SHRI OM PRAKASH & CO , JAMMU V. INCOME TAX OFFICER WARD-1 (1), JAMMU

ITA 107/ASR/2024

• Counselvise Citation: [2024] 130 COUNSELVISE.COM (IT) 5607 (ITAT-AMRITSAR)
• Duration Of Justice: 5 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-08-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 13-08-2024
• Assessment Year: misc
• Appeal Filed On: 03-03-2024
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: WAY OF REBUTTING ITS CONTENTION
• Keywords: Business income; Opportunity of being heard; Principle of natural justice
• Section: 147; 260A; 69A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR BEFORE DR. M. L. MEENA, ACCOUNTANT MEMBER AND SH. UDAYAN DASGUPTA, JUDICIAL MEMBER I.T.A. No. 107/Asr/2024 Assessment Year: 2017-18 Om Prakash & Co., Nehru Market, Jammu J & K 180001 [PAN: AADFO1975F] (Appellant) Vs. Income Tax Officer, Ward -1(1), Jammu (Respondent) Appellant by Respondent by : : Sh. Sanjay Gupta&Akanksha Gupta, CAs Sh. Arvind Bansal, Sr. D.R. Date of Hearing Date of Pronouncement : : 14.08.2024 19.08.2024 ORDER Per Dr. M. L. Meena, AM: The captioned appeal has been filed by the assessee against the order of the ld. CIT(A) National Faceless Appeal Centre (NFAC), Delhi dated 16.01.2024 which is arising out of the Assessment Order dated 31.03.2022 AO/NFAC, Delhi u/s 147 r.w.s. 144B of Income Tax Act, 1961 [hereinafter referred to as the Act] for the Assessment Year: 2017-18. 2 ITA No. 107/Asr/2024 Om Prakash & Co. v. ITO 2. At the outset, the ld. counsel for the assessee submitted that the ld. CIT(A) was not justified in rejecting the appeal of the assessee by passing order ex-parte qua the assessee and confirming the addition of Rs.21,50,000/- u/s 69A as unexplained investment without appreciating the fact that the said money was out of sale proceeds and cash appearing in the books of account which was already available with the firm on account of profits earned during the year under consideration as per the cash books. In support, the Ld. AR filed a written synopsis which reads as under: “4. That that the appellant assessee had duly replied to all the queries raised by the national faceless e assessment centre vide DIN ITBA/AST/F/142(1)/2021- 22/1037966601(1) dated 21.12.2021 like copy of all bank ledgers both appearing in our books and as per bank records (page 13-63 of paper book) source of deposit made in the bank like cash book(page 122-140), month wise comparison chart of cash deposited in bank for current and preceeding years(page 117 of paper book), copy of ledger of J&K Bank(page 64-116of paper book). 5. That the comparison chart clearly depicts that in the year ended 31.03.2016 the cash deposited by the assessee was Rs.19537244/- whereas the cash deposited during the year under consideration was Rs.8336975/- which is less by Rs.11200269/-. In almost all months during the whole year the assessee had deposited less cash than that of earlier years. Cash Cash Deposited Deposited 31-03-16 31-03-17 April 13,85,237.00 11,00,000.00 May 17,49,336.00 12,22,000.00 June 19,35,056.00 2,00,000.00 3 ITA No. 107/Asr/2024 Om Prakash & Co. v. ITO July 15,09,744.00 10,50,000.00 August 16,22,462.00 3,00,000.00 September 15,43,180.00 1,50,000.00 October 13,09,248.00 6,50,000.00 November 24,66,500.00 26,00,000.00 December 17,88,030.00 2,00,000.00 January 6,29,930.00 3,00,000.00 February 21,95,321.00 4,14,975.00 March 14,03,200.00 1,50,000.00 1,95,37,244.00 83,36,975.00 6. That the assessee had deposited Rs2500000/- in SBN the certificate of which is enclosed (pagell8 of paper book). Your honour will appreciate that the cash duly appearing in the books of accounts was deposited on the very next working day of the bank in one go which clearly shows that the assessee was having such cash with him which is apparent from the books of accounts the copy of which is enclosed herewith and he had deposited the same in the bank. 7. That the faceless department had asked for certain information like nature of business, bank account, source of cash, comparison chart month wise extract of J&K Bank ledger. That the assessee had duly explained his position in the said case vide DIN reference no. 1037966601(1) acknowledgement no 379351491160322 dated 16.03.2022 and DIN 1040711024(1) acknowledgement no 385054811170322 dated 17.03.2022. All these submissions were never considered by the learned faceless assessing officer. As per page 119-121of paper book. 8. That as per provision of section 144B(2)(xii)" the assessment unit shall after taking into account all the relevant material available on the record, prepare, in writing:- (b) in any other case a show cause notice stating the variations prejudicial to the interest of the assessee proposed to be made the income of the assessee and calling upon him to submit as to why the proposed variations should not 4 ITA No. 107/Asr/2024 Om Prakash & Co. v. ITO be made and serve such show cause notice on the assessee through the national faceless assessment centre." The provision of section 144B(2)(xii) have not been compiled by the faceless assessment unit. No show cause notice was served on the assessee. 9. That we want to bring in your notice that the turnover of the assessee from business for the year ended 31.03.2017 was Rs.39692265/- and the net profit distributed among the partners was Rs.1048308/- which works to 2.64% of the total turnover. However the assessing officer had considered Rsl51012 as the profit of the assessee and on the basis of which he had calculated the limit of cash for the assessee as Rs 3.5lacs. It is the sweet will of the assessee how better he has to run his business and how much cash is required for business purpose. We are failed to understand how the assessing officer had calculated the cash required for the business was Rs3.5 laths on the basis of closing cash in hand as on 31.03.2017 which was Rs364146/-. Whereas the cash in hand for the last 4 years and following 3 yrs was as below : 31.03.2013 : Rs. 1425673 31.03.2014 : Rs. 1959513 31.03.2015 : Rs. 3282264 31.03.2016 : Rs. 2128632 31.03.2018 : Rs. 967211 31.03.2019 : Rs. 2865839 31.03.2020 : Rs. 4124441 Thus the assumption of the assessing officer that the cash in hand required for business is Rs3.50 Lakh is not valid. It was merely that due to demonetization all the cash available with the assessee was deposited in the bank after demonetization whole of India was in cash crisis and the same was the position of the assessee. Which is the reason for short cash available with the assessee as at the end of the financial year under consideration. Copy of balance sheet enclosed 9. To substantiate the cash available with the assessee we have to submit that the Vat returns were filed in time by the assessee. Copies of which are enclosed for your reference and record. The assessee is carrying out sale and cash is realized from debtors/ sale. Which is deposited in bank as and when required? Copy of cash book is also enclosed for your reference and record. As per page 141-161 of paper book 10. That the order of the learned ITO was made under section 147read with section 144Bof the income tax act dated 31.03.2022. In which the cash deposited 5 ITA No. 107/Asr/2024 Om Prakash & Co. v. ITO on 10.11.2016 amounting to Rs.2500000/- was added under section 69A. Here the provisions of section 69A cannot be invoked because the assessee had duly shown all the transactions of credit and debit in his books of accounts. The copy of cash book stating all the transactions is enclosed herewith for your reference and record. Further as per the provisions of section 69A—Unexpalined Money "where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or other valuable article is not recorded in the books of account, if any maintained by him for any source of income , and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the Assessing Officer is satisfactory, money, bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year". Here we want to mention that there was no such money available with the assessee and all his transactions are duly appearing in his books of accounts and financial statements submitted before the department well before the assessment order was made by the assessing officer. With these submissions we hereby pray that the addition made by the learned faceless assessing officers should be deleted as the assessee has disclosed all the particulars in his return. In view of the above submission we here by pray that the addition made by the I T O and confirmed by the C I T Appeals should be deleted.” 3. The Ld. DR on the other hand, supported the impugned order. However, he has no objection to the request of the assessee. 4. We have heard both sides, perused the material on record, impugned order and written submissions filed before us. Admittedly, the Ld. CIT(A) and the AO has passed the orders exparte qua the assessee without granting adequate opportunity of being heard and appreciating the merits of the case. 6 ITA No. 107/Asr/2024 Om Prakash & Co. v. ITO The Ld. CIT(A) has observed that as appellant failed to avail the opportunities offered on various occasions from time to time, it is understood that appellant is not keen to pursue the appeal as per law and accordingly, appeal filed by the appellant is liable to be dismissed for non-prosecution by the appellant. Accordingly, he rejected the appeal by mentioning that appellant’s appeal is to be treated as not maintainable. 5. The Ld. AR for the appellant explained that the Vat returns were filed in time by the assessee to substantiate the source of cash available. He contended that the assessee has been carrying out cash sale and cash has also been realized from debtors which was deposited in bank. Copy of cash book was placed on record (APB, Pgs.141-161). 6. The AR argued that the Assessment Order was made under section 147 read with section 144B of the income tax act dated 31.03.2022 where cash deposited on 10.11.2016 amounting to Rs.2500000/- was added under section 69A. He contended that the provisions of section 69A cannot be invoked because the assessee had duly shown all the transactions of credit and debit in his books of accounts the, cash book in particular. It is seen that the CIT(A) has not decided the issue on merits of the case and he has not even discussed the factum of service of the notices issued by the AO. 7 ITA No. 107/Asr/2024 Om Prakash & Co. v. ITO 7. In our view, it was the assumption of the AO that the cash in hand required for business was Rs3.50 Lakh and that due to demonetization all the cash available with the assessee was deposited in the bank without appreciating the merits of the case, books of account and submission of the appellant.It is seen that neither the AO nor the Ld. CIT(A) has considered the relevant facts and addressed the matter regarding appellants claim of source of cash deposit in its current bank account, was being the business receipts. In support, the Ld. AR filed statement of account and bank statement with documentary evidence to establish its claim as additional evidence under Rule 29 of the ITAT Rules 1963 (APB, Pgs. 1-40) which goes to the root of the matter and hence, admitted on record. 8. In view of the principles of natural justice, the authorities below ought to have disproved the claim of the assessee by way of rebutting its contention with support of corroborative documentary evidences on record after granting an adequate opportunity of being heard. The Hon’ble Supreme Court of India in the case of Tin Box Company vs. CIT reported in 249 ITR 216 in which their Lordships of Supreme Court of India observed as under: “Assessment - Opportunity of being heard - Setting aside of assessment - Assessment order must be made after the assessee has been given reasonable opportunity of setting out his case - Same not done - Fact that the assessee could have placed evidence before the first appellate authority 8 ITA No. 107/Asr/2024 Om Prakash & Co. v. ITO or before the Tribunal is really of no consequence for it is assessment order that counts — Assessment order set aside and matter remanded to assessing authority for fresh consideration.” 9. The Hon’ble Delhi High Court in the case of “Bharat Aluminium Company Ltd. vs. Union of India”, (Supra) has held as under: 21. This Court is further of the view that a quasi-judicial body must normally grant a personal hearing as no assessee or litigant should get a feeling that he never got an opportunity or was deprived of an opportunity to clarify the doubts of the assessing officer/decision maker. After all confidence and faith of the public in the justness of the decision making process which has serious civil consequences is very important and that too in an authority/forum that is the first point of contact between the assessee and the Income- tax Department. The identity of the assessing officer can be hidden/protected while granting personal hearing by either creating a blank screen or by decreasing the pixel/density/resolution. 22. Consequently, this Court is of the view that the word "may" in Section 144B(viii) should be read as "must" or "shall" and requirement of giving an assessee a reasonable opportunity of personal hearing is mandatory. THE CLASSIFICATION MADE BY THE RESPONDENTS/REVENUE BY WAY OF A CIRCULAR DATED 23RD NOVEMBER, 2020 IS NOT LEGALLY SUSTAINABLE. AN ASSESSEE HAS A VESTED RIGHT TO PERSONAL HEARING AND THE SAME HAS TO BE GIVEN, IF AN ASSESSEE ASKS FOR IT. 23. The argument of the respondent/Revenue that personal hearing would be allowed only in such cases which involve disputed questions of fact is untenable as cases involving issues of law would also require a personal hearing. This Court is of the view that the classification made by the respondents/Revenue by way of the Circular dated 23rd November, 2020 is not legally sustainable as the classification between fact and law is not founded on intelligible differentia and the said differentia has no rational relation to the object sought to be achieved by Section 144B of the Act. 24. Also, if the argument of the respondent/Revenue is accepted, then this Court while hearing an appeal under section 260A (which only involves a substantial question of law) would not be obliged in law to grant a personal hearing to the counsel for the Revenue! 25. Consequently, this Court is of the opinion that an assessee has a vested right to personal hearing and the same has to be given, if an assessee asks for it. The right to personal hearing cannot depend upon the facts of each case. 9 ITA No. 107/Asr/2024 Om Prakash & Co. v. ITO 10. In the instant case, the assessee could have placed further evidences either before the AO or the first appellate authority, if he has been provided adequate opportunity of being heard. The argument of the Ld. DR that personal hearing would be allowed only in such cases which involve disputed questions of fact is untenable as cases involving issues of law would also require a personal hearing. In our view, the classification made by the Revenue by way of the Circular dated 23rd November 2020 is not legally sustainable as the classification between fact and law is not founded on intelligible differentia and the said differentia has no rational relation to the object sought to be achieved by Section 144B of the Act. 11. In view of the principles of natural justice, we consider it deem fit to restore back the matter to the file of the Ld. AO to pass de novo assessment after considering the written submission and evidences filed on record and may be filed before him during the fresh Assessment Proceedings after granting sufficient opportunity of being heard to the assessee with a direction that the AO shall issue a Show Cause Notice and thereafter pass a reasoned order in accordance with law. 12. Accordingly, Assessment order set aside and matter remanded to assessing authority to pass de novo assessment as per law. 10 ITA No. 107/Asr/2024 Om Prakash & Co. v. ITO 13. In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the open court on 19.08.2024 Sd/- Sd/- (Udayan Dasgupta) (Dr. M. L. Meena) Judicial Member Accountant Member *GP/Sr.PS* Copy of the order forwarded to: (1)The Appellant: (2) The Respondent: (3) The CIT concerned (4) The Sr. DR, I.T.A.T. True Copy By Order