CHANDRAKANT POPATLAL POPAT,MORBI V. INCOME-TAX OFFICER WARD 1 MORBI, MORBI

ITA 1/RJT/2024

AI Insights

The case involves Chandrakant Popatlal Popat, who appealed against the order of the CIT(A) confirming additions made by the Assessing Officer under sections 69A and 143(3) r.w.s. 147 of the Income Tax Act, 1961. The additions were based on unexplained cash deposits totaling Rs. 17,10,000 in the assessee's bank account during the assessment year 2011-12. The Assessing Officer had reopened the case due to non-filing of the return and substantial cash deposits. The CIT(A) upheld the Assessing Officer's decision, leading to the current appeal. The Tribunal found that the assessee was not given adequate opportunity to explain the sources of income and directed a fresh examination of the case.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 33866 (ITAT-RAJKOT)
• Duration Of Justice: 10 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-11-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 08-08-2024
• Assessment Year: 2011-2012
• Appeal Filed On: 02-01-2024
• Other Referred Cases: M.S.Gill vs The Chief Election Commission, A.K. Kraipak vs UOI
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHISH KUMAR PANDEY
• Assessee Lawyers: R.R. DOSHI
• Keywords: Set aside; Opportunity of being heard; Peak credit; Principle of natural justice; Reason to believe
• Section: 148; 143(3); 142(1); 143(2); 250; 133(6); 69A; 2

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL, RAJKOT BENCH, RAJKOT BEFORE DR. ARJUN LAL SAINI, ACCOUNTANT MEMBER AND SHRI DINESH MOHAN SINHA, JUDICIAL MEMBER आयकर अपील सं./ITA No. 01/RJT/2024 (Assessment Year: 2011-12) (Hybrid Hearing) Chandrakant Popatlal Popat, Giriraj Society, Sama Kanthe, Morbi-363642 Vs. The ITO, Ward-1 Morbi èथायीलेखासं./जीआइआरसं./PAN/GIR No.: AUHPP2227R (अपीलाथȸ/Assessee) (Ĥ×यथȸ/Respondent) Ǔनधा[ǐरतीकȧओरसे/Assessee by : Shri R.R. Doshi, AR राजèवकȧओरसे/Revenue by : Shri Ashish Kumar Pandey, Sr. DR सुनवाईकȧतारȣख/ Date of Hearing : 08/08/2024 घोषणाकȧतारȣख/Date of Pronouncement : 05 /11/2024 PER DR. A. L. SAINI, AM: आदेश/ORDER Captioned appeal filed by the Assessee, pertaining to assessment year (A.Y.) 2011-12, is directed against the order passed by the Learned Commissioner of Income Tax, Appeal, Addl/JCIT(A), dated 17-11-2023, which in turn arises out of an assessment order passed by the Assessing Officer u/s 143(3) r.w.s. 147 of the Income Tax Act, 1961 (in short, ‘the Act’) vide, order dated 10-12-2018. 2. The Grounds of appeal raised by the assessee are as follows: “1. The order of the learned CIT (A) u/s. 250 is bad in law and Contrary to the facts of the case. I.T.A No. 1/Rjt/2024 A.Y. 2011-12 Chandrakant Popatlal Popat vs. ITO 2 2. The learned CIT (A) has erred in confirming the addition of Rs. 10,85,605/- to the returned income, as unexplained money u/s. 69A of the Act. 3. The learned C1T(A) has erred in not accepting the sources of cash deposit made in the bank account during the year under assessment. 4. The learned CIT (A) has erred in not accepting agricultural income of Rs.2,07,400/-. 5. The learned CIT(A) has erred in not accepting the source of cash aggregating to Rs. 17,10,000/- deposited in Bank, during the year under appeal. 6. The learned CIT (A) has erred in confirming the application of peak credit principle and confirming addition as unexplained money u/s 69A of the Act by AO. 7. The learned CIT (A) has erred in not affording adequate opportunity to explain the details of income of the assessee. 8. The order of the learned C1T(A) is unjustified, illegal and against the principles of natural justice. 9. Without prejudice to the above your assessee craves leave to add, amend, alter, vary or withdraw all or any grounds of appeal on or before the hearing of appeal.” 3. The facts necessary for disposal of the appeal are stated in brief. The assessee, before us, is an individual and had not filed his return of income for the year under consideration. On verification of AIMS/NMS of i-taxnet portal, it was noticed by the assessing officer that assessee has deposited huge cash in his savings Bank account. Therefore, assessee`s case was re- opened after recording necessary reasons and after obtaining necessary approval. Accordingly, notice u/s 148 of the Act was issued on 27.03.2018 and duly served upon the assessee. The reasons for re-opening the case, are as under: \"The assessee is an individual and has not filed his return of income for the year under consideration. I.T.A No. 1/Rjt/2024 A.Y. 2011-12 Chandrakant Popatlal Popat vs. ITO 3 2. This office is in possession of the information that the assessee has made cash deposits of Rs. 17,10,000/- in Shree Morbi Nagrik Sahakari Bank Ltd, during the FY 2010-11. 3. The assessee had not filed Return of Income for AY 2011-12. Still he had surplus funds to make cash deposits of Rs. 17,10,000/- in Shree Morbi Nagrik Sahakari Bank Ltd during the FY 2010-11. This does not commensurate with the fact that the assessee had below taxable income during the year under consideration. 4. In light of the above facts and observation a letter dated 12.03.2018 was issued to the assessee for the verification of transactions discussed above. But in response, the assessee did not submit any reply or document till date. 5. In view of the above facts, it can be derived that cash deposits made of Rs. 17,10,000/-,in Shree Morbi Nagrik Sahakari Bank Ltd, during the FY 2010-11 remain undisclosed. 6. In view of the above facts, I have reason to believe that there is escapement of income to the extent of Rs. 17,10,000/-, as the cash deposits made in Shree Morbi Nagrik Sahakari Bank Ltd, during the FY 2010-11, do not commensurate with the fact that the assessee has not filed his return of income for year under consideration. 7. In this case return of income was not filed for the year under consideration. Accordingly, in this case, the only requirement to initiate proceeding u/s 147 is reason to believe which has been described above. It is pertinent to mention here that in this case, the assessee has filed return of income for the year under consideration. In view of the above provisions of clause (a) of explanation 2 to section 147 are applicable to facts of this case and the assessment year under consideration is deemed to be a case where income chargeable to tax has escaped assessment. In this case more than four years have lapsed, from the end of the assessment year under consideration. Hence, necessary sanction to issue notice u/s 148 has been obtained separately from the Pr. CIT-3. Rajkot, as per the provisions of Section 151 of the Act.\" 4. Therefore, assessing officer issued notice u/s 133(6) of the Act, to the bank. The assessing officer noticed that assessee had deposited cash of Rs. 17,10,000/-, in his Shree Morbi Nagrik Sahakari Bank Ltd in account No. I.T.A No. 1/Rjt/2024 A.Y. 2011-12 Chandrakant Popatlal Popat vs. ITO 4 4354. The assessee had filed return of income, on 27.04.2018 of Rs. 1,38,600/-, in response to notice under section 148 of the Act. Thereafter, notice u/s 143(2) of the Act, was issued and copy of reasons were provided to the assessee. Thereafter, notice u/s 142(1) of the Act, was issued to the assessee. As the assessee did not file any submission, therefore, assessing officer, issued further show cause notice on 03.11.2018. 5.In response, the assessee filed his submissions vide his reply dated 07.12.2018, which are reproduced below: “Chandrakant Popatlal Popat is engaged in the business of Stamp/Deed writing business from more than 15 years. He has obtained the licensed to do the same business from collector and district registrar on 28.06.2001 and from year to year the license that been renewed. He is also having agriculture land in support of which copy of form Nos. 7/12 and 84 already provided to you earlier Chandrakant Popatlal Popat has declared Net income of Rs. 1,38,600/- from the business and the agriculture income of Rs. 2,07,400/- during the AY 2011-12. He has deposited Rs.17,10,000/- cash in Shree Morbi Nagrik Sahkari Bank. The source of deposit is given in the annexure separately. Following are the documents/records are attached herewith in the support of income. 1. Profit and loss and balance sheet for AY 2011-12. 2. License from collector and district registrar. 3. Source of Cash deposited in Shree Morbi Nagrik Sahkari Bank\" Source of Cash Deposit Particulars Amount Amount Total Cash deposit during the year in Shree Morbi Nagrik Sahkari Bank 1710000 Source of cash deposit Cash withdrawal during the year from the Shree Morbi Nagrik Sahkari Bank 780000 Net cash Income during the year 346000 Accumulated cash balances of earlier years 584000 Total 1710000 6. However, the assessing officer, rejected the contention of the assessee and observed that the assessee has shown Bond Writing income of Rs. 3,06,250/- I.T.A No. 1/Rjt/2024 A.Y. 2011-12 Chandrakant Popatlal Popat vs. ITO 5 and agricultural income of Rs. 2,07,400/-. However, assessee has not furnished any bills of agricultural expenditure or evidence of Bond Writing income. He has only submitted copy of 7/12 extract and form number 8A etc. Regarding bond income, the assessee has submitted licence issued by collector office, but no bills or voucher regarding bond writing income has been produced before the assessing officer. Going through assessee's bank statement it has been observed by the assessing officer that there has been withdrawal and deposits of cash. In his submission also assessee has stated that he has made withdrawal of Rs. 7,80,000- during the year. Considering these facts, this is a fit case for application of peak credit principle. In his bank account Shree Morbi Nagrik Sahakari Bank Ltd, account No. 4384, the peak credit is reflected on 31.03.2011 of Rs. 10,85,605/-.As the assessee has not been able to completely explain the source of cash deposit therefore, the peak credit reflected on 31.03.2011 of Rs. 10,85,605 was added back, as assessee's unexplained money of the year u/s. 69A of the I. T. Act. 7. Aggrieved by the order of assessing officer, the Assessee carried the matter in appeal, before the ld. CIT(A), who has dismissed the appeal of the assessee. The ld CIT(A) observed that assessee did not submit any evidence in respect of agricultural income. Besides, the assessee had not made out a case that cash withdrawn has been redeposited in bank account without spending. In these circumstances, the ld CIT(A) held that peak credit worked out by the assessing officer is correct and this way, ld CIT(A) dismissed the appeal of the assessee. I.T.A No. 1/Rjt/2024 A.Y. 2011-12 Chandrakant Popatlal Popat vs. ITO 6 8. Aggrieved by the order of the ld. CIT(A), the assessee is in appeal before us. 9. Learned Counsel for the assessee, submitted before us that assessee is a Registered Stamp Vendor and Bond Writer since the year 2001. The assessee has earned Rs. 1,38,600/- from bond writing and stamp vendor income. The Assessee derives agricultural Income of Rs. 2,07,400/-.The assessee has redeposited Rs. 7,80,000 out of the cash of Rs. 7,80,000 withdrawn from bank during the year under. Learned Counsel also stated that adequate opportunity, of being heard, were not provided during the appellate proceedings, by the ld. CIT(A). Therefore, learned Counsel for the assessee, contended that addition made by the assessing officer should be deleted. 10. On the other hand, ld. DR for the Revenue, argued that the Assessing Officer has not brought the entire amount of cash deposits in bank account, under taxation. The Assessing Officer has worked out the peak credit by giving credit of cash deposited out of withdrawal during the year. No case has been made out by the assessee, that the cash withdrawal has been re- deposited without spending. It does not stand to reason that cash was withdrawn only to re-deposit later. The net cash income cannot be authenticated without ascertaining the lifestyle of the assessee, expenses incurred during the year towards festivals, marriages, illness, education expenses etc. The accumulated cash balances also cannot be said to be available for depositing to the bank account for the same reasons. Further the I.T.A No. 1/Rjt/2024 A.Y. 2011-12 Chandrakant Popatlal Popat vs. ITO 7 agricultural income cannot be determined with available documentary evidence, as all the vouchers are self made. It is not the case that entire deposits have been assessed u/s. 69A of the Act, by the assessing officer. Therefore, the cash balances do not make any difference to the peak credit worked out. The Assessing Officer has been fair enough to work out the peak credit, therefore, addition made by the assessing officer, should be sustained. 11. We have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials brought on record. We note that in ground No.4, the assessee stated that learned CIT (A) did not accept agricultural income to the tune of Rs.2,07,400/-. In ground No.7, raised before this Tribunal, the assessee`s main grievance is that the learned CIT(A) has erred in not affording adequate opportunity to explain the details of income of the assessee. Therefore, in ground number 8, raised before the Tribunal, the assessee stated that the order of the learned C1T(A) is unjustified, illegal and against the principles of natural justice. We find merit in the above grounds raised by the assessee. We note that the Hon’ble Supreme Court in M.S.Gill vs The Chief Election Commission 1978 AIR SC 851 held “The dichotomy between administrative and quasi-judicial function vis-à-vis the doctrine of natural justice is presumably obsolescent after Kraipak (A.K. Kraipak vs UOI AIR 1970 SC 150) which makes the water-shed in the application of natural justice to administrative proceedings. The rules of natural justice are rooted in all legal systems and I.T.A No. 1/Rjt/2024 A.Y. 2011-12 Chandrakant Popatlal Popat vs. ITO 8 are not any new theology. They are manifested in the twin principles of nemo judex in parte sua (no person shall be a judge in his own case) and audi alterem partem (the right to be heard). It has been pointed out that the aim of natural justice is to secure justice. We note that 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. CIT(A) 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. CIT(A) and remit the matter back to the file of the ld. CIT(A) to adjudicate the issue afresh on merits. For statistical purposes, the appeal of the assessee is treated as allowed. 12. In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the open court on 05 -11-2024 Sd/- Sd/- (DINESH MOHAN SINHA) (DR. A.L. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER Rajkot Dated: 05/11/2024 आदेश कȧ ĤǓतͧलͪप अĒेͪषत / Copy of Order Forwarded to:- 1. Assessee I.T.A No. 1/Rjt/2024 A.Y. 2011-12 Chandrakant Popatlal Popat vs. ITO 9 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Rajkot 6. Guard file. By order/आदेश से, Assistant Registrar ITAT, Rajkot "