ATUL FINLEASE,JAMNAGAR V. DCIT CIRCLE 2(1), JAMNAGAR

ITA 875/RJT/2024

AI Insights

The case involves Atul Finlease, which appealed against the order of the National Faceless Appeal Centre (NFAC) confirming the addition of Rs. 11,40,000 as unexplained money under section 69A of the Income Tax Act, 1961. The addition was initially made by the AO following a survey that revealed the deposit of Rs. 11,40,000 during the demonetization period in a bank account, which was not disclosed in the income tax return. The AO issued multiple notices to the assessee, who failed to comply, leading to a best judgment assessment under section 144. The CIT(A) upheld this addition, leading to the current appeal. The Tribunal noted the assessee's failure to comply was due to a change in email ID, which was not updated on the tax portal, and allowed the appeal for statistical purposes, remitting the case back to the AO.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 34327 (ITAT-RAJKOT)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-01-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2017-2018
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ABHIMANYU SINGH YADAV; LD.
• Assessee Lawyers: KAPIL SANGHAVI; LD
• Keywords: Set aside; Opportunity of being heard; Reopening of assessment; Principle of natural justice; Reason to believe
• Section: 147; 148; 143(3); 142(1); 143(2); 143(1); 69A; 2

Judgement Text

"ITA-875/RJT/2024 (AY-2017-18) Atul Finlease Vs. DCIT Circle-2(1), Jamnagar. IN THE INCOME TAX APPELLATE TRIBUNAL, RAJKOT BENCH, RAJKOT BEFORE DR. ARJUN LAL SAINI, AM. & DIESH MOHAN SINHA, JM आयकर अपीलसं./ITA No.875/RJT/ 2024 (Ǔनधा[रण वष[ / Assessment Year: (2017-18) (Hybrid Hearing) Atul Finlease. C/o Atul Automotives, Rajkot Jamnagar Highway, Hapa. Vs. The DCIT Circle-2(1), Jamnagar èथायीलेखासं./जीआइआरसं./PAN/GIR No.: AATFA3518L (Appellant) (Respondent) Appellant by : Shri Kapil Sanghavi, Ld. AR Respondent by : Shri Abhimanyu Singh Yadav, Ld. Sr. DR सुनवाईकȧतारȣख/ Date of Hearing :21/01/2025 घोषणाकȧतारȣख/Date of Pronouncement :23/01/2025 आदेश / O R D E R PER DINESH MOHAN SINHA, JM: Captioned appeal filed by the assessee is directed against the order passed by the National Faceless Appeal Centre [(in short “NFAC/Ld. CIT(A)”] vide order dated 18/09/2024, which in turn assessment order passed by Assessment Unit, Income Tax Department / Assessing Officer vide order dated 23/03/2022 under section 147 r.w.s. 144 of the Income Tax Act, 1961 (in short “the Act”). 2. Grounds of appeal raised by the assessee are as under: 1. Hon'ble CIT (Appeals) erred in law by confirming reopening of Assessment on the basis of details received from investigation wing without making any inquiry. 2. Hon'ble CIT (Appeals) erred in confirming order passed u/s. 144 by Ld. AO has making addition for Rs. 11,40,000/- ITA-875/RJT/2024 (AY-2017-18) Atul Finlease Vs. DCIT Circle-2(1), Jamnagar. 3. Hon'ble CIT (Appeals) erred in confirming addition made by Ld. AO u/s. 69A of Rs. 11,40,000 / - treating cash deposited in bank account as unexplained money. 3. Facts of the case are that Assessee filed its ITR for the A.Y. 2017-18 on 31.10.2017 declaring total income of Rs 31,38,840/- during the year. Same was processed u/s 143(1) of the Income tax act. Proceedings were initiated by JAO u/s 147 by issuing notice u/s 148 on 30.03.2021 after recording following reasons: \"Reasons for reopening of the Income-tax assessment in the case of Atul Finlease (PAN :AATFA3518L) for A. Y. 2017-18 u/s 147 of the I.T. Act, 1961. 1) 1.The assessee firm filed the Return of Income for the A. Y.2017-18 on 31/10/2017 declaring total income of Rs.31,38,840/-. The return of the assessee was processed u/s 143(1) of the I. T. Act. 2) 2.The ADIT (Inv), Jamnagar vide letter No.ADIT(Inv)/Jam/TNCBL/Survey Report/2018-19 dated 20/09/2018 informed that survey u/s.133A was carried out on 18.02.2017 in the case of Nawanagar Cooperative Bank Limited. It is further intimated that during the course of survey it was noticed that the assessee deposited Rs. 11,40,000/-during demonetization period in its bank account with Nawanagar Co- operative bank Ltd, Gulabnagar Branch, Jamnagar, during the period of demonetization. 3) 3. On verification of return of income filed by the assessee it is noticed that the said deposited Rs. 11,40,000/- during demonetization is not reported in Part B-TTI - Computation of tax liability on total income - of the return of income. Deposit of Rs. 11,40,000/- during demonetization period in his bank account with Nawanagar Co- operative bank Ltd, Gulabnagar Branch, Jamnagar is not disclosed in the return of income and as such deposit in this account is made out of undisclosed sources of income. 4) 4. Since no scrutiny assessment has been completed in this case, the cash deposits remains unexplained and therefore the same is required to be brought to tax. 5) 5. In this case a return of income was filed for the year under consideration but no scrutiny assessment u/s. 143(3) of the Act was made. Accordingly, in this case, the only requirement to initiate proceedings u/s.147 is reason to believe which has been recorded above (para 2, 3 & 4 above) 6) 6. It is pertinent to mention here that in this case the assessee has filed return of income for the year under consideration but no assessment as stipulated u/s.2(40) of the Act was made and the return of income was only processed u/s. 143(1) of the Act. In view of the above, provisions of clause (b) of explanation 2 to section 147 are applicable to facts in this case and the assessment year under consideration is deemed to be a case where income chargeable to tax has escaped assessment. ITA-875/RJT/2024 (AY-2017-18) Atul Finlease Vs. DCIT Circle-2(1), Jamnagar. 7) 7. In view of the above, I have reasons to believe that the income chargeable to tax has escaped assessment within the meaning of section 147 of the Income Tax Act, 1961. 8) 8. This case is within four years from the end of assessment year under consideration. Hence necessary sanction to issue notice u/s 148 has been obtained separately from Addl. Commissioner of Income Tax as per the provisions of section 151 of the Act.\" 4. Notice u/s 143(2) was issued on 02.09.2021 vide which assessee was provided copy of reasons recorded and asked to furnish reply within 15 days. Assessee did not file any reply of above notice as was required to be filed within 15 days. Assessee was issued notice u/s 142(1) dt 13.12.2021 along with questionnaire for furnishing reply by 20.12.2021 but no compliance made by the assessee. Assessee was given fresh opportunity vide notice dt 07.01.22 for furnishing reply of the questionnaire already issued particularly to explain the source of deposit of SBN of Rs 11,40,000/- with Cooperative bank Gulab Nagar Branch Jamnagar but not reported in part B-TTI-computation of tax liability in ITR. 5. As assessee did not furnish any reply, it was provided again one more opportunity vide notice 142(1) dt 07.02.22 for furnishing reply by 10.02.22 but no again no reply/compliance made by the assessee. Despite above more than sufficient opportunity already provided, last but not least one more opportunity vide notice u/s 142(1) dt 16.02.22 along with questionnaire provided to the assessee. Vide this notice, assessee was again asked to explain the source of deposit of SBN notes of Rs 11,40,000/- in bank account apart from other information and proceedings were fixed for 18.02.22. but this effort also gone futile as no compliance made by the assessee by the due date. All of the above notices served through her email id registered with the department as well as in e-filing account of the assessee but failed to comply with any of the above notices. 6. In the above circumstances, Ld. AO passed best judgment assessment because the case was getting time barred on 31.03.2022. More than sufficient opportunities has already been granted to the assessee but it appears assessee is having very casual approach towards departmental proceedings and has not furnished even single reply during assessment except filing TR in compliance of notice u/s 148. Despite the service of notices through registered e-mail as well as through its e-filing account in e-proceedings, assessee is not bothered about the pending assessment proceedings and appears not interested in pleading his ITA-875/RJT/2024 (AY-2017-18) Atul Finlease Vs. DCIT Circle-2(1), Jamnagar. case by furnishing reply/information or it has no explanation/reply of the quarries at all. So Ld. AO proceeded to complete assessment u/s 144 of the income tax act. 7. Aggrieved by the order of the Ld. AO assessee carried the matter to the Ld. CIT(A). 8. Assessee vide submission dated furnished the copies of cash book, bank statement and audit report in response to the notices issued by the Ld. CIT(A). However Ld. CIT(A) has confirmed the addition of Rs. 11,40,000/- u/s 69A made by the Ld. AO. 9. Aggrieved by the order of the Ld. CIT (A) assessee is in appeal before us. 10. During the course of hearing the Ld. Counsel for the assessee submitted that assessee has complied with the notices and submitted details and documents before the Ld. CIT(A) on 28/06/2024. Ld. CIT(A) had noted that assessee had simply withdrawn the cash from its bank account and has only kept it itself since April 2016 till Nov 2016 and had re-deposited the same into its bank account again which seemed illogical and also not practical for any reasonable person to keep on withdrawing again and again from the bank account and have the cash with oneself without spending. Therefore, assessee failed to prove the source of cash deposited in bank account and Ld. CIT(A) has confirmed the addition of Rs. 11,40,000/- u/s 69A on account of unexplained money. Hence, Ld. CIT(A) had dismissed the appeal of the assessee. 11. Aggrieved by the order of the Ld. CIT(A) assessee is in appeal before us. 12. During the course of hearing Ld. Counsel for the assessee submitted that assessee could not comply with the show cause notice issued by Ld. AO because assessee had changed the e-mail ID. However, same was not uploaded on Income Tax Portal and old mail was not accessible to the assessee. 13. Ld. Counsel submitted that assessee had complied with the notices issued by the Ld. CIT(A) and submitted details but assessee could not file the same before the Ld. AO. Ld. Counsel also prayed for an opportunity to explain the case before the lower authority. 14. On the other Ld. DR had relied on the order of the Ld. AO. However Ld. DR had not objected to the prayer of the assessee. ITA-875/RJT/2024 (AY-2017-18) Atul Finlease Vs. DCIT Circle-2(1), Jamnagar. 15. We have heard both the parties and perusal the records available, we note that due to change in e-mail ID assessee could not comply and submit the relevant documents before the Ld. AO to plead his case successfully. We also note that assessee had complied with the proceedings before the Ld.CIT(A) and furnished all the documents. It is settled law that principles of natural justice and fair play require that the affected party is granted sufficient opportunity of being heard to contest his case. Therefore, without delving much deeper into the merits of the case, in the interest of justice, we restore the matter back to the file of Ld. AO for de novo adjudication and pass a speaking order after affording sufficient opportunity of being heard to the assessee, who in turn, is also directed to contest his stand forthwith. Therefore, we deem it fit and proper to set aside the order of the Ld. AO and remit the matter back to the file of the Ld. AO to adjudicate the issue afresh on merits. For statistical purposes, the appeal of the assessee is treated as allowed. 16. In the result, the appeal of the assessee is allowed for statistical purposes. Order is pronounced in the open court on 23/01/2025 Sd/- Sd/- (Dr. A.L. SAINI) (DINESH MOHAN SINHA) ACCOUNTANT MEMBER JUDICIAL MEMBER Rajkot Ǒदनांक/ Date:23/01/2025 Copy of the Order forwarded to 1. The Assessee 2. The Respondent 3. The CIT(A) 4. Pr. CIT 5. DR/AR, ITAT, Rajkot 6. Guard File By Order Assistant Registrar/Sr. PS/PS ITAT, Rajkot "