SHRI RAVINDER SACHDEVA, AMRITSAR V. INCOME TAX OFFICER WARD -5 (4), AMRITSAR

ITA 263/ASR/2022

AI Insights

The case involves Shri Ravinder Sachdeva, the appellant, who contested the addition of Rs. 16,70,500 to his income as unexplained cash deposits under section 68 of the Income Tax Act, 1961, for the Assessment Year 2012-13. The Assessing Officer (AO) initially made this addition after an ex-parte assessment under section 144, which was later confirmed by the CIT(A). The appellant argued that the addition was unjustified as the deposits were from legitimate business activities and not unexplained income. The Tribunal found that the lower authorities had not adequately addressed the appellant's claims or provided a proper opportunity for a personal hearing, which is essential for a fair assessment process.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 114589 (ITAT-AMRITSAR)
• Duration Of Justice: 5 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-06-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 12-06-2023
• Assessment Year: 2012-2013
• Appeal Filed On: 25-12-2022
• Other Referred Cases: Shri Surinder Mahajan vs. ITO, Ward-3, Pathankot, Smt. Harshila Chordia vs ITO, ACIT vs Pradeep Agarwal, Narendra Nath Paul vs ITO, Tin Box Company vs. CIT, Bharat Aluminium Company Ltd. vs. Union of India
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Gift; Business income; Opportunity of being heard; Peak credit; Question of law
• Section: 147; 131; 68; 148; 144; 44AD; 142(1); 234B; 260A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR BEFORE DR. M. L. MEENA, ACCOUNTANT MEMBER AND SH. ANIKESH BANERJEE, JUDICIAL MEMBER I.T.A. No. 263/Asr/2022 Assessment Year: 2012-13 Shri Ravinder Sachdeva C/o Shri P.N. Arora Advocate, 3 rd Floor SRK Mall,, 14-Kennedy Avenue, Mall Road, Amritsar-143001-Punjab Vs. The ITO Ward 5(4), Amritsar PAN: AMJPS2481A APPELLANT RESPONDENT Assessee by: Shri. P.N. Arora, Advocate Revenue by: Shri Pardeep Kumar, Sr. DR Date of Hearing: 13/06/2023 Date of Pronouncement: 20/06/2023 ORDER Per Dr. M. L. Meena, AM: This appeal is filed by the Assessee against the order of the Ld. CIT(A)/NFAC Delhi dt. 16/11/2022 for the Assessment Year 2012-13. 2. The Ld. Counsel for the Assessee has filed revised grounds of appeal vide its application dt. 02/06/2023 which read as under: 1. That the assessment order passed by the Assessing Officer, thereby making the addition of Rs. 16,70,500/- by invoking the provisions of section 68 and similarly the order passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi thereby confirming the addition made by the Assessing Officer are both against the facts of this case and are untenable under the law. The authorities below did not appreciate that this case does not fall within the mischief of section 68. 2. That the order passed by the AO is bad in the eyes of law as no notice u/s 148 was ever served on the assessee and similarly no notice u/s 142(1) was served on the assessee. As such the assessment order passed is bad in the eyes of law and the same is liable to be cancelled. Again, the CIT(A) has grossly I.T.A. No. 263/Asr/2022 Assessment Year: 2012-13 2 erred in confirming the order of the AO. 3. That the AO has grossly erred in passing ex-parte order u/s 144. Similarly the CIT(A) has also erred in confirming the same and the authorities below did not appreciate that only one notice dated 06/12/2019 was served on the assessee and the same was duly replied and complied. The authorities below did not appreciate that the assessee was doing purchase and sale of mobile accessories and its repair work and the returned income as shown should have been accepted. 4. That the authorities below did not appreciate that the permission for reopening the case u/s 148 was granted by the Principal CIT in a mechanical way and there was no application of mind while granting the permission for reopening the case. As such the assessment order passed is bad in the eyes of aw and the same may be cancelled. Even otherwise, this case does not fall within the mischief of section 148. 5. That the authorities below did not appreciate that the maximum peak in the bank comes to Rs.35,184/- and the Ld. CIT(A) has miserably failed to appreciate the same and he did not adjudicated the issue in appeal. As such the addition made may be deleted. 6. That again the worthy CIT(A) has grossly erred in confirming the interest charged u/s 234A and 234B and the same may be deleted. Alternatively the interest charged is very high & excessive. 7. That any other ground of appeal which may be argued at the time of hearing of the appeal. 3. Ground Nos. 2, 3 & 4 of the appeal has not been pressed before the Bench, therefore same are dismissed as not pressed. 4. ground No. 6 and 7 are either consequential nature or general to the addition made by the AO and hence does not require separate adjudication. Hence, same are dismissed as irrelevant. 5. The remaining ground no. 1 and 5 are interlinked to each other which pertains to unexplained cash deposit in bank account. I.T.A. No. 263/Asr/2022 Assessment Year: 2012-13 3 6. In the present case, the appellant has deposited cash amounting to Rs.16,70,500/- in his bank account maintained with State Bank of India in FY 2011-12 relevant to AY 2012-13 which remained unexplained to the satishfaction of the AO. Accordingly, the AO initiated proceedings u/s 147 of the act after obtaining the approval of the Pr. Commissioner of Income Tax-ll, Amritsar and completed assessment u/s 147 r.w.s.144 of the Act by making addition of an amount of Rs. 16,70,500/- of the cash deposit in his bank account with State Bank of India during the FY 2011-12 relevant to the AY 2012-13 as unexplained income u/s 68 of the act by observing as under: "As would be evident from above that the assessee has kept silence all the times since nobody attended the assessment proceedings nor furnished any requisite information/documents. I am, therefore, constrained to frame the ex- parte assessment under section 144 of the Income Tax Act, 1961 to the best of my judgment as per information/documents available on record. As per information available on the records, the assessee has deposited cash of Rs. 16,70,500/- in his bank account maintained with STATE BANK OF INDIA, during the financial year 2011-12 relevant to the assessment year 2012-13 for which the assessee failed to furnish any documentary evidence and as such in the absence of any explanation/evidence of source of cash deposits of Rs. 16,70,500/- the same is treated as income earned from undisclosed source deposited in bank account and is assessed to tax as his unexplained investment in bank account as per provisions of section 68 of the I.T. Act, 1961. Penalty proceedings under section 271(1 )(b) and 271(1 )(c) of the Income Tax Act, 1961 for concealment of income are being initiated separately.” 7. The assesse being aggrieved with the Assessment Order, went in appeal before the Ld. CIT(A) who has confirm the addition by observing as under: I.T.A. No. 263/Asr/2022 Assessment Year: 2012-13 4 8. These grounds of appeal challenge the addition made by the AO on account of unexplained cash deposit in his bank account u/s 68 of the Act amounting to Rs. 16,70,500/-. 8.1 In the course of assessment proceedings, the AO noticed that the complete details/documents were not filed by the AR of appellant and again a notice u/s 142 (1) of the Act was issued and served upon the appellant. In response to this notice the submission was made. Further, even after repeated opportunities provided to the appellant through notices and summons u/s 131 of the Act and show cause notices no submissions were made. 8.2 The AO in his assessment order stated that:- 8.3 The appellant in its written submission has relied upon the various judicial pronouncements in support of his claims. 8.4 In view of the facts and circumstances borne out of the assessment order and legal precedents as discussed above, I am of the view that documents submitted as evidences to prove the genuineness of transaction are themselves found to serve as smoke screen to cover up the true nature of the transactions. The AO’s action in quantifying and adding such unexplained money at Rs 16,70,500/- based on evidences gathered and reasons discussed in the assessment order. 8.5 In view of the above discussion and judicial precedents, it is held that AO was justified in making addition of Rs 16,70,500/- of the IT Act. Accordingly, addition made by the AO is confirmed and the grounds of appeal are dismissed. 8. The Ld. Counsel for the Assessee has reiterated the submissions made before the Ld. CIT(A)/NFAC, Delhi. He contended that the assessment order passed by the Assessing Officer, thereby making the addition of Rs. 16,70,500/- by way of invoking the provisions of section 68 I.T.A. No. 263/Asr/2022 Assessment Year: 2012-13 5 which was confirmed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi are against the facts of the facts of the case and are untenable under the law. The authorities below did not appreciate that this case does not fall within the mischief of section 68 of the Act. The further submitted that the authorities below did not appreciate that the maximum peak in the bank comes to Rs. 35,184/- and the Ld. CIT(A) has miserably failed to appreciate the same and he did not adjudicate the issue on merits. As such the addition made may be deleted. He has filed brief synopsis and a paper book, pages147. The relevant part on section 68 of synopsis reads as under: 3. Section 68 not applicable to business receipts recorded as sales In this case return was filed by the assessee therein declaring income under presumptive basis by applying rate of profit u/s 44AD. A copy of the ITR along- with computation of income relating to AY 2012-13 is enclosed herewith and is available on Page No. 134 & 135 of the paper-book. Not only this, a copy of ITR along-with computation of income of the assessee relating to AY 2011-12 is also enclosed herewith and is available on Page No.136 & 137 of the paper- book. Thus, where the return has been filed u/s 44AD on presumptive basis, no other addition on account of cash deposits can be made. This, view finds support from the decision of ITAT, Amritsar Bench, Amritsar in the case of Shri Surinder Mahajan, Pathankot vs. ITO, Ward-3, Pathankot in ITA No.534/Asr/2015, order dated 10/10/2022 relating to AY 2011-12. A copy of the said order is enclosed herewith and is available on Page No. .......to.......... of the paper book. I.T.A. No. 263/Asr/2022 Assessment Year: 2012-13 6 Further on application of section 68, it is respectfully submitted, is a deeming provision, which deems certain cash credits, found in the books of the assessee, as income of the assessee, which remains unexplained by the assessee. The scope of section 68 of the Act, it is respectfully submitted, is not unfettered to deem all the receipts as income. The said section, it is respectfully submitted, cover only those receipts or amounts credited in the books, which are otherwise not in the nature of income (like gift, loan, share capital, etc.) and remains unexplained. Reliance, in this regard, is placed on following decisions, wherein it is held that receipts in cash against sale consideration cannot be added under section 68 of the Act: Reference in this regard may be made to the decision of the Rajasthan High Court in case of Smt. Harshila Chordia vs ITO: 298 ITR 349 [Refer Page No.86 to 95 of the Paper Book] wherein addition made under section 68 was deleted by the Court in respect of the amount which was found to be cash receipts from the customers against which delivery of goods was made to them. The relevant extracts are reproduced as under: {Refer Page No 93 of the Paper Book. “So far as question No. 2 is concerned, apparently when the Tribunal has found as a fact that the assessee was receiving money from the customers in hands against the payment on delivery of the vehicles on receipt from the dealer the question of such amount standing in the hooks of account of the assessee would not attract section 68 because the cash deposit becomes self-explanatory and such amounts were received by the assessee from the customers against which the delivery of the vehicle was made to the customers. The question of sustaining the addition of Rs. 6,98,000 would not arise. I.T.A. No. 263/Asr/2022 Assessment Year: 2012-13 7 We, therefore, hold that no addition was required to be made in respect of Rs.6,98,000, which was found to be the cash receipts from the customers and against which delivery of vehicle was made to them ” (emphasis supplied) It was held likewise by the Chandigarh Bench of Tribunal in case of ACIT vs Pradeep Agarwal: 159 ITD 54 (Chand.) wherein it was held that no addition could be made on account of cash deposited in bank where assessee had clearly shown that such deposit was out of cash received on sale of land which w as duly recorded in cash book. Similar view was expressed by the Kolkata Bench of Tribunal in case of Narendra Nath Paul vs ITO: ITA No. 2284/Kol/2014 wherein it was held that where advances were received by the assessee in cash from his dealers and the same were adjusted against the sale subsequently made by the assessee to the said dealers which were duly accounted in books of account regularly maintained by the assessee, then the corresponding advances could not be added to the total income of the assessee under section 68 treating the same as unexplained. 9. Per contra, the Ld DR although supported the impugned order, and argued that personal hearing would be allowed to the appellant only in such cases which involve disputed questions of fact and it is untenable as case involve issues of law. however, he has no objection to the request of the appellant in restoring the matter to the AO for afresh adjudication on merits by passing assessment order de novo. 10. We have heard the rival contentions, perused the material on record, impugned order, written submission and case law cited before us. Admittedly, the AO passed the order ex parte qua the assessee u/s 144 of I.T.A. No. 263/Asr/2022 Assessment Year: 2012-13 8 the Act and same has been confirmed by the Ld. CIT(A) without appreciating merits of the case and addressing the matter by rebuttal to the documentary evidences filed to be claimed by the appellant regarding the cash deposits in bank account were being out of the cash sales of the appellant and therefore, applicability of section 68 of the act is to the cash sales alleged to be claimed by the appellant assessee would require fresh adjudication as per law. In our view, the authorities below are not justified in rejecting the claim of the appellant arbitrary without bringing on record corroborative documentary evidence rebutting the claim of the appellant of cash sales and applicability of peak credit as against entire addition u/s 68 of the Act. Under the facts and circumstances of the case, we are of the considered view that the authorities below ought to have disproved the claim of the assesse by way of rebutting its contention with support of corroborative documentary evidences on record after granting an adequate opportunity of being heard. 11. 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 I.T.A. No. 263/Asr/2022 Assessment Year: 2012-13 9 reasonable opportunity of setting out his case - Same not done - Fact that the assessee could have placed evidence before the first appellate authority 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.” 12. 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 I.T.A. No. 263/Asr/2022 Assessment Year: 2012-13 10 personal hearing cannot depend upon the facts of each case. 13. In the instant case, it is alleged by the authorities below, that the assessee should have placed evidences either before the AO or the first appellate authority. 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. 14. In the above view, 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 assesse with a direction that the AO shall issue a Show Cause Notice on the issue of cash deposit and thereafter pass a reasoned order in accordance with law. Accordingly, the impugned I.T.A. No. 263/Asr/2022 Assessment Year: 2012-13 11 order is set aside and the matter is remanded to assessing authority to pass de novo assessment as per law. 15. In the result, the appeal of the assesse is allowed for statistical purpose. Order pronounced in the open court on 20/06/2023 Sd/- Sd/- (Anikesh Banerjee) (Dr. M. L. Meena) Judicial Member Accountant Member A.G/DOC* Copy of the order forwarded to: (1)The Appellant (2) The Respondent (3) The CIT (4) The DR, I.T.A.T. True Copy By Order