SACHIN KUMAR DIXIT,FARRUKHABAD vs. INCOME TAX OFFICER, WARD-4(2)(2), FARRUKHABAD, FARRUKHABAD

The brief facts of the case are that the Revenue was in possession of information that during the demonetization period, the assessee has deposited cash of Rs.8,90,000/- and Rs.1,48,000/- in bank account No. 86659910000061 and 86652010022428 respectively , maintained with Syndicate Bank, Farrukhabad. Assessing Officer obtained the bank statements directly from the bank. Assessing Officer observed that bank account No. 86659910000061 was a loan account opened on 27.05.2016 with debit balance of Rs.10 lakhs, wherein total credit was to the tune of Rs.10,35,000/-, out of which loan advance payment to the tune of Rs.3,50,000/- and Rs.5,40,000/- was made by the assessee in cash on 01.12.2016 and 14.12.2016 respectively , and the said bank account stood closed on 07.02.2017. Assessing Officer observed that in the other bank account no. 86652010022428, the assessee has deposited Rs.2,59,978.91, out of which Rs.1,48,000/- was deposited in cash during demonetization period and Rs. 70,000/- by way of credits, and further an amount of Rs. 978.91 was credited by way of interest. The AO observed that pattern of cash deposits during demonetization period

Aggrieved, the assessee filed first appeal with the CIT(Appeals).

Still aggrieved, the assessee has filed second appeal with ITAT, and the ld. Counsel for the assessee submitted that it is an ex-parte best 4 | P a g e judgment assessment order passed by the Assessing Officer, and even the ld. CIT(Appeals) has passed an ex-parte appellate order. It is submitted that the assessee was in the business of retail trade of daily needs. The assessee has filed return of income for the assessment year 2015-16 and 2016-17, declaring income under presumptive scheme of taxation u/s 44AD. It was submitted that income for the impugned assessment year was below taxable limits, and hence return of income was not filed. Thus, for the impugned assessment year, no return of income was filed u/s 139 by the assessee. Our attention was drawn to the return of income filed for the assessment year 2015-16 , wherein the assessee has shown his business as retailer and the assessee has invoked presumptive scheme of taxation u/s. 44AD of the Act. It was submitted that both the authorities below have brought to tax the entire credits in the bank account for the year under consideration , which is not appropriate. Our attention was drawn to proviso to section 251(1)(a) of the Act which was introduced by Finance Act, 2024 wef 01.10.2024, and it was submitted that now even the ld. CIT(Appeals) has been given powers to set aside the matter back to the file of Assessing Officer for making de-novo assessment in case an assessment order is passed u/s. 144 of the Act. Thus, prayers were made to restore the matter back to the file of Assessing Officer. 5 | P a g e

Learned Sr. DR, on the other hand, submitted that there is non- compliance by the assessee before the Assessing Officer as well as ld. CIT(Appeals). There were cash deposits in the bank accounts and the assessee could not offer any explanation. The assessee is referring to the Income-tax Returns for the assessment year 2015-16 and 2016-17, but the same were filed on 21.05.2016, which is just 4-5 days prior to disbursement of loan of Rs.10,00,000/-, on 27.05.2014. It was submitted that these return of income were filed only for the purpose of taking loan from the bank. The assessee could not prove that the assessee is in retail business. Prayers were made to confirm the order of ld. CIT(Appeals).

Learned counsel in the rejoinder submitted that the ITRs were filed for the assessment years 2015-16 and 2016-17 , and the assessee was engaged in small retail business. The assessee invoked the presumptive taxation scheme u/s. 44AD. There were no taxable income for assessment year 2015-16 and 2016-17. Similarly, it was submitted that there is no taxable income for the year under consideration. It was submitted that the authorities below have added the entire credits including cash deposits in the bank account as the income of the assessee.

We have considered rival submissions and perused the material on record. We have observed that the assessee has not filed return of income for the impugned assessment year. The Revenue was having information that during the demonetization period, the assessee has deposited cash of Rs.8,90,000/- and Rs.1,48,000/- in the two bank accounts maintained by the assessee with Syndicate Bank, Farrukhabad.. Assessing Officer obtained bank statements directly from the bank. Statutory notices were issued by the AI to the assessee u/s. 142(1) and 144 of the Act from time to time during the course of assessment proceedings.Assessee did not submit any reply during the course of assessment proceedings and best judgment assessment u/s. 144 was framed, wherein total credits to the tune of Rs.12,94,000/- in the two bank accounts of the assessee with Syndicate Bank, Farrukhabad were added to the income of the assessee and were brought to tax by the AO u/s. 69A read with section 115BBE of the Act, being unexplained money. Learned CIT(Appeals) dismissed the appeal of the assessee ex- parte because no of non prosecution of the appeal by the assessee. The assessee during the course of proceedings before the Bench has submitted that the assessee is in the small retail trade. The assessee has submitted that there was no taxable income, hence, no ITR was filed for the year under consideration. The assessee has produced before the 7 | P a g e Bench , ITRs for the assessment years 2015-16 and 2016-17, in which the assessee has claimed to be in retail business. Returns were filed on 21.05.2016, and in the said return of income presumptive scheme of taxation u/s 44AD was stated to be invoked by the assessee. The assessee has claimed that for the year under consideration , the turnover being from retail trade is covered u/s 44AD, and there will be no tax payable by the assessee. Plea of the assessee needs verification. The assessee has also relied upon the decision of Hon’ble Gujrat High Court in the case of CIT v. Pradeep Shantilal Patel (2014) 42 taxmann.com 2 (Gujrat) and order of ITAT, Surat in the case of Smt. Kiran Vallabhai Ahir v. ITO (ITA No. 65/SRT/2017) dated 10.02.2020 . The assessee has claimed that the assesseeis liable to tax u/s. 44AD of the Act since the turnover is around Rs.12,94,000/- , and the assessee’s income comes to Rs.99,220/-, which is below the threshold limit , and hence it is claimed the assessee is not liable to file income tax return and pay taxes. This plea of the assessee requires verification. Both the orders passed by the authorities below are ex parte orders. Now, the assessee has come forward to explain its case. The additional evidences filed for the first time before the ITAT needs verification. Onus is on the assessee to prove and substantiate that the assessee is in retail business, and is eligible to claim presumptive scheme of taxation u/s 44AD. Thus, in the interest of 8 | P a g e justice and fairness to both the parties, the orders of the authorities below are set side and the matter is restored back to the file of Assessing Officer for framing de novo assessment. The assessee is also directed to cooperate in de novo assessment proceedings before the Assessing Officer and in default, the Assessing Officer shall be free to pass the order in accordance with law after giving proper opportunity of hearing to the assessee. We clarify that we have not commented upon the merits of the issues. We order accordingly.

In the result, the appeal of the assessee is allowed for statistical purposes.