SHRI RAVINDER SACHDEVA,AMRITSAR vs. INCOME TAX OFFICER WARD -5 (4), AMRITSAR

Per Dr. M. L. Meena, AM:

1. That the assessment order passed by the Assessing Officer, thereby making the addition of Rs. 16,70,500/- by invoking the provisions of section 68 and similarly the order passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi thereby confirming the addition made by the Assessing Officer are both against the facts of this case and are untenable under the law. The authorities below did not appreciate that this case does not fall within the mischief of section 68.

2. That the order passed by the AO is bad in the eyes of law as no notice u/s 148 was ever served on the assessee and similarly no notice u/s 142(1) was served on the assessee. As such the assessment order passed is bad in the eyes of law and the same is liable to be cancelled. Again, the CIT(A) has grossly erred in confirming the order of the AO.

3. That the AO has grossly erred in passing ex-parte order u/s 144. Similarly the CIT(A) has also erred in confirming the same and the authorities below did not appreciate that only one notice dated 06/12/2019 was served on the assessee and the same was duly replied and complied. The authorities below did not appreciate that the assessee was doing purchase and sale of mobile accessories and its repair work and the returned income as shown should have been accepted.

3. Ground Nos. 2, 3 & 4 of the appeal has not been pressed before the Bench, therefore same are dismissed as not pressed.

4. ground No. 6 and 7 are either consequential nature or general to the addition made by the AO and hence does not require separate adjudication. Hence, same are dismissed as irrelevant.

5. The remaining ground no. 1 and 5 are interlinked to each other which pertains to unexplained cash deposit in bank account.

Assessment Year: 2012-13 3 6. In the present case, the appellant has deposited cash amounting to Rs.16,70,500/- in his bank account maintained with State Bank of India in FY 2011-12 relevant to AY 2012-13 which remained unexplained to the satishfaction of the AO. Accordingly, the AO initiated proceedings u/s 147 of the act after obtaining the approval of the Pr. Commissioner of Income Tax-ll, Amritsar and completed assessment u/s 147 r.w.s.144 of the Act by making addition of an amount of Rs. 16,70,500/- of the cash deposit in his bank account with State Bank of India during the FY 2011-12 relevant to the AY 2012-13 as unexplained income u/s 68 of the act by observing as under:

"As would be evident from above that the assessee has kept silence all the times since nobody attended the assessment proceedings nor furnished any requisite information/documents. I am, therefore, constrained to frame the ex- parte assessment under section 144 of the Income Tax Act, 1961 to the best of my judgment as per information/documents available on record. As per information available on the records, the assessee has deposited cash of Rs. 16,70,500/- in his bank account maintained with STATE BANK OF INDIA, during the financial year 2011-12 relevant to the assessment year 2012-13 for which the assessee failed to furnish any documentary evidence and as such in the absence of any explanation/evidence of source of cash deposits of Rs. 16,70,500/- the same is treated as income earned from undisclosed source deposited in bank account and is assessed to tax as his unexplained investment in bank account as per provisions of section 68 of the I.T. Act, 1961. Penalty proceedings under section 271(1 )(b) and 271(1 )(c) of the Income Tax Act, 1961 for concealment of income are being initiated separately.”

7. The assesse being aggrieved with the Assessment Order, went in appeal before the Ld. CIT(A) who has confirm the addition by observing as under:

8.1 In the course of assessment proceedings, the AO noticed that the complete details/documents were not filed by the AR of appellant and again a notice u/s 142 (1) of the Act was issued and served upon the appellant. In response to this notice the submission was made. Further, even after repeated opportunities provided to the appellant through notices and summons u/s 131 of the Act and show cause notices no submissions were made. 8.2 The AO in his assessment order stated that:-

8.3 The appellant in its written submission has relied upon the various judicial pronouncements in support of his claims.

8.4 In view of the facts and circumstances borne out of the assessment order and legal precedents as discussed above, I am of the view that documents submitted as evidences to prove the genuineness of transaction are themselves found to serve as smoke screen to cover up the true nature of the transactions. The AO’s action in quantifying and adding such unexplained money at Rs 16,70,500/- based on evidences gathered and reasons discussed in the assessment order.

8.5 In view of the above discussion and judicial precedents, it is held that AO was justified in making addition of Rs 16,70,500/- of the IT Act. Accordingly, addition made by the AO is confirmed and the grounds of appeal are dismissed.

8. The Ld. Counsel for the Assessee has reiterated the submissions made before the Ld. CIT(A)/NFAC, Delhi. He contended that the assessment order passed by the Assessing Officer, thereby making the addition of Rs. 16,70,500/- by way of invoking the provisions of section 68

Assessment Year: 2012-13 5 which was confirmed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi are against the facts of the facts of the case and are untenable under the law. The authorities below did not appreciate that this case does not fall within the mischief of section 68 of the Act. The further submitted that the authorities below did not appreciate that the maximum peak in the bank comes to Rs. 35,184/- and the Ld. CIT(A) has miserably failed to appreciate the same and he did not adjudicate the issue on merits. As such the addition made may be deleted.

He has filed brief synopsis and a paper book, pages147. The relevant part on section 68 of synopsis reads as under:

In this case return was filed by the assessee therein declaring income under presumptive basis by applying rate of profit u/s 44AD. A copy of the ITR along- with computation of income relating to AY 2012-13 is enclosed herewith and is available on Page No. 134 & 135 of the paper-book. Not only this, a copy of ITR along-with computation of income of the assessee relating to AY 2011-12 is also enclosed herewith and is available on Page No.136 & 137 of the paper- book. Thus, where the return has been filed u/s 44AD on presumptive basis, no other addition on account of cash deposits can be made. This, view finds support from the decision of ITAT, Amritsar Bench, Amritsar in the case of Shri Surinder Mahajan, Pathankot vs. ITO, Ward-3, Pathankot in order dated 10/10/2022 relating to AY 2011-12. A copy of the said order is enclosed herewith and is available on Page No. …….to………. of the paper book.

Further on application of section 68, it is respectfully submitted, is a deeming provision, which deems certain cash credits, found in the books of the assessee, as income of the assessee, which remains unexplained by the assessee.

The scope of section 68 of the Act, it is respectfully submitted, is not unfettered to deem all the receipts as income. The said section, it is respectfully submitted, cover only those receipts or amounts credited in the books, which are otherwise not in the nature of income (like gift, loan, share capital, etc.) and remains unexplained.

Reliance, in this regard, is placed on following decisions, wherein it is held that receipts in cash against sale consideration cannot be added under section 68 of the Act:

Reference in this regard may be made to the decision of the Rajasthan High Court in case of Smt. Harshila Chordia vs ITO: 298 ITR 349 [Refer Page No.86 to 95 of the Paper Book] wherein addition made under section 68 was deleted by the Court in respect of the amount which was found to be cash receipts from the customers against which delivery of goods was made to them. The relevant extracts are reproduced as under: {Refer Page No 93 of the Paper Book.

“So far as question No. 2 is concerned, apparently when the Tribunal has found as a fact that the assessee was receiving money from the customers in hands against the payment on delivery of the vehicles on receipt from the dealer the question of such amount standing in the hooks of account of the assessee would not attract section 68 because the cash deposit becomes self-explanatory and such amounts were received by the assessee from the customers against which the delivery of the vehicle was made to the customers. The question of sustaining the addition of Rs. 6,98,000 would not arise.

Assessment Year: 2012-13 7 We, therefore, hold that no addition was required to be made in respect of Rs.6,98,000, which was found to be the cash receipts from the customers and against which delivery of vehicle was made to them ” (emphasis supplied)

It was held likewise by the Chandigarh Bench of Tribunal in case of ACIT vs Pradeep Agarwal: 159 ITD 54 (Chand.) wherein it was held that no addition could be made on account of cash deposited in bank where assessee had clearly shown that such deposit was out of cash received on sale of land which w as duly recorded in cash book.

Similar view was expressed by the Kolkata Bench of Tribunal in case of Narendra Nath Paul vs ITO: wherein it was held that where advances were received by the assessee in cash from his dealers and the same were adjusted against the sale subsequently made by the assessee to the said dealers which were duly accounted in books of account regularly maintained by the assessee, then the corresponding advances could not be added to the total income of the assessee under section 68 treating the same as unexplained.

Admittedly, the AO passed the order ex parte qua the assessee u/s 144 of Assessment Year: 2012-13 8 the Act and same has been confirmed by the Ld. CIT(A) without appreciating merits of the case and addressing the matter by rebuttal to the documentary evidences filed to be claimed by the appellant regarding the cash deposits in bank account were being out of the cash sales of the appellant and therefore, applicability of section 68 of the act is to the cash sales alleged to be claimed by the appellant assessee would require fresh adjudication as per law. In our view, the authorities below are not justified in rejecting the claim of the appellant arbitrary without bringing on record corroborative documentary evidence rebutting the claim of the appellant of cash sales and applicability of peak credit as against entire addition u/s 68 of the Act. Under the facts and circumstances of the case, we are of the considered view that the authorities below ought to have disproved the claim of the assesse by way of rebutting its contention with support of corroborative documentary evidences on record after granting an adequate opportunity of being heard.

“Assessment - Opportunity of being heard - Setting aside of assessment - Assessment order must be made after the assessee has been given

Assessment Year: 2012-13 9 reasonable opportunity of setting out his case - Same not done - Fact that the assessee could have placed evidence before the first appellate authority or before the Tribunal is really of no consequence for it is assessment order that counts — Assessment order set aside and matter remanded to assessing authority for fresh consideration.”

Assessment Year: 2012-13 11 order is set aside and the matter is remanded to assessing authority to pass de novo assessment as per law.

Order pronounced in the open court on 20/06/2023