Dharmin N Thakkar (HUF), Ahmedabad V. The ITO, Ward-4(2)(1), Ahmedabad

ITA 18/AHD/2022

• Counselvise Citation: [2022] 107 COUNSELVISE.COM (IT) 0367 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-08-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC-2
• Assessment Year: 2017-2018
• Appeal Filed On: 16-01-2022
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Business income; Principle of natural justice; Source of fund
• Section: 271(1)(c); 44AD; 143(3); 142(1); 234B; 143(2); 69A; 139(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “SMC” BENCH Before: Ms. Annapurna Gupta, Accountant Member And Shri T.R. Senthil Kumar, Judicial Member Dharmin N Thakkar (HUF) 203, Blossom Luxurious, Nr. Mangaldeep Party Plot, Science City Road, Sola, Ahmedabad-380060 PAN No:AAJHD4311A (Appellant) Vs The Income-tax Officer, Ward-4(2)(1), Ahmedabad (Respondent) Appellant by : Shri Tushar Hemani,Sr. Adv. & Shri Parimalsinh B. Parmar, A.R. Respondent by : Ms. Sudhiksha Rani, Sr.D.R. Date of hearing : 08-07-2022 Date of pronouncement : 05-08-2022 आदेश/ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:- The present appeal has been filed by the Assessee against the order dated 26.11.2021 passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, (in short referred to as “NFAC”), against the order passed under section 143(3) of the ITA No. 18/Ahd/2022 Assessment Year 2017-18 I.T.A No. 18/Ahd/2022 A.Y. 2017-18 Page No Dharmin N. Thakkar (HUF) vs. ITO 2Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Year (A.Y) 2017-18. 2. The assessee is engaged in retail business during the Financial Year 2014-15 in name and style “N P Retailers”. The assessee obtained its PAN for the HUF capacity during the demonetization period and filed its Return of income for the Assessment Years 2015-16 & 2016-17 on 25.11.2016. For the Assessment Year 2017-18, the assessee filed its Return of Income on 07.07.2017 declaring total income of Rs.4,43,090/-. The case of the assessee was selected for scrutiny assessment and on the ground “PAN Applied for after the date of announcement of demonetization and large cash deposits during demonetization period.” 2.1. Thus the assessee was issued with142(1) notices on various dates and the assessee was requested to explain cash deposit of Rs. 12,13,500/- in bank account maintained with Punjab National Bank. 2.2 Vide letter dated 06.11.2019, the assessee replied that it is engaged in retail business of readymade garments and filed the return of income u/s. 44AD of the Act. Thus the assessee is not supposed to maintain books of accounts, since the Return is filed as per the provisions of Section 44Ad of the Act. The assessee also explained: (i) Opening cash in hand as on 01.04.2015 Rs. 5,98,200/- (ii) Closing cash in hand as on 31.03.2016 Rs. 10,23,700/- I.T.A No. 18/Ahd/2022 A.Y. 2017-18 Page No Dharmin N. Thakkar (HUF) vs. ITO 3(iii) Closing cash in hand as on 31.03.2017 Rs. 4,277/- (iv) Closing cash in hand as at midnight 08/11/2016 Rs.12,04,908/- (demonetization announcement date) 2.3. The assessee further explained that the cash deposit is from the retail business. The assessee was issued with one more notice u/s. 142(1) calling upon him to explain though the assessee filed Income Tax Returns for the Assessment Year 2015-16, 2016-17 on 25.11.2016 to the PAN Number was obtained only during the demonetization period dated 10.11.2016. As per Section 139A of the Act read with Rule 114 the assessee is required obtained the PAN where an assessee is carrying on any business or profession whose total sales, turnover or gross receipts are likely to exceeds Rs. 5 lakhs in any previous year should obtain to PAN number. However, as per the return filed by the assessee for the Assessment Year 2016-17, the gross turnover is Rs. 9,10,500/-. Therefore the assessee was requested to explain the above contradiction. 3. The assessee vide letter dated 27.11.2019 replied that PAN was obtained when the assessee came to know that his income may exceed income chargeable to tax and the assessee could provide all the documents demanded by his Tax Consultant. The assessee changed his residence, hence the documents demanded by the Tax Consultant could be provided on delayed basis. Further the assessee was busy in his divorce proceeding with his wife who left him and gone to her father’s home. Thus the assessee mentally disturbed could not maintain the purchase bills and other sales I.T.A No. 18/Ahd/2022 A.Y. 2017-18 Page No Dharmin N. Thakkar (HUF) vs. ITO 4record during shifting of his residence. Thus there was a delay in obtaining the PAN number. 3.1. The above explanation was rejected by the Assessing Officer as follows: “the assessee obtained the Permanent Account Number on 10.11.2016 whereas the Gross Turnover of the business carried out by the assessee for the Assessment Year 2016-17 was Rs. 9,10,500/- as admitted by the assessee. Return of income filed by the assessee on 25.11.2016 during the demonetization period”. 3.2. As per section 139A(1)(ii) of the Act mandates a person to obtain a Permanent Account Number whose total turnover exceeds or likely to exceed five lakh rupees in any previous year. The assessee has not filed any valid justification for non-compliance on this issue nor has he furnished any evidence in support of the fact that the business was being carried out by him since the Assessment Year 2015-16. However the Return of income for the Assessment Years. 2015-16 & 2016-17 have been filed on the same date namely 25.11.2016 i.e. time when the assessee was depositing the OHD notes in the bank account. Thus the assessee filed return of income under 44AD of the Act for the earlier assessment years only to justify his cash deposit of Rs. 12,13,500/- and as such to evade the legitimate statutory tax incident, which otherwise he is liable to pay in accidence with the Income Tax Act. I.T.A No. 18/Ahd/2022 A.Y. 2017-18 Page No Dharmin N. Thakkar (HUF) vs. ITO 54. Aggrieved against the assessment order, the assessee filed an appeal before the Ld.(CITA). The case was listed for hearing on five dates i.e. on 05.04.2021, 04.06.2021, 20.07.2021, 17.08.2021 and 24.11.2021. In the absence of any fresh details before the ld. CIT(A) and going through the assessment order the addition made of Rs. 12,13,500/- u/s. 69A r.w.s. 115BBE was confirmed and dismissed the appeal of the assessee by observing as follows: 5.1. There is a well known dictum of law "VIGILANTIBUS, NO DORMENTIBUS, JURA SUBVENIUNT" which means law will help only those who are vigilant. Law will not assist those who, are careless of his/her right. In order to claim one's right, s/he must be watchful of his/her right. Only those persons, who are watchful and careful of using his/her rights, are entitled to the benefits of law. Law confers rights on persons who are vigilant of their rights. 5. Aggrieved against the same, the assessee is in appeal before us raising the following Grounds of Appeal: 1. The learned CIT(A) has erred in law and on facts in not giving sufficient opportunity of hearing, especially during the COVID-19 pandemic which is in violation of the principles of natural justice. 2. The learned CIT(A) has erred in law and on facts in confirming the action of the AO of rejecting computation of profit u/s.44AD of the Act. 3. The learned CIT(A) has erred in law and on facts in confirming the addition of Rs.12,13,500/- r/s.69A r.v.s.HSBBE of the Act. 4. The learned CIT(A) has erred in law and on facts in confirming that the addition is taxable u/s.ll5BBE of the Act. 5. Both the lower authorities have passed the orders without properly appreciating the facts and they further erred in grossly ignoring various submissions, explanations and information submitted by the appellant from time to time which ought to have been considered before passing the impugned order. I.T.A No. 18/Ahd/2022 A.Y. 2017-18 Page No Dharmin N. Thakkar (HUF) vs. ITO 6This action of the lower authorities is in clear breach of law and Principles of Natural Justice and therefore deserves to be quashed. 6. The learned CIT(A) has erred in law and on facts of the case in confirming action of the Id. AO in levying interest u/s.234A/B/C of the Act. 7. The learned CIT(A) has erred in law and on facts of the case in confirming action of the Id. AO in initiating penalty u/s.271(l)(c) of the Act. 8. The appellant craves leave to add, amend, alter, edit, delete, modify or change all or any of the grounds of appeal at the time of or before the hearing of the appeal. 5.1. Ld. Senior Counsel Shri Tushar Hemani appearing for the assessee filed a Paper Book running into 35 pages. Page Nos. 1 to 25 are the copy of the Returns of Income and statement of total income field by the assessee for the Assessment Years 2015-16, 2016-17 & 2017-18. Page No. 26 to 29 on the letters field by the assessee before the Assessing Officer in response to 142(1) notices. Page Nos. 30 to 35 are the copy of the cash book of Profit and Loss account, Balance sheet and relevant extract of bank statement for the Assessment Year 2017-18. The ld. Senior Counsel submitted that the ld. CIT(A) has not given sufficient opportunity of being heard, the assessee that too during the peak Corona period. When the assessee is filing the return of income u/s. 44AD of the Act “presumptive taxation” the assessee is not required to maintain proper books of accounts. When the assessee was having opening and cash balance of Rs. 10,23,700/- and business receipts of Rs. 7,91,017/- during the Assessment Year 2017-18 which is sufficient cash balance available with the assessee, the same is deposited in I.T.A No. 18/Ahd/2022 A.Y. 2017-18 Page No Dharmin N. Thakkar (HUF) vs. ITO 7cash of Rs. 12,13,500/- being high denomination notes. The assessing officer is not correcting adding it u/s. 69A r.w.s. 115BBE of the Act. Therefore the addition is liable to be deleted and consequently the charging of interest u/s. 234A, 234B & 234C and initiation of penalty u/s. 271(1)(c) are liable to be deleted. 6. Per contra the ld. D.R. appearing for the Revenue taken up to Para 8 and 9 of the assessment order explaining the demonetization period and the deposits of specified bank notes: 8. It is pertinent to mention here that the Government of India, vide notification dated 08/11/2016 had demonetized the Specified Bank Notes (SBN) of denomination of Rs.500 and Rs.1000. This was the step taken to clean black money from the economic system. The period of around 50 days was given to deposit SBN in banks. This period lasted from 09/11/2016 to 31/12/2016. Holders of these SBN were allowed to deposit the same in their bank accounts. Operation clean money (OCM) was initiated in this regard to ascertain whether the entire cash deposits made by them are declared in their income tax returns and also to trace and establish the ultimate beneficiary of the transaction. Under this operation, notice under section 143(2) of the Income-Tax Act, 1961 was issued to assessee whose cash deposits are inconsistent with the income declared in their Income Tax Returns and assesee's case is one of the flagged cases of the system. 9. The assessee is not able to furnish a cogent, logical and justifiable explanation to the issues flagged vide notices issued time-to-time under section 142(1) of the Income Tax Act, 1961. The assessee was taking the shield of section 44AD of IT Act, 1961, however, the same got overruled by the basic provisions of obtaining PAN under section 139A of the IT Act, 1961 the Act. Since the assessee has not furnished any evidence in support of business being carried out by him in earlier years, the cash deposit during demonetization out of income declared u/s 44AD of IT Act, 1961 cannot be accepted. Bank statement reveals during the demonetization period, the assessee has deposited cash in its bank account amounting to Rs. 12,13,500/- and the same remains unexplained for the want of evidence. In the circumstances, this amount of Rs. 12,13,500/- is held to be borne out of undisclosed income earned out of undisclosed sources. Also, the assessee I.T.A No. 18/Ahd/2022 A.Y. 2017-18 Page No Dharmin N. Thakkar (HUF) vs. ITO 8has not put forth any evidence to prove his sources of income. As such, this amount of Rs. 12,13,500/- his held to be the income out of undisclosed sources of the assessee for the year under consideration and accordingly taxed. Penalty proceeding under section 271AAC of the Income Tax Act, 1961 is initiated separately on his point. 6.1. The Ld. D.R. further submitted when the assessee is in the business of trading of readymade garments for the Assessment Year 2015-16. The assesse has not field the respective Return of income for the Assessment Years. 2015-16, 2016-17 within due dates as prescribed u/s. 139(1) of the Act. But the Returns were filed only on 25.11.2016 in both the Assessment Years 2015-16 and 2016-17. In fact the assessee has obtained its PAN Number in the capacity of HUF only on 10.11.2016 during the demonetization period. As it can be seen from the Returns of income field by the assessee for the Assessment Year 2015-16, the gross turnover has submitted by the assessee itself is Rs. 9,10,500/- As per Section 139A(1)(ii) of the Act which mandates and assessee to have permanent account number whose total turnover exceeds or likely to exceed five lakh rupees in any previous year. But the assessee in this case has obtained the PAN Number only on 10.11.2016 and filed its return for the Assessment Years 2015-16, 2016-17 on 25.11.2016 during the demonetization period. Further the assessee has not furnished any evidence in support of its Readymade Garments business being carried out by him in earlier years. Therefore the cash deposit of Rs. 12,13,500/- during demonetization out of income declared u/s. 44AD of the Act cannot be accepted. I.T.A No. 18/Ahd/2022 A.Y. 2017-18 Page No Dharmin N. Thakkar (HUF) vs. ITO 97. We have given our thoughtful consideration and perused the materials available on record. The first ground of appeal by the assessee namely sufficient opportunity of hearing especially during the Covid-19 Pandemic period was not given to the assessee, which is violation of principles of natural justice. It is seen from the appellate order though five opportunities were given by the NFAC from April, 2021 to November, 2021. The assessee does not dispute the above hearing dates, however not filed any submissions before NFAC and now claiming before us violation of principles of natural justice. The assessee could not produce before us any valid reasons for non appearance of the assessee, before the NFAC which was only National Faceless Appellate proceeding. Thus the NFAC is correct in applying the legal maxim “VIGILANTIBUS, NON. DORMIENTIBUS, JURA SUBVENIUNT” which means, law will help only those who are vigilant. Law will not assist those who are careless of his/her right. Only those persons, who are watchful and careful of using his/her rights, are entitled to the benefits of law. Thus law confers rights on persons who are vigilant of their rights. The assesse could not demonstrate the reasons for non appearance on the hearing dates by NFAC before deciding the appeal. So we do not find any merit in the grounds raised by the assessee. The same is hereby rejected. 7.1. Ground nos. 2 to 5 on merits of addition of Rs. 12,13,500/- u/s. 69A r.w.s. 115BBE of the Act as rightly pointed out by the Ld. A.R., the assessee has not obtained the PAN Number as required u/s. 139(1)(ii) of the Act read with Rule 114 of the Income Tax I.T.A No. 18/Ahd/2022 A.Y. 2017-18 Page No Dharmin N. Thakkar (HUF) vs. ITO 10Rules. The Ld. Counsel has not produce any details for the delay in obtaining PAN Number on 10.11.2016 even though the assessee’s return of income field for the Assessment Year 2015-16 wherein the gross turnover as admitted by the assessee is Rs. 9,10,500/- which is violation of Section 139A(1)(ii) of the Act. The ld. Counsel for the assessee though placed before us, the Return of Income filed by the assessee for the subsequent Assessment years namely 2019-20 & 2020-21. The above returns also resulting in Nil assessable income and readymade business turnover assessable under 44AD @ 8% is Rs. 1,80,047/- for the Assessment Year 2010-20 and Rs. 49,693/- for the Assessment year 2020-21. Further as it can be seen that the returns for the Assessment Years 2015-16 & 2016-17 is filed on the same day namely 25.11.2016 and other list of events taken place in the above case clearly shows that the claim made by the assessee is found to be not genuine. In the absence of any evidence in support of his garments business carried out by the assessee, and the cash deposit made during demonetization period out of the income declared under the garments business is not proved with necessary records. Thus the assessee failed to prove the concurrent findings of the lower authorities with proper evidences. In the absence of the same, we do not find any merits to interfere with the orders passed by the lower authorities, consequently the grounds raised by the assessee are hereby rejected. 7.2. The other grounds namely 6 & 7 namely charging of interest u/s. 234A, 234B & 234C and initiation of penalty u/s. 271(1)(c) of I.T.A No. 18/Ahd/2022 A.Y. 2017-18 Page No Dharmin N. Thakkar (HUF) vs. ITO 11the Act, which are consequential in nature, hence the same does not require any separate adjudication. 8. Ground No. 8 is general in nature the same is also dismissed. 9. In the result, the appeal filed by the Assessee are hereby rejected and is dismissed. Order pronounced in the open court on 05-08-2022 Sd/- Sd/- (ANNAPURNA GUPTA) (T.R. SENTHIL KUMAR) ACCOUNTANT MEMBER True Copy JUDICIAL MEMBER Ahmedabad : Dated 05/08/2022 आदेश कȧ ĤǓतͧलͪप अĒेͪषत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपीलȣय अͬधकरण, अहमदाबाद