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Facts
The assessee filed an appeal against the order dated 31.01.2024, passed by the National Faceless Appeal Center (NFAC). The appeal was delayed by 50 days due to medical reasons. The Assessing Officer (AO) treated a sum of Rs.26,88,000/- deposited in bank accounts as unexplained money under section 69 of the Income Tax Act, 1961.
Held
The Tribunal condoned the delay in filing the appeal. The Tribunal noted that the Commissioner had considered the assessee's business of scrap sale and that the entire cash deposits might not be treated as unexplained. However, the Commissioner confirmed the addition to the extent of Rs.15,95,000/- for deposits during the demonetization period.
Key Issues
Whether the Commissioner erred in not considering cash withdrawals while determining unexplained cash deposits, and whether the entire deposits during the demonetization period are unexplained.
Sections Cited
250, 144A, 139(1), 139(4), 142(1), 69
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, MUMBAI BENCH “H(SMC
Before: SHRI NARENDER KUMAR CHOUDHRY & SHRI GIRISH AGRAWAL
Per : Narender Kumar Choudhry, Judicial Member:
This appeal has been preferred by the Assessee against the order dated 31.01.2024, impugned herein, passed by the National Faceless Appeal Center (NFAC)/ Ld. Commissioner of Income Tax (Appeals) (in short Ld. Commissioner) under section 250 of the Income Tax Act, 1961 (in short ‘the Act’) for the A.Y. 2017-18.
At the outset, we observe that there is a delay of 50 days in filing the instant appeal. The Assessee in the context of delay, by filing a petition along with the affidavit, has submitted that the appeal filed before the Ld. Commissioner was attended by his previous counsel, who had given his own email address i.e. cardcardkathiria@gmail.com in Form No.35. Therefore, the Assessee was under the impression that his CA should be attending the appellate proceedings before the Ld. Commissioner. However, it appears from the impugned order that the same has been passed as an ex-parte for not complying with the last notice dated 21.12.2023, whereby the Assessee was supposed to comply on 05.01.2024. Thereafter, the Assessee suffered from acute UTI and high fever and was advised complete bed rest, which resulting into non approaching the senior counsel and consequently delay of 50 days in filing the instant appeal which is neither intentional nor malafide but because of the bonafide reasons stated above and therefore interest of justice it is prayed that the lenient view may be taken and the delay may be condoned. The Ld. D.R. on the contrary refuted the claim of the Assessee qua condonation of delay.
We have considered the reason given for non appearance before the Ld. Commissioner and occurring of the delay due to medical reason as supported by filing the duly notarized affidavit by the Assessee before us. There is no reason/material to contradict the claim of the Assessee. Hence, we are inclined to condone the delay. Consequently, delay in filing the instant appeal is condoned.
Coming to the merits of the case, we observe that on verification of the bank statements pertaining to the three bank accounts mentioned below by the Assessee it was observed by the AO that during the year under consideration the Assessee had deposited the amount of Rs.26,88,000/- in total.
Name of the Bank Account No. Cash deposited 14712020000683 HDFC Bank 18,70, 500/- 1130104000075031 1,55,000/- IDBI Bank IDBI Bank 1130102000002875 6,62,500/-
The Assessing Officer (AO) therefore in order to verify the transactions, issued the show cause notice u/s 144A of the Act to the Assessee, in response to which the Assessee never responded nor filed any reply. Therefore, the AO by considering the peculiar facts and circumstances of the case observed that the Assessee has not filed any return of income either u/s 139(1) or u/s 139(4) of the Act or notice dated 12.03.2018 u/s 142(1) of the Act, treated the amount of Rs.26,88,000/- as unexplained money u/s 69 of the Act and added the same to the income of the Assessee.
The Assessee, being aggrieved, challenged the said addition before the Ld. Commissioner. As it appears from para No.4, the Assessee though submitted the relevant copy of bank statements before the Ld. Commissioner, however, thereafter virtually made no compliance.
6.1 Therefore the Ld. Commissioner proceeded with the case and observed that side ground No.2, the Assessee has claimed that the AO treated the cash deposit of Rs.26,00,000/- as unexplained income without considering the withdrawal from the said bank accounts and if at all considered then the above cash deposits might not have been construed as unexplained income of the Assessee.
6.2 The Ld. Commissioner therefore in order to decide the claim of the Assessee perused the previous return as well as of the relevant assessment year under consideration and observed that the Assessee is into the business of sale of scrap in the name and style of M/s. Naimi Enterprises and claimed to have deposited the impugned cash, which is out of his business receipts and major part of which had been credited in the current account of the said proprietorship concern held with HDFC Bank. The claim of the Assessee that impugned cash deposits are out of business activity cannot be denied keeping in view the facts of the case and the entire cash deposits throughout the financial year 2015-16 cannot be treated as unexplained source of income. Moreover, the Assessee has offered the turnover of Rs.84,32,857/- out of it the Assessee has shown the profit of Rs.6,75,205/- which is 8% of the turnover after claiming of the expenditures and deductions deductable and for the A.Y. under consideration, the Assessee by filing a defective return of income has shown its turnover more than double of its previous year but the percentage of profit offered to tax remained same i.e. 8% of the turnover.
6.3 The Ld. Commissioner also observed that from the bank account’s statement, nothing suspicious can be interpreted, however, as the Assessee failed to file the evidence for evidence of cash sources which were deposited into his bank account either during the assessment proceedings or before him, the question of genuineness of cash sources were remained unanswered.
6.4 The Ld. Commissioner ultimately by considering the peculiar facts and circumstances of the case held that the Assessee during the monetization period in the assessment year under consideration has deposited the amount of Rs.15,95,000/- only, which were not explained and therefore the same are treated as income from unexplained source and the addition made by the AO to the extent of Rs.15,95,000/- is upheld and confirmed. In effect the Ld. Commissioner granted the part relief of Rs.10,93,000/- to the Assessee.
The Assessee, being aggrieved, is in appeal before us. The main claim of the Assessee is that it was claimed before the Ld. Commissioner that the AO has not considered the withdrawals from the bank accounts and if at all should have been considered then the cash deposits might not have construed as unexplained income of the Assessee. Though the Ld. Commissioner held that entire cash deposit throughout the financial year cannot be treated as unexplained source of income and from the bank statement submitted, nothing suspicious can be interpreted, however, the Ld. Commissioner still affirmed the addition of Rs.26,88,000/- to the extent of Rs.15,95,000/- deposited during the demonetisation period in the assessment year under consideration. The Ld. Commissioner has not taken into consideration the withdrawal amounts of the Assessee and therefore the order is void and liable to be set aside.
On the contrary, the Ld. D.R. refuted the claim of the Assessee.
We have heard the parties and perused the material available on record and given thoughtful considerations to the peculiar facts and circumstances of the case. The contention raised by the Assessee to the effect that while considering the amount deposited by the Assessee and/or considering the bank statements, the authorities below should have considered the cash withdrawal as well, while considering the deposits. Thus, we are remanding the case to the file of the Ld. Commissioner as both the parties agreed to, for consideration of the cash deposits and cash withdrawals simultaneously, made during the demonetization period, to the extent of the addition under consideration as affirmed by the Ld. Commissioner, and to determine the liability afresh. The Assessee is also directed to file the evidence of cash sources and the relevant bank details/statements.
In the result, the appeal filed by the Assessee stands allowed for statistical purposes.
Order pronounced in the open court on 22.10.2024.