ITO, WARD-1, BARMER, BARMER V. GULAB SINGH, CHOHTAN, BARMER

ITA 655/JODH/2024

AI Insights

The case involves an appeal by the Income Tax Department against the order of the CIT(A), which had reduced the addition made by the AO under Section 69 of the Income Tax Act from Rs. 1,01,68,500 to Rs. 8,18,129 by treating the bank deposits as business receipts under Section 44AD. The Tribunal found that the CIT(A) had not properly addressed the grounds of appeal and had not given the AO an opportunity to respond, as required under Rule 46A of the Income Tax Rules. The Tribunal also noted that the assessee had not filed any income tax return for the relevant assessment year and had not adequately responded to the notices issued by the AO.

• Duration Of Justice: 1 year(s) 7 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-03-2026
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Jodhpur
• Assessment Year: 2017-2018
• Appeal Filed On: 20-08-2024
• Other Referred Cases: Rajesh Jhaveri Stock Brokers Pvt. Ltd. (2007) 291 ITR 500
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P.R. MIRDHA
• Assessee Lawyers: RAJENDRA JAIN
• Keywords: Set aside; Business income; Opportunity of being heard; Unexplained cash credit; Tax effect; Principle of natural justice; Bonafide mistake; Competent authority; Deemed to accrue or arise in india; Reason to believe; Validity of assessment; Tangible material
• Section: 147; 148; 144; 68; 69; 44AD

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR BEFORE DR. MITHA LAL MEENA, HON’BLE ACCOUNTANT MEMBER AND SHRI SUDHIR PAREEK, HON’BLE JUDICIAL MEMBER ITA No. 655/Jodh/2024 (Assessment Year 2017-18) ITO, Ward-1, Barmer Gulab Singh S/o Dhan Singh, Nehru Nagar, Chohttan, Barmer 344702, Rajasthan PAN No. BHLPS9049E CO No. 04/Jodh/2024 (Assessment Year 2017-18) Gulab Singh S/o Dhan Singh, Nehru Nagar, Chohttan, Barmer 344702, Rajasthan PAN No. BHLPS9049E ITO, Ward-1, Barmer Assessee by Shri Rajendra Jain, Advocate and Smt. Raksha Birla, CA(Physical) Revenue by Shri P.R. Mirdha, Addl. CIT (Virtual) Date of Hearing 18.02.2026. Date of Pronouncement 27.03.2026. ORDER DR. MITHA LAL MEENA, A.M.: This appeal by Department and cross objection by the assessee are filed against the order of National Faceless Appeal Centre, Delhi [hereinafter referred to as the NFAC/CIT (A)] dated 28.06.2024 with respect to the assessment year 2017-18. Printed from counselvise.com 2 ITA No. 655/Jodh/2024 & CO 04/Jodh/2024 (Assessment Year 2017-18) 2. The Department has raised following grounds in ITA No. 655/Jodh/2024 :- 1. Whether in the facts and circumstances of the case ld. CIT(A) is justified in restricting the addition to Rs. 8,18,129/- u/s 44AD against addition of Rs. 1,01,68,500/-made by AO u/s 69 by holding that transaction in the bank account appears to be in the nature of business, without detailed verification of the transactions recorded in bank account by himself or through AO under rule 46A, when assessee has not filed any ITR claiming business income therein. 2. Whether in the facts and circumstances of the case Ld. CIT(A) is justified in holding the credits in bank account as the business receipts when no evidence was submitted by assessee in respect of business activities and no ITR was filed by assessee. 3. 3. That the tax effect involved in this case is above the limit laid down in Circular No. 05/2024 dated 15.03.2024 issued by the CBDT, New Delhi. 4. That the appellant reserves its right to add, amend or alter the ground(s) of appeal on or before the date, the appeal is finally heard. 3. The Assessee has raised following grounds in the CO No. 04/Jodh/2024 (A/o ITA No. 655/Jodh/2024) :- 1. That on the facts & in the circumstances of the case the ld CIT (A) erred in upholding the validity & legality of assessment order passed by Printed from counselvise.com 3 ITA No. 655/Jodh/2024 & CO 04/Jodh/2024 (Assessment Year 2017-18) the ld AO which is beyond jurisdiction & also against the principle of natural justice. 2. That on the facts & in the circumstances of the case the ld CIT (A) erred in upholding the legality & validity of issuance of notice u/s 148 of the Act. 3. That on the facts and in the circumstances of the case the Ld CIT(A) grossly erred in upholding the action of Ld AO for making addition u/s 69 of the Act which is contrary to show cause notice/draft assessment order. 4. That on the facts & in the circumstances of the case the ld CIT (A) erred in upholding the entire bank credits as receipt of business and sustaining the addition of Rs.8,18,129/- by applying profit rate of 8% on total credits on the basis of assumption & presumption. 5. That on the facts & in the circumstances of the case the ld CIT (A) grossly erred in estimating the business income which is excessive & unreasonable as looking to nature & character of business transaction. 6. That the respondent may kindly be permitted to raise any additional and/or alternative ground at or before the hearing of appeal. 7. The respondent prays for justice & relief. 4. Briefly the facts of the case are that the assessee is a non-filer and that the information was received by the department with respect to the Non-Filers Monitoring Scheme(NMS) Module, that the assessee had Printed from counselvise.com 4 ITA No. 655/Jodh/2024 & CO 04/Jodh/2024 (Assessment Year 2017-18) made cash deposit of Rs. 1,01,68,500/- in his current bank account with withdrawal of Rs. 98,68,500/- but the assessee did not file any return of income for the assessment year 2017-18. A system generated letter has been issued to the assessee by the Jurisdictional Assessing Officer (JAO) but assessee failed to respondent. Thereafter, on analysis of the information the Jurisdictional Assessing Officer (JAO) initiated the proceedings under Section 147 and a notice under Section 148 of the Act dated 30.03.2021 was issues and served upon the assessee after taking prior approval of the competent authority. Further several notices were issued to the assessee besides show cause notice dated 11/03/2022 (APB No.15 to 17) but assessee has chosen to be nonresponsive. All the notices were sent on the designated E-mail ID of the Assessee i.e. somesh.lohiya13gmail.com, however, the appellant assessee has filed only one letter before the AO which is reproduced hereunder:- With due respect, I deeply regret that I have not reply various notices because I was not aware of Income Tax Notice issued to me. The given E mails Id in my profile belong to my old consultant. And He has neither checked not informed me for notice against me. He also forgets to file my income tax return for relevant FY 2016-17 (AY 2017-18). I have received notice hardcopy from speed post on 11/03/2022. And then I know about the income tax proceeding against me. I have shared the facts for not Printed from counselvise.com 5 ITA No. 655/Jodh/2024 & CO 04/Jodh/2024 (Assessment Year 2017-18) responding notices and apologies for same. I understand your disappointment, and I am truly sorry. Please accept my sincere apology for not responding income tax notices. I am trying my best to reply for the notice as early as possible. Kindly do not assess my income u/s 144. And do not impose any penalty u/s 271(1)(b)/271(1)(c) My submission is as under:- I am objecting the proposed variation as per u/s 144. As per notice cash deposited in my bank account is Rs. 10168500/- but actually it was wrong information shared by bank. Cash deposited only Rs. 300000/- in my current account held in bank of Baroda (41020200000132). Amount disclose in notice may relates to bank receipt (NEFT/RTGS entries) which related to business receipts. During the year my firm got tender from Gram panchyat for material supply under MGNREGA (Mahatma Gandhi National Rural Employment guaranty act) work. Total bank receipts in my bank account for material supplied by my firm to gram panchyat under MGNREGA work. Withdrawals from bank relate to purchase of material and expenses from various unregistered persons. During the year I have not filed my income tax return. Hence you have added whole receipts as income under un- explained cash credit u/s 68. But now I can explain source of income and related expenses. So requesting you to give me chance to file income tax return. My regular income tax return filed under section 44AD declaring deemed income under all assessment year afterwards. So requesting you to consider accordingly. Kindly cancel proposed variation and give us new chance for explaining. 5. The AO has stated that assessee has been engaged in the business of material supplier for the tender received from the Gram Panchayat Printed from counselvise.com 6 ITA No. 655/Jodh/2024 & CO 04/Jodh/2024 (Assessment Year 2017-18) under MGNREGA (Mahatma Gandhi National Rural Employment guaranty act) work, however, the assessee has made the cash deposits amounting to Rs. 1,01,68,500/- in the bank account relating to the business receipts but he did not file the return of the income and fail to explained the nature of the business activities, he has carried out. Accordingly, the AO was not satisfied with the reply of the assessee and treated the bank deposits of the assessee as unexplained cash credits and wilful concealment of the income by the assessee. 6. Being aggrieved with the assessment order the assessee went a appeal before the Ld. CIT(A), where, the Ld. CIT(A) has granted relief to the assessee by observing as under:- Decision:- I have considered the submission made by the appellant. The appellant has raised the technical & legal grounds and has also made a detailed submission on merits of the case. I first take up the issue on merits. As discussed in the paras above, the credits of Rs 1,01,68,500/-in the bank account held by the appellant have been treated as the income of the appellant. The Appellant claims to have provided detailed explanation for the said entries during the assessment proceedings, which was not considered by the assessing officer. Instead, the entire amount has been treated as unexplained and added u/s 69 of the Printed from counselvise.com 7 ITA No. 655/Jodh/2024 & CO 04/Jodh/2024 (Assessment Year 2017-18) Act. I do not concur with the conclusion arrived at by the assessing officer. I think, when the bank account contains entries of both debit and credit, a more logical and realistic view should have been taken by the AO in assessing the income, even if the order is passed u/s 144 of the Act. I also feel that the appellant should have filed the return of income in response to the notice u/s 148 of the Act. Had the appellant done so, then probably such huge addition would not have been made. I have perused the bank statements filed by the appellant. The transactions in the bank account appear to be in the nature of business, as claimed by the appellant. Considering the credits in the bank account as the business receipts, I hereby proceed to estimate the net profit on the total receipts. As stated by the appellant, the total credits in bank account is Rs 1,02,26,619/-.Section 44AD of the Act prescribes the profit percentage of 8% of the receipts. Applying the same, the income of the appellant is hereby estimated at 8% of the receipts of Rs 1,02,26,619, i.e. Rs 8,18,129/-, which I think should be a fair assessment of income. On the legal ground of the proceedings u/s 148 being bad in law, I am of the view that the entire procedure as laid down in the Act have been followed by the assessing officer and I do not find any infirmity in the same. 7. The Ld. DR for the department submitted that the Ld. CIT(A) was not justified in restricting the addition of Rs. 8,18,139/- under Section 44AD against the addition of Rs. 1,01,68,500/- made by the AO under Section 69 by holding that transaction in bank account appearing to be in Printed from counselvise.com 8 ITA No. 655/Jodh/2024 & CO 04/Jodh/2024 (Assessment Year 2017-18) nature of business without detailed verification of the transaction as per the bank account either by himself or through AO under Rule 46A when assessee has no filed any ITR claiming business income therein. The Ld. DR submitted that in the given facts of the case the Ld. CIT(A) is not justified in holding the credits of the bank account as the business receipts when no details were submitted by the assessee in respect of business activity and no ITR was filed by the assessee. The DR pleaded that the matter may be restored back to the AO for afresh examination and De Novo assessment of the matter in the present case. 8. Per contra the Ld. counsel for the assessee has supported the impugned order on the issue of treating the bank deposits as business turnover of the assessee. However, the Ld. AR has challenged the validity and legality of the assessment order in view of the principles of natural justice in upholding the action of the Ld. AO for making addition under Section 69 of the Act which is in contrary to show cause notice/ draft assessment order and sustaining the addition of Rs. 8,18,129/- by applying profit rate of 8% on total credits on estimating the business income which is excessive and unreasonable as looking to the nature of the business transaction by way of cross objection. Printed from counselvise.com 9 ITA No. 655/Jodh/2024 & CO 04/Jodh/2024 (Assessment Year 2017-18) 9. In rebuttal the Ld. DR for the department has placed reliance on the Ld. CIT(A) in upholding the validity and legality of issuance of notice under Section 148 and upholding the action of the AO for making the addition under Section 69 of the Act. The DR contended that from the bank statement APB page no. 20 to 31, it is apparently clear that there are several entries of cash deposits and cash withdrawal in addition to the cheque receipts under the contract tender received from the Gram Panchayat under MGNREGA scheme. The DR contended that the cash deposits in the bank accounts made by the assessee has no nexus to the contract/ business receipts of the assessee claimed to be received from the tender in the MGNREGA scheme. The DR contended that the Ld. CIT(A) without examining the bank statement and addressing the issue of the unexplained cash deposits in the current bank account of the assessee and without taking rebuttal of the assessing officer under Rule 46A, estimated the profit at the rate of 8% by invoking provision of Section 44AD which is against the principles of natural justice. He strongly pleaded that assessing officer must be given a opportunity by the Ld. CIT(A) to take a report/comments of the AO on the issues of unexplained cash deposits made in the bank account. Printed from counselvise.com 10 ITA No. 655/Jodh/2024 & CO 04/Jodh/2024 (Assessment Year 2017-18) 10. We have heard both the sides and perused the material on record and impugned order and case law cited before us, it is admitted fact on record that appellant assessee is non-filer. The Ld. AR contention that the appellant has not filed return due to bonafide mistake, cannot acceptable in a case where cash deposits of Rs. 1,01,68,500/- in the bank account found by the Assessing Officer. It is also noted that assessee has not complied with the notices issued by the AO at the time of verification of the information available with him. Appellant assessee’s ground challenging validity and legality of the assessment order by challenging validity of notice under Section 148 of the Act merely on the ground that the AO has neither examined the bank statement of the appellant nor analyzed ITR filed by the assessee in respect to prior and subsequent years is not sufficient to substantiate its bonafide that assessee was a non-filer for the year under consideration by default. In our view since assessee was non-filer and there was a cash deposit of worth more than crore of rupees, and that the AO has issued a letter to the assessee for verification of the aforesaid cash deposits which remained non-complied. The Hon’ble Apex Court in the case of Rajesh Jhaveri Stock Brokers Pvt. Ltd. (2007) 291 ITR 500, has observed that even an intimation under Section 143(1) of the IT Act, is not an Printed from counselvise.com 11 ITA No. 655/Jodh/2024 & CO 04/Jodh/2024 (Assessment Year 2017-18) “Assessment”. Consequently, the assessing Officer can reopen the assessment under Section 147 if they have a reasonable believe that the income escaped the assessment even without new tangible material as long as initial processing was mere intimation and not a scrutiny assessment. 11. In the present case assessee has not even filed the return of income and not complied with the notices issued by the AO for verification of the cash deposits in his bank accounts. Therefore, in our view, the AO has reason to believe, that the income has escaped the assessment with regards to cash deposits of Rs. 1,01,68,500/- even without having any new tangible material in view of the Apex Court’s Judgment in the case of Rajesh Jhaveri Stock Brokers (supra). Thus, the reopening of the assessment under Section 147 by way of issuing a notice under Section 148 is upheld. Accordingly, ground no. 1 and 2 raised by the assessee in its cross objection are dismissed. 12. As regards to ground no. 3 of the assessee in cross objection, it is noted that in the show cause notice APB page no. 15 to 17, the Ld. AR alleged that the AO has treated the cash deposits of Rs. 01,01,68,500/- in the bank account as unexplained cash credits under Section 68 of the Printed from counselvise.com 12 ITA No. 655/Jodh/2024 & CO 04/Jodh/2024 (Assessment Year 2017-18) Act, however, while passing the assessment order, the AO without analysing the reply, bank statement etc. in right perspective and judiciously treated proceeding in the wake of notice under Section 148 as formalities is factually incorrect. We find that AO has not stated any section in the show cash notice and he has made a detailed discussion in the assessment order regarding the unexplained cash deposits in the bank account of assessee which were not rebutted by the appellant either at the stage of the assessment or before the Ld. CIT(A). The case laws relied by the AR are distinguishable on peculiar facts of the present case. Accordingly, the ground no. 3 of the assessee in the cross objection is dismissed. 13. In ground nos. 4 to 7 of the cross objection the assessee has challenged the addition made on account of cash deposits as unexplained cash credits under Section 69 of the Act contending that the observation of the AO are contrary to the real and material facts as emerging from the entries appear from the bank statement. AR contended that assessee has made cash deposits of Rs. 3,00,000/- during the year under consideration, therefore, the observation of AO is contrary to the material on record, however, on perusal of the bank Printed from counselvise.com 13 ITA No. 655/Jodh/2024 & CO 04/Jodh/2024 (Assessment Year 2017-18) statement (APB No. 26 to 31) relevant of the year under consideration, it is noted that the statement submitted by the assessee was not a complete statement as the assessee has given only statement from July 2016 to 31 March 2017. At this stage in absence of complete bank statement, no inference could be drawn with regard to the correctness of the facts stated by the authorities below. The very facts regarding the claim of the cash deposits and veracity of the total cash deposits and source of the said cash deposits needs to be verified by the AO and due opportunity of being heard would be given to the appellant assessee. 14. Thus, this ground of appeal of the appellant is deserves to be restored to the AO for examination and verification. 15. It is pertinent to mention here that the Ld. CIT(A) has summarily decided the appeal without addressing the grounds of appeal raised before him as per memorandum of appeal filed in Form No. 35, whereas, as many as 6 grounds of appeals were raised before the Ld. CIT(A) as also challenged by the appellant in its cross objection filed before the Bench. 16. It is noted that Ld. CIT(A) has decided the appeal of the assessee in casual manner summarily, by treating the unexplained cash deposits in Printed from counselvise.com 14 ITA No. 655/Jodh/2024 & CO 04/Jodh/2024 (Assessment Year 2017-18) the bank as turnover of the assessee under Section 44AD of the Act and applied estimated income/profit at the rate of 8% on the total receipts of Rs. 01,02,26,619/- without granting opportunity of being heard to the AO, and the profit so estimated is also not acceptable to the appellant. 17. It is pertinent to mention here that once at the stage when the Ld. CIT(A) is resorting to invoke different provision by deviating from the assessment order and deciding the appeal on the issues which is not arising either out of grounds of appeal raised by the assessee in the memorandum of appeal filed in Form No. 35 or out of the assessment order, he is required to give an opportunity of being heard to the Ld. AO as per Rule 46A, in view of the principle of natural justice. In our view, the Ld. CIT(A) has violated the settled procedure of law and that the finding given by the Ld. CIT(A) has been vague and contrary to the facts on record. 18. We, therefore, hold that the order of the Ld. CIT(A) is perverse to the facts on record and the impugned order is liable to be set aside. However, in the larger public interest, we considered it deemed appropriate to restore the matter back to the file of the AO to pass De- Novo assessment after due examination and verification of the cash Printed from counselvise.com 15 ITA No. 655/Jodh/2024 & CO 04/Jodh/2024 (Assessment Year 2017-18) deposits in the bank account of the assessee with reference to the nature of transaction as claimed by the assessee in the current bank account of the assessee and pass De Novo assessment order in accordance with law. The AO is directed to give adequate opportunity of being heard to the appellant assessee and the assessee shall cooperate in the assessment proceedings before the JAO. 19. In the above view, we restore the matter back to the file of JAO to pass De Novo assessment in accordance with law. 20. In the result, the CO of the assessee is dismissed and the appeal of the department is allowed for statistical purposes. Order pronounced on 27/03/2026 in the open court. SD/- SD/- (SUDHIR PAREEK) (DR. MITHA LAL MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated : 27/03/2026. Pritesh Vaishnav PS TRUE COPY Printed from counselvise.com 16 ITA No. 655/Jodh/2024 & CO 04/Jodh/2024 (Assessment Year 2017-18) Copies to : (1) The appellant. (2) The respondent. (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File BY ORDER, Printed from counselvise.com "