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Income Tax Appellate Tribunal, SMC-A BENCH : BANGALORE
Before: SHRI CHANDRA POOJARI & SMT BEENA PILLAI
IN THE INCOME TAX APPELLATE TRIBUNAL SMC-‘A’ BENCH : BANGALORE BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT BEENA PILLAI, JUDICIAL MEMBER
ITA No. 304/Bang/2024 Assessment Year : 2017-18
Shri Boregowda Rajanna, No. 37, 2nd Cross, The Income Tax 3rd Main, Anjaneya Nagar, Officer, Near National Co-op. Bank, Ward – 3(3)(1), B.S.K. 3rd Stage, Bangalore. Bangalore – 560 085. Vs. PAN: AEIPR8081E APPELLANT RESPONDENT
Assessee by : Shri Ravishankar, Advocate Revenue by : Shri Narendra Kumar Naik, Addl. CIT (DR)
Date of Hearing : 02-05-2024 Date of Pronouncement : 10-05-2024 ORDER PER BEENA PILLAI, JUDICIAL MEMBER Present appeal arises out of order dated 28.12.2023 passed by NFAC for A.Y. 2017-18 on following grounds of appeal: “1. The impugned order passed by the learned Commissioner of Income-tax [Appeals] u/s 250 by upholding the Assessment order of the learned assessing officer passed under Section 144 of the Act to the extent which is against the appellant is opposed to law, weight of evidence, probabilities, facts and circumstances of the Appellant's case.
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The appellant denies his liability with regard the total Income confirmed by the CIT(A)-6 amounting to Rs. 15,00,000/- as against the income reported by the appellant of Rs nil/- (additions of Rs 15,00,000/ -) on the facts and circumstances of the case. 3. The learned CIT(A) ought to have provided meaningful opportunity and not as mere formality, for 5 days, that too uploading notice online on portal after substantial period of long time after filing appeal. Finding of Ld CIT(A) as "no clarification is given for any deficiency letter" / "not providing good reason for exemption" / "no response" and not interested in pursuing appeal is perverse finding contrary to weight of evidence available on record. 4. The Ld. CIT(A) is not justified to pass an order of dismissed of an appeal as "failure of condition for admitting an appeal", by applying the provision of section 249(4)(b). The said provision is not applicable in present case, the need of advance tax is not applicable when assessee income is below taxable limit. 5. The Ld. Hon'ble CIT(A) is not justified in passing order without making any reference or reason on merits of the matter. The Ld. CIT(A) is obligated to adjudicate the matter on merits under section 250(6) even if order is passed ex- party. 6. The Learned CIT(A) not justified in upholding arbitrary additions of AO under section 69A under the assumption that the Rs 15,00,000/- as unexplained cash deposit without any material evidence of any such cash deposits is liable to tax. 7. The Learned Assessing officer is not justified in levying tax on personal savings, without proving that the amount deposited into bank due to demonetisation is an income of an assessee to fall within the scope of section 4. 8. The Learned CIT(A) not justified in upholding addition under provisions of section 115BBE and taxing entire personal savings which was deposited as a duty towards nation's call during demonetisation period. The assessee had is retirement amount and matured FD's and post office savings all amounting to 40 lakhs (which is only life time savings). Out of which 15 lakhs was in his own hands. Other Issues
Page 3 ITA No. 304/Bang/2024 9. Principle of Natural Justice violated: The learned CIT(A) passed an order without providing sufficient opportunity, more specifically the learned AO has passed an order even without serving any hearing notice, the matter was dismissed for non-response to clarification on column 8 and 9, of form 35 on allegation of incomplete form 35. The said finding of fact is arbitrary and mere surmise. The form is complete in all aspects. Hence the order passed by the Learned CITA(A) is against the principles of natural justice and thus the additions confirmed needs to be deleted on the facts of the case. 10. Interest: Without prejudice to the right to seek waiver as per the parity of reasoning of the decision of the Hon'ble Apex Court in the case of Karanvir Singh 349 ITR 692, the Appellant denies herself liable to be charged to interest under section 234 B of the Income Tax Act on the facts and circumstances of the case. Further the levy of interest under section 234 B of the Act is also bad in law as the period, rate, quantum and method of calculation adopted on which interest is levied are all not discernible from the assessment order and are wrong on the facts of the case. 11. The appellant craves leave of this Hon'ble Tribunal to add, alter, modify, delete or substitute any or all of the above grounds of appeal as may be necessary at the time of hearing of the appeal. 12. For these and other grounds that may be urged at the time of hearing of appeal, the Appellant prays that the appeal may be allowed for the advancement of substantial cause of justice and equity.”
Brief facts of the case are as under: 2.1 The assessee is an individual, having his income below basis exemption limit for the A.Y. 2017-18, does not have any obligation to file his return u/s. 139(1) i.e. the assessee is having only pension income from Karnataka Food & Civil Supplies Corporation Ltd. as District Manager, retired during F.Y. 2011- 12.
Page 4 ITA No. 304/Bang/2024 2.2 The assessee received notice u/s. 142(1) calling for the return of income in respect of which the assessee is assessable for the year under consideration. The assessee responded by submitting that Rs. 15 Lakhs deposited in cash during the demonetisation period was withdrawn by the assessee that was received at the time of retirement during FY 2011-12. It was submitted by the assessee that as he did not want to keep the amount in his bank to avoid the disclosures to his own relatives, he withdrew all the amount and kept with him in the safe locker under his own custody.
2.3 It was submitted that during the demonetisation period, Rs. 500 and 1000 currency were declared as illegal tender and therefore assessee had to deposit the entire Rs. 15 Lakhs into the bank immediately. It is submitted that the bank statement details will be in support of the explanation provided by the assessee as above.
2.4 The Ld.AO disbelieved the explanation offered by the assessee, made addition of the entire amount of cash deposited in the bank during the demonetisation. The Ld.AO also did not consider that assessee had not filed income tax returns during the relevant year under consideration as the income during the year was below taxable limit and that assessee was in the belief that he is not liable to file the return.
2.5 Aggrieved by the order of the Ld.AO, assessee preferred appeal before the Ld.CIT(A).
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2.6 Before the Ld.CIT(A), notices were issued to the assessee. The Ld.CIT(A) noted that assessee had not filed the return of income and accordingly the deficiency letters dated 15.12.2023 and 21.12.2023 was issued. As the assessee did not comply with the said letters, the Ld.CIT(A) held that the appeal was not eligible for admission as per section 249(4)(b) of the act. The Ld.CIT(A) thus dismissed the appeal.
2.7 Aggrieved by the order of the Ld.CIT(A), assessee is in appeal before this Tribunal.
Before this Tribunal, the Ld.AR submitted that sufficient opportunity of being heard was not granted to assessee. Only two notices were issued to assessee. He submitted that before invoking the provisions of section 249(4)(b) of the act, assessee was not put to notice. The Ld.AR submitted that even otherwise, the provisions of section 249(4) deals with the form of appeal and limitation. He submitted that sub-section (4) deals with admission of appeal. It is the submission of the Ld.AR that no appeal shall be admitted unless at the time of filing the appeal, the assessee has paid the taxes due on the income returned by him. Sub-clause (b) of sub-section (4) deals with the appeal will not be admitted unless at the time of filing the appeal, the assessee has paid an amount equal to the amount of advance taxes which was payable by him at the time of filing of appeal.
Page 6 ITA No. 304/Bang/2024 4. The Ld.AR submitted that in the present facts of the case, assessee is under the bonafide belief that the entire cash deposited during the demonetisation period (Rs. 15 Lakhs) being is retirement benefits is not taxable and since assessee did not have any other income, assessee was not required to file any return of income for the year under consideration. The Ld.AR submitted that the circumstances under which the cash was withdrawn and kept in his personal custody has not been analysed by the authorities below based on the bank statements which are self-explanatory.
The Ld.AR further submitted that proviso to section 249(4) is applicable to a situation where no return has been filed by assessee and the assessee is supposed to pay an amount equal to the amount of advance taxes which was payable by him. By such proviso the legislature has intended that whether the assessee has taken the above of appeal before the Ld.CIT(A), he should have paid atleast the admitted taxes payable before the appeal is admitted. In the present facts of the case, as the entire cash added in the hands of the assessee is disputed, there is no question of any advance tax payable by the assessee. He placed reliance on the decision of Hon'ble Karnataka High Court in case of T. Govindappa Setty vs. ITO reported in (1998) 231 ITR 892 wherein the Hon’ble Court has held as under: “……………………….What is contemplated by clause (a) of sub-section (4) of section 249 is that when there is an undisputed liability, the appeal filed by the assessee in respect of the disputed liability cannot be admitted unless the assessee pays the admitted liability. The object of clause (a) of sub-section (4) of section 249 is not to entertain the appeal where the assessee fails to pay the
Page 7 ITA No. 304/Bang/2024 undisputed tax liability. In the instant case, it is the case of the petitioner that the intimations issued were wholly illegal and on that basis the petitioner sought for rectification of the intimations issued by filing applications under section 154 of the Act; and since the first respondent failed to allow the applications filed by the petitioner or rectify the intimations issued, the petitioner had preferred appeals against the intimations issued and the orders passed under section 154 of the Act. Therefore, it is clear that though the petitioner had filed the returns, the petitioner had disputed his liability to be assessed as Hindu undivided family and pay the tax liability imposed on him. Under these circumstances, I am of the opinion that the view taken by the second respondent that the appeals filed by the petitioner cannot be admitted since the petitioner had failed to pay the tax due on income shown by him in the return filed by him is erroneous in law. Sub-section (4) of section 249 has to be construed in the backdrop of the right to appeal provided to an assessee under section 246 of the Act. Under these circumstances, while interpreting sub-section (4) of section 249 of the Act, the court will have to keep in mind the object of sub-section (4) of section 249 of the Act and also the right to prefer an appeal guaranteed to an assessee. In that view of the matter, sub-section (4) has to be liberally construed to serve the object of the right of appeal provided to an assessee, and not with a view to deprive the right provided to an assessee to prefer an appeal. When the very liability is disputed by the petitioner on the ground that the petitioner could not have been assessed as an Hindu undivided family as on the date of filing of the return and on the date of the assessment there was no Hindu undivided family in existence, the right guaranteed to the petitioner to prefer an appeal cannot be deprived by taking the view that the petitioner has failed to pay the tax due on the income shown in the return filed………………..”
The Ld.AR thus submitted that the right granted to the assessee to prefer an appeal cannot be deprived by wrongly interpreting the provisions of section 249(4) of the act.
On the contrary, the Ld.DR placed reliance on the decision of Hon’ble Hyderabad Tribunal in case of Late Smt. Rafat Ghani vs.
Page 8 ITA No. 304/Bang/2024 ACIT in ITA No. 159/Hyd/2019 by order dated 18.06.2021 for A.Y. 2010-11. The Ld.DR submitted that an identical situation was considered by Hon’ble Hyderabad Tribunal wherein the assessee had not filed any return of income and this Tribunal had upheld the application of the provisions of section 249(4)(b) of the act. He also placed reliance on the order passed by the authorities below and submitted that the Ld.CIT(A) had no choice but to dismiss the appeal of the assessee as assessee’s case fell within the proviso to section 249(4)(b) of the act. We have perused the submissions advanced by both sides.
At this juncture, it is necessary to extract the provisions of section 249(4) of the act that reads as under: “(4) No appeal under this Chapter shall be admitted unless at the time of filing of the appeal, - (a) where a return has been filed by the assessee, the assessee has paid the tax due on the income returned by him or (b) where no return has been filed by the assessee, the assessee has paid an amount equal to the amount of advance tax which was payable by him : Provided that, in a case falling under clause (b) and on an application made by the appellant in this behalf, the Deputy Commissioner (Appeals) or, as the case may be, the Commissioner (Appeals) may, for any good and sufficient reason to be recorded in writing, exempt him from the operation of the provisions of that clause.”
Sub-section (4) of section 249 of the Act, extracted above, admittedly is a substantive provision. The section provides that, no appeal under Chapter XX is admitted unless at the time of filing of the appeal, where the return is filed by the assessee, the assessee has paid the tax due on the income, or where no return
Page 9 ITA No. 304/Bang/2024 has been filed by the assessee, the assessee has paid an amount equal to the amount of the advance tax which was payable by him. Further the proviso to section 249(4) empowers the first appellate authority to exempt from the operation of the condition precedent.
In the present facts of the case, the assessee has not filed any return of income for the year under consideration and therefore the question of payment of advance tax does not arise. Further, the entire addition made in the hands of the assessee is also disputed by the assessee, as a consequence, the tax liability has not been admitted. Under such circumstances, the Ld.CIT(A) should have considered the appeal on merits instead of dismissing it by holding it as not admissible. The Ld.CIT(A) ought to have granted opportunity to the assessee to make necessary application to provide sufficient reasons for seeking exemption.
It is the submission of the assessee that the entire addition cannot be admitted as income in the hands of the assessee. For such reasons, assessee is disputing the tax that is payable on such alleged addition which has not been accepted to be assessee’s income. We are therefore of the opinion that the Ld.CIT(A) should have passed a speaking order in respect of the alleged addition in the hands of the assessee. The decision relied upon by the Ld.DR is distinguishable on the facts for the reason that there was an admitted tax liability on assessee in the event the exemption claimed therein was withdrawn whereas in the
Page 10 ITA No. 304/Bang/2024 present facts of the case, the entire addition made by the Ld.AO is disputed by the assessee more so, when, the alleged cash deposits are said to be out of withdrawals. Even otherwise, we note that in the decision relied by the Ld.DR, Hon’ble Hyderabad Tribunal remanded the issue to the Ld.CIT(A) with directions. We are of the opinion that substantial justice is to be pitted against technicalities. In the present facts, the assessee is a senior citizen. The submissions of the assessee that the cash deposited into the bank account during demonetisation period were withdrawals out of his retirement benefits should have been verified. In the interest of justice, we remand this issue to the Ld.CIT(A) with the above direction. The assessee is directed to file necessary application seeking exemption which shall be considered by the Ld.CIT(A) in accordance with law. Needless to say that proper opportunity of being heard must be granted to assessee and the Ld.CIT(A) is directed to pass speaking order in accordance with law. Accordingly, the grounds of appeal raised by the assessee stands partly allowed for statistical purposes. In the result, the appeal filed by the assessee stands partly allowed for statistical purposes. Order pronounced in the open court on 10th May, 2024.
Sd/- Sd/- (CHANDRA POOJARI) (BEENA PILLAI) Accountant Member Judicial Member Bangalore, Dated, the 10th May, 2024. /MS /
Page 11 ITA No. 304/Bang/2024 Copy to: 1. Appellant 2. Respondent 3. CIT 4. DR, ITAT, Bangalore 5. Guard file 6. CIT(A) By order
Assistant Registrar, ITAT, Bangalore