M/s R. K. Foods, Chandigarh V. The Income Tax Officer, Ward-3, Ambala

ITA 672/CHANDI/2022

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The case involves M/s R.K. Foods, a firm engaged in the business of manufacturing and cultivation of agricultural products, which faced scrutiny during the demonetization period for a cash deposit of Rs. 21,77,000. The Assessing Officer (AO) made additions to the income of the firm, treating these deposits as unexplained, under Section 69A of the Income Tax Act. The CIT(A) upheld these additions ex-parte, leading to the appeal before the Income Tax Appellate Tribunal. The Tribunal noted procedural lapses in the hearing process and the need for a detailed examination of the facts, especially considering the death of the managing partner prior to the assessments.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 127846 (ITAT-CHANDIGARH)
• Duration Of Justice: 5 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-04-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Next Hearing Date: 24-04-2023
• Assessment Year: 2017-2018
• Appeal Filed On: 31-10-2022
• Other Referred Cases: S. Velu Palandar Vs. DCIT
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Principle of natural justice
• Section: 144; 250; 69A; 139(1)

Judgement Text

आयकर अपील य अ धकरण,च डीगढ़ यायपीठ, च डीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, ‘B’, CHANDIGARH BEFORE SHRI A.D. JAIN, VICE PRESIDENT & SHRI VIKRAM SINGH YADAV, ACCOUNTANT MEMBER आयकर अपील सं./ ITA No. 672/CHD/2022 नधा रण वष / Assessment Year : 2017-18 M/s R.K. Foods, # 3377/1, Sector 40-D, Chandigarh Vs. बनाम The ITO, Ward 3, Ambala थायी लेखा सं./PAN No: AAKFR8182L अपीलाथ /Appellant यथ /Respondent नधा रती क ओर से/Assessee by : Sh. Tej Mohan Singh, Advocate राज व क ओर से/ Revenue by : Smt. Surinder Kaur Waraich, Sr.DR स ु नवाई क तार$ख/Date of Hearing : 25.04.2023 उदघोषणा क तार$ख/Date of Pronouncement : 27.04.2023 आदेश/Order Per A.D. Jain, Vice President: This is an appeal filed by the Assessee against the order of the ld. CIT(A), National Faceless Appeal Centre (NFAC), Delhi, dated 29.08.2022, for the Assessment Year 2017-18 taking the following grounds of appeal: 1. That the Ld. Commissioner of Income Tax (Appeals) has erred in passing an ex-parte order without affording a proper opportunity of hearing which is against the Principals of Natural Justice and as such the order passed is illegal, arbitrary and unjustified. 672-Chd-2022 – M/s R.K. Foods, Chandigarh 2 2. Without prejudice to the above, the Ld. Assessing Officer has erred in upholding the addition of Rs.2 1,77,000/- on account of alleged unexplained cash deposit of Specified Bank Notes in the bank account treating the same to be unexplained money of the assessee applying the provisions of Section 69A treating the same to be income from other sources which is arbitrary and unjustified. 3. That the provisions of Section 69A are not attracted in as much as the entire business receipts including cash deposit of Rs.21,77,000/- already stands declared in books and as such treating Rs.21,77,000/- to be unexplained and as income from other sources is illegal, arbitrary and unjustified. 4. That the entire addition has been made on suspicion, surmises and conjectures in respect of cash deposits arising out of business which is not permissible under the Act. 5. That the order of the Ld. Commissioner of Income Tax (Appeals) has further erred in upholding the charging of tax at 60% applying the provisions of Section 115 BBE which are not applicable in the instant case. 6. That the Ld. Commissioner of Income Tax (Appeals) has further erred in upholding the making of double addition in as much as while computing the alleged payable taxes in computation sheet, as the assessing officer has taken the income to be Rs.43,54,000/- against Rs. 21,77,000/- which is illegal, arbitrary and unjustified. 7. That the Ld. Commissioner of Income Tax (Appeals) has further erred in upholding the profit on gross receipts of Rs.2,30,57,772 to be 12 percent resulting in an addition of Rs.27,66,933/-which is arbitrary and unjustified. 672-Chd-2022 – M/s R.K. Foods, Chandigarh 3 8. That the Ld. Commissioner of Income Tax (Appeals) has erred in not considering that the Assessing Officer has herself stated that the profit in the Assessment Year 2015-16 was .08 percent and as such applying the rate of 12 percent which is unheard of in the trade is arbitrary and unjustified. 9. That the appellant craves leave to add or amend the grounds of appeal before the appeal is finally heard or disposed off. 10. That the Ld. Commissioner of Income Tax (Appeals) passed under Section 250 of the Act is erroneous, arbitrary, opposed to law and facts of the case and is, thus, untenable. 2. Vide the aforesaid grounds, the foremost grievance of the Assessee is that the ld. CIT(A) was not justified in upholding the additions made by the AO and thereby dismissing the appeal of the Assessee by passing the ex-parte order without giving proper opportunity of being heard to the Assessee which is against the principals of natural justice. 3. Briefly, the facts of the case are that the Assessee firm was engaged in the business of manufacturing / cultivation of agricultural products and seeds. The said firm was constituted by two partners, namely, Sh. Rajeev Vashisht and his wife, Smt. Asha Sharma. Shri Rajeev Vashisht, who was the Managing Partner, unfortunately died, on 2.12.2016. During the demonetization period, the case of the Assessee firm was taken up in scrutiny to enquire into the cash 672-Chd-2022 – M/s R.K. Foods, Chandigarh 4 deposit of Rs. 21,77,000/-. It was brought to the knowledge of the AO by the ld. Counsel for the assessee that the Managing Partner, Shri Rajeev Vashisht, who was aware of all the facts in respect of deposit of the aforesaid cash in the bank account had expired. However, the assessment was framed by the AO at an income of Rs. 49,43,932/- under section 144 of the Act by making certain additions of cash / credits, which were upheld by the ld. CIT(A) by deciding the appeal of the Assessee ex-parte. 4. Before us, the ld. Counsel for the Assessee, through his written submissions, submitted that the Assessee was not provided with the opportunity of being heard by the authorities below. It has been submitted by the ld. Counsel for the assessee, that Shri Rajeev Vashisht, Manager Partner of the firm unfortunately expired on 2.12.2016; that the wife of Shri Rajeev Vashisht, Smt. Asha Sharma, who is also the partner of the Assessee firm, has contacted the C.A. of the firm stationed at Ambala and is in the process of collecting the information in respect of the cash deposits / credits, in question, which relate to sale proceeds, realization from sundry debtors, imprest money lying with the partners as well as cash in hand. It has further been stated by the ld. Counsel for the Assessee that the Assessee has a strong case in its favour, and prayed that in the peculiar facts of the case, as both the assessment and appellate proceedings have been 672-Chd-2022 – M/s R.K. Foods, Chandigarh 5 completed ex-parte, the case may be remanded to the AO for culling out the complete facts and adjudication afresh. 5. The ld. D.R., though, has placed reliance on the orders of the authorities below, but has no objection if the matter is remanded to the AO for adjudication afresh. 6. Heard. We have gone through the orders of the authorities below and find that the Assessee had failed to file the Income Tax Return as required u/s 139(1) of the I.T. Act within the specified period and the entire addition has been made ex-parte by the AO in respect of cash deposits /credits arising out of business despite having been made aware of the death of the managing partner of the Assessee firm, who alone was aware of the full facts of the case. We further find that the ld. CIT (A) has dismissed the appeal ex-parte by merely upholding the additions made by the AO, without considering the material available on record, as also without going into the merits of the case. As such, an opportunity of hearing requires to be given to the Assessee to represent his case fully before the lower authorities. Even otherwise, it is trite [‘S. Velu Palandar Vs. DCIT’ 83 ITR 683 (Mad.)] and incumbent on the authority to decide an appeal on merit. 7. In view of the above, in the interest of justice, the matter is remitted to the file of the Assessing Officer, to be decided afresh on 672-Chd-2022 – M/s R.K. Foods, Chandigarh 6 merit, in accordance with law, on affording due and adequate opportunity of hearing to the Assessee. The Assessee, no doubt, shall cooperate in the fresh proceedings before the AO. All pleas available under the law shall remain so available to the assessee. Ordered accordingly. 8. In the result, for statistical purposes, the appeal is treated as allowed. Order pronounced on 27.04.2023. Sd/- Sd/- (VIKRAM SINGH YADAV) ( A.D. JAIN ) Accountant Member Vice President Dated : 27.04.2023 “आर.के.” आदेश क त*ल+प अ,े+षत / Copy of the order forwarded to : 1. अपीलाथ / The Appellant 2. यथ / The Respondent 3. आयकर आय ु 1त/ CIT 4. +वभागीय त न5ध, आयकर अपील$य आ5धकरण, च7डीगढ़/ DR, ITAT, CHANDIGARH 5. गाड फाईल/ Guard File आदेशान ु सार/ By order, सहायक पंजीकार/ Assistant Registrar