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Facts
The assessee's income arose from a hospital and medical shop. The Assessing Officer (AO) issued a notice under section 142(1) regarding cash deposits made during demonetization. The assessee filed a return but the AO completed the assessment ex-parte under section 144, treating the return as invalid, denying deductions, and adding cash deposits and other credits as unexplained income.
Held
The Tribunal observed that the assessment order was passed ex-parte and the assessee had not been given a proper opportunity. Therefore, the Tribunal decided to remit the issue back to the AO for re-examination after providing the assessee with an opportunity of being heard.
Key Issues
Whether the assessment order passed ex-parte under section 144 was justified, and whether proper opportunity was provided to the assessee to explain the cash deposits and other credits.
Sections Cited
250, 144, 68, 69A, 139, 80C, 80TTA, 80G, 143(2), 115BBE, 234A, 234B, 44ADA, 44AD
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “A’’ BENCH: BANGALORE
Before: SHRI GEORGE GEORGE K. & SHRI CHANDRA POOJARI
PER CHANDRA POOJARI, ACCOUNTANT MEMBER:
This appeal by assessee is directed against the order of NFAC passed u/s 250 of the Income Tax Act, 1961 (in short “The Act’) dated 3.8.2023 for the assessment year 2017-18. The assessee has raised following grounds of appeal:
The orders of the authorities below in so far as they are against the 1. appellant are opposed to law, equity, weight of evidence, probabilities, facts and circumstances of the case.
The learned CIT[A]/NFAC is not justified in upholding the order of assessment passed u/s 144 of the Act without appreciating that the order so passed was opposed to the principles of natural justice in as much as the show cause notice dated 17/12/2019 proposed an addition to the extent of Rs. 13,58,430/- only towards the cash deposited by the appellant during the demonetization period for which the appellant had duly furnished his explanation and thereafter, a further addition to the extent of Rs.
ITA No.732/Bang/2023 Sri Bevahalli Gangappa Ramakrishnappa, Kolar Page 2 of 5 2,13,69,655/- was made without providing any opportunity to the appellant in course of assessment proceedings and therefore, the impugned order passed requires to be cancelled under the facts and circumstances of the appellant's case.
The appellant denies himself liable to be assessed on a total income of Rs.2,96,61,656/- against the returned income of Rs.69,53,571/- for the year under appeal, under the facts and in the circumstances of the appellant's case.
The learned CIT[A]/NFAC is not justified in upholding the addition of Rs.2,00,46,877/- u/s 69A of the Act towards cash deposited in the bank accounts during the year under appeal without appreciating that the appellant had explained that the cash deposits in the bank account were from out of his business of running a hospital and pharmacy for which income was duly offered to tax in the return of income filed in response to notice u/s. 142[1] of the Act under the facts and in the circumstances of the appellant's case.
The learned CIT[A]/NFAC is not justified in upholding the addition of Rs. 26,61,208/- u/s 69A of the Act towards other credits in the bank accounts, which was also explained by the appellant before the learned CIT[A] under the facts and in the circumstances of the appellant's case.
The learned CIT[A]/NFAC is not justified in sustaining the additions made u/s.69A of the Act in as much as the cash deposits and credits were from out of known and explainable sources of funds.
The learned CIT[A]/NFAC is not justified in upholding the tax imposed under the provisions of section 115BBE at the rate of 60% under the facts and in the circumstances of the appellant's case.
Without prejudice to the right to seek waiver with the Hon'ble CCIT/DG, the appellant denies herself liable to be charged to interest u/s. 234-A and 234-B of the Act, under the facts and in the circumstances of the appellant's case.
For the above and other grounds that may be urged at the time of hearing of the appeal, your appellant humbly prays that the appeal may be allowed and Justice rendered and the appellant may be awarded costs in prosecuting the appeal and also order for the refund of the institution fees as part of the costs.
Facts of the case are that the assessee’s income is from salary and profits and gains from business. The business income arises from a hospital Deccan Hospital and a medical shop Deccan Pharma. Both
ITA No.732/Bang/2023 Sri Bevahalli Gangappa Ramakrishnappa, Kolar Page 3 of 5 the hospital and the pharma are in Chintamani town. These two units were proprietary concerns of assessee’s late wife Smt. Padma Ramakrishnappa who passed away on 5 July 2012. Consequent to her death the hospital and the pharma are being managed by the assessee and his son Shri Kiran. The AO issued a notice under section 142(1) dated 9 March 2018 requiring the Appellant to file a return on or before 8 April 2018. The AO sent a reminder on 21 May 2019 on the return and stated that Rs. 13,58,430/- had been deposited by the assessee during the demonetization period in his Axis Bank account in Chintamani. The assessee filed return of income electronically on 28 September 2019 declaring & total income of RS.67,90,860/-. The total income consisted of salary of Rs.49,25,200/-, hospital income under section 44ADA of Rs.5,00,000/- pharmacy income under section 44AD of Rs. 15,27,661/- and other sources of Rs.710/-. Deductions of Rs.1,50,000/- under section 80C and Rs.12000/- under section 80G and Rs. 710 under section 80TTA were also claimed. The assessee filed a detailed letter on 19 December 2019 bringing out the facts of his case. It was explained that cash deposits are out of collections from the hospital and pharmacy both of which are in a backward area. The clientele being from rural areas and villages nearby the collections were in cash in small sums. The collections were deposited in bank at regular intervals after retaining sufficient cash to meet day to day expenses. Form 26AS, computations and cash collection list with names and addresses were filed. The AO issued show cause notice dated 17 December 2019 invoking clause (b) of subsection 1 of section 144 on the ground that the assessee had failed to comply with his notice under subsection 1 of section 142 issued on 9 March 2018. The AO sought to add Rs.13,58,430/- under section 68 of the Act as unexplained cash credits. The assessee responded on 19 December 2019 by stating that the return was already filed. The assessee requested the AO not to invoke section 68 and desist from invoking section 144. The AO completed the assessment under section 144 determining the income at
ITA No.732/Bang/2023 Sri Bevahalli Gangappa Ramakrishnappa, Kolar Page 4 of 5 Rs.2,96,61,656/-. The AO held the return to be invalid as it was filed after the due date laid down in subsection 1 of section 139 and on that ground he also denied 80C, 80TTA and 80G deduction of Rs, 1,62,710/- . The AO added Rs.2,00,46,877/- being cash deposits made during the entire financial year in to two Axis Bank accounts held in the names of Deccan Hospital and Deccan Pharma as income under section 69A. Further Rs. 26,61,208/- being other non-cash credits in these two banks were also added under section 69A of the Act. Consequently, no expenses were allowed inspite of the two bank accounts being business accounts. The AO did not issue notice under subsection 2 of section 143 and has recorded in that assessment order that no notice under subsection 2 of section 143 is issued due to non-filing of the return of income. The AO raised a tax demand of Rs.3,13,52,831/-. He gave credit for TDS of Rs. 1,37,470/- as against the correct returned figures of Rs.9,30,989/- and self-assessment tax of Rs. 5,00,000/- against the correct returned figure of Rs. 7,22,150/- resulting in aggregate short credit of Rs.10,15,669/-. Aggrieved by this assessment order the assessee is in appeal before us. 3. We have heard the rival submissions and perused the materials available on record. Before us, the ld. A.R. pleaded to give an opportunity of hearing before the ld. AO to place necessary evidences in support of the claim of the assessee. In our opinion, it is appropriate to remit the issue to the file of ld. AO since the assessment order passed by the ld. AO is ex-parte u/s 144 of the Act and even though the NFAC has given several notices to the assessee, the assessee has not used it. Hence, in the interest of justice, we remit the issue to the file of AO to examine the same in the light of CBDT Circulars dated 21.2.2017, 3.3.2017, 15.11.2017 & 9.8.2019 after giving an opportunity of hearing to the assessee.
ITA No.732/Bang/2023 Sri Bevahalli Gangappa Ramakrishnappa, Kolar Page 5 of 5
In the result, appeal of the assessee is partly allowed for statistical purposes. Order pronounced in the open court on 9th Jan, 2024
Sd/- Sd/- (George George K.) (Chandra Poojari) Vice President Accountant Member
Bangalore, Dated 9th Jan, 2024. VG/SPS
Copy to:
The Applicant 2. The Respondent 3. The CIT 4. The DR, ITAT, Bangalore. 5 Guard file By order
Asst. Registrar, ITAT, Bangalore.