Madhusudanbhai Ambalal Patel, Patan V. The ITO, Ward-3, Patan

ITA 537/AHD/2022

AI Insights

The case involves two appeals by the assessee, Madhusudanbhai Ambalal Patel, against the orders of the National Faceless Appeal Centre (NFAC), Delhi, concerning the assessment and penalty orders for the Assessment Year 2011-2012 under sections 144 and 271(1)(c) of the Income Tax Act, 1961. The primary issues revolved around the jurisdiction under section 147, the confirmation of additions of Rs. 12,47,000 and Rs. 12,74,000 as unexplained cash, and the procedural fairness in the assessment process. The Tribunal noted the lack of cooperation from the assessee in the initial proceedings but emphasized that the revenue authorities must not make arbitrary additions and should assess based on available materials scientifically.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 135611 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-05-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 23-04-2023
• Assessment Year: 2011-2012
• Appeal Filed On: 05-12-2022
• Other Referred Cases: S.R. Koshti Vs. CIT, Vinay Chandulal Satia v. N.O. Parekh, CIT, Ramlal v. Rewa Coalfields Ltd., State of West Bengal v. Administrator, Howrah Municipality, Babutmal Raichand Oswal v. Laxmibai R. Tarte, Vareli textile industry versus CIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Peak credit; Set aside
• Section: 147; 68; 271(1)(c); 144

Judgement Text

आयकर आयकरआयकर आयकर अपी अपीअपी अपीलीय लीयलीय लीय अिधकरण अिधकरणअिधकरण अिधकरण, अहमदाबाद अहमदाबादअहमदाबाद अहमदाबाद यायपीठ यायपीठ यायपीठ यायपीठ IN THE INCOME TAX APPELLATE TRIBUNAL, ‘’ SMC’’ BENCH, AHMEDABAD BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER आयकर अपील सं./ITA Nos. 537 & 538/AHD/2022 िनधा रण िनधा रणिनधा रण िनधा रण वष वष वष वष /Asstt. Year: 2011-2012 Madhusudanbhai Ambalal Patel, Jekaramdas No Madh, Chanasma At Patan, Patan-384220. PAN: BLEPP3901R Vs. Income-tax Officer, Ward-3, Patan. (Applicant) (Respondent) Assessee by : Shri Mehul Thakkar, A.R Revenue by : Shri R.R Makwana, Sr.D.R सुनवाई क तारीख/Date of Hearing : 24/04/2023 घोषणा क तारीख /Date of Pronouncement: 10/05/2023 आदेश आदेशआदेश आदेश/O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: The captioned two appeals have been filed at the instance of the Assessee against the order of National Faceless Appeal Centre (NFAC), Delhi arising in the matter of assessment order passed under s. 144 and penalty order passed under section 271(1)(c) of the Income Tax Act, 1961 (here-in-after referred to as "the Act") relevant to the Assessment Year 2011-2012. ITA No. 537/Ahd/2022, an appeal by the assessee for AY 2011-12 ITA nos.537 & 538/AHD/2022 A.Y.2011-12 2 2. The assessee has raised the following grounds of appeal: 1. The Ld. AO has erred in law in assuming jurisdiction under section 147 of the Act. 2. The Ld.CIT(A) has erred in facts in confirming the addition of Rs.12,47,000/- on the ground that appellant had neither made any submission nor sought any adjournment. 3. The Ld.CIT(A) has erred in law and on facts, in confirming the addition of Rs.12,74,000/- as unexplained cash under section 68 of the Act. 3. At the outset, it was noticed that the authorities below have passed ex- parte order by making and confirming the addition of the cash deposits in the saving bank account of the assessee for Rs. 12,74,000/- only. 4. Admittedly, the notices were issued by the AO as well as by the Ld. CIT(A), on various dates intimating the date of hearing but the assessee failed to adhere the same. It was pointed out by the Ld. AR for the assessee that there was an adjournment petition filed by the assessee in response to the notice dated 26/9/2022 fixing the case for hearing dated 03/10/2022 vide letter dated 10/11/2022. But the adjournment petition could not be considered by Ld.CIT(A), and the order was passed dated 06/10/2022. It was pleaded by the Ld. AR that the assessee was to file certain documents which were in vernacular language after getting them translated in English. Thus, the adjournment application was filed. The Ld. AR further assured that the assessee shall co-operate during the assessment proceedings. Thus, it was prayed to set aside the order to the file of the AO for fresh hearing. 5. On the contrary, the Ld. DR submitted that the assessee is not serious in pursuing the appeal as he has not responded to the notices issued by the authorities below. Thus, the Ld. DR contended that the assessee should not be given further opportunity. ITA nos.537 & 538/AHD/2022 A.Y.2011-12 3 6. Heard the rival contentions of both the parties and perused the materials available on record. Admittedly, the assessee failed to appear before the authorities below during the respective proceedings and therefore an ex-parte order was passed. In other words, an inference can be drawn that the assessee failed to extend the cooperation by furnishing the necessary details in order to justify that the cash deposits do not represent the income. However, the revenue authorities in the absence of cooperation from the assessee cannot sit idle with folded hands. As such, the revenue has to frame the assessment based on the materials available on record but in a scientific manner. Even if the assessee doesn’t cooperate, the revenue does not get the power to make the addition/disallowances in arbitrary manner. In the present case, the revenue has made the addition of the entire cash deposits in the bank as income of the assessee. In principle, the cash deposit per se does not represent the income until and unless it is corroborated by some supporting material. For example, there can be a situation where the assessee has withdrawn the money in cash from the bank which has been utilized for the purpose of re-depositing in the bank which can certainly not be made subject to the addition. It is seen that in such kind of cases, the revenue in numerous cases have adopted the peak credit theory for bringing the cash deposit under the net of taxes. But we note that such aspect has not been considered by the revenue and entire cash deposit has been added merely on the reasoning that the assessee failed to cooperate during the assessment proceedings. 6.1 We note that the Hon’ble Gujarat High Court in the case of S.R. Koshti Vs. CIT reported in 276 ITR 165 has held as under: 20. A word of caution. The authorities under the Act are under an obligation to act in accordance with law. Tax can be collected only as provided under the Act. If an assessee, under a mistake, misconception or on not being properly instructed, is over-assessed, the authorities under the Act are required to assist him and ensure that only legitimate taxes due are collected. This Court, in an unreported decision in case of Vinay Chandulal Satia v. N.O. Parekh, CIT [Spl. Civil Application No. 622 of 1981 dated 20-8-1981], has laid down the approach that the authorities must adopt in such matters in the following terms: "The Supreme Court has observed in numerous decisions, including Ramlal v. Rewa Coalfields Ltd. AIR 1962 SC 361, State of West Bengal v. Administrator, Howrah ITA nos.537 & 538/AHD/2022 A.Y.2011-12 4 Municipality AIR 1972 SC 749 and Babutmal Raichand Oswal v. Laxmibai R. Tarte AIR 1975 SC 1297, that the State authorities should not raise technical pleas if the citizens have a lawful right and the lawful right is being denied to them merely on technical grounds. The State authorities cannot adopt the attitude which private litigants might adopt." 6.2 From the above it is revealed that the income of the assessee should not be over assessed even if there is a mistake of the assessee. As such the legitimate deduction for which the assessee is entitled should be allowed while determining the taxable income. 6.3 We also note that the Hon’ble Gujarat High Court in the case of Vareli textile industry versus CIT reported in 154 Taxman 33 wherein it was held as under: It is equally well-settled that where a cause is consciously abandoned (as in the present case) the party seeking condonation has to show by cogent evidence sufficient cause in support of its claim of condonation. The onus is greater. One of the propositions of settled legal position is to ensure that a meritorious case is not thrown out on the ground of limitation. Therefore, it is necessary to examine, at least prima facie, whether the assessee has or has not a case on merits. 6.4 In view of the above and after considering the facts in totality, keeping in view of the interest of justice and fair play, I am inclined to give one more opportunity to the assessee to represent his case before the AO. It is also directed to the assessee to co-operate during the assessment proceedings and not to seek any adjournment without just cause. Hence the ground of appeal of the assessee is allowed for the statistical purposes. 7. In the result, the appeal filed by the assessee is allowed for statistical purposes. ITA nos.537 & 538/AHD/2022 A.Y.2011-12 5 Now coming to the ITA No. 538/Ahd/2022, an appeal by the assessee 8. At the outset, I note that the issue on quantum has been set aside to the file of the AO for fresh adjudication as per the provision of law. Thus, the penalty levied by the AO against the quantum addition is not maintainable. As such, the AO will initiate the penalty proceeding afresh in the light of the outcome of the quantum order which has already been set aside to the file of the AO. Hence, the ground of appeal of the assessee is dismissed. 9. In the result, the appeal filed by the assessee is dismissed. 7. In the combined result, the appeals filed by the assessee bearing ITA No. 537/Ahd/2022 for A.Y. 2011-12 is allowed for statistical purposes whereas the ITA No. 538/Ahd/2022 for A.Y. 2011-12 is dismissed. Order pronounced in the Court on 10/05/2023 at Ahmedabad. Sd/- Sd/- (MADHUMITA ROY) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER (True Copy) Ahmedabad; Dated 10/05/2023 Manish