GOVIND GOUD DADIVELA,MAHABUBNAGAR V. INCOME TAX OFFICER, WARD-1, MAHABUBNAGAR

ITA 92/HYD/2025

AI Insights

The case involves cross-appeals by the assessee, Dadivela Govind Goud, and the Revenue against the order of the Commissioner of Income-Tax (Appeals), which pertained to the assessment year 2013-14. The primary issue revolved around the unexplained cash deposits amounting to Rs.6,13,65,625 in the assessee's bank account, which the Assessing Officer treated as unexplained money under Section 69A of the Income Tax Act, 1961. The CIT(A) partly allowed the appeal, accepting the assessee's claim that the actual deposits were Rs.4,17,83,927 and not Rs.6,13,65,625, and that these were proceeds from his liquor business. However, the CIT(A) estimated the income from these receipts at 8% of the gross receipts, deviating from the assessee's declared profit. Both parties appealed against the CIT(A)'s decision, leading to the Tribunal's intervention due to procedural lapses in the admission of additional evidence.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 398059 (ITAT-HYDERABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-06-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-A
• Assessment Year: misc
• Other Referred Cases: Vidya Shankar Jaiswal vs. The Income Tax Officer, Ward-2, Ambikapur
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GURUPREET SINGH
• Assessee Lawyers: V. RAVI KIRAN
• Keywords: Condonation of delay; Set aside; Opportunity of being heard; Additional evidence; Bonafide belief; Ignorance of law; TDS; FORM 26AS
• Section: 147; 148; 144; 142(1); 44AD

Judgement Text

"आयकर अपीलीय न्यायाधिकरण में, हैदराबाद ‘‘ए” बेंच, हैदराबाद IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad “A” Bench, Hyderabad श्री रवीश सूद, माननीय न्याययक सदस्य एवं श्री मिुसूदन सावडिया, माननीय लेखा सदस्य SHRI RAVISH SOOD, HON’BLE JUDICIAL MEMBER AND SHRI MADHUSUDAN SAWDIA, ACCOUNTANT MEMBER O R D E R प्रति रवीश सूद, जे.एम./PER RAVISH SOOD, J.M. The cross-appeals filed by the assessee and Revenue are directed against the order passed by the Commissioner of Income- Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, आयकरअपीलसं./I.T.A.No.1114/Hyd/2024 (तिर्धारण वर्ा/ Assessment Year : 2013-14) Income Tax Officer, Ward-1, Mahabubnagar Vs. Dadivela Govind Goud, Mahabubnagar. PAN : BJWPD4658M. (Appellant) (Respondent / Cross-Appellant) आयकरअपीलसं./I.T.A.No.92/Hyd/2025 (तिर्धारण वर्ा/ Assessment Year : 2013-14) Dadivela Govind Goud, Mahabubnagar. PAN : BJWPD4658M. Income Tax Officer, Ward-1, Mahabubnagar (Appellant) (Respondent / Cross-Appellant) Assessee by: Shri V. Ravi Kiran, Advocate, Revenue by: Shri Gurupreet Singh, Sr.A.R. Date of hearing: 04.06.2025 Date of pronouncement: 04.06.2025 2 ITA No.1114/Hyd/2024 and ITA 92/Hyd/2025 Govind Goud, Dadivela, Mahabubnagar. dated 03.09.2024, which in turn arises from the order passed by the Assessing Officer (for short “A.O.”) u/s 147 r.w.s. 144 r.w.s 144B of the Act, 1961 (for short the “Act”), dated 14.02.2022 for the A.Y. 2013-14. The Revenue has assailed the impugned order on the following grounds of appeal before us. “1. Order of the Ld. CIT (Appeal), NPAC, Delhi dated 03/09/2024 in Appeal No. 2012-13/10099402 is against the facts of the case. 2. On facts and circumstances of the case whether the Ld. CIT(A) is correct in admitting the additional evidences in contravention of Rule 461 of the Rules without appreciating the fact that the assessee had failed to show that it had sufficient reasons for non-compliance during assessment stage which is a pre-condition for accepting additional evidence under Rule 46A of the Rules\". 3. On facts and circumstances of the case whether the Ld. CIT(A) is correct in accepting and considering the documentary evidences for adjudication without affording an opportunity to the AO for examining the sane\". 2. On the other hand, the assessee has challenged the impugned order on the following grounds of appeal. “1. The Learned CIT (A) has erred in Law's and on facts and circumstances of the case in Estimating the Total Income of Rs.37,45,219/- @ 8% on gross receipts of Rs.4,68,15,238/- 2. The Learned CIT(A) has gross erred in Law and on facts without considering the books of accounts submitted by the Appellant during the CIT(A) proceedings.” 3 ITA No.1114/Hyd/2024 and ITA 92/Hyd/2025 Govind Goud, Dadivela, Mahabubnagar. 3. Succinctly stated, the A.O. based on information that though the assessee had made cash deposits of Rs.6,13,65,625/- in his bank account but had not filed his return of income for the subject year i.e. A.Y. 2013-14, initiated proceedings u/s 147 of the Act. Notice u/s 148 of the Act, dt.29.03.2021 was issued to the assessee. However, the assessee failed to comply with the aforesaid notice and did not file his return of income. Also, the notice(s) issued by the A.O. u/s 142(1) of the Act, wherein the assessee was called upon to submit documents to substantiate the source of the aforesaid cash deposits of Rs.6.13 crores (approx.) viz. sources of his income, copies of the bank accounts, computation of income, Trading and Profit and Loss account, Balance-Sheet etc., remained uncompiled with. The A.O. in the absence of any explanation regarding the source of cash deposits of Rs. 6.13 crore (supra) was constrained to treat the entire amount as the assessee’s unexplained money under Section 69A of the Act. Accordingly, the A.O. vide his order passed under Section 147 r.w.s. 144 r.w.s. 144B of the Act, dated 14.02.2022, determined the income of the assessee at Rs.6,13,65,630/-. 4 ITA No.1114/Hyd/2024 and ITA 92/Hyd/2025 Govind Goud, Dadivela, Mahabubnagar. 4. Aggrieved, the assessee carried the matter in appeal before the CIT(A), who after considering the contentions of the assessee in the backdrop of the documents/material that were filed in the course of the proceedings before him, partly allowed the appeal. 5. Ostensibly, the assessee in the course of the proceedings before the CIT(A), had claimed that the cash deposits made in his bank account during the subject year aggregated to Rs.4,17,83,927/- and not Rs.6,13,65,625/- as was taken by the A.O., which was accepted by the CIT(A). Elaborating further on the source of the subject cash deposits, the assessee had claimed before the CIT(A) that the same were the proceeds of the liquor business that was carried out by him during the subject year. The assessee to substantiate his aforesaid claim had filed before the CIT(A) a copy of the Trading, Proft and Loss account, Balance- Sheet etc., wherein a turnover/gross receipts of Rs.4,68,15,238/- from the aforementioned liquor business was disclosed. The CIT(A), based on the aforesaid facts, was of the view that the profit of the assessee from its aforesaid turnover of Rs.4.68 crores (approx.) of liquor business could safely be estimated on a 5 ITA No.1114/Hyd/2024 and ITA 92/Hyd/2025 Govind Goud, Dadivela, Mahabubnagar. presumptive basis by applying the provisions of Section 44AD i.e. 8% of its total turnover/gross receipts of Rs. 4.68 crore (approx.). Accordingly, the CIT(A) based on his aforesaid deliberations worked out the business profits of the assessee at Rs.37,45,219/- i.e .@8% of his gross receipts of Rs.4.68 crores(supra) as against that disclosed by the assessee based on his profit & loss account at Rs. 13,91,451/-. Also, the CIT(A) directed the A.O. to give a credit of the amount of TCS/TDS of Rs.4,08,648/- (Rs.4,05,711/- + Rs.2,937/-) while giving effect to his order. For the sake of clarity, the observations of the CIT(A) are culled out as under: “5. I have gone through the facts of the case and material available on record. It is seen from the records and submission made by the appellant from time to time that the AO has passed an order u/s, 147 read with section 144 of the Act on 14.02.2022 where in total income of the appellant has determined at Rs.6,13,65,630/- u/s. 69A of the Act on account of unexplained cash deposit in the appellant's bank account. 5.1. As regards to grounds of appeal all grounds are interconnected and hence, discussed together. On perusal of the reply filed dated 19.01.2024 before the CIT(A), NFAC, Delhi the appellant has admitted that the main reason for not filing the ROI for the year under question is bonafide belief that once the tax was collected from him, there was no necessity to file his return of income. However, the appellant was in the business of Trading in liquor during the F.Y 2012-13 relevant to the A.Y 2013-14 and purchases liquor from the state government and makes retail sales in his individual capacity and the sale proceeds, which are entirely in cash are deposited in to the bank accounts maintained by him. Tax was collected by way of TCS by APBCL which is State Govt Corporation from the assessee while making purchases. Hence, it is claimed that due to bonafide belief once the tax was 6 ITA No.1114/Hyd/2024 and ITA 92/Hyd/2025 Govind Goud, Dadivela, Mahabubnagar. collected, no need to file ROI it can't be a bonafide belief and ignorance of law is not an excuse in eyes of law. 5.2. Further, it is observed from the submission furnished vide reply dated 19.01.2024 and assessment order 14.02.2022 passed u/s, 147 read with section 144 of the Act that the AO has considered entire cash deposits in bank account of the appellant as unexplained u/s. 69A of the Act without considering the purchase against the sale as the appellant is into the liquor trading, there cannot be any sales without purchases which is cardinal principal of taxation that all receipts are not taxable incomes and this fact is evident from form 26AS which is verifiable document. Also, it is a basic fact of business, instead tax the entire cash deposits without allowing any credit for purchases made by the appellant which is an allowable expenditure the addition made thereon is not sustainable. 5.3. It is noticed from the record that the appellant has actually carried out business of selling & purchasing of liquor. Further, it is seen that the entire purchase were made from APBCL, a state government corporation and sales were made on retail basis. Taxes of Rs.4,05,711/- were also collected by way of TCS by APBCL which is verifiable from Form No. 26AS submitted along with from no. 35. Therefore, it is established that cash generated and deposited in the bank account is from the appellant's liquor business only. Further, it is claimed by the appellant that the cash deposited in the bank account is Rs.4,17,83,927/- only & not Rs.6,13,65,625/- as claimed in the assessment order as the same is verifiable from the bank account statement submitted during the appellate proceedings. 5.4. During the appellate proceedings the appellant has filed copy of P & L account & Balance sheet also as per which total turnover of the appellant during the year was Rs.4.68,15,238/- and net profit derived out of that was Rs. 13,91,451/-. However, the various expenses claimed is not verifiable for the reason that neither the appellant has filed any return u/s.139 or in response to notice u/s.148 of the Act. Also, he has not got his books audited despite of having turnover of more than the prescribed limit as per Income Tax Act. Therefore, only option available is to estimate the income of the appellant considering the facts of the case. 5.5. As per appellant's own submission total turnover of the appellant during the year was Rs. 4,68,15,238/-. It would be just & proper to determine profit and gains of appellant's business on presumption basis is applying the provisions of sec. 44AD as per which 8% of the 7 ITA No.1114/Hyd/2024 and ITA 92/Hyd/2025 Govind Goud, Dadivela, Mahabubnagar. total turnover or gross receipts of the appellant can be estimated as the profit and gains of such business chargeable to tax under the head business or profession. Accordingly, the profit & gains of appellant is estimated at Rs. 37,45,219/-being 8% of gross receipts of Rs.4,68,15,238/- 5.6. In view of the above, the addition made of Rs. 6,13,65,625/- u/s. 69A is restricted to Rs. 37,45,219/- instead of Rs. 13,91,451/- as declared by the appellant in P & L A/c. Further, the AO is directed to give credit of TCS/TDS of Rs.4,08,648/-(Rs.405711 + Rs.2937) while giving the effect to the order and determining tax liability. Above direction is being issued u/s. 251(1)(C) of the Act. Thus, appeal is partly allowed.” 6. Both the Revenue and the Assessee being aggrieved with the order of CIT(A) have carried the matter in appeal before us. 7. Before proceeding any further, we may herein observe that the appeal filed by the assessee involves a delay of 54 days. On perusal of the record, it transpires that the assessee has filed an application requesting for condoning the delay involved in filing the present appeal. It is claimed by the assessee that the delay in filing of the appeal had crept in for the reason that he had during the relevant period undergone knee surgery, and thus, could not file the same within the prescribed period. 7. Per contra, Shri Gurpreet Singh, the learned Senior Departmental Representative (for short “ld. DR”) did not object to seeking of the condonation of the delay by the assessee. 8 ITA No.1114/Hyd/2024 and ITA 92/Hyd/2025 Govind Goud, Dadivela, Mahabubnagar. 8. We have thoughtfully considered the reasons leading to the delay in filing the present appeal. We are of the view that as the delay involved in filing the appeal is not inordinate and there is a justifiable reason explaining the same, therefore, the same merits to be condoned. Our aforesaid view that a liberal approach should be adopted while considering an application filed by an appellant seeking condonation of the delay involved in filing the appeal is supported by the judgment of the Hon'ble Supreme Court in the case of Vidya Shankar Jaiswal vs. The Income Tax Officer, Ward-2, Ambikapur in Special Leave Petition (Civil) Nos. 26310-26311/2024, dated 31st January, 2025, wherein the Hon'ble Apex Court while setting aside the order of the Hon'ble High Court of Chhattisgarh, which had approved the declining of the condonation of delay of 166 days by the Income Tax Appellate Tribunal, Raipur Bench, had observed, that a justice oriented and liberal approach should be adopted while considering the application filed by an appellant seeking condonation of the delay in filing the appeal. We thus, in terms of our aforesaid 9 ITA No.1114/Hyd/2024 and ITA 92/Hyd/2025 Govind Goud, Dadivela, Mahabubnagar. observations, condone the delay of 54 days involved in filing of the present appeal by the assessee before us. 9. Apropos the grievance of the department, we find that the same lies in a narrow compass, viz. the admission of certain additional documentary evidence by the CIT(A) at the back of the AO, i.e without confronting the same to the A.O. as required by the mandate of Rule 46A of the Income-Tax Rules, 1962. 10. We find on a perusal of the record that the assessee had failed to comply with the notice(s) issued by the A.O u/s 142(1) of the Act, and had not furnished the documentary evidence which were specifically called for by him to verify the source of the cash deposits of Rs.6.13 crores (supra) made during the subject year in the assessee’s bank account, viz. Trading and Profit and Loss account, Balance Sheet, computation of income, bank statements etc. As is discernible from the record, the assessee had stated before the CIT(A) that the actual cash deposits in his bank account during the subject year amounted to Rs.4,17,83,922/- only and not Rs.6,13,65,625/-, which was verifiable on a perusal of the bank account statement that was submitted by him before the 10 ITA No.1114/Hyd/2024 and ITA 92/Hyd/2025 Govind Goud, Dadivela, Mahabubnagar. first appellate authority. Apart from that, the assessee had filed before the CIT(A) the copy of the Trading, Profit and Loss Account, Balance-Sheet of the liquor business that he claimed to have carried out during the year under consideration. Ostensibly, the observations of the CIT(A), viz. (i). that the cash deposits in the assessee’s bank account aggregated to Rs.4,17,83,922/- and not Rs.6,13,65,625/-; and (ii). that the assessee during the subject year had garnered a turnover/gross receipts from his liquor business of Rs. 4,68,15,238/-, were arrived at based on the documents that were filed by the assessee for the first time in the course of the appellate proceedings before him. 11. We find substance in the ld. DR’s claim that as the aforesaid documentary evidence were filed by the assessee before the CIT(A) for the first time, viz. (i). Bank statement; and (ii). Trading, Profit and Loss Account, Balance-Sheet, were additional documentary evidence, therefore, as per the mandate of sub-rule (3) of Rule 46A of the Income Tax Rules, 1962, he was obligated to have allowed a reasonable opportunity to the A.O. to examine the said documents and file his objections to the admission of the same, if 11 ITA No.1114/Hyd/2024 and ITA 92/Hyd/2025 Govind Goud, Dadivela, Mahabubnagar. any. Apart from that, the CIT(A) as per sub-rule (2) of Rule 46A was obligated, to have recorded in writing the reasons for admission of additional documentary evidence. For the sake of clarity, we herein cull out Rule 46A which reads as under: “46A. (1) The appellant shall not be entitled to produce before the Joint Commissioner] (Appeals)] [or, as the case may be, the Commissioner (Appeals)], any evidence, whether oral or documentary, other than the evidence produced by him during the course of proceedings before the Assessing Officer], except in the following circumstances, namely :- (a) where the Assessing Officer has refused to admit evidence which ought to have been admitted; or (b) where the appellant was prevented by sufficient cause from producing the evidence which he was called upon to produce by the Assessing Officer; or (c) where the appellant was prevented by sufficient cause from producing before the Assessing Officer any evidence which is relevant to any ground of appeal; or (d) where the Assessing Officer has made the order appealed against without giving sufficient opportunity to the appellant to adduce evidence relevant to any ground of appeal. (2) No evidence shall be admitted under sub-rule (1) unless the Joint Commissioner) (Appeals)] [or, as the case may be, the Commissioner (Appeals)) records in writing the reasons for its admission. 3) The Joint Commissioner) (Appeals)][or, as the case may be, the Commissioner (Appeals)] shall not take into account any evidence produced under sub-rule (1) unless the Assessing Officer) has been allowed a reasonable opportunity- (a) to examine the evidence or document or to cross-examine the witness produced by the appellant, or (b) to produce any evidence or document or any witness in rebuttal of the additional evidence produced by the appellant. 4) Nothing contained in this rule shall affect the power of the Joint Commissioner) (Appeals)] [or, as the case may be, the Commissioner (Appeals)] to direct the production of any document, or the examination 12 ITA No.1114/Hyd/2024 and ITA 92/Hyd/2025 Govind Goud, Dadivela, Mahabubnagar. of any witness, to enable him to dispose of the appeal, or for any other substantial cause including the enhancement of the assessment or penalty (whether on his own motion or on the request of the Assessing Officer)) under clause (a) of sub-section (1) of section 251 or the imposition of penalty under section 271.]” 12. Although, sub-rule (4) of Rule 46A carves out an exception to the application of sub-rules (1) to (3), but the same is only in a case where the Commissioner (Appeals) had directed the assessee to produce any documents or the examination of any witness to enable him to dispose of the appeal or for any other substantial cause. As it is not a case that the additional documentary evidence in question were filed before the CIT(A) pursuant to his directions, therefore, we are of the firm conviction that the CIT(A) as per the mandate of Rule 46A was obligated to have allowed a reasonable opportunity to the A.O. to examine the said documentary evidence before admitting the same. Apart from that, the CIT(A) was further required to have recorded in writing the reasons for admitting the aforesaid additional documentary evidence. 13. We are of the view that as the CIT(A) had failed to comply with the statutory obligation and had bypassed the procedure contemplated U/Rule 46A for admission of the aforesaid 13 ITA No.1114/Hyd/2024 and ITA 92/Hyd/2025 Govind Goud, Dadivela, Mahabubnagar. additional documentary evidence and had summarily admitted, relied and acted upon the said documents for disposing off the appeal, therefore, the order passed by him cannot be sustained. We thus, in terms of our aforesaid deliberations, set aside the order of CIT(A) with a direction to re-decide the same after complying with the mandate of Rule 46A qua the admission of the additional documents that were filed by the assessee before him. Needless to say, the CIT(A), in the course of the set-aside proceedings shall afford a reasonable opportunity of being heard to the assessee. 14. Resultantly, both the appeals of the revenue and assessee are allowed for statistical purposes in terms of our aforesaid observations. Order pronounced in the Open Court on 4th June, 2025. Sd/- (श्री मिुसूदन सावडिया) (MADHUSUDAN SAWDIA) लेखा सदस्य/ACCOUNTANT MEMBER Sd/- (श्री रवीश सूद) (RAVISH SOOD) न्यायिक सदस्य/JUDICIAL MEMBER Sd/- Hyderabad, dated 04.06.2025. *TYNM/sps 14 ITA No.1114/Hyd/2024 and ITA 92/Hyd/2025 Govind Goud, Dadivela, Mahabubnagar. आदेशकी प्रतितलतप अग्रेतर्ि/ Copy of the order forwarded to:- 1. तिर्धाररिी/The Assessee : Dadivela Govind Gound, H.No.3-80, Jatprole, Mahabubnagar – 509103, Telangana. 2. रधजस्व/ The Revenue : The Income Tax Officer, Ward – 1, Mahabubnagar. 3. The Principal Commissioner of Income Tax, Hyderabad. 4. तवभधगीयप्रतितितर्, आयकर अपीलीय अतर्करण, हैदरधबधद / DR, ITAT, Hyderabad 5. गधर्ाफ़धईल / Guard file आदेशधिुसधर / BY ORDER "