Loading judgment…
Facts
The assessee's appeal is against the order of the CIT(A) upholding the addition of Rs.40,00,500 made by the AO. The addition was related to cash deposits in a bank account during the demonetization period, which the assessee claimed did not belong to him but to his brother's proprietorship firm.
Held
The Tribunal held that the assessee was merely an authorized signatory and not the owner of the bank account. The evidence presented indicated the account belonged to the assessee's brother's firm. Therefore, the addition made in the assessee's hands was unjustified.
Key Issues
Whether the addition made in the assessee's hands on account of cash deposits in a bank account, which the assessee claims belongs to his brother's firm, is justified? Whether the assessment completed without issuing notice u/s 143(2) is invalid?
Sections Cited
144, 143(2), 142(1), 69A, 115BBE, 150
AI-generated summary — verify with the full judgment below
PER PAWAN SINGH, JUDICIAL MEMBER;
This appeal by assessee is directed against the order of learned CIT(A)/National Faceless Appeal Centre, Delhi dated 15.09.2025 for assessment year (AY) 2017-18. The assessee has raised following grounds of appeal:
“That in any case and in any view of the matter, the NFAC has erred on facts and in law in dismissing the Appeal of the Appellant and upholding the Assessment Order of the AO.
2. That in any case and in any view of the matter, the NFAC has erred on facts and in law in passing the Appeal Order without adjudicating on the Additional Ground no.1.
3. That in any case and in any view of the matter, the NFAC erred in law and on facts in confirming that there was no assumption of illegal jurisdiction by the AO for not issuing a Notice under Section 143(2) during the assessment proceedings.
4. That in any case and in any view of the matter, the NFAC has erred on facts and in law in upholding the addition of Rs.40,00,500 made in the hands of the Appellant by the AO as to cash deposits made in the bank account of another person during the period from 9.11.2016 to 21.11.2016(demonetization period).
5. That in any case and in any view of the matter, the NFAC has erred on facts and in law in upholding that tax rate of 60% plus surcharge of 25% of 60% charged under Section 115BBE on the additions made under Section 69A, when the tax rates as on the date of infraction of law(dates of deposit of cash in the bank account) was 30% under Section 115BBE.
6. That in any case and in any view of the matter, the NFAC has erred in law and on facts in upholding the Assessment Order passed by the AO in respect of income of Rs.40,00,500 being brought to tax twice, once in the hands of the other person to whom the Account belonged to and second time in the hands of the Appellant in the same Assessment Year and for the same cash deposits made in the Bank Accounts.”
Rival submissions of both the parties have been heard and record perused.
The learned Authorized Representative (AR) of the assessee submits that the assessee filed his return of income for AY 2017-18 on 31.07.2019 in physical/paper mode. A copy of acknowledgment of return is place on record. The Assessing Officer completed the assessment on 31.12.2019. The assessment was completed under section 144 of the Act. No notice under section 143(2) was issued before completion of assessment. A notice under section 142(1) issued to assessee on 16.08.2019. The assessee responded to said show-cause vide reply dated 26.08.2019. In reply dated 26.08.2019, that bank account which was mentioned in the show-cause notice, wherein specified bank notes (SBN) were allegedly deposited from 09.11.2016 to 30.12.2016 does not belong to the assessee, reply of assessee is placed on record. In fact the reply placed on record is the certified copy which was obtained by assessee later on from the record of Assessing Officer, to file it before the Tribunal. The assessee explained that M/s Vardhman Store does not belong to the assessee and he is not the partner in the firm and he is unable to file reply in response to such bank account. The Assessing Officer still continued with the assessment made addition of Rs.40.00 lakhs under section 69A of the Act. Aggrieved by the addition in the assessment order, the assessee filed appeal before the learned CIT(A). Before the learned CIT(A), the assessee raised legal issue that assessment completed without issuing notice under section 143(2) is invalid. Non-issuance of notice under section 143(2) is jurisdiction issue and in absence of issuance of such notice, the assessment order is invalid as has been held in a series of decisions. The learned CIT(A) has held that notice under section 142(1) was issued to the assessee and that assessee has not filed return of income in response to such notice. The case of the assessee is not filing of return and in absence of no return available in ITD system, there is no requirement of issuance of notice u/s 143(2). A copy of return of income was not made available to the Assessing Officer during the assessment proceedings and in absence of return of income, no notice was issued by the Assessing Officer under section 143(2) of the Act. The learned AR of the assessee reiterated the submission that once the assessee has filed the return of income and acknowledgment was issued against such filing of return of income, maintaining such record in the ITD system is not the duty of assessee, rather it was duty cast upon the Income Tax Department.
On merit of the case, the learned AR of the assessee submits that the assessee is not owner of the bank account in which the specified bank note SBI of Rs.500 or 1000 was deposited during demonetization period. The assessee is neither account holder nor any document of the assessee in KYC is available with bank authority. The proprietorship firm namely Vardhman Store belongs to Shri Sanjeev Kumar Jain. The assessee is merely authorized person to deal with certain banking transaction. The learned AR of the assessee submits that copy of Form 3CD (audited report) wherein Vardhman Store is proprietorship concern of Shri Sanjeev Kumar Jain and shown as individual. The Assessing Officer despite bringing such fact in his notice by way of reply dated 26.08.2019 has not taken a corrective steps to issue notice against the rightful owner of the bank account to tax the income with regard to cash deposit. The ld AR of the assessee submits that the assessee has good case on legal issue as well as on merit.
On the other hand, the ld. Senior Departmental Representative for the Revenue (Sr. DR) supported the orders of lower authorities. The learned Sr.
DR for the revenue submits that addition in this assessment was made in absence of any response. On the submission of the assessee the remand report was called from Assessing Officer. During the remand proceeding, the Assessing Officer obtained KYC detail from banks where specified bank notes were deposited. The KYC details contained the signature of the assessee. Moreover, e-mail ID of assessee is also mentioned in both the accounts. Both the accounts were now shown in the ITR of Bijendra Kumar Jain (assessee). There was total credit of rupees more than Rs. 3.00 Crores, however, the addition of Rs.40.00 lakhs was made by the Assessing Officer.
The assessee during assessment proceedings gave a general explanation that the impugned bank account does not belong to him rather belong to his brother and furnished the details ITR and audited PAN of his brother. Since, no return of income was filed by assessee either during assessment or in respect of notice u/s 142(1), there was no need to issue notice u/s 143(2) as assessee was stated to non-filer.
I have considered the rival submissions of both the parties and have gone through the orders of lower authorities carefully. Firstly, instead of considering the legal issue about issuance/non-issuance of notice u/s 143(2), deem it appropriate to consider the merit of the case. No doubt that the assessment was completed under section 144 for want of reply by assessee.
However, before learned CIT(A), the assessee explained the fact that the impugned bank account, against which the explanation was sought does not belong to assessee, rather it belongs to his brother’s proprietary firm M/s Vardhman Store. On the submission of the assessee, the remand report was called from Assessing Officer. The Assessing Officer in his remand report reported that the assessee has stated Vardhman Store belong to his brother Shri Sanjeev Kumar Jain. The current account xxxxxx33353 belongs to his brother. Before Assessing Officer, the assessee also explained that bank account xxxxx11153 is shown in the ITR, balance sheet and audited report of his brother for AY 2017-18. I find such fact is not controverted by Assessing Officer or ld. CIT(A). Mere authorized signatory would not made the assessee owner of the proprietary business or the account in the name of his brother.
The investigation carried out by Assessing Officer during the remand proceedings supports the case of assessee that impugned bank account wherein cash deposit were made belongs to M/s Vardhman Store. Thus, in my considered view, the learned CIT(A) was not justified in confirming the action of the Assessing Officer in making addition in the hand of assessee instead of passing direction under section 150 of the Income Tax Act. Thus, I do not find any justification when the assessee has brought sufficient material in the notice of learned CIT(A) that the impugned bank account which belongs to M/s Vardhman Store, is owned by brother of assessee. In the result, additions are deleted. Considering the facts that once the assessee is allowed relief on merit, the adjudication on legal issue have become academic.
In the result, appeal of the assessee is allowed. Order was pronounced in the open Court on 03rd December, 2025.