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Facts
The assessee's income tax return for A.Y. 2012-13 was reopened, leading to additions by the Assessing Officer (AO) for unexplained cash deposits (Rs. 38.86 lakhs) in his savings account, amounts reflected in Form 26AS (Rs. 24.07 lakhs), and disallowance of interest expenses (Rs. 3.15 lakhs) under "Business or Profession." The Commissioner of Income Tax (Appeals) [CIT(A)] confirmed these additions because the assessee failed to provide adequate explanations and documentary evidence during the assessment and first appellate proceedings.
Held
The Income Tax Appellate Tribunal (ITAT) noted that the assessee was unable to properly represent his case before the CIT(A) due to unfamiliarity with the faceless procedure. To ensure justice, the ITAT restored the matter to the file of the CIT(A), granting the assessee a final opportunity to submit all necessary explanations and documentary evidence within 60 days.
Key Issues
Whether additions for unexplained cash deposits, amounts in Form 26AS, and disallowance of interest expenses were justified, and if the assessee should be granted a further opportunity to submit evidence.
Sections Cited
Section 250, Income Tax Act, 1961, Section 69, Section 147, Section 148, Section 143(2), Section 142(1), Section 69A, Section 271(1)(c), Section 143(3), Section 143(4)
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Income Tax Appellate Tribunal, MUMBAI BENCH “B”, MUMBAI
Before: SHRI. OM PRAKASH KANT & SHRI. RAJ KUMAR CHAUHAN
PER RAJ KUMAR CHAUHAN (J.M.):
This present appeal is directed against the order dated 30/10/2023 passed by Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC) [hereinafter referred to as the “CIT(A)”], passed under section 250 of the Income Tax Act, 1961 [hereinafter referred to as “the Act”] for the A.Y. 2012-13 that has been challenged on the following grounds of the appeal.
ITA No. 4824/Mum/2023 Nitinkumar Mulchand Shah; A.Y. 2012-13 1) On the facts and circumstances of the case and in law, the NFAC erred both on facts and in law in confirming addition made by the Learned Assessing Officer of Rs.38,13,000/- in regard to the cash deposits in saving account of the appellant by treating the same as unexplained money by invoking provision of section 69 of the Act, in spite of furnishing all the details along with the explanation at the time of hearing before the Learned Assessing Officer. The appellant has withdrawn cash from partnership firm and deposited in his account. 2) On the facts and circumstances of the case and in law, the NFAC erred in confirming the addition made by the Learned Assessing officer of Rs.24,07,205/- which is reflected in Form 26AS in spite of furnishing all the details and explanations at the time of hearing before him. The said amount is not pertaining to the appellant and he has also not claimed refund of the amount reflected in his 26AS. 3) On the facts and circumstances of the case and in law, the NFAC erred in confirming addition made by the Learned Assessing Officer who has disallowed Rs.3,15,000/- being the claim of deduction as expenses being Interest paid under the head Income from Business or Profession even after providing details and explanation before him at the time of hearing.” 2. The brief facts as culled out from the proceedings before the Ld. AO are that the assessee has filed return of income on 31/03/2014 declaring total income of Rs. 4,08,760/-. The case was reopened u/s 147 of the Act on the basis of information received after recording reasons and also after obtaining prior satisfaction of the competent authority and thereafter notice u/s. 148 of the act was issued on 29/03/2019. 3. In response to the notice u/s. 148 of "the Act", the assessee has filed return of income electronically on the 23/04/2019 declaring total income of Rs. 4,08,760/-. Subsequently, the assessing officer issued Page | 2
ITA No. 4824/Mum/2023 Nitinkumar Mulchand Shah; A.Y. 2012-13 notices under section 143(2) and 142(1) of "the Act" dated 26/04/2019 along with questionnaires were issued and served upon the assessee/appellant. However, no response to the notice u/s. 142(1) dated 26/04/2019 was filed by the assessee. 4. Another notice u/s. 141 of the act was issued on 27/05/2019 and in response to that the assessee has filed the letter dated 03/06/2019 enclosing part details. Against the notice u/s 142(1) of the Act was issued on 12/12/2019 requesting the assessee to explain the source of cash deposits, P& L A/c. and Balance Sheet, Cash book, audit report etc. of Samrat Wines. In response to that letter dated 12/06/2019, assessee’s representative filed a letter dated 19/06/2019. 5. In compliance of this notice, assessee has filed the required documents, and it is noticed that whatever details furnished by assessee are not verifiable for the simple reason that firms P&L account, Balance sheet, Capital account of the partner, etc. are not filed by the assessee although he happens to be a partner and claiming that he has received cash sales of the firm which is stated to be transferred through bank account to the firm M/s. Samrat Wines. Also, bank statements of the firm’s M/s. Samrat Wines has not been filed to verify whether assessee has transferred the receipts in cash properly into the firm’s account. 6. Again, further information was asked for by issuing notice u/s. 142(1) of the Act dated 08/12/2019 and in response to the same the assessee uploaded the explanation dated 13/12/2019, by enclosing P&L A/c., Balance Sheet and interest ledger account. However, the explanation and the document submitted by the assessee were not considered by
ITA No. 4824/Mum/2023 Nitinkumar Mulchand Shah; A.Y. 2012-13 the Ld. AO for the reasons stated in the order from para 7.1 to para 9 as under: “7.1 Firstly, in regard to the cash deposits, in Savings Bank of the assessee, of Rs. 38,86,000/- (which was one of the reasons for reopening of assessment), the assessee has replied that he received cash as under: - Sr. Name Amount of Cash No. i. Trimurti Wines Rs. 7,50,000/- ii. Samrat Wines Rs.28,50,000/- iii. Samrat Wines (Car Rent) Rs. 48,000/- iv. Jhakaria Distributors (Salary) Rs. 25.000/- v. Cash out of past savings/earnings Rs. 2,02,000/- Total Rs. 38,86,000/- The above explanations in support of the cash deposits are not convincing nor acceptable. Firstly, purpose of receiving cash from the above firms out of their sale proceeds is made clear, although it is mentioned that there is a limit of cash deposits of Rs.1,00,000/- regarding deposits in account of the firm and hence, cash deposits of above Rs 1,00,000/- are deposited in the saving account of the partners. However, the Trading A/c. of M/s. Samrat Wines shows a turnover of Rs. 5.99 crores and that of Trimurti wines shows turnover of R69.19 lakhs. If that is so, there is no logic or rationale behind depositing a small percentage of amount cash sales of the firms in the Saving Alc. of the partner. Moreover, the amount shown at Sr. No. (iii), (iv) & (v) above, are nothing but figures accommodated just to arrive at total figure of Rs.38,86,000/- since they are not supported by any material on record. 7.2 But more importantly, the assesse's explanation in Para No.4 of the letter dated 12.12.2019, uploaded on 13.12.2019, that capital introduction to the firm M/s. Samrat Wines, of Rs. 26,45,300/- was out of the cash Page | 4
ITA No. 4824/Mum/2023 Nitinkumar Mulchand Shah; A.Y. 2012-13 deposit in Saving Bank A/c. out of above-mentioned cash sales of M/s. Samrat Wines. It is indeed violation of partnership business since the assessee as a partner has a right on share of profit which will be ascertained after end of the accounting year and that share of profit as per audited accounts, will be credited to the respective partner's capital account. Moreover, this version of me explanation is not supported by bank statements of either the assessee or the partnership firms. Under these circumstances, and after careful consideration of the case, the amount of Rs. 38,86,000/- appearing in the SB A/c. of the assessee is treated as unexplained money and is added u/s. 69A of the Act. Penalty proceedings- initiated u/s. 271(1)(c) of the Act for furnishing inaccurate particulars of income. 8. Coming to the deposits reflected in Form 26AS of Rs. 24,07,205/-, it is explained by the assessee in Para no. 2 of the letter dated 12.12.2019, that the PAN of the partner was wrongly quoted in the place of the firm's PAN (Samrat Wines) where the assessee is a partner. However, this explanation is also not corroborated by relevant information like Sales of the said partnership firm which should have been produced in this office to support the explanation. However, nothing of this sort has been brought on record and I am unable to accept the bald explanations furnished by the assessee. Under these circumstances, and after careful consideration, the amounts reflected in Form 26AS pertaining to the assessee are held to be the income of the assessee and is assessed accordingly in his hand, under the head “Business Income”. Penalty proceedings-initiated u/s. 271(1)(c) of the Act for furnishing inaccurate particulars of income. 9. In the computation of total income, the assessee has claimed deduction for expenses on account of interest paid Rs. 1,77,000/- and Rs 1,38,000/- under the head "Income from Business or Profession”. However, in Para 5 of the explanations dated 12.12.2019, there is hardly any explanation justifying the reason for the deduction claimed for this sum. Hence, the claim of deduction for Page | 5
ITA No. 4824/Mum/2023 Nitinkumar Mulchand Shah; A.Y. 2012-13 Rs. 3,15,000/- (1,77,000 + 1,38,000) is hereby disallowed.” 7. Aggrieved by the assessment order passed by Ld. AO u/s 143(3) r.w.s. 147 of “the Act” appeal was filed before the Ld. CIT(A) and the said appeal was dismissed. 8. Hence, the present appeal has been filed for setting aside the impugned order of the Ld. AO as well as Ld. CIT(A) erred that Ld. CIT(A) has heard on both fact and law in confirming addition made by the assessing officer of Rs. 38,13,000/- as an unexplained money u/s. 69A of “the Act” despite furnishing all details along by the assessee. 9. The impugned order is challenged on grounds which has been reproduced earlier in this order. 10. We have heard the Ld. AR of the appellant who would submit that the appellant/assessee is ready to submit all necessary details in respect of the deduction and allowances and requested for granting permission to submit the said details before the Ld. CIT(A). It was further submitted that the assessee was ready to submit an undertaking in that regard before this Tribunal. 11. The Ld. DR on behalf of the revenue has no objection in case, the permission sought by the Ld. AR of the appellant/assessee subject to undertaking to this Tribunal, is granted to file details before the Ld. CIT(A) by restoring the matter to the file of Ld. CIT(A). 12. In order to appreciate the argument advanced by the Ld. AR of the appellant/assessee, the findings recorded by Ld. CIT(A) in para 4.2 and 4.3 in his order are relevant and reproduced as under: Page | 6
ITA No. 4824/Mum/2023 Nitinkumar Mulchand Shah; A.Y. 2012-13 4.2 “From the above, it is clear that during the course of assessment proceedings, the appellant had not submitted any explanation or documentary evidence with regard to the cash deposits of Rs. 38,13,000/- made in baraboreceipts as reflected in Form No.26AS and deduction of Rs.3,15,000/- claimed towards interest expenses. Therefore, the assessing officer made the additions. 4.3 Aggrieved with the above additions, the appellant filed an appeal raising the above grounds of appeal No. 1, 2, 3 & 4. During the course of appellate proceedings, notices under section 250 of the Income Tax Act, 1969 dated 29.12.2020, 28.09.2021, 24.06.2023, 13.07.2023, 11.09.2023 and 04.10.2023 were issued to the appellant through ITBA functionality along with an auto generated letter dated 04.11.2022 issued regarding enablement of communication window. However, in response to the notices issued on 29.12.2020 and 28.09.2021, the appellant had not given any reply. Further, in response to notices under section 250 of the Income Tax Act, 1961 issued on 24.06.2023, 13.07.2023, 11.09.2023 and 04.10.2023, the appellant kept on filing adjournment requests without submitting any explanation and written submissions along with documentary evidence(s) in support of grounds of appeal raised by the appellant. Therefore, it is evident that the appellant could not submit any explanation or documentary evidence with regard to the cash deposits of Rs 38 13:000/- made in bank, receipts as reflected in Form No. 26AS and deduction of Rs.3,15.000- claimed towards interest expenses. Hence, the appellant had nothing to explain/submit in support of his grounds of appeal Non 1.2.3 & 4. Therefore. I do not find any reason to interfere in the order under section 143(4) r.w.s. 147 of the Income Tax Act, 1961 dated 16 12.2019 for the assessment year 2012-13 in respect of additions of Rs 33,86,000, 24.07.205 43.15.000/- Accordingly, these grounds of appeal Nos 1, 2, 3 & 4 are required to be dismissed. 13. Thus, it is evident from the above findings recorded by the Ld. CIT(A) that the Ld. CIT(A) has confirmed the order of the Ld. AO on the ground that the appellant/assessee has failed to submit the
ITA No. 4824/Mum/2023 Nitinkumar Mulchand Shah; A.Y. 2012-13 explanation and documentary evidence in support of his case at the appropriate time before the Ld. AO. 14. In view of these facts and circumstances and the observation of the Ld. CIT(A) as mentioned above, the end of justice requires that the appellant/assessee be given an opportunity to submit necessary explanation and documentary evidence before the Ld. CIT(A) in respect of his claim and contention on the basis of which the Ld. AO’s order was challenged. 15. The appellant has submitted the undertaking as under: “1. I am a resident individual and partner of M/s. Samrat Wines & and M/s. Trimurti Wines. 2. I had filed an appeal before the Commissioner of Income Tax (Appeals) against the order of assessment passed under section 143(3) r.w.s. 147 of the Income Tax Act, 1961 in my own case for Assessment Year 2012-13. 3. I was unable to represent myself properly during the proceedings before the Commissioner of Income Tax (Appeals) because I was not well versed with faceless procedure and was also not able to seek any professional assistance. 4. Given an opportunity, I hereby undertake to adequately represent before the Commissioner of Income Tax (Appeals) for the above referred case and shall cooperate with the department in whatever manner possible; either my myself or through an authorized representative.” 16. In view of the above directions and undertaking of the appellant mentioned above, the file is restored to the file of the Ld. CIT(A) for giving opportunity to the appellant/assessee for submitting his explanation and documentary evidence in support of his case. The
ITA No. 4824/Mum/2023 Nitinkumar Mulchand Shah; A.Y. 2012-13 appellant/assessee will submit the required explanation and documentary evidence within 60 days. 17. In the result, appeal filed by the assessee is partly allowed for statistical purposes in the above terms. Order pronounced in the open court on 07.06.2024 Sd/- Sd/- (OM PRAKASH KANT) (RAJ KUMAR CHAUHAN) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) Mumbai / Dated 07.06.2024 Karishma J. Pawar, (Stenographer)
Copy of the Order forwarded to: 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy// BY ORDER
(Asstt. Registrar) ITAT, Mumbai