SHRI SURINDER KUMAR,MANSA vs. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1, BATHINDA
What did the Tribunal hold?
The Tribunal held that the CIT(A) confirmed the AO's findings without properly considering the assessee's explanations and without granting an opportunity to rebut adverse views, violating principles of natural justice. The case was restored to the AO for fresh assessment.
What were the facts?
The assessee challenged disallowances made by the AO under Section 40A(3) for cash payments exceeding the limit and additions under Section 68 for alleged unexplained cash credits. The CIT(A) confirmed these additions without adequately addressing the assessee's explanations.
What were the issues?
Whether the CIT(A) erred by confirming disallowances and additions without providing the assessee an opportunity to rebut adverse findings, thus violating principles of natural justice.
Which sections of the Income-tax Act were involved?
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, AMRITSAR BENCH, AMRITSAR
Before: DR. M. L. MEENA & SH. ANIKESH BANERJEE
ORDER Per Dr. M. L. Meena, AM:
This appeal has been filed by the assessee against the impugned order dated 08.02.2018 passed by the Ld. Commissioner of Income Tax (Appeals), Bathinda in respect of the Assessment Year 2014-15.
The assessee has raised the following grounds of appeal:
“1. That the Ld. CIT(A), Bathinda erred on facts and law in confirming the disallowance of Rs. 505000/- made by the AO u/s 40A(3), addition of Rs. 650000/- made u/s 68 on account of alleged unexplained cash credits and Surinder Kumar v. DCIT disallowance of Rs. 22525/- being the interest paid to the creditors for which the addition has been made u/s 68.
2. That the Ld. CIT(A), Bathinda erred on facts and law in confirming the disallowance of Rs. 505000/- made by the AO by invoking the provisions of section 40A(3) on account of cash payment made for purchase of property being stock in trade. The explanation submitted during the course of assessment proceedings as well as appellate proceedings has been rejected without rebutting the same.
That the Ld. CIT(A), Bathinda erred on facts and law in confirming the addition of Rs. 650000/- made by the AO on account of alleged unexplained cash credits. The explanation submitted during the course of assessment proceedings as well as appellate proceedings has been rejected without rebutting the same.
That the Ld. CIT(A), Bathinda erred on facts and law in confirming the disallowance of Rs. 22525/- being the interest paid to the creditors for which the addition has been made u/s 68.
That the appellant craves leave to add or amend the grounds of appeal before the appeal is finally heard or disposed of.”
3. Apropos ground no. 2 & 3, the assessee challenged the impugned order that the Ld. CIT(A) had erred in law and on facts in not considering the assessee’s explanation submitted during the course of assessment proceedings and appellate proceedings as well and further not allowing any rebuttal to the assessee, before taking the adverse view against the appellant.
4. In the scrutiny proceeding, the AO there noted the fact that cash has been paid in excess of the limit laid down in section 40A(3) of Income Tax Act. Accordingly, disallowance of Rs. 505000/- was made by the AO by invoking the provisions of section 40A(3) being not satisfied with the Surinder Kumar v. DCIT explanation of the assessee that cash payment was made on account of purchase of property being stock in trade. Similarly, an addition of Rs. 6,50,000/- made by the Assessing Officer in by observing that credit entries from three creditors received during the year under consideration are not complied with to the requirements of Section 68 of Income Tax Act, besides Rs. 22,525/- the appellant claimed to have paid as on interest to these creditors as the person were not produced for examination. The additions have been confirmed by the Ld. CIT(A). Aggrieved by the above, the present appeal was filed before us.
5. The Ld. counsel for the assessee submitted that the Ld. CIT (A) was not justified in law and on facts in confirming the disallowance of Rs. 505000/- made by invoking the provisions of section 40A (3) being cash payment made on account of purchase of property being stock in trade and Rs. 6,50,000/- towards three credits received during the year u/s 68 of Income Tax Act, besides Rs. 22,525/- on interest paid to these creditors. He argued that during the course of appellate proceedings, written submissions were filed. However, the Ld. CIT(A) has merely mentioned that the same were considered and rejected relying on some citation without discussing the facts of the case at hands that how the citation relied by the CIT(A) are applicable to the appellants case by distinguishing the explanation submitted by the assessee and granting an opportunity in rebuttal to the adverse finding against him. The counsel argued that without discussing the facts mentioned in the assessment order and without allowing any opportunity of being heard in rebuttal, such an adverse view taken is against the principles of natural Justice. Accordingly, he requested
Surinder Kumar v. DCIT for remanding back the case to the AO with direction to grant sufficient opportunity to the assessee to explain and justify its stand with supporting documentary evidences if any further required.
The Ld. DR stands by the impugned order; however, he has no objection to the request of the assessee on principles of natural justice.
Heard. The main objection of the assessee to order of the Ld. CIT(A) is that he has confirmed the finding of the AO, by outright rejecting the explanation of the assessee submitted during the course of assessment proceedings as well as appellate proceedings without rebutting the same in violation of the principles of natural justice. It is evident from the order of the CIT(A) that the assessee has not been granted an opportunity to rebut, the adverse view taken against him by the AO and the ld. CIT(A) who had arbitrarily jumped on the decision that assessee that cash has been paid in excess of the limit laid down in section 40A(3) of Income Tax Act, without discussing the criterion of business expediency viz-a-viz Rule 6DD (a) to 6DD (I) of the I.T. Rules, 1962.
It is seen that the assessee had raised loans of Rs. 2,00,000/- from Shri Husan Kumar [APB 47-58], Rs. 2,50,000/- from Shri Parveen Kumar [APB 59-64] and Rs.2,00,000/- from Smt. Vanit Rani [APB 65-72] and had also debited interest of Rs.6,575/-, Rs.9,375/- and Rs.6,575/- respectively during the assessment year under consideration. He has filed the copies of confirmation of account alongwith bank statements of the creditors and explained that the loans raised have since been returned through banking
Surinder Kumar v. DCIT channels [APB 45-46]. In this way, by adducing the aforesaid documents, the assesses established their identity, capacity and genuineness of the creditors.
From the impugned order, it evident that the ld. CIT(A) without discussing and appreciating the facts on the issue just held that he finds no merit in the contention of the appellant assessee because once the Assessing Officer has treated the deposits as unexplained, it is unexplained investment of the appellant. As regard to production of creditors in the AO’s office, the appellant requested for more time but the same was not provided by the AO and not addressed by the Ld. CIT(A). The counsel argued that the AO proceeded to make the addition of Rs.6,72,525/- (Rs.6,50,000/- as principal amount of loan and Rs.22,525/- as interest paid) u/s 68 of the Act by holding the said cash credits as un- explained. Such an addition by the AO is neither justified nor legal. It is accordingly requested that the addition of Rs.6,72,525/- made by the AO may kindly be either deleted restored to the AO to make enquiries to ascertain the genuineness of cash credits. It is, therefore, considered necessary that this is a fit case to be restored back to the file of the AO to pass de novo assessment order to decide the issues afresh by speaking order after issuing after granting adequate opportunity of being heard to the assessee by way of show cause notice and examination of the creditors before taking any adverse view in assessment proceedings after considering the assesses replies on record and would be furnished in the course of the fresh proceeding in compliance of any quarry. In view of principles of natural justice, the Ld. AO is directed to grant sufficient
Surinder Kumar v. DCIT opportunity of being heard to the assessee before concluding the proceeding. All plea under the law, shall be so available to the assessee. No doubt, the assessee shall cooperate in the fresh assessment proceedings.
In the result, appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open court on 07.07.2022.
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