Shri Shalabh Agarwal, Lucknow V. Income Tax Officer-2(3), Lucknow

ITA 376/LKW/2020

AI Insights

The case involves Shri Shalabh Agarwal, who was assessed for income tax for the year 2017-18. The Income Tax Department noted a deposit of Rs.11,50,000 in his bank account during the demonetization period, which led to an addition of this amount to his income. The Assessing Officer initially added the entire amount to the income, which was later partially reduced by the CIT(A) to Rs.4,00,000 after considering some withdrawals and the nature of the business. The assessee appealed to the Tribunal, challenging the remaining addition and the treatment of his return as non-est by the CIT(A). The Tribunal found the CIT(A)'s reasoning insufficient and allowed the appeal, removing the remaining addition.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 123091 (ITAT-LUCKNOW)
• Duration Of Justice: 2 year(s) 10 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-09-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 04-09-2023
• Assessment Year: 2017-2018
• Appeal Filed On: 18-11-2020
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Presumptive income
• Section: 144; 142(1); 69A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH “SMC”, LUCKNOW BEFORE SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA No.376/LKW/2020 Assessment Year 2017-18 Income Tax Officer-2(3), Lucknow. Vs. Shri Shalabh Agarwal, 8, Jagdish Chand Bose Marg, Lalbagh, Lucknow. PAN ABRPA 6125C (Respondent) (Appellant) Shri Samrat Chandra, C.A. Appellant by Shri Sanjeev Krishna Sharma, Addl. CIT(DR) Respondent by 05/09/2023 Date of hearing 26/09/2023 Date of pronouncement O R D E R This appeal has been preferred by the assessee against the order dated 23.09.2020 passed by the ld. Commissioner of Income Tax (Appeals)-1, [hereinafter referred to as CIT(A)] Lucknow for Assessment Year (AY) 2017-18. 2. The brief facts of the case are that as per the information received by the Income Tax Department, the assessee had deposited Rs.11,50,000/- during the demonetization period in his bank account being maintained with the Bank of Baroda, Niyawan, Faizabad. The notice u/s. 142(1) of the Income Tax 2 ITA No. 376/Lkw/2020 Act, 1961 (hereinafter referred to as ‘the Act’) was issued to the assessee but no response was received from his side. The Assessing Officer proceeded to complete the assessment in terms of Section 144 of the Act at total income of Rs.18,68,510/- after making addition of Rs.11,50,000/- on account of cash deposited and a further addition of Rs.7,18,514/- on account of net profit @ 8% on gross receipt of Rs.89,81,430/-. 3. Aggrieved, the assessee approached the ld. First Appellate Authority challenging the additions. The ld. CIT(A) partly allowed the assessee’s appeal by restricting the addition on account of cash deposit to the extent of Rs.4,00,000/-. The ld. CIT(A), however, upheld the application of net profit rate of 8% on gross receipt of Rs.89,81,430/- thereby confirming the addition of Rs.7,18,514/-. 4. Now, the assessee has approached this Tribunal challenging the order of the ld. First Appellate Authority by raising the following grounds of appeal: “1. Because without considering the facts and in the circumstances of the case, the Ld. CIT(A) had erred in law 3 ITA No. 376/Lkw/2020 and in facts while treating the return filed u/s 142(1) as nonest. 2. Because without considering the facts and in the circumstances of the case, the Ld. Assessing officer had erred in law and in facts by in sustaining addition of Rs 4,00,000/- by not quashing the Assessment Order passed without issuance of the mandatory notice u/s 142 of the Income Tax Act, 1961. 3. Because Ld. CIT (A) was erred on facts and law while sustaining addition of Rs 4,00,000/- against made by Ld. AO at Rs. 11,50,000/- arbitrarily and on adhoc basis. 4. Because Ld. CIT (A) was erred on facts and law while sustaining addition of Rs 4,00,000/- has ignored submission made during appellate proceedings and guidelines issued by Hon'ble CBDT on deposit during the demonetization period. 5. Because Ld. CIT (A) erred on facts and law while sustaining addition of Rs.4,00,000/- u/s 69A read with Sec.115BBE ignoring the nature of business, being covered by presumptive taxation. 6. Any other relief which your good self may deem fit. 7. The humble assessee, carves for leave to add/amend any other ground with the prior permission of your honours.” 5. At the outset, the ld. Authorized Representative submitted that the Ground No.4 raised by the assessee was not being pressed. Accordingly, this ground is dismissed as not pressed. 4 ITA No. 376/Lkw/2020 6. Coming to the remaining grounds, the ld. A.R. submitted that the ld. CIT(A) was patently wrong in treating the return filed by the assessee during the course of assessment proceedings as non - est because interest of Rs.40,970/- was charged on this belated return. The ld. A.R. submitted that interest cannot legally be charged on a non est return and, therefore, the action of the ld. CIT(A) in doing so was against the settled law. It was further submitted that the ld. CIT(A) had wrongly sustained the addition of Rs.4,00,000/- without any reason or basis. It was submitted that the ld. CIT(A) had accepted that a sum of Rs.7,50,000/- stood explained in view of cash withdrawals as well as the nature of business of the assessee but had not given any reason as to why the remaining amount of Rs.4,00,000/- was to be sustained. The ld. A.R. prayed that the addition sustained to the tune of Rs.4,00,000/- deserved to be deleted. 7. In response, the ld. Departmental Representative submitted that the ld. CIT(A) had given adequate relief to the assessee and no further relief was called for. He drew my attention to the assessment order and submitted that there was difference in sales figures. It was also argued that the assessee has not 5 ITA No. 376/Lkw/2020 provided any evidence to substantiate the contention that the difference in sales was duly explained. The ld. Senior D.R. prayed that the appeal of the assessee deserved to be dismissed. 8. I have heard the rival submissions and have also perused the material on record. It is seen that the assessee had deposited an amount of Rs.11,50,000/- during the demonetization period which was added to the income of the assessee by the Assessing Officer. On appeal, the ld. CIT(A) observed that Rs.3,00,000/- stood explained from the withdrawals made by the assessee. It was also noted by the ld. CIT(A) that looking into the nature of business of the assessee, further amount of Rs.4,50,000/- can be taken as explained. However, as rightly pointed out by the ld. A.R., ld. CIT(A) has not given any cogent reason as to why the amount of Rs.4,50,000/- was to be taken as explained and the remaining amount of Rs.4,00,000/- was to be treated as unexplained. If the ld. CIT(A) was doubting the veracity of the entire cash deposits, he could have rightly fully confirmed the entire addition. However, if he has given partial relief, there has to be cogent reason for giving the relief as well as for sustaining the remaining addition. Thus, apparently, the ld. CIT(A) has just 6 ITA No. 376/Lkw/2020 estimated the amount which needed to be sustained without citing any plausible reason. Therefore, on an overall view of the facts of the case and after going through the impugned order, I am unable to approve the action of the ld. CIT(A) in this regard and I deem it appropriate to delete the remaining addition of Rs.4,00,000/-. 9. In the final result, appeal of the assessee stands allowed. (Order pronounced in the open court on 26/09/2023) Sd/- (SUDHANSHU SRIVASTAVA) JUDICIAL MEMBER Aks – Dtd. 26 /09/2023 Copy of order forwarded to: (1) The appellant (2) The respondent (3) Commissioner (4) Departmental Representative (5) Guard File By order Assistant Registrar