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Income Tax Appellate Tribunal, CHANDIGARH BENCH “A”, CHANDIGARH
Before: SHRI. VIKRAM SINGH YADAV, AM & SHRI. PARESH M. JOSHI, JM
आयकर अपीलीय अिधकरण,च"ीगढ़ "ायपीठ “ए” , च"ीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH “A”, CHANDIGARH HEARING THROUGH: PHYSICAL MODE "ी िव"म िसंह यादव, लेखा सद" एवं "ी परेश म. जोशी, "ाियक सद" BEFORE: SHRI. VIKRAM SINGH YADAV, AM & SHRI. PARESH M. JOSHI, JM आयकर अपील सं./ िनधा"रण वष" / Assessment Year : 2017-18 Banur Brothers बनाम The ITO (Since Dissloved) Ward-1, Ambala Ward No. 3, Jain Mohalla, Banur, Patiala, Punjab-140603 "ायी लेखा सं./PAN NO: AAPFB0813M अपीलाथ"/Appellant ""थ"/Respondent िनधा"रती की ओर से/Assessee by : Shri Nikhil Goyal, Advocate & Shri Ashok Goyal, C.A राज" की ओर से/ Revenue by : Shri Rohit Sharma, CIT DR सुनवाई की तारीख/Date of Hearing : 11/06/2024 उदघोषणा की तारीख/Date of Pronouncement : 27/06/2024 आदेश/Order PER PARESH M. JOSHI, J.M. :
This is an appeal filed by the Assessee being aggrieved by order No. ITBA/NFAC/S/250/2023-24/1057158867(1) dt. 18/10/2023 of Ld. CIT(A) under section 253 of the Income Tax Act, 1961. The order of Ld. CIT(A) is passed under section 250 of the Income Tax Act, 1961. Factual Matrix 2. The Appellant was a partnership firm engaged as commission agent of food grains. The Appellant sells the agricultural produce to the Government Agencies and Trade Associations as a commission agent and receives the sale proceeds in the bank account. After receiving the sale proceeds, the Appellant withdraws cash for making the payments to the farmers whose produce had been sold.
Furthermore, the Appellant was dissolved on 31.12.2016. The Appellant filed its Income Tax Return for the AY 2017-18 on 28.06.2017 declaring business income of Rs. 62,860/-. Thereafter, the case was selected for scrutiny through Computer Aided Scrutiny Selection (CASS) for the reason "Aggregate of high cash withdrawals by the assessee during the year under consideration i.e. higher than the profit interest and taxed reported in the return of income" and statutory notice under section 143(2) was issued on the ITBA portal on the email ID of belonging to the Chartered Accountant who assisted the e-filing of ITR.
Further, all the notices during the assessment proceedings were received on the email ID of the Chartered Accountant with whom the Appellant was out of touch. Therefore, all the notices issued by Ld. AO remained unanswered and the Assessment Order was passed ex parte under Section 144 of the Act making an addition of Rs. 3,68,63,786/- under Section 69A/69C of the Act.
In the Ld. AO order No. ITBA/AST/S/144/2019-20/1022600929(1)dt. 18/12/2019 following is observed and recorded: “Return of income was e-filed by the assessee on 28.06.2017 declaring business income at Rs. 62,860/- which was processed u/s 143(1) of the IT. Act, 1961. The case was selected for limited scrutiny under CASS to verify:- "Aggregate of high cash withdrawals by the assessee during the year under consideration i.e. higher than the profit interest and taxed reported in the return of income" Statutory notice under section 143(2) of the Income-tax Act, 1961 was issued to the assessee on 13.08.2018 which was sent to the assessee online through ITBA portal. Notices u/s 142(1) of the IT. Act alongwith query letters were issued to the assessee on 13.05.2019 was also sent to the assessee online through ITBA portal. The assessee was allowed opportunities for filing his reply from time to time through online ITBA portal which are detailed below:-
S.N. Letter / Notice Dated Service Date for which Remarks Mode compliance was required to be made 1. Notice u/s 142(1) of the IT. Through ITBA portal 11.10.2019 No compliance Act, 1961 on 07.10.2019 2. Final show cause on Through ITBA portal 06.12.2019 —do---------- 03.12.2019 All these notices remained uncomplied with. In the final show cause notice it was categorically mentioned that Notice u/s 143(2) of the IT. Act, 1961 was issued in your case on 13.08.2018 as your case was selected through CASS for limited scrutiny. Notice u/s 142(1) of the Income Tax Act, 1961 alongwith query letter was issued on 13.05.2019 vide which you were required to furnish the following information:-
1. 1. Please furnish the nature of your business alongwith day to day activities.
2. Please furnish the copies of your bank statements w.e.f 01.04.2016 to 31.03.2018. Please also give narration of each cash deposit entry in your bank accounts during the F.Y. 2016-17 relevant to A.Y. 2017-18.
3. As per statement of financial transaction report you had made high value cash withdrawals 'during the year under consideration i.e. higher than the profit before interest and taxes reported in the return of income.
The above said notice remained uncomplied with. Again notice u/s 142(1) of the Income Tax Act, 1961 was issued on 07.10.2019 for furnishing the required information but this notice again remained uncomplied with. Vide this office show cause notice dated 03.12.2019 you were again required to show cause why penalty u/s 270A of the Income Tax Act, 1961 may not be initiated in your case. Since you did not comply with the notices to avail the opportunity provided to your from time to time for furnishing the required information I have left with no option but to treat the entire cash withdrawal amounting to Rs. 3,68,63,786/- from undisclosed sources u/s 69A of the Income Tax Act and is proposed to brought the same to tax u/s 115BBE of the Income Tax, 1961. The section 69A and 115BBE are reproduced under:- a. Section 69A "Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or valuable article, or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year. b. Section 115BBE "Tax on income referred to in section 68 or section 69 or section 69A or Section 69B or Section 69D.
Where the total income of an assessee,- includes any income referred to in section 68, section 69, section 69A, section (a) 69B, section 69C or section 69D and reflected in the return of income furnished under section 139; or (b) determined by the Assessing Officer includes any income referred to in section 68, section 69A, section 69B, section 69C or section 69D, if such income is not covered under clause (a), The income tax payable shall be the aggregate of- i. the amount of income tax calculated on the income referred to in clause (a) and clause (b), at the rate of sixty per cent; and ii. the amount of income tax with which the assessee would have been chargeable has his total income been reduced by the amount of income referred to in clause (i).
Notwithstanding anything contained in this Act, 'no deduction in respect of any expenditure or allowance or set off of any loss shall be allowed to the assessee under any provision of this Act in computing his income referred to in clause (a) [and clause (b)] of sub section (1)." Penalty proceedings u/s 270A and 272A(1)(d) of the Income Tax Act are also proposed to be initiated. In the interest of natural justice, you are hereby given final opportunity for filling you return of income and reply as on or before date mentioned above. Please note that in case of non compliance no further opportunity will be allowed. The above said notice again remained uncomplied with. From the above facts, it is clear that the assessee has no explanation to offer regarding the nature and cash withdrawals in bank accounts during the year under consideration. The assessee is deliberately avoiding to comply with the statutory notices. As the assessee failed to furnish the any explanation regarding cash withdrawlas of Rs. 3,68,63,786/- is added to the income of the assessee treating the entire amount of withdrawal as unexplained expenditure during the year under consideration. I am satisfied that 1. The assessee has misreported the income penalty proceedings u/s 270A of the Income Tax Act, 1961 are being initiated separately. ii. The assessee has not complied with the statutory notices from time to time penalty proceedings u/s 272A(1)(d) of the Income Tax Act, 1961 are also being initiated separately With above observations, income of the assessee is computed as under:- Returned Income Rs. 62,860/- Rs. 3,68,63,786/- Addition on account of cash deposited during the period of demonetization i.e. 09.11.2016 to 31.12.2016 Total Income Rs. 3,69,26,646/- Assessed at income of Rs. 3,69,26,646/- chargeable to tax. Charge interest as per IT. Act. A copy of this order alongwith demand notice and penalty notices u/s 270A of the Income Tax Act, 1961 for misreporting the income, and U/s 272A(1)(d) of the IT. Act for non compliance of notice sent to the assessee online electronically in E-proceedings facility through assessee's account in e- filing website of Income Tax Department.”
A bare and simple perusal of Ld. AO order clearly shows that assessee was totally non responsive to any notices issued by the Ld. AO including show cause notice and under tiring circumstances Ld. AO was left with no option but to pass the exparte order against the assessee.
Being aggrieved by the exparte order of Ld. AO the assessee preferred a appeal before the Ld. CIT(A) who dismissed the appeal in para 6.5 & 7 wherein the Ld. CIT(A) has held as follows: “ 6.5 In view of the above discussion and the case laws relied, it is held that the AO correctly held that the assessee failed to discharge the onus vested on him by not filing necessary explanation of source of cash deposited with sufficient documentary evidence. Therefore, the additions made by the AO are confirmed u/s 69A of the Act as the source of which remain unexplained and unsubstantiated. Ground No. 1 is dismissed. 7. In the result, the appeal is dismissed.
Being aggrieved by the order of the Ld. CIT(A) dt. 18/10/2023 the assessee has filed the present appeal before us in Form No. 36 and interalia has raised the following grounds of appeal:
1. That the initiation of Assessment proceedings is bad in law and illegal as the Partnership Firm cease to exist on 31.12.2016 and issuance of notice to a nonexistent entity is bad in law and illegal.
2. That the Ld. CIT (Appeals) had erred in upholding the order of the Ld. AO making addition of Rs 3,68,63,786/- u/s 69A of the Income Tax Act, 1961 with respect to cash withdrawals without any finding doubting the source of funds withdrawn.
3. That under the facts and circumstances of the case, the Ld. CIT (Appeals) had erred in upholding the order of the Ld. AO making an addition u/s 69A based on surmises and conjectures and without considering the documents on record. 4. That the Ld. CIT (Appeals) had erred in making Order under section 250 of the Act by relying on the Remand Report from the Ld. AO and submissions of the Assessee have not been considered in the impugned order. 5. That the impugned Order had been passed in gross violation of the principle of natural justice and without allowing reasonable opportunity of being heard to the Assessee. 6. That the Appellant craves for your honor to take additional ground or grounds of appeal and/or modify or resign any ground(s) of appeal before or at any time of hearing. Record of Hearing
9. The personal hearing in the matter took place on 11/06/2024 when both the parties appeared before us. At the outset and threshold the Ld. AR contended before us that the very initiation of the proceedings against the assessee is bad in law and illegal in as much as the assessee Banur Brothers which was a partnership firm ceased to exist on 31/12/2016 and placed reliance on partnership retirement deed dt. 02/01/2017 which is at pages 1 to 3 of the paper book. We have perused the said document. It was then contended that all the notices during the assessment proceedings were served to the Chartered Accountant of the Firm as the email ID on the ITBA portal was that of the Chartered Accountant who assisted the e-filing of ITR. Further, the Appellant was out of touch with Chartered Accountant as the Partnership Firm was dissolved on 31.12.2016 after which the business was taken over by one of the Partners, i.e., Mrs. Ashima w/o Mr. Varun Bansal.
Reliance was placed on section 189 of the Income Tax Act, 1961 which reads as under:
"(1) Where any business or profession carried on by a firm has been discontinued or where a firm is dissolved, the Assessing Officer shall make an assessment of the total income of the firm as if no such discontinuance or dissolution had taken place, and all the provisions of this Act, including the provisions relating to the levy of a penalty or any other sum chargeable under any provision of this Act, shall apply, so far as may be, to such assessment. (2) Without prejudice to the generality of the foregoing sub- section, if the Assessing Officer or the Joint Commissioner (Appeals) or the Commissioner (Appeals) in the course of any proceeding under this Act in respect of any such firm as is referred to in that sub-section is satisfied that the firm was guilty of any of the acts specified in Chapter XXI, he may impose or direct the imposition of a penalty in accordance with the provisions of that Chapter.
Every person who was at the time of such discontinuance or dissolution a partner (3) of the firm, and the legal representative of any such person who is deceased, shall be jointly and severally liable for the amount of tax, penalty or other sum payable, and all the provisions of this Act, so far as may be, shall apply to any such assessment or imposition of penalty or other sum. (4) Where such discontinuance or dissolution takes place after any proceedings in respect of an assessment year have commenced, the proceedings may be continued against the person referred to in subsection (3) from the stage at which the proceedings stood at the time of such discontinuance or dissolution, and all the provisions of this Act shall, so far as may be, apply accordingly. (5) Nothing in this section shall affect the provisions of subsection (6) of section 159."
It was further contended that as per sub section (3) and (4) of Section 189 all the proceedings are required to be instituted on the name of partners and not on the name of the Appellant. Therefore, Ld. AO had erred in initiating the assessment proceedings against the Appellant.
It was also contended that CIT(A) had not provided sufficient opportunity to the Appellant to present its case before it. CIT(A) only relied on the remand report issued by Ld. AO and disposed of the appeal of the Appellant which is a clear violation of the basic principles of natural justice.
It was further also contended that appellant was not given sufficient opportunity to participate and prosecute matter before first appellate authority, therefore impugned order passed by Ld. CIT(A) must be set aside.
The Ld. AR on merits in respect of ground No. 2 & 3 has submitted as follows:
2.2.1 That the Appellant was a commission agent. In this capacity, they facilitate the sale of agricultural produce on behalf of farmers, who are the owners of the agriculture produce. Thereafter, the government agencies make payments for these produce sales directly into the Appellant's bank account. These transactions are also facilitated by intermediary agents known as Kacha Arhatia Billing cum Payment Agents. The Appellant then withdraws these funds from their bank account to disburse payments to the farmers whose produce was sold to the government agencies. 2.2.2 That the total sales made to DFSC comes to Rs. 3,19,30,276.78/-. Modus Operandi is foods grains procured from farmers are supplied to DFSC either directly or collectively through Kacha Arhatia Association. The supply made directly to DFSC, such proceeds are received in bank account of the Appellant from DFSC. Where sale is through Kacha Arhatia Association same is first received through Association bank account. 2.2.3 Total proceeds from DFSC as per bank statement (at page no. 74 to 76 of the paperbook) is as follows – Date DFSC 10.10.2016 3,11,062.00 12.10.2016 34,37,550.00 03.11.2016 77,557.00 29.11.2016 76,768.10 15.12.2016 690.40 27.12.2016 92,713.53 12.01.2017 43,639.00 17.03.2017 681.14 Total 40,40,661.17 2.2.4 Total proceeds from Kaccha Arhtiya Association as per bank statement (at page no. 74 to 76 of the paperbook) is as follows- Date Kacha Arhtiya Association 07.10.2016 5,96,400.00 12.10.2016 7,93,200.00 13.10.2016 48,99,200.00 17.10.2016 52,73,600.00 19.10.2016 22,61,000.00 21.10.2016 38,78,200.00 24.10.2016 24,92,100.00 26.10.2016 3,91,800.00 27.10.2016 17,65,000.00 31.10.2016 3,86,900.00 03.11.2016 23,72,600.00 07.11.2016 7,62,700.00 15.11.2016 5,80,970.00 23.11.2016 1,43,990.00 13.12.2016 3,02,046.00 27.12.2016 9,44,168.17 Total 2,78,43,874.17 2.2.5 Thus, total sales made during the year is summarized as follows:
Particulars Amount (Rs.) Gross Receipt from DFSC 40,40,661.17 Gross Receipt through Kacha Arhatia Association 2,78,43,874.17 Add: Tax-deducted at Source by DFSC 45,642 Total Sales to DFSC 3,19,30,177.34 Sales to others 506796.04 Total Sales during FY 2016-17 3,24,36,996.00/- 2.2.6 Reference is drawn to page no. 72 and 73 of Paperbook, going through the DFSC certificates, which was certified by the DFSC (having TIN no. 06491005236) for payment made to Appellant is summarized as follows- Quarter Sales Amount VAT @ 5% 01.07.2016 to 30.09.2016-11 Quarter 40,45,511.23 2,02,275.56 01.07.2016 to 30.09.2016 - II Quarter 6,91,269.54 34,563.48 01.10.2016 to 31.12.2016-III Quarter 1,034.10 51.71 01.10.2016to 31.12.2016-III Quarter 2,71,92,385.46 13,59,619.27 Total 3,19,30,200.33 15,96,510.02 2.2.7 Therefore, the total sales made to DFSC and Kacha Arhatia Association comes to Rs. 3,19,30,200.33/- as per certificate provided by them. Further, this figure can be tallied with the proceeds received in the bank of the Appellant which is Rs. 3,18,84,535.34/- (40,40,661.17+2,78,43,874.17)
2.2.8 Further, the Ld. CIT(A) in para 6.1 of the Order held that- "6.1 It is argued by the appellant that the assessee is a commission agent who works as a middle man between farmers and purchaser (Government agencies). Thus, grain sold to government agencies by the assessee belongs to farmers. The amount of sales proceeds received from government agencies in the bank account of assessee has been withdrawn in cash to make onwards payments to farmers whose grain was sold by the assessee. Thus, cash has been withdrawn with the purpose of making onward payment to the farmers. The AO observed that the appellant in its submissions before the Id. CIT(A), claimed sales to DFSC at Rs. 3,19,20,300/- whereas sales as per Form 26AS to DFSC only Rs. 11,26,943/-. Further, the AO observed from the bank statement, there are total credits of Rs. 3,44,32,009/- during demonetization period in the relevant year, out of which credits ofRs. 2,52,08,060/- have been received from Kacha Artiya Association whereas the assessee has claimed to have made sales of Rs. 3,19,30,200/- to DFSC and to have received this amount from DFSC in its bank account."
2.2.9 The Ld. CIT(A) contended that the Appellant claimed sales of Rs. 3,19,30,200/- whereas the sales as per Form 26AS to DFSC is Rs. 11,26,943/- (page no. 87 to 88 of Paperbook). Going through the working sheet, which was also provided to Ld. AO during the Appellate proceedings, it is submitted that the income of Rs. 11,26,943/- reflecting in Form 26AS comprises of commission income received as a commission agent amounting to Rs. 7,70,085.85/- and labour charges received of Rs. 3,56,857.44/-. The details of income of Rs. 11,26,943/- and TDS of Rs. 45,642/- deducted on this is as follows – income Amount Credited Total TDS deposited' Commission 7,70,085.85 38,505.00 Labour Charges 3,56,857.44 7,137.00 Total 11,26,943.29 45,642.00 2.2.10 The details of commission income received against sales is as follows:
Particulars Sale Amount Commission 31930200.85 770085.85 Total Sales to DFSC and Kacha Arhatia Association Sales to others 506796.04 10295.21 Total Commission received 780381.00 2.2.11 Thus, Ld. AO and Ld. CIT(A) had erred in considering this working sheet. Further, nowhere in the Income Tax Act 1961 it is obligatory to deduct TDS on supply of foods grains. As there is no respective section dealing with deduction of TDS on supply of foodgrains. Therefore, Ld. CIT(A) had erred in upholding the finding of Ld. AO that total sales to DFSC of Rs. 3,19,30,200/- doesn't match with the Form 26AS sales. 2.2.12 Moreover, the Appellant had also deposited Value Added Tax (VAT) of Rs. 16,14,682.03/- on the total sales made during the year. Further, Appellant had provided all the documents during the submission before the Ld. CIT(A), but the same were not recognized. Therefore, Ld. CIT(A) had erred in upholding the addition under section 69A/69C of the Act.
2.2.13 Going through the bank statement of the Appellant, the cash deposited during the demonetization period was only Rs. 8,82,500/-. And the total cash deposited during the year is Rs. 9,27,500/-. Whereas the total cash withdrawals during the year are Rs. 3,09,85,000/-.
2.2.14 The table below showing the cash withdrawals and cash deposits during the year is as under- Date Withdrawals Deposits 29.04.2016 45,000 04.05.2016 45,000 16.06.2016 2,00,000 27.06.2016 1,40,000 10.10.2016 6,00,000 13.10.2016 38,00,000 14.10.2016 49,00,000 17.10.2016 48,00,000 20.10.2016 25,00,000 21.10.2016 38,00,000 25.10.2016 25,00,000 27.10.2016 22,00,000 03.11.2016 29,00,000 08.11.2016 8,00,000 10.11.2016 8,00,000 12.11.2016 82,500 16.11.2016 50,000 22.11.2016 50,000 28.11.2016 50,000 07.12.2016 50,000 14.12.2016 50,000 21.12.2016 50,000 18.01.2017 1,00,000 25.01.2017 1,00,000 14.02.2017 1,00,000 15.02.2017 5,00,000 16.02.2017 3,00,000 06.03.2017 4,00,000 Total 3,09,85,000 9,27,500 2.2.15 The cash withdrawn on 08.11.2016 of Rs. 8,00,000/- from the bank was redeposited on 10.11.2016 because of demonetization with the effect of which the currency became invalid. Therefore, the old currency was deposited back in the bank. 2.2.16 Further, the total credits in the bank account of the Appellant are more than the cash withdrawn. Therefore, the Appellant had withdrawn cash from the deposit received against the supply of food grains. Moreover, the Ld. AO's scrutiny of cash withdrawals is being questioned. It's 2.2.17 crucial to emphasize that all payments were indeed received from government agencies, rendering Ld. AO's inquiry into cash withdrawals from the bank invalid. Therefore, the issue of cash withdrawals and any potential addition under section 69A/69C of the Act is entirely baseless. 2.2.18 Reference is drawn to page no. 94 of Paperbook, the Appellant filed Rectification application for rectifying the Assessment Order dated 18.12.2019. The Appellant stated that addition may kindly be rectified. Further, it was requested to rectify the tax calculation without applying section 69A or section 115BBE of the Act.
The rectification order was received on 18.05.2020 (page no. 96 of the Paperbook) wherein it was stated that section 69A of the Act was inadvertently written instead of section 69C. 2.2.19 During the appellate proceedings, all pertinent documents, and explanations regarding the receipt of funds and subsequent withdrawals for payments to farmers were duly provided. However, Ld. CIT(A) made an error by disregarding these facts and instead shifting the focus to cash deposits. They claimed that the appellant failed to explain the source of these cash deposits. This demonstrates the oversight on the part of Ld. CIT(A), as they neglected to consider the cash withdrawals. 2.2.20 In para 6.3 of the order, the Ld. CIT(A) held that - "6.2 As the cash is deposited in the bank a/c of the assessee, as per section 69 A the assessee has to explain the source of the same to the satisfaction of the AO. If no explanation is filed, or the explanation given is not satisfactory, the section provides that the money is deemed to be income of the assessee for the year in which it was deposited. In this case the assessee failed to give any explanation, therefore, the amount of cash deposited is liable to be added under deeming provision of section 69A." 2.2.21 It's essential to note that there is not any liability for cash withdrawals from the bank account. Every person, as defined under section 2(31) of the Act, may hold a bank account, and withdraw cash to meet various day-to-day expenses or to make payments to suppliers or for meeting various liabilities. Taxing these cash withdrawals under sections 68, 69, 69A, 69B, 69C, or 69D of the Act would be an extreme measure against businesses and households alike. 2.2.22 Therefore, while conducting business operations, entities routinely withdraw cash to meet expenses. Similarly in the Appellant's case the cash was withdrawn for making payments to farmers whose produce was sold to the State Government. Therefore, the actions of Ld. AO are not justifiable. Ld. CIT(A) erred in affirming the order passed by Ld. AO under section 144 of the Act and in making additions under section 69A/69C of the Act.
The Ld. AR on merits in respect of ground no. 4 has interalia submitted as follows: 2.3.1 As the Appellant was not able to reply to the notices received during the assessment proceedings, the submissions and documents were submitted before the Ld. CIT(A) along with an application for admission of additional evidence under rule 46A of the Income Tax Rules, 1962. 2.3.2 Thereafter, Ld. CIT(A) sent these documents to Ld. AO for a remand report. In the remand report the Ld. AO mentioned that the Appellant made sales to DFSC amounting to Rs. 3,19,30,200.85/--whereas the sales as per Form 26AS to DFSC are Rs. 11,26,943.29/-. It is submitted that the Appellant had in its VAT return shown the total sales of Rs. 3,24,35,962.57/- on which the VAT of Rs. 16,14,682.03/- has been duly deposited to the exchequer. The Ld. CIT(A) and Ld. AO have erred in considering the VAT return and the tax deposited on total sales. 2.3.3 The remand report evidently lacks any findings regarding the specific cash withdrawals totaling Rs. 3,68,63,786/-. It is notably absent how this precise figure was derived upon scrutinizing the bank statements. Instead, Ld. AO only mentioned the total amount of money credited to the bank account, which was Rs. 3,44,32,009/-, during the demonetization period. 2.3.4 The finding about credits received of Rs. 3,44,32,009/- during the demonetization i.e., from 09.11.2016 to 31.12.2016 period is totally baseless. The total payments received from the sale of agriculture produce were Rs. 3,24,35,962.57/- during the year. And the examination of the Ld. AO that total credits received during demonetization period is totally absurd as 3,44,32,009/- is more than 3,24,35,962.57/-. 2.3.5 Given this substantial variance between the stated figure by the Ld. AO and the sale proceeds received, it raises considerable doubts about the accuracy and reliability of the assessment conducted by the Ld. AO.
2.3.6 In the remand report the Ld. AO mentioned that while framing Assessment Order, he/she had wrongly mentioned cash deposits during the demonetization period instead of cash withdrawals. However, in the order framed under section 250 of the Act, Ld. CIT(A) mistakenly mentioned cash deposits and upheld Ld. AO's decision for addition under section 69A/69C of the Act. The CIT(A) should have accurately framed the order by considering the case's facts. It appears that CIT(A) relied solely on the remand report without thoroughly analyzing the facts presented during the appellate proceedings. 2.3.7 That in the remand report, Ld. AO requested to maintain the additions made in the Assessment Order. Additionally, Ld. AO urged Ld. CIT(A) not to admit additional evidence under Rule 46A of the Income Tax Rules, 1962, alleging potential manipulation. The Ld. AO further claimed that the facts presented by the Appellant in its submissions before the Ld. CIT(A) contradicted the facts on record. 2.3.8 That Ld. AO's request to disallow additional evidence under Rule 46A of the Income Tax Rules, 1962 should not be accepted without due scrutiny of evidence. The dispute about potential manipulation should not exclude the examination of material that may be relevant to the Appellant's case. Each piece of evidence should be evaluated on its merits rather than dismissed based on tentative claims. 2.3.9 Furthermore, the discrepancy lies in the figures for cash withdrawals documented in the Show Cause Notice and Assessment Order. The actual cash withdrawal during the year amounts to Rs. 3,09,85,000. However, the Show Cause Notice indicates a figure of Rs. 3,11,35,000, while the Assessment Order states it as Rs. 3,68,63,786. It appears that the Ld. AO has made significant errors in assessing these figures, indicating confusion or oversight. 2.3.10 Furthermore, it is evident that Ld. AO actions were not in accordance with the facts, as the figures he arrived at differ substantially from the reality. Additionally, Ld. CIT(A) erred in affirming the addition on account of cash deposit without addressing the discrepancies in the cash withdrawal figures. This oversight further aggravates the situation, highlighting the need for a fair and accurate assessment based on the correct information. 2.3.11 That the Ld. CIT(A) has erred in relying on the remand report of the Ld. AO and therefore, the impugned order passed under section 250 of the Act must be quashed.
It was finally submitted and concluded by the Ld. AR that impugned order of Ld. CIT(A) be set aside and matter be remanded back to Ld. AO so that case can be thresh out on merit. Per contra the Ld. DR too stated that under the peculiar facts and circumstances since many issues are involved it would be just and fair that Ld. AO to examine the issue fresh. Findings and Conclusions
We have perused all the papers and proceedings of the case and we are of the considered view that act of dissolution of firm ought to have been brought to the notice of Department of Income Tax as order of Ld. AO is dated 18/12/2019 whereas the deed of retirement is dated 02/01/2017. There is not even a whisper either in the pleadings nor in the course of hearing that the assessee had brought to the notice of Department fact of dissolution of firm. We feel and hold that it was incumbent upon the assessee to have informed the Department about it.
From the order of Ld. AO we observe that despite several opportunities afforded to the assessee and that he/ they have remained non responsive throughout the proceedings consequently Ld. AO was left with no other alternative but to pass order by resorting to Section 144. Before Ld. CIT(A) from page 1 of the impugned order dt. 18/10/2023 we notice that no appearance is shown against Column “ Present for appellant”. In fact no appearance of any authorised representative is recorded in the order of Ld. CIT(A). However an application cum letter was filed under Rule 46A to bring on record certain additional evidence and submissions in this regard were made. The Ld. CIT(A) rightly referred the matter to Ld. AO to seek his comments. The Ld. AO in his comments observed that additional evidence seems to be manipulated and facts narrated by the assessee in its submissions contradict the actual facts available on official record. In appeal before us it is contended by Ground No. 4 that the Ld. CIT(A) has erred in law by relying upon remand report from Ld. AO and that the submissions so made have not been considered in the impugned order of CIT(A). The grievance of the assessee is that Remand Report ought to have been disclosed to them and non disclosure is in violation of the principles of natural justice. We therefore hold that order of CIT(A) is in breach of the principles of natural justice too.
Be that as it may since both the parties are in the agreeemtn with each other that the matter should be examined a fresh by the Ld. AO, we therefore accordingly set aside the impugned order of CIT(A) dt. 18/10/2023 and remand the matter back to the file of the Ld. AO with a strict direction to verify all the material evidences which the assessee would put forth including books of accounts and other papers, documents, tax credits, VAT returns including deed of retirement. Further such verification and examination would be done strictly in accordance with law. We also direct the Ld. AO to verify the original deed of partnership as the same is not filed with the paper book. The verification would reveal the character of the assessee firm before the dissolution and so also after the dissolution. The Partnership Act read with Income Tax Act may be read in this regard. 13. In the result appeal of the assessee is allowed as and by way of remand to Ld. AO with above directions. The assessee and his AR to cooperate with the Department to dispose off the assessment a fresh with full vigor and vitality without causing any unnecessary delay. We direct fresh assessment be completed as soon