AJMANI HIRE PURCHASE INVESTEMENTS LITD.,LAKHIMPUR V. COMMISSIONER OF INCOME TAX APPEALS, BAREILLY

ITA 159/LKW/2023

AI Insights

The case involves Ajmani Hire Purchase Investments Ltd, which appealed against the order of the CIT(Appeals) Bareilly concerning the assessment year 2017-18. The primary contention was the addition of unexplained cash deposits and other financial discrepancies noted by the Assessing Officer (AO). The AO had added Rs.50,00,000 as unexplained income under section 69A of the Income Tax Act, 1961, citing that the assessee failed to provide satisfactory explanations and documentation regarding the source of these deposits. The CIT(A) upheld the AO's decision, leading to the appeal before the Income Tax Appellate Tribunal. The Tribunal found procedural lapses in the handling of the assessee's submissions and the denial of a video hearing, which was part of the Faceless Appeal Scheme, 2021. Consequently, the Tribunal restored the matter to the AO for a fresh assessment.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 471444 (ITAT-LUCKNOW)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-03-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2017-2018
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUNIL KUMAR RAJWANSHI
• Assessee Lawyers: SHISHIR BAJPAYEE
• Keywords: Additional evidence; Unexplained expenditure; Principle of natural justice; TDS; Bogus
• Section: 250; 154; 54; 69C; 69A; 40(a)(ia); 207

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH “A”, LUCKNOW BEFORE SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER AND SHRI NIKHIL CHOUDHARY, ACCOUNTANT MEMBER ITA No. 159/LKW/2023 Assessment Year: 2017-18 Ajmani Hire Purchase Investments Ltd 0, Nighasan Road, Lakhimpuri Kheri-262701. v. CIT(Appeals) Bareilly. PAN:AAECA3166E (Appellant) (Respondent) Appellant by: Shri Shishir Bajpayee, C.A. Respondent by: Shri Sunil Kumar Rajwanshi, Addl. CIT(DR) Date of hearing: 10.02.2025 Date of pronouncement: 26.03.2025 O R D E R PER NIKHIL CHOUDHARY, A.M.: This is an appeal filed by the assessee, against the order of the Ld. Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre (NFAC), under section 250 of the Income Tax Act, 1961 (“Act”, for short) on 23.03.2023, for the assessment year 2017-18. The grounds of appeal preferred by the assessee are as under:- “1. Because order of Hon'ble CIT Appeal is void ab initio as mandatory right of video hearing as per notification no. 139 dated 28.12.2021, the clause no. 12(3) is not being given to assessee in spite of request. 2. Because addition of Rs.50 lacs made u/s 69A is not in accordance with the provisions of statute. 3. Because case law relied by the assessee for addition u/s 69A is not being distinguished. 4. Because reply on remand report submitted on 02.03.2023 is not being perused as mentioned that assessee failed to make comment on the same. Moreover, the assessee has filed an application u/s 54 on same issue. 5. Because addition of Rs.4,18,079/- made u/s 69C in respect of interest payment on old deposits is not in accordance with provision of statute. ITA No. 159/LKW/2023 Page 2 of 12 6. Because addition of Rs.12,34,371/- made u/s 69A in respect of deposit from director in previous years is not accordance with the provision of statue. 7. Because order passed is against principle of equity and natural justice and assessee may raise any further issue in accordance therewith.” 2. The facts of the case are that the assessee filed its return of income for the A.Y. 2017-18 at a gross total income of Rs.37,978/-. The case was taken up for scrutiny for examination of “High value receipt of cash shown from third parties” in response data and “cash deposit during demonetization”. In response to notices issued by the AO, the assessee filed some replies, copies of banks account statements and documents called for by the AO. The AO observed that on 16.11.2016, the assessee had deposited a sum of Rs.50,00,000/- in his bank account i.e. a/c no. 1874002102016491. Thereafter, large amounts of money were transferred to various other persons including the Director of the company and her close relatives, which led the Assessing Officer to conclude that the money belonged to the Director and her close relatives and the company was only being used as conduit for the same. The assessee was asked to submit explanation regarding nature and source of cash deposited in the aforementioned bank account along with other details such as names of customers with their complete address, PAN number, Bank account number, amount and date of receipts. It is observed that on 20.09.2019, the assessee submitted the details of trade receivables and ledger of a few debtors. Subsequently, the AO records that on 13.05.2019, the assessee furnished a contradictory statement that it had no trade receivables. He also records that the except the “Memorandum of Association” and the ledger account of the Director, Smt. Rashmi Bajpai, no other documents were furnished in support of the source and nature of cash deposited in old SBNs on 16.11.2016. Therefore, the Assessing Officer again required the assessee to furnish information in this regard. In response to the same, the ITA No. 159/LKW/2023 Page 3 of 12 assessee again changed its stance on the issue of trade receivables, pointing out that while it did not have sundry debtors, it did have trade receivables and no adverse view should be taken of the typographical mistake committed while filing the last reply. Regarding the source and nature of SBNs, it was submitted that the same had already been uploaded and details were again being enclosed. The AO again recorded that in spite of what the assessee was saying with regard to the source of cash deposit, information had not been furnished before him. He, therefore, issued another notice requiring the assessee to furnish the nature and source of cash deposited. However, the AO records that the assessee never furnished verifiable details regarding the nature and source of cash deposit of Rs.50,00,000/- during demonetization. The assessee had neither submitted confirmation letters from the persons from whom it received loan in cash or repayment in cash, nor given complete correspondence address thereof. Further, the AO was of the opinion that there was the possibility of bogus entries because of the non-furnishing of books of accounts, copy of balance-sheet, returns submitted to registrar of companies, returns submitted to appropriate authority for NBFCs and that the assessee had not maintained the books of accounts for A.Y. 2017-18. Therefore, on account of all these reasons the AO concluded that the nature and source of cash deposit was neither explained nor offered for taxation and the assessee had not been able to discharge the onus to show that the deposits made, did not bear the character of income. He, therefore, held that the assessee is the owner of the money but since it could not offer any justifiable and cogent explanation regarding the source of the money found in its bank account, the income earned was required to be brought to tax u/s 69A of the Act for the A.Y. 2017-18 at the special rates provided u/s 115BBE of the Act. The AO also added back a sum ITA No. 159/LKW/2023 Page 4 of 12 of Rs.4,18,079/- u/s 69C of the Act, in view of the fact that the assessee had not submitted the books of accounts, copy of ledger accounts of depositors, copy of TDS return in Form 26Q, detail of TDS deducted and deposited. Thus, the interest paid to depositors was not verifiable and it was accordingly treated as unexplained expenditure and added to taxable income of the assessee. Finally, since the assessee had not submitted its books of accounts, nor copy of ledger accounts of depositors, therefore, the unsecured loans reflected in the liability side of ITR for A.Y. 2017-18 of Rs.12,34,371/- was also added back u/s 69A of the Act. 3. Aggrieved with all these additions, the assessee went in appeal to the Ld. CIT(A) and submitted that the action of the AO was not in accordance with law, because the AO had added of Rs.50,00,000/- in respect of cash deposited in bank during demonetization period u/s 69A of the Act, but since this cash deposited was duly accounted in the books of accounts, section 69A of the Act would not be attracted in the present case. It was submitted that the details and source of Rs.50,00,000/- deposited in the bank had been submitted on 10.02.2017 in the cash response transaction sheet. The source of cash deposited was also explained in the assessee’s reply dated 21.11.2019 to be arising out of cash repayment during the year under consideration, or payment of interest along with opening cash available with the assessee. These had not been disputed by the AO. Therefore, treating the cash deposit as unexplained money u/s 69A of the Act was against the facts of the case. With regard to interest paid to depositors of Rs.4,18,079/-, disallowed as an unexplained expenditure u/s 69C of the Act due to non submission of ledger, the assessee submitted that it had duly uploaded the copy of ledger of unsecured loans on 13.05.2019 and on 01.10.2019 on the Income Tax Website. Furthermore, ITA No. 159/LKW/2023 Page 5 of 12 section 69C of the Act was not attracted in this case, as the interest paid was duly accounted for in the books of accounts and the assessee had submitted the copies of the books of account. The findings of the AO were contradictory because the AO had himself mentioned on pages 4 and 5 of his assessment order, that the ledgers had been uploaded, which showed the amount of interest paid and the TDS deducted on the same. With regard to the addition of Rs.12,34,371/- u/s 69A of the Act on account of unsecured loan disallowed, it was submitted that the same has been disallowed due to the non-submission of copies of ledger, but the assessee had duly uploaded copies of ledger of unsecured loans on 13.05.2019 and 01.10.2019 on the Income Tax Site. Furthermore, section 69A of the Act was not attracted in the case as the amount of unsecured loan was duly accounted in the books of accounts and the copies of accounts were submitted by the assessee. It was further submitted that no new loans have been obtained during the A.Y. 2017-18, and the sum of Rs.12,34,371/- was the outstanding balance of unsecured loans which was reduced from Rs.55,16,970.70 at the end of A.Y. 2016-17. In the circumstances, since no addition was made in the unsecured loan, except addition of interest paid on such loan on which TDS was duly deducted, no addition could be made in this regard. The assessee also filed a petition for acceptance of additional evidence and furnished a copy of cash statement for the period of 15.04.2016 to 03.11.2016 which showed the collection of Rs.17,12,200/-, by way of repayment of old loan given to the loanees. The assessee placed reliance on various case laws through which it sought to demonstrate that the provisions of Section 69A of the Act could not be attracted in its case. It was further submitted that the assessee had filed an application u/s 154 of the Act before the Assessing Officer pointing out that it had filed copy of account of all depositor and ITA No. 159/LKW/2023 Page 6 of 12 the same was apparent from the assessment order on pages 4 & 5. Therefore, it prayed that its appeal in this regard may kindly be allowed. The Ld. CIT(A) called for a remand report from the Assessing Officer. In the same the Assessing Officer contested the arguments of the assessee pointing out that the claim of the assessee was that the deposit of Rs.50,00,000/- was out of the cash of Rs.38,63,581/- which stood as on 01.04.2016, but no evidence with regard to the same has been furnished. The assessee could not furnish any concrete evidence of possession of the said cash and therefore, it could not be accepted that the said cash that was deposited on 16.11.2016, was covered by opening balance. With regard to addition of Rs.12,34,371/- u/s 69A of the Act, it was pointed out that since assessee had not submitted books of account, ledger accounts and confirmation letter from the depositors, therefore, the same was unexplained and not verifiable and deserving being added back u/s 69A of the Act. With regard to addition of Rs.4,18,070/- u/s 69C of the Act, it was pointed out that since the assessee had not submitted the books of accounts, copy of ledger account of depositors, copy of TDS return in Form 26, detail of TDS deducted and deposited, interest paid to depositors was not verifiable and therefore treated as unexplained expenditure. The assessee was offered an opportunity by the Ld. CIT(A) to offer a reply to the remand report but the Ld. CIT(A) records that it did not file a reply. From the same, the Ld. CIT(A) concluded that the assessee had nothing to say in this regard and therefore, he upheld the order of the Assessing Officer and dismissed the appeal of the assessee. 4. The assessee is aggrieved at this summary disposal of its, appeal and has accordingly come before us. Shri Shishir Bajpayee, C.A. (hereinafter referred as “AR”), representing the assessee submitted that the addition sustained by Ld. CIT(A) was totally unwarranted because the addition had been made of ITA No. 159/LKW/2023 Page 7 of 12 opening balances which was not permissible under the Act. He drew our attention to pages 121 to 124 of his paper book which contained the copy of the depositors accounts to show that all the deposits were actually opening balances. It was submitted that unsecured loans, on account of which addition of Rs.12,34,371/- had been made were all loans from the Directors and ledger account had been placed before the Assessing Officer but he still added the same back. It was further submitted that the only accretion to these opening balances, were interest paid on them, and therefore, there could not be any addition made on this account u/s 69A of the Act. With regard to the addition of Rs.50,00,000/- on account of the deposits in the bank account on 16.11.2016, which had been added back as unexplained money u/s 69A of the Act, it was submitted that the accounts of the assessee shows that the assessee had opening balance of cash of Rs.38,63,581/- as on 01.04.2016 and the same had not been considered while making the assessment order. It was further submitted that since the AO had asked for the IDs of the borrowers, and the assessee’s nature of business was giving loan to petty borrowers mostly in rural areas, the assessee had asked for some more time to obtain these IDs, but the AO had passed the order without giving sufficient time to the assessee. The Ld. AR further invited our attention to page no. 145 of his paper book which contained the details of cash recovered from sundry debtors amounting to Rs.17,12,200/- and submitted that out of this amount something had been spent and the net was Rs.11,36,419/- which had been added back to the sum of Rs.38,63,581/- to constitute the deposit of Rs.50,00,000/-. Since the information in this regard had been furnished, there was no reason for the said disallowance. Attention was also invited to pages 5 to 68 of the paper book which contained the ledger accounts of all sundry debtors. It was submitted that this had ITA No. 159/LKW/2023 Page 8 of 12 been provided but none of this had been taken into account by the Ld. CIT(A). In fact, the Ld. CIT(A) had not given finding on the issue. He had only relied upon the order of the Assessing Officer. The Ld. AR further invited our attention to the page no. 207 of his paper book which contained details of repayment against the deposit in bank and it was submitted that the payments to the Directors that had been made was on account of deposit that had been made in the company and therefore there was no reason to draw adverse the inference on this account. The Ld. AR further submitted that petition u/s 154 of the Act which had been furnished before the Assessing Officer had not been disposed till date. With regard to the disallowance of Rs.4,18,079/- u/s 69C of the Act, it was submitted that the TDS had been deducted in respect of interest payments and the detail of the interest account had been placed before the AO. It was further submitted that if at all that there was a violation it was of section 40(a)(ia) of the Act and not violation of section 69C of the Act which was not attracted in the said case. Without prejudice to this argument, it was submitted that since TDS has been deducted, there was no violation at all. It was further submitted that the assessee had been served a copy of remand report and had filed a reply to the remand report, which was contained in page no. 210 of its paper book, whereby the assessee had made a request for a video hearing as per the Faceless Appeal Scheme, 2021, but the Ld. CIT(A) had not considered this request of the assessee and had finalized the appeal order on the grounds that the assessee had chosen not to file a reply. Thus, the order of the Ld. CIT(A) was also bad in law because it had omitted to consider the fact that the necessary replies had been filed on 06.03.2023. Accordingly, on all these accounts, he prayed that the orders were not maintainable and deserving to be quashed. ITA No. 159/LKW/2023 Page 9 of 12 5. On the other hand, Shri Sanjeev Kumar Rajwanshi, Ld. Addl. DR pointed out to pages 5, 7, 9 and 11 of the assessment order to show that the assessee had not made any compliance before the Assessing Officer. He submitted that the Ld. CIT(A) had also reiterated the finding of non-compliance. The Ld. Addl. DR submitted that the additions have been made because of this non-compliance by the assessee and the assessee did not deserve any relief in this regard. Accordingly, he prayed that the appeal filed by the assessee may be dismissed. 6. We have duly considered the facts and circumstances of the case. The main issue in dispute between the assessee and the Department is regarding whether due compliance was made by the assessee during the assessment and appeal proceedings or not, resulting in the additions has been made. It is observed from a bare perusal of the assessment order that the assessee has not furnished the details of cash deposited of Rs.50,00,000/- before the Assessing Officer with the necessary evidence so as to enable the Assessing Officer to satisfy himself that the amounts were explained. The assessee has submitted that it had already submitted the break-up of such cash deposits in the cash response transaction sheet on the Income Tax Portal on 10.02.2017 and also mentioned the source of cash deposited in its reply dated 21.11.2019. On consideration of the same, we observe that the details furnished in the cash response transaction sheet, though furnished to the Income Tax Department, do not constitute a part of the assessment proceedings and therefore do not constitute sufficient compliance to the notices of the Assessing Officer. The assessee was obliged to have furnished the details before the Assessing Officer during the course of assessment proceedings. Be that as it may, the fact that the assessee has submitted such details to the Income Tax Department at the earliest available opportunity, is not ITA No. 159/LKW/2023 Page 10 of 12 something which ought to be ignored by the Assessing Officer while formulating an opinion regarding the nature and source of the deposits. We also observe that the assessee has submitted that of the amount of Rs.50,00,000/-, an amount of Rs.38,63,581.08, constituted the opening balances as on 01.04.2016. Furthermore, the assessee has submitted a cash flow statement before the Ld. CIT(A) along with a petition u/r 46A of the Act, in order to explain how the opening balances continued to remain with it upto 08.11.2016. The order of the Ld. CIT(A) does not reveal as to whether the said evidence was accepted or rejected. It is further observed that the assessee submitted that it was given time upto 09.12.2019 to submit the details of debtors but it was unable to submit these details on time and the order was passed on 11.12.2019, before the same could be submitted. We have noted that the assessee’s submission that the cash had been recovered from sundry debtors amounting to Rs.17,12,200/- and while some of this have been spent, the net of such recoveries which amounted to Rs.11,36,419/-, when added back of Rs.38,63,581/-, would constitute the amount of Rs.50,00,000/- which was deposited on 16.11.2019. The assessee has submitted ledger accounts of the sundry debtors as proof of this recovery. Furthermore, the assessee has submitted that the reason that the money was subsequently transferred to the Directors, was because deposits of the Directors were lying with the company since 01.04.2016 and no new deposits had been taken. Rather, the amounts had been varied only on account of interest payments and no adverse inference could be taken with respect of such opening balances. We noticed that the balance sheet and final accounts of assessee were submitted before the Assessing Officer. The Assessing Officer could have verified the authenticity of the assessee’s submissions from a perusal of the assessee’s accounts as on ITA No. 159/LKW/2023 Page 11 of 12 01.04.2016 and the subsequent cash flow statement submitted to the Ld. CIT(A). However, the remand report filed by the Assessing Officer does not seen to have taken any of these facts into account. We also note that the following submission of the remand report, the assessee had requested for a video conference with the Ld. CIT(A) in accordance with Notification No. 139 dated 28.12.2021 clause no. 12(3). However, this opportunity of video conferencing was not granted to the assessee for reasons which are not evident from the order of the Ld. CIT(A). It is seen that the assessee had requested time to furnish a reply in view of the Holi festival, but this request is not seen to have been agreed to and the appeal order that has been passed is silent as to the facts and on this request or the grounds on which it was rejected. It, therefore, appears that the additions have been confirmed by the Ld. CIT(A) without affording the assessee due opportunity to present its case. After considering that even the Assessing Officer does not seem to have seriously considered the evidences presented even during remand proceedings, therefore in the interest of justice, we deem it fit to restore the matter back to the file of the Assessing Officer, who may consider all the evidences presented by the assessee before himself and the Ld. CIT(A) so as to arrive at a decision as to whether the deposits of Rs.50,00,000/- on 16.12.2016 were duly explained or not. Furthermore, the Assessing Officer may also consider afresh whether the claims of the assessee for deposits by the Directors being opening balances and deduction of tax at source on interest paid to the depositors are justified or not. Accordingly, the matter is restored to the Assessing Officer for denovo assessment in the interest of justice. ITA No. 159/LKW/2023 Page 12 of 12 7. In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the open Court on 26/03/2025. Sd/- Sd/- [SUDHANSHU SRIVASTAVA] [NIKHIL CHOUDHARY] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 26/03/2025 Vijay Pal Singh, (Sr. PS) Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. DR 5. Guard File By order // True Copy// Assistant Registrar "