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Facts
The assessee, a partnership firm, changed its business address, leading to non-receipt of statutory notices. The AO passed a best judgment assessment order under section 144, treating unexplained money under section 69A. The CIT(A) upheld the AO's order. The assessee deposited Rs. 47,86,000 in SBN during demonetisation, later clarified as Rs. 9,55,000.
Held
The Tribunal noted that the assessee made cash deposits during demonetisation, and while the AO made additions under section 69A, the lower authorities did not sufficiently verify the evidence. The Tribunal directed the assessee to provide details of depositors for loan repayments and ordered the AO to verify these with proper opportunity for the assessee to be heard.
Key Issues
Whether the additions made by the AO and upheld by the CIT(A) are justified, considering the principles of natural justice and the specific facts of the case regarding cash deposits during demonetisation.
Sections Cited
144, 69A, 250(4), 234A, 234B, 234C, 115BBE, 68
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘B’ BENCH : BANGALORE
Before: SHRI CHANDRA POOJARI & SMT. BEENA PILLAI
ORDER PER BEENA PILLAI, JUDICIAL MEMBER Present appeal arises out of order dated 11.10.2023 passed by NFAC, Delhi for A.Y. 2017-18 on following grounds of appeal:
1. The order passed by the Learned Assessing Officer (ITO, Ward 7(2)(5), Bangalore), as upheld by the Commissioner of Income Tax (Appeals) (National Faceless Appeal Centre) is bad in law, in so far as not. considering the contention of the Appellant, making the additions and the same is not in accordance with the provisions of the Income-tax Act, 1961 and facts of the case.
2. The impugned order/s is/are bad in law as proceedings have been concluded in violation of the principles of natural justice; 3. The Learned CIT(A) has erred in law and on facts in passing ex parte order without adjudicating on merits, the same being against the provisions of section 250(4) read with subsection (6) is bad in law and liable to be set aside; 4. The AO/CIT(A) have erred in not appreciating that the Appellant was prevented by sufficient cause for not submitting a response/details during the assessment proceedings. 5. The Learned AO has erred in law and on facts in making, and the CIT(A) has erred in upholding, the addition of Rs.98,86,000/- to the total income; 6. The Learned AO/CIT(A) have erred in law and on facts in not appreciating that the provisions of section 68 of the Act are not applicable to the facts in the present case; 7. Without prejudice to the above, provisions of section 68 of the Act cannot be invoked treating the bank credits as cash deposits; 8. The additions made, without considering the documents available on records, are bad in law and liable to be deleted as it is in gross violation of the principles of natural justice. 9. The Learned CIT(A)/AO have erred in summarily dismissing the submissions of the Appellant, as already available on records, by stating that there is no submissions filed. 10. The impugned addition is liable to be quashed as it is high pitched and without understanding the facts of the case, without considering the submissions and is based on assumptions and surmises. 11. The Learned CIT(A)/A0 have erred in invoking provisions of section I 15BBE to tax the total income of the Appellant; 12. Without prejudice, the interest levied u/s 234A, 234B and 234C of the Act requires to be waived off under the facts and circumstances of the case.
The Appellant craves leave to add, delete, modify or amend any of the grounds of appeal during the course of the proceedings. (Total tax effect: Rs. 1,19,13,599/ -) On the basis of the above grounds and other grounds which may be urged at the time of hearing with the consent of the Honorable Tribunal, it is prayed that the order passed under section 144/250, to the extent it is against the Appellant, be quashed and the relief sought be granted.”
Brief facts of the case are as under: 2.1 The assessee is a registered Partnership Firm engaged in the business of construction and development of flats. The firm changed its place of business, leading to non-receipt of statutory notices as they were issued to the old address mentioned in the assessment order.
2.2 It is submitted that the assessee firm experienced internal differences among the partners, and the project undertaken by the assessee firm resulted in a financial loss, causing significant financial distress to all the partners. The Ld.AO passed a best judgment order of assessment under section 144 of the Income Tax Act, determining the total income of the appellant as unexplained money under the provisions of section 69A of the Act.
2.3 Aggrieved by the order of the Ld.AO, assessee preferred appeal before the Ld.CIT(A). The Ld.CIT(A) confirmed the order of the Ld.AO as assessee did not furnish any response to submitting
Page 4 of 6.2 of the NFAC order.
2.4 Aggrieved by the order of the NFAC/CIT(A), the assessee is in appeal before this Tribunal.
We have heard the rival contentions of both sides in the light of records placed before us.
It is noted from the records that the assessee had made cash deposits in SBN to the tune of Rs. 47,86,000/- during the demonetisation period. However, the Ld.AR in the written submission filed submitted that the cash deposited is Rs.9,55,000/- as clarified by the Bank statement placed at pages 19-20 of the paper book. The assessee has filed additional evidence and affidavit dated 20.01.2024 wherein the assessee is seeking leave to adduce the same. The authorities below has not verified any documents that may be available in the possession of the assessee to explain the cash deposits and has made addition u/s. 69A of the act. We note that the assessment order has been passed as a best judgment. In our considered opinion, this needs to be verified in the light of the circular issued by the CBDT.
We have carefully gone through the various standard operating procedures laid down by the central board of direct taxes issued from time to time in case of operation clean. The 1st of such instruction was issued on 21/02/2017 by instruction number 03/2017. The 2nd instruction was issued on 03/03/2017
Page 5 of 4/2017. The 3rd instruction was in the form of a circular dated 15/11/2017 in F.No. 225/363/2017-ITA.II and the last one dated 09/08/2019 in F.no.225/145/2019- ITA.II. These instructions gives a hint regarding what kind of investigation, enquiry, evidences that the assessing officer is required to take into consideration for the purpose of assessing such cases.
In one of such instructions dated 09/08/2019 speaks about the comparative analysis of cash deposits, cash sales, month wise cash sales and cash deposits. It also provides that whether in such cases the books of accounts have been rejected or not where substantial evidences of vide variation be found between these statistical analyses. Therefore, it is very important to note that whether the case of the assessee falls into statistical analysis, which suggests that there is a booking of sales, which is non-existent and thereby unaccounted money of the assessee in old currency notes (SBN) have been pumped into as unaccounted money.
Instruction 21/02/2017 issued by the CBDT suggests some indicators towards verifying the suspicion of backdating of cash. It also suggests indicators to identify abnormal jump in cash trials on identifiable persons as compared to earlier history in the previous year. Therefore in our opinion it is important to examine whether assessee falls into any of these categories and transfer of deposit of cash is not in line with history of transactions in the preceding assessment years.
The assessee is directed to establish all relevant details to substantiate its claim in line with the above applicable instructions based on the facts in present case. We are aware of the fact that not every deposit during the demonetisation period would fall under category of unaccounted cash. However the burden is on the assessee to establish the genuineness of the deposit in order to fall outside the scope of unaccounted cash. Assessee is directed to furnish PAN and address details of the depositors from whom loan repayment has been accepted in cash. The Ld.AO shall verify all the details / evidences filed by the assessee based on the above direction and to consider the claim in accordance with law. Needless to say that proper opportunity of being heard must be granted to the assessee. The assessee may be granted physical hearing in order to justify its claim. Accordingly, the grounds 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 22nd March, 2024.