LOKESH GOYAL,JODHPUR vs. ITO, WARD-1(3), JODHPUR

Brief facts emerging from records are that the assessee is a salaried employee of M/s Kotak Mahindra Gold Mutual Life Insurance Limited, having income from salary and income from consultancy and other income as per return.

On the basis of information (AIR /CIB) extracted from ITD application, that the assessee has made investment for purchase of mutual fund amounting to Rs. 13.09 lakhs and has deposited cash amounting to Rs. 7.70 lakhs, coupled with the fact that there was no regular return on record, the ACIT- 2, Jodhpur, initiated and no notice u/s 148 has been issued by him, which makes the reassessment proceedings invalid.

The Ld. DR submitted that in the instant case no regular return of income was on record and the PAN juri iction was with the ACIT - Circle – 2, who on the basis of information gathered, applied his mind to the information gathered, recorded the reasons on 25th March, 2014, and issued the notice u/s 148, on the next day on 26/03/2014, and the ACIT-2, held PAN juri iction over the assessee on the date of issue of 148 notice. He further submitted that it is normal that notice may be issued by the AO holding juri iction on basis of PAN data, and thereafter, finding that the income returned on22nd April, 2014, u/s 148, being less than 15 lakhs, the said case was transferred to the ITO ward 1(3) holding proper territorial juri iction on monetary limit on 26/05/2014. He further submitted referring to the discussion of the AO in the assessment order (page 5 and 6)all subsequent formalities were complied and objections raised by the assessee also has been disposed off, and the objection relating to juri ictional issue raised by the assessee on th February, 2015, (after ten months of issue of 148 notice), does not have any basis because the assessment proceedings are already continuing under the AO holding proper juri iction and statutory notices u/s 143(2) has also been issued in this case by the AO holding proper juri iction, within statutory time limit, before commencing with the assessment proceedings. Lokesh Goyal v. ITO

As such the Ld DR submitted that, on the facts on record the contention of the assessee that there is no whisper in the recorded reasons regarding escaped income is not at all correct.

We have heard the rival submissions and considered the materials on record. The first two legal issues raised by the assessee in his memorandum of appeal in form 36, relating to the juri ictional issue of ACIT – circle 2, issuing the notice u/s 148, we find that on the basis of information gathered, the ACIT holding juri iction on basis of PAN data, (in absence of any regular return on record), applied his mind to the information so gathered, regarding deposit of cash in bank account and investments in mutual funds, and after application of mind has formed a reason to believe, that income has escaped assessment, and after recording reasons, has issued notice u/s 148 of the Act through speed post. On this issue the Hon'ble Apex court in I.T.A. Nos. 155 & 156/Jodh/2019 Lokesh Goyal v. ITO withdrawals by cheques were deposited in the insurance and investment account of the clients of the assessee, by way of investments for and on behalf of the clients, as well as other associates, and in lieu of such payments, cash has been collected from his clients and the said cash bas been deposited in the bank account. He further submits that this addition has been made by the Assessing Officer without any issue of show cause notice and without any opportunity to the assessee to explain the same. He further submits that for proper analysis of the transactions in the HDFC Bank A/c No. xxxxxx39935 in the name of assessee, both the debits as well as credit are to be taken into consideration which the Assessing Officer has not done. The AO has simply considered the credits in the bank account without considering the debits and the withdrawals from the said bank account and if both are considered together, it will be seen that the assessee being an employee of Kotak Mahindra Gold Mutual Life Insurance has acted on behalf of his clients and customers for collection of cash and depositing the same in his bank account and thereafter the said amount has been transferred through bank channel by way of various investments in the name of the clients.

He further submitted that as per the record, the Assessing Officer has only called for explanation regarding cash credit of Rs.7.75 lacs as per the ITD information and the assessee has submitted the same and regarding the balance amount the AO has never raised any queries before making addition. Lokesh Goyal v. ITO income at Rs.1,50,000/- thereby making an addition of Rs.56,093/-, which is very much on the higher side and the addition made on estimated may please be deleted.

The 5th ground of addition relates to interest of Rs.762/- on income tax refund which is not pressed.

The 6th ground of appeal relates to the addition of Rs.12,230/- which has been directed to be added back by the ld. first appellate authority being profits arisen out of intraday trading of equity shares (Coal India Ltd.) which has been overlooked by the Assessing Officer in course of hearing of assessment proceedings. The ld. AR submits that even though the powers of the ld. first appellate authority are co- terminus with the power of the Assessing Officer, even then also, if any addition is to be made then separate show cause notice is to be issued which in this case has not been done. As such, he prays for deletion of the said addition.

The ld. DR submitted that the source of cash deposited in bank account needs to be verified and explained by production of regular cash book which has not been done by the assessee in this case and the assessee has also not been able to co-relate the collection made by the assessee from his clients for the purpose of investments through the same bank account. Regarding the addition of Rs.56,093/- being the estimated addition from consultancy receipts, the ld. DR submitted that out of the total receipts of 2,58,500/-, the AO has only considered 58% of the total receipts as Lokesh Goyal v. ITO clients for investments in various mutual funds. As such, in the interest of justice, we set aside this issue back to the files of the Assessing Officer and direct the assessee to produce necessary supporting evidences for the purpose of co-relating and explaining the said deposits in bank account vis-a-vis withdrawals and investments on behalf of clients and for the purpose of fresh adjudication on this issue.

Regarding the grounds relating to estimation of consultancy income, we direct the assessee to produce supporting documentary evidences in support of his income declared on account of consultancy business, and this ground is also set aside to the AO for fresh adjudication. The assessee will be allowed reasonable opportunity of being heard.

Lastly, regarding an addition of Rs.12.230/- made by the ld. CIT(A) which according to him is arisen out of intraday trading on sale of equity of shares, we find that the contention of the assessee regarding non issue of any show cause is a procedural defect and we set aside this issue back to the files of the ld. CIT(A) to adjudicate on this matter afresh after issuing the necessary show cause notice, and the assessee will be allowed opportunity of hearing.

As such, on the whole appeal of the assessee is partly allowed for statistical purposes. Lokesh Goyal v. ITO adjudication on merits and ground no. 5 relating to interest on I.T refunds being not pressed is dismissed.

The assessee will be allowed reasonable opportunity of being heard.

In the result, both the appeals filed by the assessee are partly allowed for statistical purposes. Order pronounced in accordance with Rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1963 as on 16.05.2025 (Dr. M.L. Meena) Accountant Member *GP/Sr.PS* Copy of the order forwarded to: (1)The Appellant: (2) The Respondent: (3) The CIT concerned (4) The Sr. DR, I.T.A.T. (Udayan Dasgupta) Judicial Member