INCOME TAX OFFICER, WARD-4(1)(1), BENGALURU V. .KITTAPPA LOKESH, BENGALURU

ITA 2054/BANG/2024

AI Insights

The case involves an appeal by the Revenue against the order of the National Faceless Appeal Centre (NFAC), which had partly allowed the assessee's appeal against an assessment order. The assessee, Shri Kittappa Lokesh, had not filed any return of income for the assessment year 2015-16, leading to an assessment order under section 144 of the Income-tax Act, 1961, which treated a cash deposit of Rs.2,34,17,702 as unexplained income. The assessee later provided explanations and documents during the appellate proceedings, which led the NFAC to delete the addition. The Revenue challenged this decision, arguing that the CIT(A) had not properly considered the lack of compliance by the assessee and had admitted new evidence without proper procedure under Rule 46A of the Income Tax Rules.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 475378 (ITAT-BANGALORE)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-12-2024
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2015-2016
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SUNAINA BHATIA
• Keywords: Additional evidence
• Section: 147; 148; 142(1); 139

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH : BANGALORE BEFORE SHRI PRASHANT MAHARISHI, VICE PRESIDENT AND SHRI SOUNDARARAJAN K., JUDICIAL MEMBER ITA No.2054/Bang/2024 Assessment year : 2015-16 The Income Tax Officer, Ward 4(1)(1), Bangalore. Vs. Shri Kittappa Lokesh, No.8, Old No.6, 3rd Main, 3rd Cross, Behind Kempfort K R Garden, Murugesh Palya, Vimanapura SO, Bangalore - 560 017. PAN: ADFPL 8833Q APPELLANT RESPONDENT Appellant by : Ms. Sunaina Bhatia, Advocate Respondent by : Shri V. Parithivel, Jt.CIT(DR)(ITAT), Bengaluru. Date of hearing : 02.12.2024 Date of Pronouncement : 20.12.2024 O R D E R Per Prashant Maharishi, Vice President 1. This appeal is filed by Revenue for the assessment year 2015-16 against the appellate order passed by the National Faceless Appeal Centre, Delhi (NFAC) [ld. CIT(A)] dated 12.7.2024 wherein the appeal filed by the assessee against the assessment order passed u/s. 144 of the Income-tax Act, 1961 (the Act) by the Assessment Unit of the Income Tax Department [ld. AO]dated 02.3.2023 was ITA No.2054/Bang/2024 Page 2 of 7 partly allowed. The Revenue is aggrieved with the same and has preferred this appeal. 2. The brief facts of the case show that assessee is an individual, who did not file any return of income and therefore a notice u/s. 147 of the Act was issued for examination of transaction of cash deposit of Rs.2,34,17,702 in Oriental Bank of Commercial during the FY 2014-15. Assessee was granted several opportunities of hearing, but none of them were responded. Therefore, the ld. AO passed the assessment order u/s. 144 of the Act that cash deposit of Rs.2,34,17,702 is unexplained income of assessee chargeable to tax u/s. 115BBE of the Act and passed assessment order on 02.3.2023 at a total income of Rs.2,34,17,702. 3. Assessee preferred appeal before the ld. CIT(A) wherein assessee explained by way of written submissions that assessee is engaged in the business of buying and selling of Vodafone Sim cards. The ld. CIT(A) was also shown all the details required by the ld. AO, but were not filed before him. Assessee also submitted a cash flow statement as well as month-wise cash received and deposited in the bank account. The ld. CIT(A) based on the above explanation, deleted the above addition holding that the bank statement as well as cash flow statement clearly show that cash deposited by the assessee is a legitimate source of business activity of the appellant. The Revenue is aggrieved with the appellate order, supporting the grounds of appeal. ITA No.2054/Bang/2024 Page 3 of 7 4. The ld. DR vehemently submitted that assessee did not submit any detail before the ld. AO, but submitted all the details before the ld. CIT(A) and on examination of such details, without giving any opportunity to the AO, the addition of Rs.2.34 crores is deleted. He further submitted that the ld. CIT(A) has noted that assessee is carrying on business of purchase and sale of mobile Sim cards and money deposited have been sent to Vodafone South. This fact is accepted by the ld. CIT(A) without making any enquiry either from Vodafone South or from the dealer. The ld. CIT(A) has believed the written submissions made by the assessee that cash deposit in the bank account is gross receipt of cash sales of sim cards. The ld. CIT(A) did not enquiry how the assessee got the sim cards on credit and money was paid to Vodafone only after receipt of cash. Therefore, there is a complete connection that Vodafone has sold sim cards to assessee on credit for which no documents were furnished. He further referred to Rule 46A of the I.T. Rules stating that if the CIT(A) is admitting additional evidence, an opportunity must be given to the AO and same can be admitted only in specified circumstances. It was further stated that the order of the first appellate authority even did not discuss why assessee was prevented in submitting these details before the ld. AO. 5. The ld. AR vehemently submitted that the ld. CIT(A) cannot be prevented in examining the details on his own. It was further stated that the bank statement and the details of cash deposit was already available before the ld. AO and therefore it cannot be said that the ITA No.2054/Bang/2024 Page 4 of 7 order of the ld. CIT(A) is not valid by considering those evidence. The ld. counsel submitted that even otherwise, there is no infirmity pointed out by the ld. DR on the order of the ld. CIT(A) in deleting the addition and therefore the order of the ld. CIT(A) deserves to be confirmed. 6. We have carefully considered the rival contentions and the order of the ld. lower authorities. Facts show that assessee has not filed his return of income u/s. 139 of the Act. Subsequently information was received that assessee has deposited cash of Rs.2.34 crores in his Oriental Bank of Commerce account and based on this information, notice u/s. 148 of the Act was issued on 30.3.2022. Further notice u/s. 142(1) was issued on 11.10.2022 and 17.11.2022. Further notice u/s. 144 of the Act was issued on 29.11.2022 and further show cause notice was issued on 17.2.2023. Assessee did not make a single compliance before the ld. AO. Thus, addition of the whole sum was made by the ld. AO. 7. During the appellate proceedings, the assessee submitted certain details stating that assessee is engaged in the business of buying & selling of Vodafone Sim cards and amount of amount of cash deposits of Rs.3,67,92,235 in the OD account with Oriental Bank of Commerce, source of such deposit was stated to be cash ledger account and bank statement showing on that date when the cash was deposited, assessee was having cash received on sale of Sim cards. It was also shown that cash deposit in bank account was ITA No.2054/Bang/2024 Page 5 of 7 transferred to Vodafone South through RTGS. The assessee also disclosed month-wise cash received and cash deposit to who that the amount of cash deposit in the bank account is through regular source of income. Based on this information, the ld. CIT(A) deleted the addition stating that amount of cash deposit was transferred to Vodafone South entity on purchase and sale of sim cards. We are surprised that the ld. CIT(A) did not even once ask the asse that despite several opportunities granted by the AO, why assessee did not respond to any of the notices. Even notice of reopening was not responded to. Further before the CIT(A), cash flow statement, ledger account of cash, bank statements were provided and based on these, he deleted the addition holding that as the amount of cash deposit was transferred to Vodafone South through RTGS, it appears to him that assessee is engaged in the business of purchase and sale of sim cards. The ld. CIT(A) did not apply his mind at all the facts of the case that a sum of Rs.3.68 crores stated to be deposited by the assessee on sale of sim cards, how and when the assessee got such sim cards on credit. He also did not care to look at the provisions of Rule 46A of the Rules, which prohibits the CIT(A) in entertaining any new additional evidence which was not before the AO, without recording his reasons and also giving an opportunity to the AO. Even the order of the ld. CIT(A) on merits is not sustainable because he even did not visualise that what is the regular income of assessee and without at least retaining that sum, deleted the whole of the ITA No.2054/Bang/2024 Page 6 of 7 addition. In fact, even if assuming while denying that the findings of the ld. CIT(A) is correct, it cannot be appreciated that when sim card is sold of Rs.3.68 crores, it does not have any income chargeable to tax. No doubt, assessee has not made any application for additional evidence, but it is for the CIT(A) to apply his mind where the appellant is producing any evidence which was not before the ld. AO. The ld. CIT(A) did not apply his mind to this aspect at all because any person reading the order of assessment will come to know that there is 100% non-compliance by the assessee before the ld. AO. In view of this, we completely agree with the ld. DR that the order passed by the ld. CIT(A) is in clear- cut violation of provisions of Rule 46A of the Rules. Therefore, ideally we should have restored this matter back to the file of ld. CIT(A), but as the assessee has furnished all the details before him and he has given a finding, the natural course of action would be that the ld. CIT(A) will seek the remand report of the AO in compliance of the provisions of Rule 46A. This exercise will put unnecessary burden on the assessee as well as the revenue. In view of this, we restore the whole matter back to the file of the jurisdiction of the AO, with a direction to the assessee to submit all these details within 90 days from the date of receipt of this order. The ld. AO may examine the same and decide the issue afresh in accordance with law. In view of this, ground no.2 of the appeal challenging the violation of Rule 46A and ground No.1 challenging ITA No.2054/Bang/2024 Page 7 of 7 the deletion of addition on merits, both grounds are allowed for statistical purposes. 8. In the result, the appeal filed of the Revenue is allowed for statistical purposes. Pronounced in the open court on this 20th day of December, 2024. Sd/- Sd/- ( SOUNDARARAJAN K.) ( PRASHANT MAHARISHI ) JUDICIAL MEMBER VICE PRESIDENT Bangalore, Dated, the 20th December, 2024. /Desai S Murthy / Copy to: 1. Appellant 2. Respondent 3. Pr. CIT 4. CIT(A) 5. DR, ITAT, Bangalore. By order Assistant Registrar ITAT, Bangalore. "