SHRI PRAKASHBHAI MADHAVJIBHAI THUMMAR,RAJKOT vs. THE INCOME TAX OFFICER, WARD-3(1)(2),, RAJKOT

There was sufficient & reasonable cause for which no details could be submitted without any fault of appellant, which requires an opportunity for sake of natural justice.” AY : 2010-11 2

When the matter was called out for hearing, neither the assessee nor his authorized representative appeared before us despite the fact that the impugned matter has already been listed for hearing on several occasions. Thus, in the absence of any co-operation from the assessee, we proceed to adjudicate the issue after hearing the ld. DR of the Revenue.

The only issue raised by the assessee is that the learned CIT(A) has erred in confirming the addition made by the AO for ₹63,88,000/- representing the cash and cheque deposits in the saving bank accounts.

The facts in brief are that the assessee in the present case is an individual and runs a shop of pan masala. The assessee has filed his return of income for AY 2010-11 under section 139 of the Act on 28.01.2011 declaring an income of ₹ 1,09,140/- only.

At the outset, it was noticed that the authorities below have passed ex-parte order by making and confirming the addition of the cash/cheque deposits in the saving bank accounts of the assessee for ₹ 63,88,000/- only.

Admittedly, the notices were issued by the AO as well as by the Ld. AY : 2010-11 3

Heard the ld. DR and perused the materials available on record. Admittedly, the assessee failed to appear before the authorities below during the respective proceedings and therefore an ex-parte order was passed. In other words, an inference can be drawn that the assessee failed to extend the cooperation by furnishing the necessary details in order to justify that the cash/cheque deposits that the same do not represent the income. However, the revenue authorities in the absence of cooperation from the assessee cannot sit idle with folded hands. As such, the revenue has to frame the assessment based on the materials available on record but in a scientific manner. Even if the assessee doesn’t cooperate, the revenue does not get the power to make the addition/disallowances in arbitrary manner. In the present case, the revenue has made the addition of the entire cash/cheque deposits in the bank as income of the assessee. In principle, the cash/cheque deposit per se does not represent the income until and unless it is corroborated by some supporting material. For example, there can be a situation where the assessee has withdrawn the money in cash from the bank which has been utilized for the purpose of re-depositing in the bank which can certainly not be made subject to the addition. It is seen that in such kind of situations, the revenue in numerous cases has adopted the peak credit theory for bringing the cash/cheque deposit under the net of taxes. But we note that such an aspect has not been considered by the revenue and entire cash/cheque deposit has been added merely on the reasoning that the assessee failed to cooperate during the assessment proceedings.

1 We note that the Hon’ble Gujarat High Court in the case of S.R. Koshti Vs. CIT reported in 276 ITR 165 has held as under: AY : 2010-11 4

A word of caution. The authorities under the Act are under an obligation to act in accordance with law. Tax can be collected only as provided under the Act. If an assessee, under a mistake, misconception or on not being properly instructed, is over-assessed, the authorities under the Act are required to assist him and ensure that only legitimate taxes due are collected. This Court, in an unreported decision in case of Vinay Chandulal Satia v. N.O. Parekh, CIT [Spl. Civil Application No. 622 of 1981 dated 20- 8-1981], has laid down the approach that the authorities must adopt in such matters in the following terms:

""थ" / The Respondent. 2. संबंिधत आयकर आयु" / Concerned CIT 3. आयकर आयु" अपील