Smt. Guddo Devi, Bareilly V. Assistant Commissioner of Income Tax, Circle-1, Bareilly

ITA 715/LKW/2019

AI Insights

The case involves Smt. Guddo Devi, the appellant, who contested the addition of Rs.13,50,000 to her income for the assessment year 2014-15, claimed to be gifts from relatives. The Assessing Officer initially added this amount under section 68 of the Income Tax Act, 1961, due to insufficient evidence of the gifts' genuineness. The CIT(A) upheld this addition. The Tribunal found procedural lapses in how the Assessing Officer and CIT(A) handled the case, particularly in not providing adequate opportunity for the assessee to substantiate her claims and in not properly communicating the adverse materials used against her. Consequently, the Tribunal set aside the CIT(A)'s order and directed a de novo assessment.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 113273 (ITAT-LUCKNOW)
• Duration Of Justice: 3 year(s) 9 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-09-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: SMC
• Next Hearing Date: 08-08-2023
• Assessment Year: 2014-2015
• Appeal Filed On: 08-12-2019
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Gift; Principle of natural justice; Additional evidence; Set aside
• Section: 131; 68; 143(3); 142(1)

Judgement Text

I.T.A. No.715/Lkw/2019 Assessment Year:2014-15 1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH ‘SMC’, LUCKNOW BEFORE SHRI ANADEE NATH MISSHRA, ACCOUNTANT MEMBER I.T.A. No.715/Lkw/2019 Assessment Year:2014-15 Smt. Guddo Devi, C-19, Hari Om Petrolium, DD Puram, Bareilly. PAN:AGPPD9092A Vs. A.C.I.T., Circle-1, Bareilly. (Appellant) (Respondent) O R D E R (A) This appeal vide I.T.A. No.715/Lkw/2019 has been filed by the assessee for assessment year 2014-15 against impugned appellate order dated 12/09/2019 of learned Commissioner of Income Tax (Appeals) [learned “CIT(A)” for short]. The grounds of appeal are as under: “1. Because, on the facts and in the circumstances of the case, additions by the learned Assessing Officer as confirmed by the CIT(A) of Rs.13,50,000/- is bad in law, the order of CIT(A) deserves to be set aside. 2. Because, on the facts and in the circumstances of the case, the learned Assessing Officer has made the addition u/s 68 of the act on account of cash introduced, explanation of the same was Appellant by None Respondent by Shri Sanjeev Krishna Sharma, Addl. CIT (D.R.) I.T.A. No.715/Lkw/2019 Assessment Year:2014-15 2 not accepted, the same deserves re-verification and the order of CIT(A) deserves to be set aside.” (B) In this case assessment order dated 21/12/2016 was passed by the Assessing Officer u/s 143(3) of the Income Tax Act, 1961 (“IT Act” for short) whereby the assessee’s total income was determined at Rs.39,95,777/- (rounded off to Rs.39,95,780/-). The office note recorded by the Assessing Officer at page 6 of the assessment order is as under: “The case was selected for scrutiny to examine the mismatch in sales turnover reported in audit report and ITR. During the course of assessment proceedings the issue was examined and no discrepancy was noticed.” (C) The dispute in this appeal pertains to an addition of Rs.13,50,000/-. The assessee’s claim of having received this amount as gifts from relatives was not accepted by the Assessing Officer and aforesaid amount of Rs.13,50,000/- was added to the assessee’s income. Relevant portion of the order of the Assessing Officer is reproduced below: “6. Fact relating to introduction of cash in Cash Book On examination of ledger accounts it has been noticed that a ledger account in the name of Smt. Guddo Devi, proprietor, Imprest account has been formed wherein total sum of Rs 23,50,000/- has been introduced in the cash book in cash by you and the same has been repaid during the year itself. 6A Confrontation to the assessee and her submission Therefore, vide para 1 & 2 of notice u/s 142(1) dated 28.11.2016 the assessee was required to explain the nature and introduction of money and sources of cash introduction. I.T.A. No.715/Lkw/2019 Assessment Year:2014-15 3 In compliance to the above query, the assessee, vide reply furnished in this office on 14.12.2016, the following explanation have been offered: i) that the assessee introduced Rs.11,00,000/- in his imprest account for business need. The same was deposited from assessee’s own savings, gifts from relatives. Assessee’s relatives are all agriculturist having agriculture income. Assessee is enclosing copy of khautni of her family including son. Assessee introduced money for payment of HPCL for supply of petro products. Assessee introduce Rs.11,00,000/- on 01/04/2013 and deposited Rs.12,83.650/- on 02.04.2013 and same date DD was paid to HPCL vide no. 488522. ii) assessee deposit cash and withdraw cash from his imprest account according to her business need. From the perusal of imprest account your honour would observe that assessee deposited Rs.11.00,000/- in her imprest account and then after amount was withdrawn and same amount was deposited After the end of the year imprest account was clear leaving cash in hand with the assessee. 6B Observation & Conclusion “The explanation of the assessee has been considered but it has not been found believable as the assessee has not furnished any evidence of receiving gifts from relatives as well as their sources of income, extent of agricultural holding, financial and IT status of her relatives, date and mode of receipt of gift to substantiate the genuineness of transactions and gifts. The perusal of imprest account of the assessee reveals that she has introduced total cash of Rs.13,50,000/- which is huge amount and the assessee ought to have provided complete details of the persons from whom cash has been received which the assessee has failed to do so. Under these facts and circumstances, the assessee has failed to substantiate the sources of cash introduction of Rs.13,50,000/- recorded in the cash book. Under these facts and circumstances, it is established that the introduction of total cash amounting to Rs.13,50,000/- is nothing but the unaccounted money of the assessee which she has tried to bring it in the main stream without paying proper taxes by giving it a colour I.T.A. No.715/Lkw/2019 Assessment Year:2014-15 4 of gifts. As such total amount is treated to be income of the assessee u/s 68 of the IT Act, 1961.” (C.1) Aggrieved, the assessee filed appeal in the office of learned CIT(A). Vide aforesaid impugned appellate order dated 12/09/2019, the learned CIT(A) sustained the aforesaid addition of Rs.13,50,000/-. The relevant portion of the order of learned CIT(A) from paragraphs (9.1) and (9.2) of his impugned order, is reproduced below: “(9.1) The written submissions filed were examined. The written submissions and additional evidences filed by the appellant were forwarded to AO vide letter dated 16.05.2018. The AO filed a remand report vide letter dated 14.01.2019 which is reproduced as under: As directed by the ibid letter, the assessee was requested vide this office dated 21.05.2018 to attend this office to examine the following:- (i) Complete name and address of the persons from whom you have received gifts during the F.Y. 2013-14 relevant to the A.Y. 2014-15. (ii) During the course of assessment proceedings, vide para 1 & para 2 of notice u/s 142(1) dated 28.11.2016, you were required to explain the nature and sources of depositing cash of Rs.23,50,000/- by you with supporting evidence. But at that time you have failed to produce any supporting evidence regarding depositing cash of in the imprest Account formed by you. In this regard, please justify as to why the additional evidences produced by you before learned CIT(A), Bareilly should not be treated as 'after thought' for proving the introduction of cash in the cash book by you. This letter has been duly served upon the assessee (to Shri Mukesh Kumar Officer bearer) through the Notice Server of this office. No response was received from the assessee in this regard. Further a summon was issued to three relatives of the assessee separately who had given gift to the assessee and they are:- I.T.A. No.715/Lkw/2019 Assessment Year:2014-15 5 1) Shri Tilak Singh 2) Shri Nem Pal Singh 3) Shri Nachatra Pal Singh With regard to the above summon, none of the above responded. Show cause notice to impose penalty u/s 272A(2)(c) of the IT Act 1961, is being issued separately. Thereafter, again a reminder letter dated 15.10.2018 was also sent to the assessee (received by Mr. Saxena Manager) through the N.S. of this office, requesting to attend the officer and to furnish documents for additional evidences. In response to this letter, no one attended or complied the notice. In view of the facts and circumstances of the case as explained above, the pleas of the assessee for accepting the additional evidences cannot be relied upon as sufficient opportunity has already been provided to the assessee of being heard. As such, the pleas to accept the additional evidence may please be dismissed.” 9.2 Finding: The contents of the remand report of the AO are self- explanatory. Inspite of specific opportunity provided, the appellant did not produce the three relatives before the AO for examination. Nor did these persons comply with the summons issued u/s 131 of the Act. No compliance was made by the appellant to the letter of the AO dated 15.10.2018 calling for the explanation of the appellant on this issue. In view of these facts it is clear that appellant was not able to discharge the onus cast on it to explain the nature of deposits, creditworthiness of parties, genuineness of transactions and identity of parties. Therefore, the addition made by the AO u/s 68 of the Act to tune of Rs.13,50,000/- is confirmed. Ground of appeal no. 2 is dismissed.” (C.1.1) At the time of hearing, the assessee was represented by none, and a letter was filed seeking adjournment on the ground that the assessee was in the process of preparing this appeal and that it would take some more time to complete the preparation of appeal since certain important I.T.A. No.715/Lkw/2019 Assessment Year:2014-15 6 documents were still awaited. After hearing learned Sr. Departmental Representative for Revenue (“Sr. D.R.” for short), it was decided to dispose off this appeal as adequate opportunity has already been provided to the appellant assessee. It may be added here that on earlier occasions, hearings fixed in ITAT on 19/02/2020, 11/06/2020, 22/06/2021, 13/07/2021, 17/08/2021, 20/09/2021, 28/12/2021, 20/01/2022, 14/02/2022, 27/04/2022, 30/05/2022, 22/06/2022, 12/07/2022, 01/08/2022, 25/08/2022, 03/10/2022, 17/10/2022, 17/04/2023, 02/05/2023, 30/05/2023, 14/07/2023 were adjourned either from the request from assessee’s side or because the assessee was not represented on the aforesaid dates of hearing. The request for adjournment made from the assessee’s side was rejected as adequate opportunity has already been provided. (C.2) On perusal of the orders of the Assessing Officer and learned CIT(A), I find that they have not brought out the relevant facts in their respective orders. Even the amounts separately received by the assessee from three relatives (Shri Tilak Singh, Shri Nem Pal Singh, Shri Nachatra Pal Singh), as claimed by the assessee, has also not been mentioned in the orders of the Assessing Officer and learned CIT(A) and this information is not available on records. In paragraph 9.1 of the order of learned CIT(A) (already reproduced in foregoing paragraph of this order), the learned CIT(A) has referred to written submissions and additional evidences filed by the appellant assessee; and learned CIT(A) has also quoted from remand report dated 14/01/2019 of the Assessing Officer. However, there is no discussion about what the written submissions were. In the quoted portion of the remand report dated 14/01/2019 of the Assessing Officer, there is reference to letter dated 21/05/2018 issued by the Assessing Officer to the assessee. On perusal of the quoted portion of the remand report, as reproduced in I.T.A. No.715/Lkw/2019 Assessment Year:2014-15 7 para 9.1 of impugned order of learned CIT(A), it is found that the Assessing Officer raised two queries; (i) name and address of the persons from whom gift was received (ii) why the additional evidences should not be treated as ‘after thought’. As regards (ii) the learned CIT(A) has already held that the assessee was prevented by sufficient cause from producing the additional evidence before the Assessing Officer, which was relevant to the merits of appeal. The learned CIT(A) had specifically admitted the additional evidence under Rule 46A of I.T. Rules. Therefore, query (ii) in the aforesaid letter dated 21/05/2018 is not only irrelevant and superfluous but also vexatious. Further, there is specific mention of summons having been issued by the Assessing Officer to the aforesaid three relatives of the assessee (which shows that the assessee must have provided details regarding names, address etc. of the relatives from whom the assessee claimed to have received gifts). Therefore, even from the quoted portion of the remand report of the Assessing Officer, there is evidence that compliance was made to the letter dated 21/05/2018 issued by the Assessing Officer regarding query (i) in the aforesaid letter dated 21/05/2018 or that this information was already available on record. Further, while there is mention of summons having been issued to the relatives of the assessee, there is no mention as to whether sufficient opportunity was provided to the persons to whom summons were issued. There is no mention of date of issue of summons, date of service of summons and date of compliance prescribed in the summons. Further, on perusal of the impugned order of learned CIT(A), there is no mention that contents of the remand report vide letter dated 14/01/2019 of the Assessing Officer were communicated to the appellant assessee. The learned CIT(A), thus used material adverse to the assessee (remand report of the Assessing Officer) without confronting assessee with the same and without providing I.T.A. No.715/Lkw/2019 Assessment Year:2014-15 8 reasonable opportunity to the assessee. This was in complete violation of principles of natural justice. In view of all these facts and circumstances, the learned Sr. D.R. for Revenue submitted that the impugned order dated 12/09/2019 of learned CIT(A) may be set aside and the Assessing Officer may be directed to pass fresh assessment order in accordance with law after providing reasonable opportunity to the assessee. (C.2.1) In view of the foregoing and in the specific facts and circumstances of the present case, the impugned order dated 12/09/2019 of learned CIT(A) is hereby set aside and the issue regarding aforesaid addition of Rs.13,50,000/- is restored to the file of the Assessing Officer with the direction to decide the issue a fresh in accordance with law, after providing reasonable opportunity to the assessee and to pass de-novo order on this issue accordingly. (D) As I have mentioned earlier in foregoing paragraph (B), it is clear that the case was selected for scrutiny to examine the mismatch in sales turnover reported in audit report and ITR. Further, it is also evident, on perusal of the office note of the Assessing Officer that the Assessing Officer found no discrepancy as far as the purpose for which the case was selected for scrutiny. Obviously, therefore, in respect of the main purpose for selection of the case for scrutiny, there was no discrepancy found. The issue regarding the aforesaid amount of Rs.13,50,000/-, claimed to have been received by the assessee as gift, was only an incidental inquiry made during the course of scrutiny proceeding before the Assessing Officer. On perusal of the para 6A of assessment order, it is found that vide notice dated 28/11/2016, the Assessing Officer asked the assessee to explain “the nature and introduction of money and sources of cash introduced.” Vide reply dated 14/12/2016, the assessee furnished explanation, which also is I.T.A. No.715/Lkw/2019 Assessment Year:2014-15 9 reproduced in para 6A of the assessment order. The explanation of the assessee was disbelieved on the ground that the assessee had not furnished any evidence of receiving gifts from relatives as well as their sources of income, extent of agricultural holding, financial and status of her relatives, date and mode of receipt of gift to substantiate the genuineness of transactions and gift”. However, from the available records, there is nothing to suggest that the Assessing Officer even asked the assessee to furnish these evidences/information /materials. Shortly after assessee’s reply vide letter dated 14/12/2016, the Assessing Officer passed assessment order on 21/12/2016, taking adverse view against the assessee. Moreover, a total amount of Rs.13,50,000/- received as gift, as claimed by the assessee, comes to an average of Rs.4,50,000/- received from each donor. Whether having regard to facts and circumstances of the present case, this amount of Rs.4,50,000/- is such that required the kind of rigorous and hot pursuit scrutiny by the Assessing Officer, which went as far as issue of summons to the assessee’s relatives during remand to the Assessing Officer by the learned CIT(A); also deserves to be considered. Therefore, this is a fit case in which the Additional/ Joint Commissioner of Income Tax should play his role by issuing direction(s) u/s 144A of the IT Act to the Assessing Officer, giving due consideration to all relevant facts and circumstances. Therefore, the Assessing Officer is directed to make reference to learned Addl. CIT/Joint CIT u/s 144A of the IT Act and seek suitable directions (on whether the materials on record of the Assessing Officer are sufficient to accept the assessee’s claim; and if not, the lines on which further investigation should be made) after the Assessing Officer starts fresh proceedings for passing denovo order in pursuance of aforesaid directions contained in foregoing paragraph (2.1) of this order. Both the Assessing Officer as well as Addl. CIT/Joint CIT are directed to view the entire matter I.T.A. No.715/Lkw/2019 Assessment Year:2014-15 10 with a fresh outlook without getting influenced by earlier orders of the Assessing Officer and the learned CIT(A). (E) Both grounds of appeal are treated as disposed off in accordance with aforesaid directions. The appeal is partly allowed for statistical purposes. (Order pronounced in the open court on 22/09/2023) Sd/. (ANADEE NATH MISSHRA) Accountant Member Dated:22/09/2023 *Singh Copy of the order forwarded to : 1. The appellant 2. The Respondent 3. Concerned CIT 4. Concerned Additional/Joint Commissioner of Income Tax 5. D.R., ITAT 6. CIT(A) Assistant Registrar