ld.CIT(DR) and perused the material on record. From a perusal of the assessment order, it is clear that the AO made ex-parte assessment u/s 144 of the Act. It is only during the course of proceedings before the CIT(A), the respondent-assessee had produced cash book explaining sources for cash deposits made in the banks viz., UCO Bank, Bengaluru, and ICICI Bank, Mumbai. Based on this cash book prepared by the assessee, the CIT(A) had come to conclusion that only a Page 4 of 5 sum of Rs.19,61,920/- remains unexplained. Even this amount was treated as business receipts and profit was estimated at 10% of the said sum of Rs.19,61,920/-. There is nothing on record indicating that the CIT(A) had given an opportunity of rebuttal in conformity with the provisions of rule 46A of the IT Rules. Further there is nothing showing that even the amount of Rs.19,61,920/- treated as unexplained deposits had come from business source of execution of civil contracts. Thus, the order of the CIT(A) is not based on evidence nor additional evidence admitted in the form of cash book prepared by the assessee, was never put to the AO thereby infringing the provisions of rule 46A of the IT Rules and the principles of natural justice. Thus the order of the CIT(A) cannot be sustained in the eyes of law. Therefore, we remand this issue back to the file of the CIT(A) to decide the issue in appeal after affording due opportunity to the AO in accordance with law.

7.

In the result, the appeal filed by the revenue is treated as partly allowed for statistical purposes.

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