DCIT-CIRCLE-SHILLONG, SHILLONG V. SMT BILAT RYNGKHLEM, SHILLONG

ITA 134/GTY/2023

AI Insights

The case involves an appeal by the Revenue against the order of the Commissioner of Income Tax (Appeals) - NFAC, Delhi, which had deleted an addition made by the AO regarding unexplained money under section 69A of the Income Tax Act, 1961. The assessee, Smt. Bilat Ryngkhlem, had made substantial cash deposits during the demonetization period, which were scrutinized by the AO. The CIT(A) allowed the appeal of the assessee, leading to the Revenue's appeal. The Tribunal found procedural irregularities in the assessment process, particularly the issuance of notices to a deceased person and the admission of additional evidence without a remand report from the AO. The Tribunal emphasized the need for proper procedural adherence and the opportunity for the legal heir to present their case.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 46719 (ITAT-GUWAHATI)
• Duration Of Justice: 1 year(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2024
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 26-09-2024
• Assessment Year: 2017-2018
• Appeal Filed On: 23-11-2023
• Other Referred Cases: Commissioner of Customs vs. Dilip Kumar and Co and Others, CIT vs. Amarchand Shroff, Deccan Wine & General Stores vs. CIT, Vipin Walia vs. ITO, Durlabhai Kanubhai Rajpara vs. ITO, Rajender Kumar Sehgal vs. ITO, Smt. Kaushalyabai vs. CIT, Pr. CIT vs Maruti Suzuki India Ltd., Shri Aijaz Ahmed Suri Vs. The Income Tax Officer, Ward \\u2013 1, Bagalkot, Jagjit Singh v. Income-tax Officer
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Set aside; Opportunity of being heard; Additional evidence; Procedural lapse
• Section: 144; 142(1); 250; 48; 131; 133(6); 69A; 20; 101

Judgement Text

"आयकर अपीलीय अधिकरण गुवाहाटी पीठ, कोलकाता में IN THE INCOME TAX APPELLATE TRIBUNAL GUWAHATI BENCH AT KOLKATA [वर्ुुअल कोटु] [Virtual Court] श्री मनमोहन दास, न्याधयक सदस्य एवं श्री राक ेश धमश्रा, लेखा सदस्य क े समक्ष Before SRI MANOMOHAN DAS, JUDICIAL MEMBER & SRI RAKESH MISHRA, ACCOUNTANT MEMBER I.T.A. No.: 134/GTY/2023 Assessment Year: 2017-18 DCIT, Circle-Shillong, Shillong Vs. Smt. Bilat Ryngkhlem, Shillong BR Agency, Lad- Kynruhsaph, Jowai Lawmusiang, Meghalaya – 793150. (Appellant) (Respondent) PAN: BCOPR7996H Appearances: Department represented by : Kausik Ray, JCIT. Assessee represented by : None. Date of concluding the hearing : September 26th, 2024 Date of pronouncing the order : November 27th, 2024 ORDER PER RAKESH MISHRA, ACCOUNTANT MEMBER: This appeal filed by the Revenue is against the order of the Ld. Commissioner of Income Tax-NFAC, Delhi [hereinafter referred to as Page | 2 I.T.A. No.: 134/GTY/2023 Assessment Year: 2017-18 Smt. Bilat Ryngkhlem. Page 2 of 10 “the Ld. CIT(A)”] passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) for AY 2017-18 dated 26.10.2023, which has been passed against the assessment order u/s 144 of the Act, dated 28.12.2019. None appeared on behalf of the assessee and the appeal was heard with the assistance of ld. DR. 2. The grounds of appeal raised by the assessee are reproduced as under: “1 For that, the Ld. CIT(A) has erred in admitting additional evidences submitted by the assessee during appellate proceedings without calling for Remand Report from the Assessing Officer in violation of Rule 46A of the Income Tax Rules, 1962. 2 For that, the Ld. CIT(A) has erred in deleting addition of Rs.4,31,10,970/- made by the AO as unexplained money u/s 69A of the Income Tax Act although no such supporting documents about the nature and sources thereof were furnished before the Assessing Officer. 3 For that, the Ld. CIT(A) has erred in accepting the submission of the assessee that the cash deposits were out of cash sales from her proprietary business carried out in the name of M/s B.R Grocery without any supporting documentary evidences for such claim 4 For that, the Ld. CIT(A) has erred in holding that assessment proceeding was initiated by issue of notice u/s 142(1) on 09.03.2019 only when the assessee was already dead and therefore, any notice issued to a dead person for making assessment or re- assessment will be invalid in the eyes of law as against the fact that the first notice u/s 142(1) for assessment proceedings was issued on 27.12.2017 and no information about the death of the assessee was made to the department during assessment proceedings. Therefore, proceedings were initiated against the assessee before her death and be continued against the legal representative. 5 That the appellant craves leave to add, alter, amend and or/modify the ground taken therein.” 3. Brief facts of the case are that the assessee made cash deposits in the bank accounts, which were examined by the Assessing Officer (hereinafter referred to as ld. 'AO'). There were 4 accounts in which the following amounts were deposited: Page | 3 I.T.A. No.: 134/GTY/2023 Assessment Year: 2017-18 Smt. Bilat Ryngkhlem. Page 3 of 10 Sl. No. Account Number Name of the Bank and Branch Amount of Deposit 1 32363227319 State Bank of India, Jowai Branch Rs.1,00,000.00 Total Cash Deposits during demonetization period Rs. 1,00,000.00 Sl. No. Account Number Name of the Bank and Branch Amount of Deposit 1 18121000006729 HDFC Bank Limited, Jowai Branch Rs.6,00,000.00 2 -do- -do- Rs.1,00,000.00 3 -do- -do- Rs.1,00,000.00 4 -do- -do- Rs.1,56,000.00 Total Cash Deposits during demonetization period Rs. 9,56,000.00 Sl. No. Account Number Name of the Bank and Branch Amount of Deposit 1 10941566992 State Bank of India, Jowai Branch Rs.1,50,000.00 Total Cash Deposits during demonetization period Rs. 1,50,000.00 Sl. No. Account Number Name of the Bank and Branch Amount of Deposit 1 30590548506 State Bank of India, Jowai Branch Rs.63,47,500.00 (During 10.11.2016 to 29.12.2016) Total Cash Deposits during demonetization period Rs.63,47,500.00 3.1. The bank account no. 30590548506 was of the proprietor of M/s. B.R. Grocery. The assessee did not file any return for the AY 2017-18 which was relevant to the previous year during which these deposits were made. No compliance was made before the ld. AO. As regards the allowability of exemption u/s 10(26) of the Act, the ld. AO discussed the provisions of Section 10(26) of the Act which are reproduced as under: “10(26) in the case of a member of a Scheduled Tribe as defined in clause (25) of article 366 of the Constitution, residing in any area specified in Part I or Part II of the Table appended to paragraph 20 of the Sixth Schedule to the Constitution or in the [States of Arunachal Pradesh, Manipur, Mizoram, Nagaland and Tripura] or in the areas covered by notification No. TAD/R/35/50/109, dated the 23rd February, 1951, issued by the Governor of Assam under the proviso to subparagraph (3) of the said paragraph 20 [as it stood immediately before the commencement of the North-Eastern Areas (Reorganisation) Act, 1971 (81 of 1971)] [or In the Page | 4 I.T.A. No.: 134/GTY/2023 Assessment Year: 2017-18 Smt. Bilat Ryngkhlem. Page 4 of 10 Ladakh region of the State of Jammu and Kashmir], any income which accrues or arises to him,-— (a) from any source in the areas or States aforesaid], or (b) by way of dividend or interest on securities; Over the period of time, section 10(26) has undergone various judicial scrutiny. However, the basic tenets of provision stand on 3(three) conditions which must coexist in order to be eligible for exemption being claimed under the section. The conditions are as under; i. He/she should be a member of a Scheduled Tribe as defined in Clause (25) of Article 366 of the Constitution; ii. He/she should be residing in any area specified in Part A or Part B of the Table appended Page 6 of 10 paragraph 20 of the Sixth Schedule to the Constitution; or the State or Union Territories mentioned in this provision; iii. The income in respect of which exemption is claimed must be an income which accrues or arises to him/her- (a) from any source in the area, State or Union territories mentioned in the provision or (b) by way of dividend or interest, on securities.” 3.2. The Ld. AO further relied upon the decision of the Hon'ble Supreme Court in the case of Commissioner of Customs vs. Dilip Kumar and Co and Others (Supreme Court) (Constitution Bench) pronounced on 31.07.2018 to hold that the exemption notification is to be interpreted strictly and when there is ambiguity in the exemption notification, the benefit of such ambiguity cannot be claimed by the subject/assessee. Reliance was also placed by him on the decision of the Hon’ble Supreme Court in the case of Dilip Kumar and Co and Others (supra) to hold that no individual can decide on its own by interpreting the law in its favour without following the due process envisaged for the claim of exemption. The ld. AO also called for the details from the bank by issuing notices and summons u/s 133(6) & 131 of the Act respectively, sought the direction of the Range Head u/s 144A of the Act and made an addition Page | 5 I.T.A. No.: 134/GTY/2023 Assessment Year: 2017-18 Smt. Bilat Ryngkhlem. Page 5 of 10 of Rs. 4,31,10,970/- u/s 69A of the Act and Rs. 15,625/- as income from other sources in respect of the bank deposits. 3.3. On both these issues, the assessee filed an appeal before the ld. CIT(A) who relied upon the judicial pronouncements to hold that since the notice was issued to the dead person and not to the legal heir, the notices issued were not followed up and the assessee’s appeal was allowed. The relevant extract from the order of the ld. CIT(A) is as under: “7. It is seen from Para - 1 of the assessment order that the assessment proceeding was initiated by issue of notice u/s 142(1) on 9.3.2019 only when the assessee was already dead. Therefore, the proceeding was taken after her death and, so, Section 159(2)(a) was not applicable. It is Section 159(2)(b) which was applicable and, so, the proceeding was required to be taken against legal representative (LR). The notice issued in the name of a dead person is not a valid notice. This position has been upheld in a number of decisions. In CIT vs. Amarchand Shroff [1963] 48 ITR 59 (SC) it was held, \"The individual assessee has ordinarily to be a living person and there can be no assessment on a dead person and the assessment is a charge in respect of the income of the previous year and not a charge in respect of the income of the year of assessment as measured by the income of the previous year.’’ Also relevant are Deccan Wine & General Stores vs. CIT, 106 ITR 111 (Andhra), Vipin Walia vs. ITO, W.P.(C) 8273/2015 (Del), Durlabhai Kanubhai Rajpara vs. ITO [Special Civil Application No. 16125 of 2010 dated 26.03.2019] and Rajender Kumar Sehgal 101 taxmann.com 233 (Delhi) in W.P. (C) NO. 11255/2017. The basis of the aforesaid legal position is that an individual under the Act has ordinarily to be a living person. Consequently, a dead person will not fall within the scope of the expression ‘person’ under Section 2(31) of the 1961 Act. Therefore, any notice issued to a dead person for making assessment or reassessment will be invalid in the eyes of law. Madhya Pradesh High Court in Smt. Kaushalyabai vs. CIT [1999] 238 ITR 1008 held that once the legal heir of the deceased assessee had participated in the proceedings, the defect in the notice stood automatically cured. However, this principle has not been followed by the Hon’ble Supreme Court in the case of Pr. CIT vs Maruti Suzuki India Ltd. (416 ITR 613) where it is held that participation in the proceedings by the appellant in the circumstances cannot operate as an estoppel against law. In view of the above also, the assessment suffers infirmity.” Page | 6 I.T.A. No.: 134/GTY/2023 Assessment Year: 2017-18 Smt. Bilat Ryngkhlem. Page 6 of 10 4. We have heard the appeal with the assistance of the ld. DR. The ld. CIT(A) has mentioned that the assessee was entitled to the exemption u/s 10(26) of the Act. However, he failed to appreciate that there were 4 bank accounts in which cash was deposited and only one of the bank accounts was linked to the proprietary business of the assessee which could justify the claim of exemption u/s 10(26) of the Act. As the exemption was allowable from any source in the areas or States aforesaid or by way of dividend or interest on securities and since no income tax return was filed, it could not be held that the deposits were from any source in the areas or States aforesaid as mentioned in Section 10(26) of the Act. Further, the legal representative did not inform at any stage of the proceeding to the ld. AO that the assessee had expired, therefore, there was no occasion for the Ld. AO to substitute the L/H in place of the deceased for the purpose of issuing notices. 5. As there was no participation by the assessee nor any such information regarding the demise of the assessee was provided, hence, in the absence of any information in this regard, there was no occasion for the ld. AO to substitute the legal heir in place of the deceased assessee. The order of the ld. CIT(A) is also vitiated on account of admitting the additional evidence during the appellate proceeding without calling for the remand report from the ld. AO, which is in violation of Rule 46A of the Income Tax Rules, 1962. Therefore, ground no. 1 of the appeal is allowed. 6. Ground no. 4 is also allowed as no intimation was sent to the ld. AO in respect of the demise of the assessee, therefore, in the absence of such information, the legal heir could not be substituted for the assessee. The substitution of legal heir in place of the assessee was a Page | 7 I.T.A. No.: 134/GTY/2023 Assessment Year: 2017-18 Smt. Bilat Ryngkhlem. Page 7 of 10 procedural irregularity and the same was curable on the facts of the case. No finding is being given in respect of other two grounds of appeal. The order of the ld. CIT(A) as well as the order of the ld. AO are hereby set aside and the proceedings are remitted to the ld. AO. He shall grant an opportunity of being heard to the legal heir of the assessee and provide adequate opportunity of being heard and re-frame the assessment after considering the submission and in accordance with law. 7. As regards Ground Nos. 3 and 4 relating to the addition under 69A, similar issue relating to cash deposited during the demonetisation period also came up before the ITAT SMC-'A' Bench, Bangalore in the case of Shri Aijaz Ahmed Suri Vs. The Income Tax Officer, Ward – 1, Bagalkot, in which the following procedure has been prescribed for assessing the unexplained deposit: 6. We have carefully gone through the various standard operating procedures laid down by the central board of direct taxes issued from time to time in case of operation clean. The 1st of such instruction was issued on 21/02/2017 by instruction number 03/2017. The 2nd instruction was issued on 03/03/2017 instruction number 4/2017. The 3rd instruction was in the form of a circular dated 15/11/2017 in F.No. 225/363/2017-ITA.II and the last one dated 09/08/2019 in F.no.225/145/2019- ITA.II. These instructions give a hint regarding what kind of investigation, enquiry, evidences that the assessing officer is required to take into consideration for the purpose of assessing such cases. 7. In one of such instructions dated 09/08/2019 speaks about the comparative analysis of cash deposits, cash sales, month wise cash sales and cash deposits. It also provides that whether in such cases the books of accounts have been rejected or not where substantial evidences of vide variation be found between these statistical analyses. Therefore, it is very important to note that whether the case of the assessee falls into statistical analysis, which suggests that there is a booking of sales, which is non-existent and thereby unaccounted money of the assessee in old currency notes (SBN) have been pumped into as unaccounted money. Page | 8 I.T.A. No.: 134/GTY/2023 Assessment Year: 2017-18 Smt. Bilat Ryngkhlem. Page 8 of 10 8. Instruction 21/02/2017 issued by the CBDT suggests some indicators towards verifying the suspicion of backdating of cash. It also suggests indicators to identify abnormal jump in cash trials on identifiable persons as compared to earlier history in the previous year. Therefore, in our opinion it is important to examine whether assessee falls into any of these categories and transfer of deposit of cash is not in line with history of transactions in the preceding assessment years. 9. The assessee is directed to establish all relevant details to substantiate its claim in line with the above applicable instructions based on the facts in present case. We are aware of the fact that not every deposit during the demonetisation period would fall under category of unaccounted cash. However, the burden is on the assessee to establish the genuineness of the deposit in order to fall outside the scope of unaccounted cash. Assessee is directed to furnish PAN and address details of the depositors from whom loan repayment has been accepted in cash. The Ld.AO shall verify all the details / evidences filed by the assessee based on the above direction and to consider the claim in accordance with law. 7.1 Further, in the case of Jagjit Singh v. Income-tax Officer [2023] 149 taxmann.com 48 (Amritsar - Trib.), it has been held as under: 5. We heard the rival submission and relied on the documents available on the record. Considering the order of the revenue authorities the assessee was not able to submit the confirmation from the sundry debtor, M/s AD Traders. The confirmation is annexed with the paper book of the assessee APB page no. 3. The assessee received SBN during demonetization period on dated 10-11-2016. The amount was deposited in the bank account. The amount was received before the appointed day i.e., dated 31-12-2016. So, the assessee shall not in a violation for receiving SBN as per the Act. In Income-tax Act the source was unexplained before the revenue authorities as the evidence was not able to submit before any of the lower authorities by the assessee. Considering the factual matrix here we direct to set aside the matter before the ld.AO for necessary verification de novo. Both the revenue and the counsel of the assessee had not made any objection for remanding back the issue before the ld. AO. Needless to say, that the AO shall provide proper and adequate opportunity of being heard to the assessee in set aside proceedings. The evidence/explanation submitted by assessee in its defence shall be admitted by the AO and adjudicated on merits in accordance with law. We order accordingly. Accordingly, the appeal of the assessee is remanded back to the ld. AO as per above terms. 8. Hence, in order to be fair to both the assessee and the Ld. AO, and respectfully following the orders of the coordinate Benches (supra), both the appeal order as well as the assessment order are set aside to the Page | 9 I.T.A. No.: 134/GTY/2023 Assessment Year: 2017-18 Smt. Bilat Ryngkhlem. Page 9 of 10 Ld. AO with the direction that the evidence in possession of the Legal Heir/Legal representative should be considered and thereafter the income/additions, if required may be made keeping in view the above judicial pronouncements and the departmental instructions and no addition may be made on this ground without proper verification. The Ld. AO shall provide adequate opportunity to the Legal Representative and the Legal Representative also shall not seek unnecessary adjournment. Ground Nos. 3 and 4 are allowed for statistical purposes. 9. Ground No. 5 is general in nature and does not require any separate adjudication. 10. In the result, the appeal filed by the Revenue is allowed for statistical purposes. Order pronounced as per Rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1963 on 27th November, 2024. Sd/- Sd/- [Manomohan Das] [Rakesh Mishra] Judicial Member Accountant Member Dated: 27.11.2024 Bidhan (P.S.) Page | 10 I.T.A. No.: 134/GTY/2023 Assessment Year: 2017-18 Smt. Bilat Ryngkhlem. Page 10 of 10 Copy of the order forwarded to: 1. DCIT, Circle-Shillong. 2. Smt. Bilat Ryngkhlem, BR Agency, Lad-Kynruhsaph, Jowai lawmusiang, Shillong, Meghalaya, 793150. 3. CIT(A)-NFAC, Delhi. 4. CIT- 5. CIT(DR), Guwahati Benches, Guwahati. 6. Guard File. //True copy // By order Assistant Registrar ITAT, Kolkata Benches Kolkata "