PRAMOD SHANKER PAWAR,AHMEDABAD vs. THE I T OFFICER, WARD-5(3)(5), AHMEDABAD

This appeal has been filed by the Assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals), (in short “Ld. CIT(A)”), National Faceless Appeal Centre (in short “NFAC”), Delhi vide order dated 27.02.2024 for Assessment Year 2012-13.

The Assessee has taken the following grounds of appeal:-

The brief facts of the case are that during the course of assessment proceedings. Ld. Assessing Officer observed that on verification of the Individual Transaction Statement, in the Financial Year 2011-12, the assessee deposited a sum of Rs. 22,43,630/- in bank account held with ICICI Bank. Additionally, the Ld. Assessing Officer noted that the assessee engaged in transactions at the NSE and BSE, totaling to Rs. 86,10,772/-. Based on these findings, the assessee's case was reopened under Section 147 of the Income Tax Act, 1961. To verify the transactions, the Ld. Assessing Officer sent a letter to the assessee on 11th March 2019, but the assessee did not respond. Upon reviewing the bank statement, the Ld. Assessing Officer noted that the assessee had deposited a sum of Rs. 22,43,630/- in cash into the aforesaid bank account and had engaged in transactions amounting to Rs. 86,10,772/- at NSE and BSE. Additionally, the assessee earned salary income from Spice Jet Ltd., on which TDS had been deducted. However, the assessee had not filed a return of income. In response to the notice issued under Section 148 of the Act, the assessee filed a return of income for the Assessment Year 2012-13 on 18th May 2019, declaring a total income of Rs. 3,92,710/-. Subsequently, a notice under Section 143(2) of the Act was issued on 14th June 2019, along with the reasons recorded for reopening the case. Further notices under Section 142(1) of the Act were issued on 19th August 2019, 8th November 2019, and 8th November 2019, requesting the assessee to provide details regarding the source of the cash deposits amounting to Rs. 22,43,630/- and the details of the transactions in various shares amounting to Rs. 86,10,772/-. However, the assessee failed to furnish the required details. Consequently, the Ld. Assessing Officer issued a final show-cause notice to the assessee on 20th November 2019, giving him another opportunity to comply by 25th November 2019. In response to the show-cause notice, the assessee provided a statement of transactions in shares along with an equity profit and loss statement, showing a loss of Rs. 1,48,375/- from intraday share transactions. However, the assessee did not submit any details regarding the source of the cash deposits in the bank, despite multiple notices. Upon verification of the details available through the Individual Transaction Statement and information from the bank, the Ld. Assessing Officer was of the view that that the assessee had deposited a sum of Rs. 22,43,630/- in cash in the ICICI Bank account between 1st April 2011 and 31st March 2012, however, despite several opportunities, the assessee had failed to explain the source of these cash deposits. Therefore, the Ld. Assessing Officer was of the view that the assessee had no valid explanation or justification for the cash deposits. Accordingly, the Ld. Assessing Officer treated the amount of Rs. 22,43,630/- as unexplained money under Section 69A of the Act and added the same to the total income of the assessee.

In appeal, Ld. CIT(Appeals) observed that during the assessment proceedings, the assessee was given ample opportunities to explain the source of cash deposits, but failed to do so. Consequently, the Assessing Officer (AO) obtained details directly from the bank and proceeded to add the cash deposits of Rs. 22,43,630/- under Section 69A of the Income Tax Act as unexplained money. Before Ld. CIT(Appeals), the assessee submitted that a review of the bank statement clearly indicates frequent cash withdrawals, which were subsequently deposited back into the same bank account. Upon reviewing the case, Ld. CIT(Appeals) agreed with the assessee’s contention on two aspects. Firstly, copy of the bank statement submitted during appellate proceedings, which was also available with the AO was not considered as additional evidence under Rule 46A and secondly, Ld. CIT(Appeals) observed that examination of the bank statement reveals that there were frequent cash withdrawals evenly spread throughout the financial year, followed by immediate cash deposits. The total of these cash withdrawals amounting to Rs. 18,38,500/- was later deposited back into the bank account. In the absence of any evidence suggesting that the assessee had used these cash withdrawals for any other purpose, the assessee’s claim that these withdrawals were subsequently redeposited into the bank account was accepted by Ld. CIT(Appeals). Accordingly, Ld. CIT(Appeals) held that the source of cash deposits amounting to Rs. 18,38,500/- was satisfactorily explained by the assessee as being sourced from these cash withdrawals.

However, Ld. CIT(Appeals) refused to consider additional evidence sought to be submitted by the assessee for the balance additions, on the ground that the assessee was afforded adequate opportunity during the course of assessment proceedings, which the assessee failed to avail. Accordingly, Ld. CIT(Appeals) held that the assessee's claims regarding the balance addition of Rs. 4,05,130/- remained unverified and Ld. CIT(Appeals) upheld the AO's addition under Section 69A of the Act to the extent of Rs. 4,05,130/-. Accordingly, the appeal of the assessee was partly allowed.

The assessee is in appeal before us against the aforesaid order passed by Ld. CIT(Appeals) partly confirming the additions in his hands. Before us, the Ld. Counsel for the assessee submitted that during the Financial Year 2011-12, the assessee deposited and withdrew cash from ICICI Bank Savings Account No. 002401002080. These transactions were undertaken due to financial setback caused by losses in his younger brother's business. To help alleviate these losses and secure loans from the bank, the assessee engaged in part-time commission and brokerage activities alongside his primary employment with Spice Jet Airlines. The Ld. Counsel for the assessee submitted that the cash deposits in the bank included commission income and cash loans. However, the Assessing Officer held that all cash deposits totaling Rs. 22,43,630/- were the unexplained income of the assessee under Section 69A of the Income Tax Act, 1961. Though Ld. CIT(Appeals) partly allowed the appeal of the assessee by holding that Rs. 18,38,500/- was withdrawn and redeposited in the bank, thus granting part relief to the assessee for this amount, however, the Ld. CIT(A) refused to accept additional evidence regarding a sum of Rs. 1,50,000/- taken as loan by the assessee and commission income of Rs. 2,55,130/- earned by the assessee, amounting to a total of Rs. 4,05,130/-. Before us, the Ld. Counsel for the assessee provided a list of persons from whom he had taken loans totaling Rs. 1,50,000/-, along with their PAN numbers, return of income and Confirmations. The Ld. Counsel for the assessee submitted that it is a fit case where additional evidences should have been admitted in the interests of justice. The Ld. Counsel for the assessee also submitted a confirmation of “Neel Enterprises” as proof of having earned commission income of Rs. 2,65,300/- which was deposited by the assessee in his bank account and submitted that for the remaining Rs. 1,50,000/- he has also filed detailed proof of unsecured loan taken from eight individuals (Rs. 20,000/- individually) as per details and supporting evidences furnished. The Ld. Counsel for the assessee filed confirmation letters and copies of income tax returns to support the genuineness of the parties. In light of this evidence, the Ld. Counsel for the assessee submitted that the addition of the unsecured loan amounting to Rs. 1,50,000/- and the addition of commission income of Rs. 2,65,300/- as unexplained income, is liable to be deleted.

We have heard the rival contentions and perused the material on record.

In our view the assessee has made out a fit case justifying as to why he was unable to furnish additional evidence during the course of assessment proceedings. The assessee’s submission is that the assessee could not respond to notices dated 14.06.2019, 19.09.2019 and 08.11.2019 due to depressed state of mind and also due to employment commitments with Spice Jet. The Counsel for the assessee has produced before us a list of names, details of amounts, PAN Number and confirmation and return of income of eight parties amounting to Rs. 1,50,000/- and on perusal of the same, we are of the view that the assessee has been able to substantiate the source of sum of Rs. 1,50,000/-. Regarding the commission amounting to Rs. 2,55,130/-, the assessee has furnished before us confirmation of “Neel Enterprises”, Ahmedabad wherein they have confirmed payment of a sum of Rs. 2,65,300/- as commission to the assessee. Accordingly, in view of the facts and evidences placed before us, we hereby directed that the balance addition amounting to Rs. 4,05,130/- is liable to be deleted.

In the result, the appeal of the assessee is allowed. This Order pronounced in Open Court on 29/08/2024