Sri Vamadevappa Kalpanahalli Maheshwarappa, Chitradurga V. Income-Tax Officer, Ward-1, Chitradurga

ITA 807/BANG/2023

• Counselvise Citation: [2023] 100 COUNSELVISE.COM (IT) 5313 (ITAT-BANGALORE)
• Duration Of Justice: 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-11-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: B
• Next Hearing Date: 14-11-2023
• Assessment Year: 2017-2018
• Appeal Filed On: 19-10-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: V. SRINIVASAN
• Section: 68; 144; 250; 69A

Judgement Text

ITA No.807/Bang/2023 Sri Vamadevappa Kalpanahalli Maheshwarappa, Chitradurga IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” “B’’ BENCH: BANGALORE BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER ITA No.807/Bang/2023 Assessment Year: 2017-18 Sri Vamadevappa Kalpanahalli Maheshwarappa Khata No.267 B Durga, Holalkere Taluk Chitradurga 577 526 Karnataka PAN NO : AWIPK9277F Vs. ITO Ward-1 Chitradurga APPELLANT RESPONDENT Appellant by : Shri V. Srinivasan, A.R. Respondent by : Shri Ganesh R. Ghale, A.R., Standing Counsel for Revenue Date of Hearing : 15.11.2023 Date of Pronouncement : 15.11.2023 O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: This appeal filed by assessee is directed against the order of NFAC for the assessment year 2017-18 passed u/s 250 of the Income-tax Act,1961 ['the Act' for short] dated 6.9.2023. The assessee has raised following grounds of appeal: 1. “The orders of the authorities below in so far as they are against the appellant are opposed to law, equity, weight of evidence, probabilities, facts and circumstances of the case. 2. The learned CIT[A] is not justified in disposing off the appeal ex-parte without allowing sufficient and real opportunity to the appellant to represent the case especially considering that the original assessment order was also passed u/s. 144 of the Act by ignoring the return of income filed by the appellant on 13/11/2019 together with audited financials and there was a delay in filing the return of income in response to notice issued u/s. 142[1] of the Act on account of the appellant's ill-health and the remote location of the appellant who was ITA No.807/Bang/2023 Sri Vamadevappa Kalpanahalli Maheshwarappa, Chitradurga Page 2 of 6 not conversant with electronic means of communication and hence, the impugned order passed requires to be cancelled. 3. Without prejudice to the above, the learned CIT[A] is not justified upholding the order of the A.O. in completing the assessment u/s 144 of the Act without appreciating the explanation of the appellant for non-compliance under the facts and circumstances of the appellant's case. 4. Without prejudice to the above, the learned CIT[A] is not justified in upholding the addition of Rs.12,58,000/- as unexplained cash deposits made during the demonetization period u/s.69A of the Act and taxing the same u/s.115BBE of the Act, without appreciating that these deposits made by the appellant was also forming part of the business receipts of the appellant and hence, the same could not be regarded as unexplained money liable for tax u/s. 69A of the Act, under the facts and in the circumstances of the appellant's case. 5. The learned CIT[A] is not justified in upholding the assessment of income from business of Rs.26,01,841/- made on estimate basis at 10% of the purchases from KSBCL without appreciating that the appellant had prepared his financials and had filed a return of income showing income of Rs. 14,63,430/-, which was also supported by audited financials statement and books of accounts maintained in normal course of business and hence, the impugned addition made deserves to be deleted. 6. Without prejudice to the above, the learned CIT[A] ought to have telescoped the business income estimated by him with the cash deposits made during the period of demonetization and ought not to have assessed the same separately under the facts and in the circumstances of the appellant's case. 7. Without prejudice to the right to seek waiver with the Hon'ble CCIT/DG, the appellant denies himself liable to be charged to interest u/s. 234-A and 234-B of the Act, which under the facts and in the circumstances of the appellant's case and the same deserves to be cancelled. 8. For the above and other grounds that may be urged at the time of hearing of the appeal, your appellant humbly prays that the appeal may be allowed and Justice rendered and the appellant may be awarded costs in prosecuting the appeal and also order for the refund of the institution fees as part of the costs.” ITA No.807/Bang/2023 Sri Vamadevappa Kalpanahalli Maheshwarappa, Chitradurga Page 3 of 6 2. Facts of the case are that the assessee is a proprietor carrying on the business under the name and style of Pavan Wines and assessed to tax in the status of an individual. The Assessment order under section 144 of the Act for the AY 2017-18 was concluded by the learned Income Tax Officer, Ward I Chitradurga vide dated 14th Nov 2019. While concluding the assessment order for the said Assessment year, the learned A.O had made addition in respect of the following while ascertaining the outstanding amount a. Net Profit as estimated at Rs 26,01,841/-. b. Addition in respect of section 69A of the Act and to be taxed under section 115BBE of the Act at Rs.12,58,000/- c. Total Income at Rs.38,59,841/-. 2.1 It was the submission of the assessee that the assessee has not responded to the notice issued by Income Tax Department but due to loss of family member and also deteriorating health issues on a continuous basis which kept least concerned towards the notices received. The assessee is into business of liquor sales wherein daily cash transactions will takes place. In usual course of business, it is normal practice to deposit the two or three days’ cash collected from customers is deposited into the bank accounts and in turn through bank the payment is made for purchase of liquor from KSBCL. However, the Assessing Officer has passed an order stating the fact that old currency was collected during the demonetization period and deposited into bank and considered as unaccounted money under section 69A of the Act and considered for tax under Section 115BBE of the Act. The learned A O estimated income as Rs.26,01,841/- at 10 percent income of total purchase during the FY 2016-17 without considering the return of income filed by the assessee on 13 th Nov 2019 wherein gross profit was at 11 percent against the purchases and net profit was 5.60 percent as against the total purchases. The assessee has filed the Audited Income Tax return dated 13 th Nov 2019 ITA No.807/Bang/2023 Sri Vamadevappa Kalpanahalli Maheshwarappa, Chitradurga Page 4 of 6 bearing acknowledgement numbered as 255118541131119 which was prior to date of passing an order under section 144 of the Act. The assessee hospitalized in the month of Nov 2019 from Nov 20 th 2019 till 28th Nov 2019 and was advised to be on continuous medication and observation for the next two to three months. It was also stated by the ld. A.R. that the assessee was hospitalized in the month of Nov’19 from 20 th Nov’19 to 28 th Nov’19 and was advised to be on continuous medication and observation for the past 2 or 3 months. Hence, the assessee has not participated in the assessment proceedings. Further, it was submitted that even before NFAC, assessee was not able to file necessary details in time as and when called for by the NFAC due to lack of knowledge of Income Tax proceedings by virtual mode. The NFAC having no alternative has confirmed the addition made by the ld. AO. Against this assessee is in appeal before me. 3. I have heard the rival submissions and perused the materials available on record. In my opinion, the order passed by ld. AO is ex- parte. In this case, the assessment order passed by ld. AO as well as NFAC are ex-parte without participation of assessee. It is appropriate to remit the entire issue to the file of ld. AO for reconsideration in the light or order of the Tribunal in the case of Bhoopalam Marketing Services Pvt. Ltd. in ITA No.375/Bang/2022 dated 15.9.2022, wherein held as under: “7. We have carefully considered the rival contention and perused the orders of the lower authorities. Admittedly the assessee has deposited Rs.298,08,080/- during the post- demonetization between 09/11/2016 and 30/12/2016. Therefore, Ld.AO made addition of INR 5,82,76,300/- as income of the assessee u/s. 68 of the income tax act, by passing assessment order u/s. 144 of the Act. The Ld.AO made such addition as the assessee could not file requisite details as the notice was issued to the email address that was not functional. In the interest of justice, we deem it proper to remand the issues back to the Ld.AO for a de novo verification. 7.1 We have carefully gone through the various standard operating procedures laid down by the central board of direct taxes ITA No.807/Bang/2023 Sri Vamadevappa Kalpanahalli Maheshwarappa, Chitradurga Page 5 of 6 issued from time to time in case of operation clean. The 1st of such instruction was issued on 21/02/2017 by instruction number 03/2017. The 2nd instruction was issued on 03/03/2017 instruction number 4/2017. The 3rd instruction was in the form of a circular dated 15/11/2017 in F.No. 225/363/2017-ITA.II and the last one dated 09/08/2019 in F.no.225/145/2019-ITA.II. These instructions gives a hint regarding what kind of investigation, enquiry, evidences that the assessing officer is required to take into consideration for the purpose of assessing such cases. 8. In 1 of such instructions dated 09/08/2019 speaks about the comparative analysis of cash deposits, cash sales, month wise cash sales and cash deposits. It also provides that whether in such cases the books of accounts have been rejected or not where substantial evidences of vide variation be found between these statistical analyses. Therefore, it is very important to note that whether the case of the assessee falls into statistical analysis, which suggests that there is a booking of sales, which is non-existent and thereby unaccounted money of the assessee in old currency notes (SBN) have been pumped into as unaccounted money. 8.1 The instruction dated 21/02/2017 that the assessing officer basic relevant information e.g. monthly sales summary, relevant stock register entries and bank statement to identify cases with preliminary suspicion of back dating of cash and is or fictitious sales. The instruction is also suggested some indicators for suspicion of back dating of cash else or fictitious sales where there is an abnormal jump in the cases during the period November to December 2016 as compared to earlier year. It also suggests that, abnormal jump in percentage of cash trails to on identifiable persons as compared to earlier histories will also give some indication for suspicion. Non- availability of stock or attempts to inflate stock by introducing fictitious purchases is also some indication for suspicion of fictitious sales. Transfer of deposit of cash to another account or entity, which is not in line with the earlier history. Therefore, it is important to examine whether the case of the assessee falls into any of the above parameters are not.” 3.1 Accordingly, the issue in dispute is remitted to the file of ld. AO for fresh consideration after giving an opportunity of hearing to the assessee. ITA No.807/Bang/2023 Sri Vamadevappa Kalpanahalli Maheshwarappa, Chitradurga Page 6 of 6 4. In the result, the appeal of the assessee is partly allowed for statistical purposes. Order pronounced in the open court on 15 th Nov, 2023 Sd/- (Chandra Poojari) Accountant Member Bangalore, Dated 15 th Nov, 2023. VG/SPS Copy to: 1. The Applicant 2. The Respondent 3. The CIT 4. The DR, ITAT, Bangalore. 5 Guard file By order Asst. Registrar, ITAT, Bangalore.