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Facts
The assessee, an NRI residing in the USA, failed to file an income tax return for AY 2013-14. The AO initiated reassessment proceedings under section 147 and made additions under section 69A for unexplained cash deposits, mutual fund investments, and credit card payments. The assessee's appeal before the NFAC was dismissed.
Held
The Tribunal condoned the 43-day delay in filing the appeal due to sufficient cause. The Tribunal admitted additional evidence filed by the assessee and decided to restore the matter to the AO for examination of this evidence, as the original assessment was made on a best judgment basis.
Key Issues
Whether additions made under section 69A for unexplained income were justified, and whether the assessee was provided with adequate opportunity and if procedural irregularities occurred during the assessment.
Sections Cited
144, 147, 148, 142(1), 69A, 250, 29
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 George George K, Vice President:
This appeal at the instance of the assessee is directed against the CIT(A)’s Order dated 19.04.2024, passed under section 250 of the Income Tax Act, 1961 (hereinafter called ‘the Act’). The relevant Assessment Year is 2013-14.
There is a delay of 43 days in filing this appeal. Assessee has filed an application for condonation of delay stating therein the reasons for the belated filing of this appeal. On perusal of the reasons stated for late filing of the appeal, we are of the view that no latches can be attributed to the assessee as there is sufficient cause for belated filing of this appeal. Hence, we condone the delay and proceed to dispose off the matter on merits.
Brief facts of the case are as follows:
Assessee is an NRI residing in USA since 1967. According to the assessee, for the Assessment Year 2013-14, no return of income was filed since for the relevant Financial Year, the income was below the income chargeable to tax. The AO issued notice under section 148 of the Act on 25.09.2017 as well as several notices under section 142(1) of the Act, directing to explain the source of cash deposits, investments in Mutual Fund and Credit Card payments. It is stated that due to assessee’s residence in USA, these notices were not noted and went unacknowledged. Consequently, assessment under section 144 r.w.s 147 of the Act was passed on 06.12.2018. In the Assessment Order completed, additions were made under section 69A of the Act, as under: a. The assessee deposited Rs.13,22,000 into a bank account during impugned assessment year. The AO deemed this amount unexplained b. During the assessment year in question, the assessee made investments in mutual funds totaling 95,00,000. The AO added this amount of 95,00,000 under section 69A of the Act, on the grounds that the assessee had not provided an explanation for the source of these investments. c. Further, the payments made by the assessee totaling Rs.10,39,719 to American Express Bank and Kotak Mahindra Bank, along with an additional Rs.7,00,000 for other expenses, were similarly treated as unexplained. The AO cited the lack of explanation for these payments as the basis for the additions.
Aggrieved by the Assessment Order completed under section 144 r.w.s. 147 of the Act, assessee preferred appeal before the First Appellate Authority (FAA). The assessee submitted additional documents and requested time to provide further evidence citing difficulties in obtaining records from over 10 years ago. Despite the assessee’s plea for more time, the National Faceless Appeal Centre (NFAC) upheld the additions relating to cash deposits, mutual funds purchases and credit card payment vide the impugned order dated 19.04.2024.
5. Aggrieved by the NFAC’s Order passed under section 250 of the Act, assesse has filed the present appeal before the Tribunal raising the following grounds:
1. The order of the learned Commissioner of Income–tax (Appeals), National Faceless Appeal Centre (NFAC) dated 19-Apr-2024 passed under section 250 of the Income-tax Act, 1961 (“the Act”) insofar it is against the Appellant, is opposed to the law, weight of evidence, facts and circumstance of the Appellant’s case.
2. The order is passed against the principle of natural justice and thus, is liable to be quashed.
3. It is a well-established principle that a notice issued by the Income Tax Department must be properly signed to validate its authenticity and legal effect. In this case, the notice under Section 148 of the Act, has not been duly signed, neither manually nor digitally. In the absence of a valid signature on the said notice for the reopening of proceedings under Section 148 should be considered as null and void.
4. The learned Assessing Officer has erroneously invoked the provisions of section 69A in the law, facts, and circumstances of the case. The application of section 69A appears to be unjustified and not in accordance with the true nature of the transactions under consideration.
Despite the assessment being conducted under the 'e-proceedings' scheme, there is no assessment order reflected on the Income Tax portal. While notices were issued electronically under 'e- proceedings', the assessment order was passed manually. This raises concerns regarding the procedural irregularity of the assessment process.
The learned Assessing Officer has failed to provide sufficient justifications and reasoning for the impugned additions of alleged income in the assessment order. Merely referencing the notices issued during the assessment proceedings, including the show cause notice, without substantive explanations, renders the assessment order a non- speaking order. The lack of detailed justifications and reasoning in the assessment order undermines the principles of natural justice and due process. The assessment order, being non-speaking and lacking substantive explanations for the additions made, is invalid in law and fails to meet the required standards of a valid assessment.
The learned NFAC erred by upholding the cash deposits of Rs. 13,22,000/- as additions under section 69A of the Act, disregarding the appellant's explanations regarding the genuine source of the impugned cash deposits during the appeal proceedings and passed adverse order in haste.
8. The learned NFAC erred by upholding the Investment in mutual of Rs. 95,00,000/- as additions under section 69A of the Act, disregarding the appellant's contention that the impugned investments were made out of funds transferred by the Appellant from its source of income in USA.
9. The learned NFAC erred by upholding the payments of Credit card bill & other payments of Rs. 10,39,719/- and Rs. 7,00,000/- respectively as additions under section 69A, disregarding the appellant's contention that the impugned payments were made out of funds transferred by the Appellant from its source of income in USA. 10.The Appellant craves leave to add, alter, substitute, and delete any or all the grounds of appeal urged above.
6. Assessee has also filed additional evidence under Rule 29 of the Income Tax (Appellate Tribunal Rules), 1963, such as bank statements evidencing payment for investment in mutual funds, confirmation with regard to sale of gold jewellery, etc.
7. The learned AR submitted that the CIT(A) ought to have granted adequate opportunity to the assessee to represent his case. It was submitted that on the facts of the instant case, there is violation of principles of nature justice and prayed that the matter may be restored to the files of the AO since assessment completed was a best judgment assessment. As regards the legal issues, the learned AR submitted that the matter may be kept open.
The learned DR strongly supported the Orders of the AO and CIT(A).
We have heard the rival submissions and perused the material on record. Assessment under section 144 r.w.s. 147 of the Act was completed since assessee did not respond to the notices issued under section 148 of the Act as well as to several notices issued under section 142(1) of the Act. Assessee submits that the notices issued were not served on the assessee as he was residing in USA since 1967. Before the FAA, assessee had submitted the additional evidences and requested further time citing difficulties in obtaining records from over 10 years. This request was made vide letter dated 15.04.2024. However, the NFAC, without heeding to the assessee’s request, upheld the additions made under section 69A of the Act. One major addition that is made is with regard to the investment made in mutual funds totaling to Rs.95 lakhs under section 69A of the Act. Assessee in additional evidences has clearly pointed out from the statements of bank accounts that these investments are from bank transfers. The additional evidence now filed before the Tribunal goes to the root of the matter and in the interest of justice and equity, we admit the same on record. Since additional evidence is taken on record, the same needs to be examined by the Revenue authorities. Since the assessment has been completed on best judgment basis, we deem it appropriate to restore the matter to the AO for examination of the additional evidence / material produced before the CIT(A) and ITAT. As regards the legal issue raised, we leave open the same. The assessee is directed to co-operate with the Revenue and shall not seek unnecessary adjournments in the matter. It is ordered accordingly.
In the result, appeal filed by the assessee is allowed for statistical purposes.