Thibbanahalli Nijagunaiah Javarayi Gowda, Bangalore V. The Assistant Commissioner Of Income Tax, Central Circle-1(3), Bangalore

ITA 267/BANG/2022

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 3671 (ITAT-BANGALORE)
• Duration Of Justice: 3 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-07-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2017-2018
• Appeal Filed On: 17-04-2022
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained investment; Principle of natural justice
• Section: 68; 69; 142(1); 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH : BANGALORE BEFORE SHRI GEORGE GEORGE K., JUDICIAL MEMBER AND Ms. PADMAVATHY S, ACCOUNTANT MEMBER ITA No.267/Bang/2022 Assessment year : 2017-18 Thibbanahalli Nijagunaiah Javarayi Gowda, No.121, Madilu I Main Road, 1 st Block, 2 nd Stage, Nagarabhavi, Bangalore – 560 072. PAN: AAYPJ 8055C Vs. The Deputy Commissioner of Income Tax, Central Circle 1(3), Bengaluru. APPELLANT RESPONDENT Appellant by : Smt. Suman Lunkar, CA Respondent by : Smt. Priyadarshini Baseganni, Addl.CIT(DR)(ITAT), Bengaluru. Date of hearing : 12.07.2022 Date of Pronouncement : 25.07.2022 O R D E R Per Padmavathy S., Accountant Member This appeal by the assessee is against the order of the CIT(Appeals)-11, Bangalore dated 24.03.2022 for the assessment year 2017-18. 2. The assessee has raised 6 grounds contending the addition confirmed by the CIT(A). During the course of hearing the learned A.R. argued only on Ground No. 2 as reproduced below: - ITA No.267/Bang/2022 Page 2 of 6 “2. The learned CIT(A)-11, Bangalore has erred in holding that the appellant had not sought any adjournment against the hearing notices issued. On proper appreciation of facts the appellant had sought adjournment online and the date of compliance was fixed online on 02/04/2022. The action of the CIT(A), passing the appellate order much before the date of compliance is against the principles of natural justice and same is to be negated.” 3. Brief facts of the case are that the assessee is an Individual. The assessee returned his income at Rs. 16,97,850/- which was assessed at Rs. 2,10,79,327/- with the following additions:- i. A sum of Rs. 5,64,000/- as unexplained cash credit u/s 68 of the Act on the ground that the appellant has not been able to substantiate the additional rental receipts through relevant documents and proof . The sum so arrived is the difference between Rs . 16.91 lakhs (stated as Income from house property shown in the return of income by the appellant) and Rs. 11.27 lakhs (being proportionate rental income for the months April to November 2016, as calculated by the assessing officer ). This addition is made to the income of the appellant ii. A sum of Rs. 1,88,17,477 as unexplained investment u/s 69 of the Act on the ground that during the course of survey proceedings u /s 133A incriminating documents were found showing Rs. 1,88,17,477/- as excessive cash. 4. The appellant owns house property which has been let out to various tenants . The rental receipts from these properties have been offered to tax as Income from house property . The computation of Income from house property as returned was as under : Gross rental receipts Rs. 24,25,500/- Less: Standard deduction u/s 24(b) @ 30% Rs. 7,27,650/- Net Income from house property Rs. 16,97,850/- ITA No.267/Bang/2022 Page 3 of 6 5. During the course of assessment proceedings to the query of the AO regarding source of cash deposited during the year, the appellant replied vide letter dated 18 .12.2019 that one of the source of cash deposits is rental receipts amounting to Rs . 15,36,000/- for the month April 2016 to November 2016 . The AO compared this figure with the proportionate net rental income for the period April to November 2016 and arrived at the above conclusion. It is submitted that the AO, however, has failed to appreciate the fact that what has been received by the appellant from tenants as rent are gross rental receipts and the figure reported in the return of income is net rental income which is after standard deduction @30 % of gross receipts. Thus it was not correct on the part of AO to compare details by calculating proportionate net rental income and assuming that there are additional rental receipts which is not disclosed by the appellant. 6. Notice u /s 142(1) of the Act was served on the appellant seeking certain details as per the Annexure to the notice which is reproduced as under:- AY Cash balance to be adopted as per Col 7 Cash withdrwal if any from Bank CASH SALL A V A I L .A B L L C A S! i 1 2-3 4+5 i CASH PURCHASE CLOSING balance of CASH (6-7) Cash as per El's EMT (8- 9) 1 3 4 5 6 7 8 9 10 2017- 18 18936263 0 0 18936263 0 18936263 118786 18817477 It could be seen from the above table that the assessee is having more cash on hand in the respective year ending. This increase cash on hand has to be brought to tax as asset over liability in the hands of the assessee. The total difference for AY 2017- , 8 is Rs. 1.88,17.4771- and cumulative for different assessment years is Rs 9.56.94.831I-and the same is estimated as undisclosed income Please show cause why Rs. 1.88.17.4771- should not be treated as undisclosed income for AY 2017-18. ITA No.267/Bang/2022 Page 4 of 6 7. To the above notice the appellant had not filed any reply . Therefore the Assessing Officer made an addition of Rs. 1,88,17,477/- to the income of the appellant treating it as undisclosed investment u /s 69 of the IT Act 1961 . 8. Before the CIT(Appeals), the appellant submitted that there is no excess cash which is not disclosed and the difference as noticed by the Assessing Officer is not there at all. The documents in support of explanation would be filed as additional evidence during the appellate proceedings. 9. The assessee did not respond to the notices of hearing before the CIT(Appeals) nor filed any written submissions and therefore the CIT(Appeals) proceeded to dispose of the appeal ex parte on the basis of material on record. He deleted the addition of Rs.5,64,000 u/s. 68 of the Act, but sustained the addition of Rs.1,88,17,477 u/s. 69A. The CIT(Appeals) noted that excess cash of Rs.1,88,17,477 was found during the survey as on 31.3.2017 than that recorded in the books of account. There was no reply by the assessee when the AO confronted this issue and hence AO made the addition. Since the assessee did not respond to the hearings nor filed any written submissions or any evidence which was stated to be filed during the appellate proceedings, the CIT(Appeals) confirmed the addition. 10. Aggrieved by the order of the CIT(A) the assessee is in appeal before the Tribunal. 11. Before us the learned A.R. submitted that the assessee was not given proper opportunity to present his case by the CIT(A). The learned A.R. drew our attention to the letter of adjournment submitted online by the assessee seeking time to appear before the CIT(A). The learned A.R. ITA No.267/Bang/2022 Page 5 of 6 further submitted that the CIT(A) has passed the order without considering the adjournments sought by the assessee which is against the principles of natural justice. 12. The learned D.R. supported the order of the CIT(A). 13. We heard the rival submissions and perused the material on record. We notice that the assessee has made two requests online seeking adjournments as detailed below: - i) Requested on 10.03.2022 seeking adjournment upto 25.03.2022 ii) Requested on 18.03.2022 seeking adjournment upto 02.04.2022 14. We also notice that the CIT(A) has passed order dated 24.03.2022 without taking cognizance of the above adjournment requests filed by the assessee online. Thus in our view, the order of the CIT(A) is not passed in accordance with the principles of natural justice. Hence in the interest of justice, we remit this case back to the CIT(A) for a de novo consideration of the issue before him, after affording a reasonable opportunity of being heard to the assessee. 15. In the result, the appeal of the assessee is allowed for statistical purposes. Pronounced in the open court on this 25 th day of July, 2022.. Sd/- Sd/- ( GEORGE GEORGE K. ) ( PADMAVATHY S. ) JUDICIAL MEMBER ACCOUNTANT MEMBER Bangalore, Dated, the 25 th July, 2022. / Desai S Murthy / ITA No.267/Bang/2022 Page 6 of 6 Copy to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR, ITAT, Bangalore. By order Assistant Registrar ITAT, Bangalore.