DILSHAD HUSAIN,FIROZABAD V. ITO W2(2)(1), FIROZABAD

ITA 67/AGR/2023

AI Insights

The case involves Dilshad Husain, the appellant, who faced additions to his income for the assessment year 2017-18 due to unexplained cash deposits during the demonetization period. The Assessing Officer (AO) made additions of Rs. 14,25,000 as unexplained money under Section 69A and Rs. 75,168 as undisclosed business income. The CIT(Appeals) upheld these additions but later enhanced the income assessment without adequate reasoning, leading to the appeal before the ITAT. The ITAT found procedural lapses in the CIT(Appeals)'s handling of the case, particularly the lack of a reasoned decision and failure to adhere to principles of natural justice, prompting the decision to remand the case for a fresh hearing.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 474815 (ITAT-AGRA)
• Duration Of Justice: 1 year(s) 6 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-11-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 26-11-2024
• Assessment Year: 2017-2018
• Appeal Filed On: 01-05-2023
• Other Referred Cases: Collector Land Acquisition, Anantnag & Ors. V. Mst. Katiji & Ors. (1987) 167 ITR 471 (SC), Sh. Ravi Kant Sharma v. ACIT (ITA Nos. 223 & 224/Agr/2023), National Steel Industries v. ADIT (ITA No. 64/Agr/2022)
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHAILENDRA SRIVASTAVA
• Assessee Lawyers: PRARTHANA JALAN
• Keywords: Condonation of delay; Set aside; Business income; Opportunity of being heard; Principle of natural justice
• Section: 144; 142(1); 69A; 139

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL AGRA (SMC) BENCH, AGRA BEFORE: SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ITA No. 67/Agr/2023 Assessment Year: 2017-18 Dilshad Husain, 144, Gali No. 4, Galib Nagar, Firozabad-283203 U.P. PAN: ACSPH7636R v. Income-tax Officer, Ward 2(2)(1), Firozabad. (Appellant) (Respondent) Assesseeby : Ms. Prarthana Jalan, C.A. Revenue by : Sh. Shailendra Srivastava, Sr. DR Date of hearing : 26.11.2024 Date of Pronouncement : 28.11.2024 ORDER This appeal in ITA No. 67/Agr/2023 for the assessment year 2017-18 has arisen from the appellate order dated 09.01.2023 (DIN& Order No. ITBA/NFAC/S/250/2022-23/1048548221(1),which in turnhas arisen from the assessment order dated 05.11.2019 passed by Assessing Officer u/s. 144 of the Income-tax Act, 1961. 2. At the outset, it is observed that this appeal is filed belatedly by assessee by 52 days before the Income-tax Appellate Tribunal, Agra beyond the time prescribed u/s. 253(3) of the Act. Assessee has filed ITA No. 67/Agr/2023 2 application for condonation of delay, supported by affidavit and medical certificate of the assessee Shri Dilshad Husain, issued by Dr. Hariom Sharma, Firozabad and also by Dr. M.C. Sharma, Firozabad. In this medical certificate and affidavit, it is stated that the assessee was suffering from typhoid fever ,and prayersare made that due to medical reasons, assessee could not file the appeal before the Tribunal within the limitation of time as is prescribed u/s 253(3) of the 1961 Act.Prayers are made by the assessee to condone the aforesaid delay in filing this appeal belatedly with ITAT. The assessee has relied upon the decision of Hon’ble Supreme Court in the case of Collector Land Acquisition, Anantnag &Ors.V.Mst. Katiji&Ors. (1987) 167 ITR 471 (SC) . The assessee has also relied upon the decision of ITAT Agra Bench in the cases of Sh. Ravi Kant Sharma v. ACIT (ITA Nos. 223 & 224/Agr/2023) ,and also order of ITAT, Agra Bench, Agra in the case of National Steel Industries v. ADIT (ITA No. 64/Agr/2022).Learned Sr. DR has no serious objection to the condonation of delay in filing this appeal belatedly by the assessee. 2.2 After hearing both the parties, I observe that this delay of 52 days in filing this appeal belatedly by the assessee need to be ITA No. 67/Agr/2023 3 condoned. If substantial justice and technicalities are pitted against each other, Courts will lean towards advancement of substantial justice, unless malafide is at writ large on the part of litigant. I do not find any mala fide on the part of the assessee in filing this appeal belatedly by 52 days with the Income-tax Appellate Tribunal. I further observe that the assessee is not likely to gain anything by filing the appeal belatedly. I, therefore, condone the delay of 52 days in filing of this appeal belatedly by the assessee beyond the time prescribed u/s. 253(3) of the Act. Reliance is placed on the decision of Hon’ble Supreme Court in the case of Collector Land Acquisition, Anantnag &Ors. vs Mst. Katiji&Ors.(supra). 3. Brief facts of the case are that notice u/s. 142(1) was issued by the AO to the assessee on 14.03.2018 calling the assessee to prepare and file a true and correct return of income for the impugned assessment year, as the assessee has failed to furnish return of income u/s. 139 of the Act. Further, the assessee failed to file return of income in response to notice u/s. 142(1). Assessing Officer observed from the SFT data obtained from ITBA Portal that the assessee has deposited total cash amounting to Rs.14,25,000/- in his ITA No. 67/Agr/2023 4 bank account bearing No. 88141400000085 maintained with Syndicate Bank, Firozabad during the demonetization period. The Assessing Officer called for information such as bank statement , details of cash deposits, directly from the Branch Manager, which were supplied by the bank .The Assessing Officer observed that the assessee has deposited total amount of Rs.23,64,600/- in the said bank account, out of which Rs.14,25,000/- was deposited in cash during demonetization period. The Assessing Officer issued notice u/s. 142(1) as well as show cause notice u/s. 144, but there was no response/compliance by the assessee, which led to the additions in the hands of assessee to the tune of Rs.14,25,000/- as unexplained money u/s. 69A of the Act with respect to cash deposited in the bank account during the demonetization period , as undisclosed income of the assessee. 3.2 Further the Assessing Officer made addition to the tune of Rs.75,168/- being 8% as the net profit of the total turnover with respect to the balance cash/credit entries in the bank account to the tune of Rs.9,39,600/-(after excluding cash deposits of Rs. 14,25,000/- ITA No. 67/Agr/2023 5 during demonetisation period), by treating the same as unexplained and undisclosed business income of the assessee. 4. Aggrieved, the assessee filed first appeal with ld. CIT(Appeals). The Ld. CIT(Appeals) issued notices from time to time during the course of appellate proceedings and as many as five notices were issued , but there was no compliance from the assessee. Ld. CIT(Appeals) dismissed the appeal of the assessee ex parte in liminewithout deciding the issues arising in the appeal on merits, by upholding the addition of Rs.14,25,000/- as was made by the AO. 4.2 Further, with respect to addition of Rs.75,168/- being 8% of the balance amount of Rs.9,39,600 being cash/credit entries in the bank account as profits from business, the ld. CIT(Appeals) gave enhancement notice to the assessee because in view of ld. CIT(A) there is no justification of applying profit rate of 8% to the balance cash/credit entries in the bank to the tune of Rs. 9,39,600, and rather the entire amount of Rs. 9,39,600/- need to be added to the income of the assessee. There was no compliance on the part of the assessee to the enhancement notice issued by the ld. CIT(A), which led to enhancement of income of the assessee by ld. CIT(A) to ITA No. 67/Agr/2023 6 Rs.9,39,600/- from Rs. 75,168/- in the hands of the assessee by invoking provisions of Section 69A. The ld. CIT(A) further applied provisions of Section115BBE of the Act to the aforesaid income brought to tax. 5. Aggrieved, the assessee filed second appeal with the Tribunal, and the ld. Counsel for the assessee Ms. Pratha Jalan, CA appeared and submitted that the email address was given in Form No. 35 of the counsel of the assessee who did not appear before the ld. CIT(Appeals), and the assessee was not aware that the counsel is not complying with the directions of ld. CIT(Appeals). It was further submitted that no submissions could be made by the assessee before the Assessing Officer and the ld. CIT(Appeals). It was submitted that the assessee has duly filed return of income in the preceding year as well as succeeding year, but inadvertently the return of income was not filed by the assessee for the impugned assessment year. It was stated and prayed by the ld. Counsel for the assessee before the Bench that one more opportunity be granted to the assessee by setting aside and restoring the matter back to the file of the ld. CIT(A) for fresh adjudication, and the assessee will duly ITA No. 67/Agr/2023 7 comply with all the information called for by ld. CIT(Appeals). It was submitted that the CIT(Appeals) order confirming the order of Assessing Officer with respect to addition of Rs.14,25,000/- was made without any independent reasoning by the ld. CIT(Appeals), and merely the assessment order of Assessing Officer was confirmed, and there is a breach of provisions of Section 250(6) by ld. CIT(A). It was further submitted that although ld. CIT(Appeals) has given notice for enhancement of income, but the assessee could not give reply before ld. CIT(Appeals) due to mistake of counsel and it was submitted that the ld. CIT(Appeals) enhanced the assessment ex-parte. It was submitted that so far as enhancement of income is concerned, only one notice was given by ld. CIT(A) and principles of natural justice were not adhered to. Reliance is placed by the assesseeto the order of ITAT Agra in the case of Sh. Ravi Kant Sharma v. ACIT (ITA Nos. 223 & 224/Agr/2023), in which I was part of the Division Bench. Reliance was also placed on the order of ITAT SMC Bench, Agra in the case of National Steel Industries v. ADIT (ITA No. 64/Agr.2022) of which I was the author of the said order,andPrayers were made to set aside and restore the matter back ITA No. 67/Agr/2023 8 to the file of ld. CIT(A) keeping in view that the appellate order of ld. CIT(A) was in breach of provisions of section 250(6) of the Act as well principles of natural justice were not complied with. 5.2. Ld. Sr. DR, Shri Shailendra Srivastava on the other hand, relied upon the order of ld. CIT(Appeals). 6. After hearing both the parties and perusing the material on record, I have observed that the assessee has not filed return of income u/s. 139 for the impugned assessment year. Notice u/s. 142(1) was issued by the AO requiring the assessee to file return of income. Assessee did not file return of income either u/s. 139 or in compliance to notice u/s. 142(1). As per SFT details obtained from ITBA Portal, Assessing Officer observed that the assessee has deposited cash of Rs.14,25,000/- in his bank account maintained with Syndicate Bank, Firozabad during demonetisation period. The assessee was asked by AO to explain the same but there was no compliance on the part of the assessee, which led to addition of Rs.14,25,000/- being cash deposited during the demonetization period in the bank account. It was further observed by the Assessing Officer that there was further cash deposit/credit entries in the said ITA No. 67/Agr/2023 9 bank account to the tune of Rs.9,39,600/- apart from the cash deposits made in the demonetization period, which led to the addition to the tune of 8% profit ratio on the said cash deposit /credit entriestreating the same as turnover of the assessee, which led to addition of Rs.75,168/- in the hands of the assessee. The first appeal filed by the assessee was dismissed by ld. CIT(Appeals) ,with respect to first ground of addition of Rs.14,25,000/- on account of cash deposited during demonetization period , ex-parte in limine without deciding the issues on merits by merely upholding the assessment order, on account of no response/reply received by the ld. CIT(Appeals) from the assessee. Further there was enhancement of incomeby the ld. CIT(Appeals), whereby the entire cash deposit/credit entries during rest of the period in the bank account of Rs.9,39,600/- (excluding cash deposits of Rs. 14,25,000/- during demonetisation period) stood added by the ld. CIT(Appeals) to the income of the assessee after giving enhancement notice instead of 8% net profit rate as was brought to tax by the AO as the income of the assessee.TheAssesseedid not filed any reply in response to ITA No. 67/Agr/2023 10 notice(s)/enhancement notice issued by ld. CIT(Appeals) during first appellate proceedings. 6.2. I have observed that the ld. CIT(Appeals) has not decided the appeal on merits so far as first addition of Rs. 14,25,000/- is concerned ,and the appeal of the assessee was dismissed ex-parte in limine without deciding the issues on merit in accordance with law by simply upholding the assessment order.The ld. CIT(A) is required and obligated to pass appellate order in compliance with the provisions of section 250(6), as ld CIT(A) is required to pass reasoned and speaking order on merits in accordance with law. The appellate order passed by ld. CIT(A) is subject to further appeal with ITAT u/s 253. The appellate order passed by ITAT is subject to further appeal before Hon’ble High Court u/s 260A. The judgment and order passed by Hon’ble High Court is also subject to challenge before Hon’ble Supreme Court. Thus, the appellate order passed by ld. CIT(A) is not a final order, as it is subject to challenge before higher appellate authority. Thus, Reasons which weighed in the minds of the adjudicating authority while adjudicating appeal on merits of the issues are cardinal as the higher appellate authority can ITA No. 67/Agr/2023 11 then adjudicate appeal on the issues arising in appeal before them, based on decision and reasoning of ld. CIT(A) in deciding the issues. If the ld. CIT(A) simply dismiss the appeal merely because the assessee did not comply with the notices issued by ld. CIT(A) in limine without adjudicating issues arising in the appeal on merits , such order is not sustainable in the eyes of law keeping in view provisions of Section 250(6) , and also higher appellate authorities will be deprived to see what weighed in the mind of the ld. CIT(A) while adjudicating appeal as it will be an order passed without reasoning on the issues on merits . The appellate order of the CIT(A) is clearly in violation of section 250(6) of the Act and liable to be set aside. Merely stating the assessment order passed by AO is upheld, and that the assessee has not submitted details/documents is not sufficient. The ld. CIT(A) is not toothless as his powers are co- terminus with the powers of the AO., which even includes power of enhancement. It is equally true that the assessee also did not complied with the notices issued by ld. CIT(A) and did not file the requisite details/documents to support his contentions. Thus, the assessee is equally responsible for its woes. ITA No. 67/Agr/2023 12 6.3 So far as enhancement of income by ld. CIT(A) is concerned, ld. CIT(Appeals) has given enhancement notice dated 20.12.2022 fixing the case for 27.12.2022 but there was no compliance by the assessee. The ld. CIT(A) has enhanced the income to Rs.9,39,600/- being total cash deposit/credit entries during rest of the period(apart from cash deposit of Rs. 14,25,000/- during demonetisation period),as against bringing to tax @ 8% of the said deposits as made by the Assessing Officer, as in view of ld. CIT(A) there is no material available on record to justify/substantiate applying 8% profit rate by treating the gross receipts as business receipts. However, I have observed that in case of enhancement of income, only one notice was issued by the ld. CIT(Appeals) and principles of natural justice were not adhered to. 6.4 Keeping in view the entire factual matrix as culled out above in the preceding para’s of this order, it will be fair to both the parties as well in the interest of justice, that the appellate order of ld. CIT(Appeals) be set aside and the matter be remanded back to the file of ld. CIT(Appeals) for fresh adjudication after giving proper opportunity of being heard to both the parties w.r.t. both the issues ITA No. 67/Agr/2023 13 arising in the appeal . It is also noticed that the ld. Counsel for the assessee has made statement before the Bench that if the matter is set aside/restored to the file of ld. CIT(Appeals), the assessee shall duly comply with the notice issued by ld. CIT(Appeals) during the appellate proceedings. I clarify that I have not commented on merits of the issues. Thus, the appellate order passed by ld. CIT(A) is set aside and matter is restored back to the file of ld. CIT(A) for fresh adjudication. I order accordingly. 7. In the result, appeal filed by the assessee is allowed for statistical purposes. Order pronounced in the open court on 28/11/2024. Sd/- (RAMIT KOCHAR) ACCOUNTANT MEMBER Dated: 28th November, 2024 *aks/- "