BHOOPRAM SHARMA,PANCHKULA V. INCOME TAX OFFICER, WARD NO.1, PANCHKULA

ITA 860/CHANDI/2024

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The case involves Bhoopram Sharma, who appealed against the order of the CIT(A)/NFAC, Delhi, which upheld the Assessing Officer's decision regarding unexplained cash deposits during the demonetization period and additional income assessed on the turnover. The Assessing Officer had treated the cash deposits of Rs. 58,97,020 as unexplained income under Section 69A of the Income Tax Act, 1961, and applied a gross profit rate of 10% on the assessee's turnover. The CIT(A) dismissed the appeal due to non-compliance and procedural delays. The Tribunal found that the CIT(A) had not adequately considered the assessee's explanations for the delays and the nature of the deposits, leading to the decision to remit the case back to the Assessing Officer for a detailed examination.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 126121 (ITAT-CHANDIGARH)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-04-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2017-2018
• Other Referred Cases: Chuharmal Vs CIT (1988), Smt. Srilekha Banerjee and others Vs CIT (1964)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIVEK VARDHAN
• Assessee Lawyers: RISHAB GUPTA; C.A
• Keywords: Business income; Additional evidence; Corroborative evidences; Income from undisclosed sources; FORM 26AS
• Section: 144; 143(3); 142(1); 143(2); 69A

Judgement Text

" आयकर अपीलीय अिधकरण,चǷीगढ़ Ɋायपीठ “ए” , चǷीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH “A”, CHANDIGARH HEARING THROUGH: PHYSICAL MODE ŵी लिलत क ुमार, Ɋाियक सद˟ एवं ŵी क ृणवȶ सहाय, लेखा सद˟ BEFORE: SHRI. LALIET KUMAR, JM & SHRI. KRINWANT SAHAY, AM आयकर अपील सं./ ITA No. 860 /Chd/ 2024 िनधाŊरण वषŊ / Assessment Year : 2017-18 Bhoopram Sharma C/o M.K. Aggarwal & Associates SCO 1, First Floor, Sector 11, Panchkula-134113 बनाम The ITO Ward No. 1, Panchkula ˕ायी लेखा सं./PAN NO: DBZPS5982L अपीलाथŎ/Appellant ŮȑथŎ/Respondent िनधाŊįरती की ओर से/Assessee by : Shri Rishab Gupta, C.A राजˢ की ओर से/ Revenue by : Shri Vivek Vardhan, Addl. CIT सुनवाई की तारीख/Date of Hearing : 07/04/2025 उदघोषणा की तारीख/Date of Pronouncement : 21/04/2025 आदेश/Order PER LALIET KUMAR, J.M: This is an appeal filed by the Assessee against the order of the Ld. CIT(A)/NFAC, Delhi dt 29/05/2024 pertaining to Assessment Year 2017-18. 2. In the present appeal Assessee has raised the following grounds: 1. The Ld. Commissioner of Income Tax (Appeals) erred in law in upholding the order of Ld. Assessing Officer, wherein the Ld. Assessing Officer has made a grave legal error in considering the cash deposit in bank account during demonetization period as unexplained money u/s 69A without considering the activities of the assessee. 2. The Ld. Commissioner of Income Tax (Appeals) errored in law in upholding the order of Ld. Assessing Officer, wherein the Ld. Assessing Officer has made a grave legal error in considering Gross Profit Ratio @ 10% on Cash Deposits made by the assessee erroring the fact that the 2 amount deposited in a day is transferred to another account on same day. 3. The Ld. Commissioner of Income Tax (Appeals) has dismissed the appeal of the assessee with a pre-conceived mind as the Ld. Commissioner has stated in the order that No Return of Income has been filed by the assessee despite the fact that assessment proceedings are concluded u/s 144 r.w.s. 143(3) of the Income Tax Act, 1961. 4. That the appellant graves leave to add, delete or amend the grounds of appeal till the disposal of the same. 3. Briefly the facts of the case are that the assessee filed his income tax return on 04.08.2017, declaring an income of Rs. 2,86,490/- for the assessment year 2017-18. The case was selected for complete scrutiny under CASS due to large cash deposits made during the demonetization period. A statutory notice under section 143(2) of the Income Tax Act, 1961, was issued on 28.09.2018, scheduling a hearing for 04.10.2018. Subsequently, a notice under section 142(1) with a questionnaire was issued on 29.07.2019, fixing a hearing for 07.08.2019. Additional notices were issued on 13.08.2019, 11.10.2019, and a show-cause notice under section 144 on 09.11.2019, fixing the case for hearing for 15.11.2019. The assessee failed to respond to any of these notices or provide explanations regarding the cash deposits. Bank records revealed that the assessee deposited Rs. 58,97,020/- in cash during the demonetization period across two accounts with Punjab National Bank Rs. 56,52,520/- in one account and Rs. 2,44,500/- in another. Additionally, the assessee’s total turnover for the year was reported as Rs. 1,74,87,205/-, excluding transactions not routed through the bank. 4. The Assessing Officer (AO) concluded that the assessee’s failure to comply with multiple statutory notices left no option but to proceed with an ex-parte assessment under section 144 of the Income Tax Act, 1961, based on available records. The AO found that the cash deposits of Rs. 58,97,020/- during the demonetization period were unexplained, as the assessee provided no details regarding their nature or source. Invoking section 69A of the Act, which deems unexplained money as income if not recorded in the books of account and lacking satisfactory explanation, the AO treated the entire cash deposit as income from undisclosed sources. The AO supported this conclusion with judicial precedents, including the Supreme Court’s rulings in Chuharmal Vs CIT (1988) and Smt. Srilekha Banerjee and others Vs CIT (1964), which emphasize that 3 unexplained cash deposits constitute taxable income when the assessee fails to prove they are not income. The income of Rs. 58,97,020/- was taxed at 60% under section 115BBE, and penalty proceedings under section 271AAC were proposed at 10% of the tax payable. Additionally, the AO noted an unusual trend in cash deposits relative to the reported turnover of Rs. 1,74,87,205/-. Due to the lack of compliance and unverifiable expenses, the AO applied a flat gross profit rate of 10% on the turnover, resulting in an additional income of Rs. 17,48,720/-. Penalty proceedings under section 270A for misreporting this income were initiated. Furthermore, the AO proposed penalties under section 272A(1)(d) for non-compliance with statutory notices. The total assessed income was computed as Rs. 79,32,230/-, comprising the declared income of Rs. 2,86,490/-, the unexplained cash deposits of Rs. 58,97,020/-, and the additional turnover-based income of Rs. 17,48,720/-. The AO issued the assessment order along with a demand notice and challan, initiating penalty proceedings separately. 5. Against the order of the Ld. AO the assessee went in appeal before the Ld. CIT(A). 6. The Ld. CIT(A) dismissed the appeal filed by Shri Bhoopram Sharma for the Assessment Year 2017-18, upholding the AO’s order dated 11/12/2019. The CIT(A) noted that the assessee failed to respond to multiple notices issued during both the assessment and appellate proceedings, including e-notices sent on 15/04/2024 and 30/04/2024. No written submissions or supporting documents were provided to justify the grounds of appeal, leading the CIT(A) to adjudicate based on available records and the assessment order. 6.1 The CIT(A) examined the delay of 733 days in filing the appeal and rejected the assessee’s explanations—citing the death of their counsel and unawareness due to Covid-19—as unacceptable due to the lack of supporting evidence. The explanation that the assessee was informed only after the bank account was attached was not considered a sufficient reason to excuse the delay, as it did not establish a valid cause for not filing the appeal within the statutory 30-day period under Section 249(2). Nevertheless, the CIT(A) proceeded to examine the case on its merits. 4 6.2 On the substantive issues, the CIT(A) upheld the AO’s additions of Rs. 58,97,020/- under Section 69A for unexplained cash deposits and Rs. 17,48,720/- as business income. The assessee claimed the cash deposits were related to his role as a business correspondent for Punjab National Bank, with transactions belonging to the bank and commission income reflected in Form 26AS. However, no documentary evidence, such as bank statements, cash books, or bills, was submitted to substantiate this claim or explain the source of deposits, particularly those made during the demonetization period. The CIT(A) emphasized that the onus was on the appellant to prove the nature and source of the deposits, especially given the demonetization context aimed at curbing black money. The CIT(A) found that the AO had provided adequate opportunities during the assessment for the appellant to explain the deposits, but the appellant remained non-cooperative. The AO’s estimation of 10% net profit on a turnover of Rs. 1,74,87,205/- was deemed reasonable in the absence of any contrary evidence. The Ld. CIT(A) held that in the absence of the above details, it is found unnecessary and imprudent to disturb the order of the AO and his findings. Therefore, the impugned assessment order is upheld and no interference is called for. 7. Against the order of the Ld. CIT(A) the assessee is in appeal before us. 8. The Ld. AR for the assessee has submitted that there is delay in filng the appeal before the Ld. CIT(A) for a period of 774 days and that delay was on account of the death of the Counsel for the assessee. It was further submitted that the Ld. CIT(A), has failed to condone the delay despite the fact that the assessee was not aware about the outcome of the proceedings due to COVID 19 and was only came to know about the proceedigns when the bank account of the assessee was attached by the Revenue. It was submitted that the assessee had also filed the additional evidences to show that the assessee working as a business correspondent agent for PNB Bank and was providing door to door services to the small and petty consumers and were depositing the amount with the bank. It was submitted that all the amounts collected by the assessee were credited in the K code no. K2002902 and settlement account no. 2522002100004398. It was submitted that the Assessing Officer had made the addition of entire sum which was deposited in the settlement bank account named above as income of the assessee. 5 9. It was submitted that the matter may kindly be remitted back to the lower authorities so that the issue can be examined in the light of the additional documents. 10. Per contra the Ld. DR had objected to referring back the matter and admission of the additional documents. 11. We have heard the rival contentions of the parties and perused the material available on record. In the present appeal before us, the assessee has reiterated that the delay was unintentional and occurred due to extraordinary circumstances prevailing during the COVID-19 pandemic. It was further submitted that in view of the Hon’ble Supreme Court’s suo motu decision in In Re: Cognizance for Extension of Limitation, 2022 SCC Online SC 231, the period from 15.03.2020 till 28.02.2022 stood excluded for the purpose of limitation under all general and special laws in respect of judicial and quasi-judicial proceedings. 12. Furthermore, we also find that the assessee’s counsel had passed away, and the assessee had not received any intimation of the order passed by the Assessing Officer. We find merit in the submission of the assessee. The Hon’ble Supreme Court, by invoking its powers under Article 142 read with Article 141 of the Constitution, has held that in computing limitation, the period from 15.03.2020 to 28.02.2022 shall stand excluded. Even if the appeal was filed belatedly, a substantial part of the delay stands covered by the extended limitation granted by the Hon’ble Apex Court. 13. In the present case, the Ld. CIT(A) had not only dismissed the appeal on account of delay but also decided the grounds raised by the assessee without referring to any documents or submissions made. It has come on record that the assessee was functioning as a Business Correspondent Agent with Punjab National Bank, and therefore, it is preposterous for the lower authorities to have taxed the entire deposit in the settlement account as income of the assessee. We do not countenance such an approach and strongly disapprove the mechanical treatment of the case without verifying the factual nature of the transactions. Accordingly, we hold that the delay in filing the appeal before the CIT(A) stands condoned, in light of the above binding judgment of the Hon’ble Supreme Court. 6 14. Since the matter has not been properly examined on merits and no opportunity was given to produce supporting documents, we deem it appropriate to restore the matter to the file of the Assessing Officer. The AO shall provide the assessee a reasonable opportunity to present his case along with supporting evidence. The AO shall frame a fresh assessment in accordance with law after considering all relevant material, including the nature of the cash deposits, turnover, and the business correspondent relationship with the bank. It is clarified that nothing contained in the foregoing paragraphs shall be construed as an expression of opinion on the case's merits. The learned Assessing Officer shall decide the matter independently, in accordance with law, and uninfluenced by any observation made hereinabove. 15. The assessee is directed to extend full cooperation and file complete details within the time prescribed. No unnecessary adjournments shall be sought. In case of failure to do so, the AO is at liberty to proceed in accordance with law on the basis of available material. 16. In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the open Court on 21/04/2025. Sd/- Sd/- क ृणवȶ सहाय लिलत क ुमार (KRINWANT SAHAY) (LALIET KUMAR) लेखा सद˟/ ACCOUNTANT MEMBER Ɋाियक सद˟ /JUDICIAL MEMBER AG आदेश की Ůितिलिप अŤेिषत/ Copy of the order forwarded to : 1. अपीलाथŎ/ The Appellant 2. ŮȑथŎ/ The Respondent 3. आयकर आयुƅ/ CIT 4. आयकर आयुƅ (अपील)/ The CIT(A) 5. िवभागीय Ůितिनिध, आयकर अपीलीय आिधकरण, चǷीगढ़/ DR, ITAT, CHANDIGARH 6. गाडŊ फाईल/ Guard File आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar "