Siddharth Azad, Allahabad V. ITO, Range 1(5), Allahabad

ITA 11/ALLD/2023

AI Insights

The case involves Mr. Siddharth Azad, who appealed against the ex-parte assessment order for the assessment year 2017-18, which was passed under Section 144 of the Income-tax Act, 1961. The AO had made additions to the assessee's income based on unexplained cash deposits during the demonetization period and treated deposits in a business account as business income. The CIT(A) upheld the AO's decision, leading to the appeal in the Tribunal. The Tribunal found procedural lapses in the assessment and appellate proceedings, particularly the lack of a reasonable opportunity for the assessee to present his case, and thus decided to set aside the lower orders and remand the case for a fresh assessment.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 128993 (ITAT-ALLAHABAD)
• Duration Of Justice: 2 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-04-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 18-04-2023
• Assessment Year: 2017-2018
• Appeal Filed On: 29-01-2023
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Set aside
• Section: 144; 142(1); 69A

Judgement Text

ITA No. 11/Alld./2023 Assessment Year: 2017-18 Siddharth Azad, Allahabad , U.P. v. ITO, Range1(5), Allahabad,U.P. 1 IN THE INCOME TAX APPELLATE TRIBUNAL, ALLAHABAD BENCH ‘SMC’, ALLAHABAD BEFORE SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ITA Nos.11/Alld./2023 Assessment Year: 2017-18 Mr. Siddharth Azad 23/15, Amar Nath Jha Marg, George Town, Allahabad- 211001, U.P. v. Income Tax Officer , Range 1(5), Allahabad- 211001, U.P. (Appellant) (Respondent) Appellant by: None Respondent by: Shri A.K. Singh ,Sr. D.R. Date of hearing: 19.04.2023 Date of pronouncement: 19.04.2023 O R D E R PER Ramit Kochar, AM: This appeal, filed by assessee, being ITA Nos.11/Alld/2023 for assessment year(ay): 2017-18, is directed against appellate order dated 25.08.2022 in Appeal Nos. CIT(A),Allahabad/10357/2019-20, for ay: 2017-18 , passed by learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre(NFAC), Delhi (hereinafter called "the CIT(A)") (DIN & Order ITBA/NFAC/S/250/2022- 23/1044937703(1), the appellate proceedings had arisen before learned CIT(A) from an ex-parte assessment order dated 29 th November , 2019 for assessment year 2017-18 passed by learned Assessing Officer (hereinafter called "the AO") under Section 144 of ITA No. 11/Alld./2023 Assessment Year: 2017-18 Siddharth Azad, Allahabad , U.P. v. ITO, Range1(5), Allahabad,U.P. 2 the Income-tax Act,1961(hereinafter called “the Act”)(Order No. ITBA/AST/S/144/ 2019-20/1021359116(1)).I have heard this appeal through physical hearing mode in Open Court proceedings. 2. The grounds of appeal raised by the assessee in memo of appeal filed with Income Tax Appellate Tribunal, Allahabad Bench, Allahabad (hereinafter called “the tribunal”) , reads under: “1. That in view of the matter assessment framed u/s 144 by order dated 29.11.2019 in income of Rs. 13,59,680/- is bad both on the facts and in law. 2. That in view of the matter CIT(A) wrong in decide the appeal ex-parte without providing reasonable opportunity to the assessee and the order is not speaking in the eye of laws. 3. That in view of the matter addition of Rs.8,65,180/- by applying net rate of 8% on total deposit in bank as made by the assessing officer and confirmed by CIT(A) is highly unjustified. 4. That in view of the matter addition of Rs.4,94,500/- on account of cash deposit during demonetization period considered as unexplained money and added u/s 69A is highly unjustified when the amount deposited from disclosed sources but both the two lower authorities were wrong in confirming addition. 5. That in view of the matter the finding and observation of the assessing officer with regard to the addition of Rs.8,65,780/- and 4,94,500/- as added by the Assessing Officer in an arbitrary manner by passing the order ex-parte and his action as confirmed by the CIT(A) is highly unjustified. 6. That in view of the matter the appellant reserved his right to take any fresh ground of appeal before the hearing of appeal.” 3. The brief facts of the case are that the assessee did not file his return of income for the assessment year 2017-18. The AO observed that the assessee has deposited Rs. 19,00,300/- in cash in his following bank accounts during demonetization period (09.11.2016 to 30.12.2016), detailed as below: ITA No. 11/Alld./2023 Assessment Year: 2017-18 Siddharth Azad, Allahabad , U.P. v. ITO, Range1(5), Allahabad,U.P. 3 The AO issued notice u/s 142(1), dated 26.02.2018 to the assessee which was claimed to have been served on the assessee by the AO through registered post, requesting assessee to file return of income. The assessee did not file return of income in pursuance to notice u/s. 142(1). The AO issued further statutory notices u/s 142(1) on 17.05.2019 to frame exparte assessment u/s 144, asking assessee to explain the nature and source of cash deposited by him during demonetization . The assessee did not comply with the said notice also. The AO sought information from bank u/s 133(6), and bank statements were directly obtained by the AO, and it transpired that the cash deposited in bank accounts by the assessee during the demonetization period was Rs.19,00,300/- , while total cash deposited in the bank accounts during the entire year was Rs. 56,63,626/- , and total deposits in the bank accounts were to the tune of Rs. 1,13,81,775/- . The details are as under: ITA No. 11/Alld./2023 Assessment Year: 2017-18 Siddharth Azad, Allahabad , U.P. v. ITO, Range1(5), Allahabad,U.P. 4 The AO issued further statutory notices, but the same remained un- complied with by the assessee. The AO observed that the nature of transactions in the bank account no. 502000202052767 were in the nature of business transactions. This bank account was in the name of ‘Yogi Enterprises’ and an amount of Rs. 1,08,14,767/- was deposited by the assessee in this bank account during the year out of which Rs. 51,63,126/- was deposited in cash by the assessee in this bank account. The AO brought to tax income in this bank account by adopting rate of net profit @8% of the total deposits in this bank account to the tune of Rs. 1,08,14,767/- which led to bringing to tax an income of Rs. 8,65,180/- in the hands of the assessee. The ld. CIT(A) ITA No. 11/Alld./2023 Assessment Year: 2017-18 Siddharth Azad, Allahabad , U.P. v. ITO, Range1(5), Allahabad,U.P. 5 upheld the action of the AO , as the assessee did not file any response before ld. CIT(A) also, and an ex-parte appellate order was passed by ld. CIT(A). Before me also , the assessee did not appear during the course of hearing, but the assessee has filed written letter dated 18.04.2023 (placed on record in file) stating that the matter was decided ex-parte by both the authorities below, and he did not received the notices also , and the matter can go back to be decided afresh, and the assessee will plead the matter. The ld. Sr. DR also has no objection to the matter being set aside to the file of the AO for denovo assessment . After considering facts and circumstances of the case, I fail to understand as to how AO has concluded and treated that the total deposit in the bank account no. 502000202052767 to the tune of Rs. 1,08,14,767/- were in the nature of business transactions. No doubt, this account was in the name of ‘Yogi Enterprises’ but that does not conclude that these deposits are in the nature of business receipts and the assessee is entitled to be taxed by computing income by way of net profit@8% of the total deposits , more-so the assessee never filed any return of income and the assessee never came forward to give any explanation as to nature and source of the deposits to the tune of Rs. 1,08,14,767/- in this bank account , out of which Rs. 51,63,126/- was deposited in cash in this bank account during the ITA No. 11/Alld./2023 Assessment Year: 2017-18 Siddharth Azad, Allahabad , U.P. v. ITO, Range1(5), Allahabad,U.P. 6 entire year as also out of which Rs. 14,05,800/- was deposited in cash in this bank account during demonetization period. Thus, the finding of the AO that deposits in this bank account in the name of ‘Yogi Enterprises’ are business receipts is without any basis and evidence on record. The onus is entirely on the assessee to file return of income as also to explain nature and source of each of the deposits in this account, and also to comply with the requirements of various provisions of statute as are concerning with the allowability of deductions towards business expenses while computing business income, such as provisions of Section 37(1), 40A(2) , 40A(3), 40(a)(ia), 36(1)(va) etc etc. The onus is squarely on the assessee to prove that he is carrying on business and compliance with provisions of statute before any business deduction is allowed to the assessee. Similarly, the onus is on the assessee to explain every source of deposits in his bank account . Similarly, for other addition to the tune of Rs.4,94,500/- being made by the AO which were the cash deposits in the bank accounts of the assessee during demonetization period (account no.13920100031032 and 501000186411596), for which no explanation was furnished by the assessee before the AO as well before ld. CIT(A). The ld. CIT(A) on its part has simply confirmed the assessment order , while he was required to give his independent ITA No. 11/Alld./2023 Assessment Year: 2017-18 Siddharth Azad, Allahabad , U.P. v. ITO, Range1(5), Allahabad,U.P. 7 reasoning by way of speaking order. Reference is drawn to provisions of Section 250(6) of the 1961 Act. Thus, I am restoring the entire matter back to the file of the AO for denovo assessment and orders of both the authorities are set aside , and the matter is restored to its original status for framing denovo assessment by the AO , and all issues are kept open. The assessee is directed to co-operate and file all necessary details called for by the AO for framing denovo assessment. I clarify that I have not commented on the merits of the issue’s in this appeal. I order accordingly. 4. In the result, appeal filed by assessee in ITA nos. 11/Alld/2023 for ay: 2017-18 stand allowed for statistical purposes. Order pronounced in Open Court on 19/04/2023 at the conclusion of hearing in the presence of ld. Sr. DR at Allahabad, U.P. dSd/- Sd/- Sd/- SdSd Sd/-S s Sd/- [RAMIT KOCHAR] ACCOUNTANT MEMBER DATED:19/04/2023 Copy forwarded to: 1. Appellant –Mr. Siddharth Azad , 23/15, Amar Nath Jha Marg, George Town, Allahabad-211001, U.P. 2. Respondent –The ITO , Range 1(5) Aayakar Bhawan, 38, M G Road, Civil Lines, Allahabad-211001, U.P. 3. The CIT, Allahabad, U.P. ITA No. 11/Alld./2023 Assessment Year: 2017-18 Siddharth Azad, Allahabad , U.P. v. ITO, Range1(5), Allahabad,U.P. 8 4. The ld. Sr. DR. ITAT, Allahabad, U.P. 5. The CIT(A), Allahabad, U.P. 6. The Guard File By Order P.S.