SHRI MANJIT SINGH, AMRITSAR V. INCOME TAX OFFICER WARD - 3 (2), AMRITSAR

ITA 44/ASR/2022

AI Insights

This case involves an appeal by Sh. Manjit Singh against the orders of the Income Tax Officer (ITO) and the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, concerning the assessment year 2017-18. The primary contention revolves around the addition of Rs. 35,04,500 to the assessee's income, which was alleged to be unexplained cash deposits in a bank account. The assessee argued that these deposits were from the sale proceeds of goods, which had already been declared as income under section 44AD of the Income Tax Act, 1961. The ITAT found that both the AO and the CIT(A) had not adequately addressed the merits of the case and had proceeded ex-parte, leading to a decision to remand the case back to the AO for a thorough re-assessment.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 114609 (ITAT-AMRITSAR)
• Duration Of Justice: 6 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-11-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 18-10-2022
• Assessment Year: misc
• Appeal Filed On: 23-04-2022
• Other Referred Cases: Smt Babbal Bhatia vs The ITO Ward 45(2),New Delhi, CIT vs Bhaichand H. Gandhi, Manasi Mahendra Pitkar vs Income Tax Officer, Mehul V. Vyas vs Income Tax Officer 23,(2)(3),Mumbai, Smt Babbal Bhatia vs The ITO Ward 45(2),New Delhi, Laxmi Narain Gupta vs. CIT, ITO vs. Sh. Om Parkash Sharma, Sh. Amarjeet Singh vs. ITO, Sh. Yadwinder Singh vs. ITO, Sampat Automobiles vs. ITO, Ms. Mayawati vs. DCIT, Sheraton Apparels vs. ACIT, Shri Satish Kumar vs. ITO, Ward - IV(1), Jalandhar, Shri Kanwaljit Singh Sandhu vs. ITO, Ward-1, Tam Taran
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset converted into stock in trade; Business income
• Section: 68; 69; 144; 44AD; 143(3); 113

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. 44/Asr/2022 Assessment Year: 2017-18 Sh. Manjit Singh, H.No. 206-Aman Avenue O/s Gate Hakiman, Amritsar -143001 Punjab [PAN: ABQPS 7919B] Vs. Income Tax Officer, Ward -3(2), Amritsar 143001- Punjab (Appellant) (Respondent) Appellant by : Sh. P. N. Arora, Adv. Respondent by: Smt. Kanchan Garg, Sr. DR Date of Hearing: 19.10.2022 Date of Pronouncement: 17.11.2022 ORDER Per Dr. M. L. Meena, AM: This appeal has been filed by the assessee against the order dated 10.08.2021 passed by the CIT (Appeals), National Faceless Appeal Centre (NFAC), Delhi in respect of Assessment Year 2017-18. 2. The assessee has raised the following grounds of appeal: ITA No. 44/Asr/2022 Manjit Singh v. ITO 2 “1. That the assessment order as well as the order of Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi are both against the facts of this case and are untenable under the law. 2. That no reasonable and proper opportunity of being heard was allowed before passing the assessment order. As such the order of the Ld CIT(A) thereby confirming the same is also liable to be cancelled. 3. That the Ld. CIT(A) has grossly erred in confirming the addition of Rs.35,04,500/- vide order dated 10/08/2021 made by the A.O. vide assessment order dated 27/12/2019. The authorities below did not appreciate that all these deposits were made out of the sale proceeds of trading/goods and this is an admitted fact. Thus the CIT(A) has blown hot & cold in the same breath. 4. That the Ld. CIT(A) did not appreciate that the assessee has declared business income at Rs.3,30,590/- against the retail sale of Rs.40,56,230/- u/s 44AD. The CIT(A) did not appreciate that the net profit was returned at Rs.3,30,590/- on account of sales made by the assessee and the assessee has duly shown the profit u/s 44AD on sales of Rs.40,56,230/- and the returned income has duly been accepted. As such no addition is called for and the worthy CIT(A) should have deleted the whole addition made by the AO while completing the assessment. 5. That there cannot be a double addition i.e. one on account of profit on sales of goods and other on account of deposits made in the bank on account of sale proceeds of goods. Thus the addition made is unjustified, uncalled for and the same may be deleted. 6. That merely because there are deposits in the bank did not tantamount to concealment. The authorities below did not appreciate that the deposits are made out of sale proceeds. 7. That no addition is called for by invoking the provisions of section 68. The AO did not appreciate that the provisions of section 68 are not at all application in this case as the assessee is not maintaining books of accounts and this is an admitted fact. As such the addition made may be deleted. Alternatively the addition made is very high & excessive. ITA No. 44/Asr/2022 Manjit Singh v. ITO 3 8. That any other ground of appeal which may be argued at the time of hearing of the appeal. 3. The counsel stated that there was a delay of 138 days in filing the appeal due to the reasons beyond the control of the assesse. The counsel has filed condonation application dated 24.02.2022 wherein the reasons for delay are stated as under: “In this case the appeal is being filed today i.e. 24/02/2022 and there is delay in filing the appeal by 137 days. As a matter of fact, the appeal was due to be filed on 09/10/2021 as the order was received on 10/08/2021. Thus, the appeal is being filed late as there is reasonable and sufficient cause for the same. In this connection I am enclosing herewith my Affidavit which will speak for itself. It may be further pointed out that your honour is already aware of the fact that the whole period was drastic and was a period of pandemic and there was all around Covid. Even my counsel Shri P.N. Arora Advocate has suffered twice on account of Covid. As such it is prayed that the delay may kindly be condoned in the interest of natural justice and the assessee should not be deprived of his right to contest the appeal. The business of the assessee is closed permanently and the assessee is doing service at very nominal salary and he is virtually on road. In view of these circumstances and looking to the facts and the worst prevailing in the country, it is prayed that the delay may kindly be condoned.” 3.1 The Ld. DR although raised objection to condonation of delay but he has not controverted the reasons narrated by the appellant in the application. Following the judgment of Hon'ble ITAT in the case of M/s Gurfateh Films and Sippy Grewal Productions (P) Ltd., in ITA No. ITA No. 44/Asr/2022 Manjit Singh v. ITO 4 92/Asr/2020, wherein, it was held that the assessee does not gain anything for not filing appeal in time and it was, only on account of circustances beyond the control of the assessee that there has been delay of 138 days, is hereby condoned and appeal is admitted on merits. 4. The assessee is engaged in business activities and as declared business income of Rs.3,30,590/- against the retail sale of Rs.40,56,230/- u/s 44AD of the I.T. Act, 1961. The AO has observed that the assessee has deposited an amount of Rs.35,04,500/- in cash in bank account maintained with Punjab National Bank in Bank of India in a staggered manner from 18 th Nov., 2016 to 29 th Nov., 2016. The AO being not satisfied with the reply of the assessee held that a cash transaction made by the assessee to the extent of Rs.35,04,500/- remained unexplained even after affording sufficient opportunities of being heard from time to time in the interest of natural justice, however, the AO has not mentioned the factum of the date of the opportunities granted to the assessee during the course of hearing and concluded the assessment by finalizing the assessment proceedings ex-parte qua the assessee to the best of his judgment within the meaning of section 144 of the Income Tax Act, 1961. Thus, the AO has made an addition of Rs.35,04,500/- to the return income of the assessee u/s 68 of the Income Tax Act, and to be charged u/s 114BB of the ITAT Act, 1961. ITA No. 44/Asr/2022 Manjit Singh v. ITO 5 5. The ld. CIT(A) has confirmed the finding of the AO by inter-alia observing pg. 8 is as under: “During the course of appellate proceedings three opportunities were given to the assessee to explain the case or furnish documentary evidences in support of grounds of appeal taken by the assessee. However, assessee neither submitted any written explanation nor any documentary evidences were furnished and therefore, I have no reason to deviate from the assessment order. The appeal is dismissed.” 6. The ld. counsel for the assessee has reiterated the submissions made before the ld. CIT(A), he contended that the ld. CIT(A), NFAC, Delhi has confirmed the assessment order without appreciating the facts of the case. To buttress its contentions, the ld. counsel filed a brief note as under: “This is an appeal preferred by the assessee against the order of the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi wherein the worthy CIT(A) has confirmed the assessment order without applying his mind and without appreciating the facts of this case. The brief facts of this case are as under: (i) That the assessee is an individual and filed the return of income therein declaring an income of Rs.3,30,590/- on 29/03/2018. (ii) That a copy of computation of income is enclosed herewith [Refer Page No.3 & 4 of the paper-book] wherefrom it is clear that business income was shown from Karan Singh & Co. and Laxmi Enterprises on the basis of section 44AD of the IT Act, 1961. (iii) That the assessment order was decided ex-parte by invoking the provisions of section 144 and the addition of Rs.35,04,000/- was made on account of cash deposits appearing in the bank account during FY 2016-17. Inspite of all these facts the assessment was completed u/s 143(3) instead of section 144 and the relevant ITA No. 44/Asr/2022 Manjit Singh v. ITO 6 observation of the A.O. in the assessment order is being reproduced hereunder: “/ have left with no option except to finalize the assessment ex-parte to the best of my judgment within the meaning of section 144 of the Income Tax Act, 1961. I am satisfy that the unexplained cash credit in his above said bank account of Rs.35,04,500/- made by the assessee during the financial year 2016-17 relevant to asstt. Year 2017-18 is income of the assessee u/s 68 of the Income Tax Act, 1961 and tax to be charged u/s 115BBE of the l.T. Act, 1961. Penalty notice is being issue separately as the assessee has under reported his income. ” (iv) That against the said order of the A.O. the assessee preferred an appeal before the Learned CIT(A), NFAC Delhi and the worthy CIT(A), NFAC Delhi decided this appeal ex-parte without application of mind and without appreciating the facts of the case and without deciding the case on merits. It may be submitted that no notice of hearing was received by the appellant from the CIT(A). (v) That again the CIT(A) while passing the order has only reproduced the grounds of appeal raised by the assessee and also reproduced the assessment order and he has dismissed the appeal of the assessee in limini without deciding the case on merits. As such the order passed by the CIT(A) is bad in the eyes of law and the same may be cancelled and the addition made may be deleted. (vi) That where a return has been filed and the income has been shown on the basis of section 44AD, no further addition can be made u/s 68 or 69 of the IT Act, 1961. As such no addition is called for. ( v i i ) That it is clear that the assessee is not maintaining the books of accounts and the return has been filed u/s 44AD. It may be submitted that the AO has completed the assessment by applying the provisions of section 68 which is not applicable to the present facts and circumstances of the case. It has been held by several authorities that the provisions of section 68 cannot be applied under these circumstances. This view finds support from the following judgments: ITA No. 44/Asr/2022 Manjit Singh v. ITO 7 1. Decision of ITAT, Delhi ‘A’ Bench, New Delhi in the case of Smt Babbal Bhatia vs The ITO Ward 45(2),New Delhi in ITA No’s. 5430 & 5432(DEL)/2011, order dated 08/06/2018 relating to Assessment Year 2010-11 TO 2012-13. This judgment contains several judgments. 2. Decision of High Court of Bombay in the case of CIT vs Bhaichand H. Gandhi reported in [1983] 141 ITR 0067. 3. Decision of ITAT , Bombay Tribunal in the case of Manasi Mahendra Pitkar vs Income Tax Officer reported in [2016] 160 ITD 0605 (Mumbai). 4. Decision of ITAT Mumbai Bench ‘B’ in the case of Mehul V. Vyas vs Income Tax Officer 23,(2)(3),Mumbai reported in [2017] 80 Taxmann.com 311 (Mumbai-Trib). 5. Decision of ITAT, Delhi ‘A’ Bench, New Delhi in the case of Smt Babbal Bhatia vs The ITO Ward 45(2),New Delhi in ITA No’s. 5430 & 5432(DEL)/2011, order dated 08/06/2018 relating to Assessment Year 2010-11 TO 2012-13. 6. Decision of High Court of Patna in the case of Laxmi Narain Gupta vs. CIT reported in (1980) 124 ITR 0094. 7. Decision of ITAT, Delhi Bench in the case of ITO vs. Sh. Om Parkash Sharma in ITA No.2256/Del/2009 for the AY 2000-2001. 8. Decision of ITAT, Amritsar Bench, in the case of Sh. Amarjeet Singh vs. ITO in ITA No. 114(ASR)/2015. 9. Decision of ITAT, Amritsar Bench, in the case of Sh. Yadwinder Singh vs. ITO in ITA No. 508(ASR)/2014. 10. Decision of ITAT, Jodhpur Bench, in the case of Sampat Automobiles vs. ITO reported in (2005) 96 TTJ 0368. 11. Decision of ITAT, Delhi ‘A’ Bench, in the case of Ms. Mayawati vs. DCIT reported in (2008) 113 TTJ 0178. ITA No. 44/Asr/2022 Manjit Singh v. ITO 8 12. Decision of High Court of Bombay in the case of Sheraton Apparels vs. ACIT reported in (2002) 256 ITR 0020. 13. Decision of ITAT, Camp Bench at Jalandhar, in the case of Shri Satish Kumar, VPO UGGI, Distt. Jalandhar vs. ITO, Ward - IV(1), Jalandhar in ITA No. 105/Asr/2017, order dated 15/01/2019 relating to AY 2008-09. 14. Decision of ITAT, Amritsar Bench, Amritsar in the case of Shri Kanwaljit Singh Sandhu, Village Warian Purian, Naushera Pannuan, Distt. Tam Taran vs. ITO, Ward-1, Tam Taran in ITA No. 82/Asr/2018, order dated 24/12/2021 relating to AY 2009-10. (viii) That in view of these circumstances, it is prayed that the addition made may be deleted. (ix) That alternatively, without prejudice to the above, it is requested that the whole matter may be set-aside and may be restored back to the file of the AO.” 7. The Ld. DR stands by the impugned order. 8. We have carefully considered the submission of both the sides, assessment order, impugned order and material placed on record. Admittedly, there is an addition of an amount of Rs.35,04,500/- towards cash deposits in bank account maintained with Punjab National Bank in Bank of India in a staggered manner from 18th Nov., 2016 to 29th Nov., 2016 by the authorities below in exparte proceedings qua the assesse. It is seen that aggrieved with the exparte assessment order, the assessee preferred an appeal before the Learned CIT(A), NFAC Delhi who too ITA No. 44/Asr/2022 Manjit Singh v. ITO 9 decided this appeal ex-parte without appreciating the facts and merits of the case as per the contentions raised by the appellant before us. 9. From the Impugned order, it is evident that the CIT(A) while passing the order has only reproduced the grounds of appeal raised by the assessee and the assessment order while dismissing the appeal of the assessee in limini without deciding the case on merits. We hold that the impugned order passed by the CIT(A) is a non-speaking being passed without application of mind to the issues raised in the grounds of appeal. 10. In view of the principles of natural Justice and considering the factual matrix of the case, we are of the considered view, that the appellant assesse should get an opportunity to explain and substantiate the nature cash deposits in the alleged bank account with the support of material evidence relevant for the year under consideration. Accordingly, we consider it deem fit to restore back the matter back to the file of the Ld. AO to pass de novo assessment after considering the written submission and evidences filed on record before him during the appellate proceedings, and to be filed in fresh proceedings after granting sufficient opportunity of being heard to the assessee. No doubt, the assessee shall cooperate in the fresh proceedings. ITA No. 44/Asr/2022 Manjit Singh v. ITO 10 11. In the result, the appeal of the assessee is allowed for statistical purpose. Order pronounced in the open court on 17.11.2022 Sd/- Sd/- (Anikesh Banerjee) (Dr. M. L. Meena) Judicial Member Accountant Member *GP/Sr/PS* Copy of the order forwarded to: (1) The Appellant: (2) The Respondent: (3) The CIT(Appeals) (4) The CIT concerned (5) The Sr. DR, I.T.A.T True Copy By Order