MR. RIYAZ AHMED ,CHIKAMAGALORE vs. INCOME TAX OFFICER, WARD-1, , CHIKMAGALORE

2.3 Subsequently, the case was transferred to NFAC and another notice u/s. 142(1) was issued on 14.12.2021 requiring the assessee to furnish details pertaining to cash deposits in the bank accounts. The assessee filed letter on 06.01.2022 seeking adjournment which was granted. Thereafter on 21.01.2022, the assessee submitted that, cash deposits of Rs.2,32,20,000/- made in saving bank account; and total cash deposits in assessee’s

Page 4 of 16 ITA No. 1130/Bang/2023 current account with Corporation Bank was only Rs.1,41,70,000/- as against Rs. 133.50 crores mentioned in the communications issued by the revenue. The assessee furnished bank accounts statements with cash deposits details held with Corporation Bank and SBI. The explanation provided by the assessee regarding the source of cash deposit was that, they were from previous cash withdrawals, savings and sale profits of onion and coconuts. This explanation provided by the assessee was not accepted by the Ld.AO as these were not substantiated with relevant documentary proof as regards to the sale profits.

2.4 The Ld.AO thereafter noted that return was filed in response to the notice u/s. 148 on 10.03.2022 after one year, declaring total income of Rs.1,97,570/- and agricultural income of Rs.1,55,200/-. The assessee admitted income from business of Rs.1,85,585/- and income from other sources of Rs.21,985/-. The purchases and sales declared by assessee were Rs.43,40,000/- and Rs.47,63,000/- respectively. From the belated return filed by the assessee, the Ld.AO was of the opinion that the total income offered to tax does not commensurate with the huge cash deposit in the bank accounts. The Ld.AO therefore observed and held as under: “7.2 It is seen that the assessee has e-filed return of income on 10.03.2022 in response to notice issued u/s 148. The siadreturn was e-verified on 15.03.2022. it is pertinent to mention that notice u/s 148 was issued to the assessee on 26.03.2021 giving 30 days time to submit his return of income. However, The assessee chose not file any return of income till 15.03.2022 when the limitation date to complete the assessment is 31.03.2022, leaving no time to issue notice u/s 143(2). It is pertinent to mention that a minimum time of 15 days is allowed to assessee to

Page 5 of 16 ITA No. 1130/Bang/2023 prepare his response, if allowed goes beyond the limitation date of 31.03.2022. Therefore. The return of income filed by the assessee now on 15.03.2022 is not treated as valid return for the purpose of issue of notice u/s 143(2). This is supported the judicial decision in the case of Rakesh Agarwal Vs Income Tax Officer ( Income Tax Appellate Tribunal, Delhi ) wherein it was stated as under: “Thus the issue is whether in case the return is filed as late as in the month of September. 2017 can be treated as valid return or not. The answer is clearly " No" as even after 30 days any return of income filed by the assessee would not have been taken cognizance by the Assessing Officer. There is no requirement of the law that if the return is filed any time before Assessing Officer u/s 148 read with 143(3) of the 1.T Act. The Assessing Officer should have been issued notice u/s 143(2). The question will arise then that if the assessee was issued a notice u/s 148 of the Act and he does not file any return of income till the date of framing of the assessment Order or also filed a return before passing of the assessment order u/s 143(2) of the Act. then what is the stand revenue should take?. In such case, it is not at all possible that the assessee can contest that notice u/s 143(2) should have been issued, in all such cases reassessment required to be made. The onus of filing of return of income on the assessee is responsibility which is cast upon him to be fulfilled by him, if he fails to take benefit of any of the provisions of law the assessee can not plead that he will not comply with the law and not follow time limit before the Assessing Officer and the Assessing Officer is duty bound to follow the law even in belated compliance by the assessee”. In view of the above, the assessement of the assessee is completed u/s 144 of the I.T Act without issuing notice u/s 143(2).” 2.5 The Ld.AO thus completed the assessment u/s. 144 of the act without issuing notice u/s. 143(2) of the act by treating the belated return of income filed by assessee as invalid. The Ld.AO thus was of the opinion that there was no requirement under law to issue notice u/s. 143(2) under such facts and circumstances.

Page 6 of 16 ITA No. 1130/Bang/2023 2.6 Based on the explanation offered by assessee on the cash deposits that were without any supportive documentary evidences, rejected the same.

2.7 The Ld.AO compared the purchase and sales registered with the cash flow statement and came to the conclusion that the highest cash balances as per cash flow statement was Rs.38,00,200/- which was treated as peak of unexplained cash of the assessee u/s. 69A of the act. In the absence of supportive evidences, the Ld.AO made an addition of Rs.38,00,200/- as unexplained cash credits in the hands of the assessee u/s. 69A of the act.

2.8 Aggrieved by the order of the Ld.AO, assessee preferred appeal before the Ld.CIT(A). Before the Ld.CIT(A), assessee raised the ground that order passed u/s. 147 r.w.s. 144 is without issuing notice u/s. 143(2) of the act and therefore is bad in law. The Ld.CIT(A) after considering the legal issue based on the arguments advanced by the assessee observed and held as under: “5.2.2 On the above facts and findings, the appellant at the time of appellate proceedings, submitted his contention, the relevant part of the same is reproduced hereunder for ready reference: "The Assessing Officer, passed the order on 30.03.2022 u/s 147 r.w.s 144 r.w.s. 144B, which could have been u/s 147 r.w.s 143(3) r.w.s. 144B as the appellant was relied for all the notices u/s 142(1) and show-cause notice dated 21.03.2022, and also filed the return of income in response to the notice u/s 148. But the Assessing Officer without issuing the 143(2) notice to assume the jurisdiction to reassess the income after the return has been filed, passed the order which is bad in

Page 7 of 16 ITA No. 1130/Bang/2023 law and against the Hon'ble supreme Court Judgement in the case of Hotel Blue Moon (2010) 321 ITR 362 (SC). The Assessing Officer in the assessment order, for his failure in issuing the 143(2) notices, after the return of income was filed relied on the Hon'ble ITAT, Delhi Tribunal judgment in the case of Rakesh Agarwal vs Income Tax officer, the fact of the judgment is different from the assessee's case. In the Delhi High Court judgment, the fact is that notice u/s 143(2) was issued and served on the assessee, whereas the A/R was denied that one. Due to the non-attendance of the assessee, order u/s 144 was passed. But in the petitioner's case, notice u/s 143(2) was not at all issued. When the Assessing Officer can issue the show- cause notice after a gap of 11 days, on being the return of income is filed, what prevented the Assessing officer from issuing 143(2) notices prior to the show-cause notice or along with the show-cause notice dated 21-03- 2022. Hence, the order passed without issuing the notice u/s 143(2) is bad in law, not in existence and void ab initio. At Para 7.2, of the assessment order, the A.0 stated that ''the return in response to notice u/s 148 filed on 10-03-2022 and e-verified on 15- 03-2022. leaving no time to issue notice u/s 143(2), it is pertinent to mention that minimum 15 days allowed to the assessee to prepare his reply, then, if allowed goes behind the limitation date of 3103-2022". If that was the finding of the Assessing officer, then why he has issued a show- cause notice dated 21.03.2022 to the assessee for his reply. The assessee immediately replied to the show- cause notice on 24-03-2022 only. If the 143(2) notice would have been issued to the assessee, he may not reply for that, as the said notice is issued to give an option to the assessee to come forward to produce evidence(s) or documents on which he relied to file the return of income' As such the Appellant may exercise the option or not, but the procedure laid down as per mandatory provisions of law cannot be overlooked on vague excuses." 5.2.3 I have gone through the assessment order, submission of the appellant and facts of the case. On perusal of assessment order it is noticed that the notice u/s 148 of the Act was issued to the appellant on 26.03.2021 calling upon the appellant to file return of

Page 8 of 16 ITA No. 1130/Bang/2023 income within 30 days. However, the appellant failed to comply to the same within the prescribed time. The appellant e-filed return of income on 10.03.2022 which was verified on 15.03.2023. It is not a case where the AO has missed issuance of 143(2) notice w.r.t. duly filed return in response to the notice u/s 148. Infact the AO himself has categorically recorded in the assessment order that the return furnished on 10/15.03.2023 cannot be considered a valid return as the same has been filed much beyond the time limit prescribed in the notice u/s 148. The lapse on the part of the appellant is not of a small period but the delay is of around 11 months. It is further noted that the return furnished on 15.03.2023 is just before the limitation date provided by the statute for completion of assessment i.e. 31.03.2022. Hence, considering the entire sequence of events I agree with the decision of the AO that the return filed on 15.03.2023 cannot be treated as valid return for the purpose of issue of notice u/s 143(2). The case laws submitted by the appellant are factually different from the present case as in the present case, the assessee has not filed any return prior to issuance of Section 148 notice and the AO has in the assessment order taken due cognizance of the fact of filling of return by the appellant beyond the due date. The ground of appeal raised is dismissed.”

2.9 The Ld.CIT(A) thus dismissed the legal issue raised by the assessee. On merits of the case, the Ld.CIT(A) upheld the addition made by the Ld.AO by observing as under: 5.3.3 I have gone through the assessment order, submission of the appellant and facts of the case. The appellant is a non-filer. The case was reopen based on the information of substantial cash deposits in his bank account by the appellant. The AO in the assessment order has noted that the entries in the purchase register produced before the AO did not match with the cash flow statement filed by the appellant before the AO. He has further observed that the appellant could not justify with supporting evidence the opening cash balance of Rs.16,25,000/- shown in the cash flow statement. Hence left with no option the AO based on the cash flow statement submitted by the assessee, took maximum/highest cash balance of Rs.38,00,200/-as appearing on 09.10.2013 to be the unexplained cash of the

Page 9 of 16 ITA No. 1130/Bang/2023 assessee under 69A of the Act. During the course of appeal proceedings the entire submission with respect to the addition u/s 69A made by the appellant has been reproduced in para 5.3.2 above. The only documents filed by the appellant during appeal proceedings in support of his claim are as under: 1. Details of Bank accounts. 2. Date wise Entries of cash deposits made in bank accounts. 3. Self made statement of inome, unaudited Profit & Loss Account and Balance Sheet of half page each and ITR-V of ROI e-verified on 15.03.2022. 5.3.4 From the above, it is evident that the appellant has not filed any substantive details/documents during the course of assessment as well as in appeal proceedings so as to enable verification of the claim of the appellant that the cash deposits in the bank account during the year of Rs.1,41,70,000/- were from explained sources. The appellant has erred on undernoted fronts viz. : 1. Not filing regular return of income; 2. Not filing return of income in response to the notice u/s 148 within the prescribed time limit; 3. Sales shown in P&L account is of Rs.47,63,000/- whereas the cash deposit during the year is of Rs.1,41,70,000/-. 4. Failure to reconcile the bank withdrawal with the cash deposits, in support of his claim that huge deposits are out of the withdrawals. 5. Non furnishing of bills and vouchers in support of the entries appearing in purchase and sales register; 6. Non matching of entries in purchase register and cash flow statement produced before the AO; 7. If at all it is considered that the cash deposits are from regular business of the appellant, the appellant has failed in not getting books of account audited despite the fact that cash deposited by the appellant in his bank accounts is of Rs.1,41,70,000/-; 8. Non furnishing of return of income for A.Y. 2013-14 to verify the closing cash balance for AY 2013-14 of Rs.16,25,000/-; 9. Non furnishing of any other document to verify the claim of opening cash balance of Rs.16,25,000/-; 10. The half page P&L account and balance sheet furnished by the appellant in appeal proceedings do not reflect opening and closing stock;

Page 10 of 16 ITA No. 1130/Bang/2023 11. Non furnishing of any substantial documents in appeal proceedings so as to enable this office to verify the claim of the appellant. 5.3.5 In this back drop, I find the stand of the AO more than reasonable in making the addition of Rs.38,00,200/- by applying the highest peak of cash balance as unexplained income of the appellant. The addition of Rs.38,00,200/- made u/s 69A is accordingly upheld. The ground of appeal raised is dismissed.”

2.10 Aggrieved by the order of the Ld.CIT(A), assessee is in appeal before this Tribunal.

3.1 He submitted that these issues raised are squarely covered by the decision of Hon’ble Supreme Court in case of Hotel Blue Moon reported in (2010) 321 ITR 362. The Ld.AR also placed reliance on the decision of Hon’ble Delhi High Court in case of Pr.CIT vs. M/s. Dart Infrabuild (P) Ltd. in ITA 10/2022 dated 17.11.2023 and submitted that issue of notice u/s. 143(2) is mandatory even if the return of income is filed belatedly in response to notice u/s. 148 of the act and is not a curable defect u/s. 292BB of the act. He also placed reliance on the decision of

Page 11 of 16 ITA No. 1130/Bang/2023 Hon’ble Delhi High Court in case of PCIT vs. Shri Shiv Shankar Traders reported in (2015) 64 taxmann.com 220 (Delhi). On the contrary, the Ld.DR vehemently supported the observations of the Ld.CIT(A) on this issue. He also placed reliance on the order of Hyderabad Tribunal in case of Gonuguntla Nirmala Devi vs. ACIT in ITA No. 412/Hyd/2022 vide order dated 17.08.2023.

3.2 We have perused the submissions advanced by both sides in the light of records placed before us.

3.3 Before we proceed to analyse this issue, it is necessary to understand the provisions of section 143(2) that reads as under: “Section 143(2) Where a return has been furnished under section 139, or in response to a notice under sub-section (1) of section 142, the Assessing Officer or the pres-cribed income-tax authority, as the case may be, if, considers it necessary or expedient to ensure that the assessee has not understated the income or has not computed excessive loss or has not under-paid the tax in any manner, shall serve on the assessee a notice requiring him, on a date to be specified therein, either to attend the office of the Assessing Officer or to produce, or cause to be produced before the Assessing Officer any evidence on which the assessee may rely in support of the return: Provided that no notice under this sub-section shall be served on the assessee after the expiry of [three] months from the end of the financial year in which the return is furnished.]

3.4 From the above provisions, it is clear that whether a return has been furnished u/s. 139 was in response to notice u/s. 142(1), the AO shall serve the notice u/s. 143(2) to the assessee within six months from the end of the financial year in which the

Page 12 of 16 ITA No. 1130/Bang/2023 return is furnished. Thus the requirement for issuance of notice u/s. 143(2) is filing of return u/s. 139(1)/ (4)/(5) or in response to notice u/s. 142(1) of the act with the period specified therein. Therefore it is just not a directory rather a mandatory requirement under the law for an assessing officer to issue notice u/s. 143(2), once the return of income is furnished by the assessee.

3.5 In a circumstance where a notice u/s. 148 of the act is issued, the assessee is required to furnish the return in lieu of the notice u/s. 148 within a period of 30 days from the date of service of such notice. Under such circumstances, the assessee has an option either to file a fresh return or to intimate the Ld.AO to treat the original return filed u/s. 139 in pursuance to notice u/s. 148 of the act. The decision of Hon’ble Supreme Court in case of ACIT vs. Hotel Blue Moon (supra) held that where an assessing officer for any reason repudiates the return filed by assessee in response to notice u/s. 158BC(a), the assessing officer must necessarily issue a notice u/s. 143(2) within time period prescribed.

3.6 Coming to the present facts of the case, the assessee had not filed any return u/s. 139(1)/(4)/(5) of the act. The assessment was reopened u/s. 148 and the notice was issued on 26.03.2021 giving 30 days time to the assessee to file the return of income. Undoubtedly and admittedly the assessee did not file the return of income within specified period mentioned in the notice u/s. 148, but filed the return of income on 10.03.2022 which is way

Page 13 of 16 ITA No. 1130/Bang/2023 beyond the period of limitation with a delay of over 11 months. The Ld.AO thus treated the return of income filed by the assessee with such delay and that too at the fag end of completion of assessment proceedings to be non-est. Therefore the Ld.AO proceeded to complete the assessment u/s. 147 r.w.s. 144 of the act, without issuing notice u/s. 143(2) of the act. On these facts, it is required to be determined whether a notice u/s. 143(2) of the act is to be issued or not.

3.7 The records are very clear that assessee has failed to furnish the original return of income u/s. 139 of the act, and also did not comply with the requirement of filing the return of income in response to the notice u/s. 148 of the act within the given time period. The assessee filed the return of income on 10.03.2022 which is belatedly by more than 11 months, and therefore, the return cannot be considered as a return in response to notice u/s. 148 of the act. The Ld.AO therefore rightly treated the return of income to be non-est.

3.8 It’s not the case of the assessee that subsequent to notices issued under section 148 of the Act, the assessee sought for extension of time to file the return of income or that the learned Assessing Officer granted time. Assessee is expected to file the return of income within such period, as may be specified in the notice under section 148 of the Act or the assessee is expected to seek the extension of such time on the basis of an application made in this regard. Neither of the things are done by the assessee. It’s not the option of the assessee to file the return of

Page 14 of 16 ITA No. 1130/Bang/2023 income pursuant to the notice under section 148 of the Act whenever he pleases. For want of compliance with the letter of law, there is no proper filing of return of income. We agree with the submissions of the learned DR that what the learned Assessing Officer accepted was to consider the written submissions of the assessee in the letter dated 12/12/2019 on the merits of the case, but it does not amount to the extension of time for filing the return of income pursuant to the notice under section 148 of the Act.

3.9 Coming to the judicial precedence relied by the Ld.AR of Hon’ble Delhi High Court in case of PCIT vs. Shri Shiv Shankar Traders (supra), we observe that, the assessee therein filed the return in response to notice u/s. 148 of the act within the period of limitation. Therefore in that case, the return was available with the assessing officer. The decisions relied by the Ld.AR does not support the case of the assessee as they are factually different.

3.10 The ratio laid down by Hon’ble Supreme Court in case of Hotel Blue Moon (supra), it is the situation, where the assessing officer rejected to accept the return of income filed by the assessee thereby, repudiating the return of income filed. Under such circumstances, Hon’ble Court held that the assessing officer still have to issue notice u/s. 143(2) of the act, within the prescribed time period. This ratio also does not support the facts of the present assessee as the assessee in present case filed the return of income belatedly in response to the notice u/s. 148 of

Page 15 of 16 ITA No. 1130/Bang/2023 the act after 11 months. The Ld.AO thus treated such return to be non-est. In fact, the assessee filed such return belatedly just before the expiry of time period for completing the reassessment proceedings. In such situation, it is not possible that the assessee can contest the validity of the reassessment without issuance of notice u/s. 143(2). There is no requirement under the law that if the return is filed in response to the notice u/s. 148 just before the passing of the assessment order or whenever the assessee feels appropriate, the assessing officer should issue notice u/s. 143(2). The onus of filing of return of income in response to notice u/s. 148 of the act is upon the assessee to be fulfilled within the period of limitation. It, therefore, goes without saying that non-issuance of notice under section 143(2) of the Act vitiates the proceedings if the assessee filed the return of income, such a return as filed was not acceptable to the learned Assessing Officer and the assessment has to be made at variance with the return filed by the assessee. If no return of income is filed by the assessee, such allegation does not arise. We agree with the observations of both the authorities that there is no return of income filed pursuant to the notice issued under section 148 of the Act. We therefore do not find any force in the arguments advanced by the Ld.AR in support of ground nos. 2, 3 and 6 by assessee. Accordingly, ground nos. 2, 3 and 6 raised by assessee stands dismissed.

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4.1 It is noted that assessee has not furnished relevant documentary evidences in support of the sale of purchase of traded goods, evidences in support of the cash deposited in the bank accounts, bills, vouchers supporting entries appearing the purchase and sales registers. Under such circumstances, we deem it proper to remit this issue back to the Ld.AO for necessary verifications. The Ld.AO is directed to consider the cash deposits in the light of the evidences filed by the assessee and to carry out necessary verification in accordance with law. Accordingly, ground nos. 4 and 5 raised by assessee stands partly allowed for statistical purposes. In the result, the appeal filed by the assessee stands partly allowed. Order pronounced in the open court on 15th April, 2024.

Sd/- Sd/- (CHANDRA POOJARI) (BEENA PILLAI) Accountant Member Judicial Member Bangalore, Dated, the 15th April, 2024. /MS / Copy to: 1. Appellant 2. Respondent 3. CIT 4. DR, ITAT, Bangalore 5. Guard file 6. CIT(A) By order

Assistant Registrar, ITAT, Bangalore