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Facts
The Revenue received information about cash deposits of Rs. 30,00,000 in the assessee's bank account during demonetization. The assessee was a non-filer, and further notices did not yield compliance. Bank statements revealed significant cash deposits and withdrawals, and the account was a joint account with Mahesh Soni. Mahesh Soni claimed the deposits and offered them for taxation.
Held
The Tribunal held that the CIT(A) did not provide adequate opportunity to the assessee. The CIT(A) should have sought clarification regarding the inconsistency in the assessee's stance and conducted inquiries, especially since the assessment was protective and Mahesh Soni had claimed the deposits.
Key Issues
Whether the CIT(A) erred in dismissing the appeal without granting a proper opportunity of hearing, and whether the addition made on a protective basis is sustainable.
Sections Cited
250, 144, 131, 69A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, JABALPUR BENCH, JABALPUR
A.Y. 2017-18 Rahman Shah, H. No. 817, vs. The ITO, Lakhanwarda Ghasanvada Bsrahira Ward-Chhindwara, M.P. Seja, Amarwada, Chhindwara, M.P. PAN:GGKPS4130P (Appellant) (Respondent) Assessee by: Sh. G.N. Purohit, Sr. Advocate Revenue by: Sh. Alok Bhura, Sr. DR Date of hearing: 20.05.2025 Date of pronouncement: 30.06.2025 O R D E R PER NIKHIL CHOUDHARY, A.M. This is an appeal filed against the order of the learned CIT(A) under section 250 of the Income Tax Act 1961 wherein the learned CIT(A) has dismissed the appeal of the assessee that was filed against the order of the ITO-Ward 1, Chhindwara under section 144 of the Act dated 30.10.2019. The grounds of appeal are under:-
1. That the learned AO as well as CIT(A) has erred in law and on facts of the case making ex party order. The assessee did not received any communication regarding the hearing of the appeal. The assessee is denied opportunity of hearing. The order should be set-aside.
2. The addition of Rs. 60,00,000/- is illegal unjustified. It is fully covered but the withdrawals from the same bank account. The addition should be deleted in toto.
3. The assessee is an agriculturist and advised not liable to Income Tax. The assessment for the Assessment year 2017-18 should be quashed in toto.
A.Y. 2017-18 Rahman Shah 4. That The applicant reserves his right to raise additional ground or grounds of appeal those may arise at the time of hearing of this appeal.”
2. The facts of the case are that the Department received information with regard to cash deposits of Rs. 30,00,000/- during the demonetization period in the bank account of the assessee maintained at Zila Sahkari Kendriya Bank, Parasiya, District Chhindwara, Madhya Pradesh and observed that the assessee was a non-filer. Therefore, a notice was issued to the assessee to file a return and upon failure to receive compliance of the same, further notice was issued along with the questionnaire to seek a response to the information available with the Department. The ld. AO also obtained the bank statement of the relevant bank account and found from the same, that during the whole year there have been 5 deposits of cash totaling to Rs. 1,10,00,000/- lacs and most of this cash has subsequently been withdrawn through cheques drawn up in the name of Mr. Mahesh. The ld. AO, then called for an account opening form, and found that account was a joint account opened in the name of the assessee Shri. Rahman Shah and Shri. Mahesh Soni S/o Shri. Gaya Prasad Soni. The ld. AO, thereafter issued summons under section 131 of the Income Tax Act 1961 to Shri. Mahesh Soni and in response Shri. Mahesh Soni appeared before the ld. AO and owned up the cash deposits. He said he would offer the same for income tax and reflect the same in the return. The assessee also appeared before the ld. AO and informed that he was a farmer by profession and though the bank account in question had jointly been opened by him and Shri. Mahesh Soni, all the deposits and withdrawals from the same belongs to Shri Mahesh Soni. The ld. AO thus concluded that the transactions in this account pertained to Shri. Mahesh Soni. However, to protect the interest of the Revenue he decided to add back the peak credit in the said account amounting to Rs. 60,00,000/- to the income of the assessee.
A.Y. 2017-18 Rahman Shah 3. The assessee being aggrieved by the order filed an appeal before the learned CIT(A). The learned CIT(A) in his order records that he issued three notices to the assessee but the assessee did not make any compliance to the same. From this, the learned CIT(A) concluded that the assessee was not interested in pursuing the appeals and therefore, he adjudicated it based on the materials available on record. The learned CIT(A) drew reference to the ground no. 2 and said that, as opposed to his earlier submissions during assessment that the cash belongs to Shri. Mahesh Soni, in this ground of appeal
, the assessee had contended that the cash deposits in his bank account were sourced from his earlier withdrawals. Since the assessee was not consistent with his claims, the learned CIT (A) held that since the submissions made by the assessee in the grounds of appeal were not backed by any supporting documents, the said money was to be assessed in his hands under section 69A of the Income Tax Act, 1961. He therefore, confirmed the addition under section 69A of the Act and dismissed the appeal of the assessee.
4. The assessee is aggrieved at this summary dismissal of his appeal. Shri. G.N. Purohit, Senior Advocate appearing on behalf of the assessee submitted that the learned CIT(A) acted in haste in dismissing the appeal of the assessee. He drew our attention to the notices issued for hearing by the learned CIT(A) and pointed out that in each case, the learned CIT(A) had given a very little time to the assessee to respond. It was submitted that the assessee was a pure agriculturist and was not liable to pay income tax. It was further submitted that the delay in appeal, filed before the learned CIT(A) had been caused due to ignorance of law and due to the Covid and it was submitted that the learned CIT(A) had accepted the arguments of the assessee that the assessee was unaware of knowledge of computers and software applications and therefore had condoned the delay. That being the case, there was no reason for the A.Y. 2017-18 Rahman Shah learned CIT(A) to act so hastily and to dismiss the appeal of the assessee, by varying the assessment order, without giving the assessee an opportunity to be heard.
5. On the other hand, Shri Alok Bhura, learned Sr. DR appearing on behalf of the Revenue submitted that the assessee had been given due opportunities to appear before the learned CIT(A) but had not availed the same and therefore, the action of the CIT(A) was in order.
6. We have duly considered the facts and circumstances of the case. We are in agreement with the learned AR that the learned CIT(A) did not provide adequate opportunity to the assessee to explain his stance before the learned CIT(A). We note that before the learned AO, it had been established that the account was a joint account and that one of the two account holders had owned up the entire deposits in the said account as belonging to him. We also observe that the assessee had submitted before the learned CIT(A), that he was a farmer by profession and not liable to pay income tax. In view of these two facts which had been brought on record, it was the duty of the learned CIT(A) to seek clarification from the assessee regarding the change in stance, before summarily rejecting the appeal of the assessee on the grounds of inconsistency. The learned CIT(A) ought to have conducted enquiries to determine whether Shri. Mahesh Soni had filed a return and owned up the deposits, since the assessment of the assessee was done in protective mode, rather than to overturn the findings of the ld. AO, on a perceived inconsistency in the stance of the assessee, taken during the assessment and appeal proceedings. We are, therefore, of the opinion that in view of the fact that the assessment of the assessee was done on protective basis, that the other account holder Shri. Mahesh Soni had owned up the deposits and offered to pay the taxes on the same and that the assessee had submitted that he was an agriculturist not liable to pay income tax, the matter is required to be re-examined by the learned