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Facts
The Assessing Officer (AO) reopened the assessment for AY 2017-18 after noting that the assessee had not filed a return of income and had deposited a large sum of cash (Rs. 1,69,63,416) into their bank account. The assessee eventually filed a return declaring a lower income, but failed to respond to subsequent notices. The AO treated the unexplained cash deposits as income under Section 69A. The CIT(Appeals) dismissed the assessee's appeal.
Held
The Tribunal noted that the assessee claimed the cash deposits belonged to a partnership firm, not the appellant personally, and that they had not submitted adequate proof of ownership of the bank account to the lower authorities. Given that the matter was decided ex-parte by the FAA, the Tribunal decided to remit the issue back to the AO for fresh consideration.
Key Issues
Whether the cash deposits in the bank account belonged to the assessee or a partnership firm, and whether the reassessment proceedings were validly initiated.
Sections Cited
148, 139, 69A, 144, 147, 150
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “A” BENCH : BANGALORE
Before: SHRI GEORGE GEORGE K. & SHRI LAXMI PRASAD SAHU
Per Laxmi Prasad Sahu, Accountant Member
This appeal is filed by the assessee against the order dated 07.06.2024 of the CIT(Appeals), National Faceless Appeal Centre, Delhi [NFAC], for the AY 2017-18 on the following grounds:-
“ 1. The appellate order passed by the Ld. NFAC/CIT(A) is erroneous and bad both on facts and in law.
2. On the facts and in the circumstances of the case in law the Ld. NFAC/CIT(A) has ought to have appreciated the fact that the Ld. Ld. Income tax Officer, Ward 14(1) Hyderabad has wrongly issued notice under 148 as the alleged income chargeable to tax escaped assessment is above 20 lakhs. As per the CBDT Instructions the jurisdiction over the cases whose income is above Rs. 20 Lakhs vests with Assistant Commissioner or Deputy Commissioner of Income tax and hence the proceedings initiated by the Ld. Income tax Officer, Ward 14(1) Hyderabad is bad in law.
3. On the facts and in the circumstances of the case in law the Ld. NFAC/CIT(A) has erred in sustaining the assessment order passed by the Assessing Officer under section 144 r.w.s. 147 of the I.T. Act, 1961 based on the incorrect and mistaken facts and further the very initiation of the re assessment proceedings on such mistaken facts will make the assessment order bad in law.
4. On the facts and in the circumstances of the case in law the Ld. NFAC/CIT(A) ought to have considered the fact that the bank account wherein alleged cash deposits are made did not belong to the appellant 5. Such other ground or grounds that may be urged during the course of hearing of the appeal”
Briefly stated the facts of the case are that the AO noted that as per information with the department the assessee has not filed return of income u/s. 139 and has deposited cash of Rs.1,69,63,416 in his bank account during FY 2016-17. The case was reopened after issuing notice u/s. 148 dated 30.03.2021. In response to notice the assessee filed return declaring income of Rs.3,50,650. Subsequently other statutory notices were issued, but there was no response from the assessee’s side. Further the AO issued show cause notice on 10.03.2022. The assessee failed to comply the show cause notice. Accordingly the AO observe that the assessee has nothing to say in the matter and failed to explain the source of total cash deposits of Rs.1,69,63,416 in his bank account and treated it as income u/s. 69A of the Act after relying on two judgments and passed the order on 28.08.2022. Aggrieved from the above order, the assessee filed appeal before the First Appellate Authority (FAA) on 16.04.2022.
During the appellate proceedings notices for enablement of communication was issued on 16.11.2022, in response the assessee submitted only copy of Form 35 and proof of payment of fee for filing the appeal. Thereafter other two notices were issued on 05.02.2024 and 16.05.2024, however there was no response from assessee’s side. Accordingly the ld. FAA after relying on various judgments dismissed the appeal of the assessee. Aggrieved, the assessee is in appeal before the ITAT.
The ld. AR reiterated the statement of facts before the FAA and submitted that the money belongs to the partnership firm in which he is a partner and the entire deposits were made in the firm’s bank account out of sale proceeds from its medical distribution business. The current account No.16880200000781 does not belong to the assessee and he has not made any deposits in that account from personal funds. He relied on page 16 of PB which shows the bank statement for proof of ownership of account. He further submitted that during the reassessment proceedings the assessee could not represent the case because of Covid-19 period and there was no malafide intention of the assessee. He requested that if a chance is given to the assessee, he undertook to respond to the notices and substantiate the case of the assessee with evidence before the lower authorities. He also submitted that the ld. CIT(Appeals) has not properly appreciated the submissions made by the assessee.
The ld. DR relied on the order of lower authorities and objected to sending back the matter to lower authorities.
Considering the rival submissions, we note that there is huge cash deposit in the bank account and accordingly notice was issued u/s. 148 and the assessee did not file return u/s. 139. After issuing notice the assessee filed return of income and there was no response by the assessee to the notices issued by the AO. During the appellate proceedings the assessee has submitted documents which is placed at page 6 to 57 of PB and submitted that the cash deposits belong to the partnership firm and to assessee ex partner. However we note that there is no proof of ownership of bank deposit that it belongs to the partnership firm account submitted before the CIT(Appeals). Since the matter has been decided ex parte by the ld. FAA, therefore considering the facts of the case and in the interest of justice, we remit the issue to the Assessing Officer for fresh consideration and decision as per law. The assessee is directed to file necessary documents that would be essential and required for substantiating his case that the money belongs to the partnership firm and for proper adjudication by the revenue authorities. Needless to say that reasonable opportunity of being heard be given to the assessee. The assessee is directed to cooperate with the proceedings and in case of further default, the assessee shall not be entitled to any leniency. The assessing officer shall be at liberty to re-open assessment in the hands of the partnership firm if he finds that cash deposits are in the bank account of the partnership firm by following time line as per section 150 of the Act and decide the issue as per law.
In the result, the appeal by the assessee is allowed for statistical purposes.