JAGJEET SINGH MALHOTRA,MUMBAI V. .ASSISTANT COMMISSIONER OF INCOME TAX, RAIPUR

ITA 281/RPR/2024

AI Insights

The case involves Jagjeet Singh Malhotra, the appellant, who contested the order of the Commissioner of Income-Tax (Appeals), National Faceless Appeal Center, Delhi, which arose from an earlier order under Sections 147 and 144 of the Income-tax Act, 1961. The primary contention was the incorrect assessment of undisclosed income amounting to Rs.13,48,090, which the assessing officer erroneously treated as the assessee's income. The assessee argued that this amount was from legitimate business activities dealing with cloth materials for tents, and not undisclosed income. The Tribunal noted procedural lapses in the notice and hearing process, leading to the decision to restore the matter to the CIT(Appeals) for a comprehensive re-evaluation.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 35768 (ITAT-RAIPUR)
• Duration Of Justice: 6 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 28-05-2024
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRIYANKA PATEL
• Assessee Lawyers: AYUSH GARG
• Keywords: Business income; Opportunity of being heard; Additional evidence; Unexplained investment; Principle of natural justice; Competent authority; Non compliance
• Section: 147; 148; 142(1); 22; 69; 133(6); 13

Judgement Text

"आयकर अपीलȣय अͬधकरण Ûयायपीठ “एक-सदèय” मामला रायपुर मɅ IN THE INCOME TAX APPELLATE TRIBUNAL RAIPUR BENCH “SMC”, RAIPUR Įी रवीश सूद, ÛयाǓयक सदèय क े सम¢ BEFORE SHRI RAVISH SOOD, JUDICIAL MEMBER आयकर अपील सं. / ITA No. 281/RPR/2024 Ǔनधा[रण वष[ / Assessment Year : 2011-12 Jagjeet Singh Malhotra Tirath Niwas, Near Bhai Taru Singh Chowk, Main Road, Shyam Nagar, Raipur (C.G.)-492 011 PAN: BNPPM8224H .......अपीलाथȸ / Appellant बनाम / V/s. The Assistant Commissioner of Income Tax, Circle-Raipur (C.G.) ……Ĥ×यथȸ / Respondent Assessee by : Shri Ayush Garg, CA Revenue by : Dr. Priyanka Patel, Sr. DR सुनवाई कȧ तारȣख / Date of Hearing : 02.12.2024 घोषणा कȧ तारȣख / Date of Pronouncement : 09.12.2024 2 Jagjeet Singh Malhotra Vs. ACIT, Raipur ITA No. 281/RPR/2024 आदेश / ORDER PER RAVISH SOOD, JM: The present appeal filed by the assessee is directed against the order passed by the Commissioner of Income-Tax (Appeals), National Faceless Appeal Center (NFAC), Delhi, dated 01.06.2022, which in turn arises from the order passed by the A.O under Sec. 147 r.w.s.144 of the Income-tax Act, 1961 (in short ‘the Act’) dated 17.12.2018 for the assessment year 2011-12. The assessee has assailed the impugned order on the following grounds of appeal: “• That the Ld. CIT(A) has assessed the undisclosed income amounting to Rs.13,48,090/-, which was erroneously treated as assessee's income by the assessing officer. Upon reviewing the assessment order, it is evident that the assessment was based on incorrect information regarding the nature of his business activities. • That the assesse was engaged in the business of dealing with cloth materials specifically used for making tents. His business involves procuring and supplying various types of cloth materials tailored for tent manufacturing purposes. He has set up his new business during the year. • That the assessee has done business in a bonafide manner. His total income is less than the exempted limit of Rs. 1,60,000 thus he is not liable to mandatorily file income tax return during the year FY 2010-11. • That the assessee has deposited the cash of Rs. 13,48,090 which compose of the income received from sale of clothes. The assessee has invoices as proof of the sales made during the year. which clearly shown the assessee has small business and is not earning income enough to exceed exemption limit of Rs. 1,60,000. • The assessee submits this appeal on the grounds of being unaware of the procedures for filing an appeal. Furthermore, 3 Jagjeet Singh Malhotra Vs. ACIT, Raipur ITA No. 281/RPR/2024 the Assesse was uninformed about the notices served, and their previous representative was also not apprised of any such notices. It was only upon filing the return for Assessment Year 2024-25, that the Assesse became aware of the appeal notices. • The Assessee respectfully brings to the attention of the Ld. CIT(A) that due to lack of awareness regarding the appeal procedures and the absence of communication regarding the notices, they inadvertently failed to appear for the appeal proceedings. Consequently, a penalty of Rs. 15,0001- (Rs. 10,000 + Rs. 5,000) was imposed on the Assessee for non- appearance. • In light of the aforementioned circumstances, the Assessee requests the Ld. CIT(A) to consider the notice date as of 02/05/2024, the date on which they became aware of the appeal order. Therefore, date of service of order should be consider as 02/05/2024. Furthermore, the Assessee appeals for the waiver of the penalty imposed for non-appearance, as the failure to attend was unintentional and stemmed from a lack of knowledge about the appeal process and notifications thereof. The Assessee earnestly appeals for leniency and understanding in this matter, and requests the authority to reconsider the income and penalty imposed in light of the circumstances presented herein.” 2. Succinctly stated, the A.O, based on information that though the assessee had during the subject year made cash deposits of Rs.13,48,090/- in his bank account with State Bank of India, Branch: Ramsagarpara but had not filed his return of income, initiated proceedings u/s.147 of the Act. Notice u/s. 148 of the Act was issued to the assessee. However, the assessee failed to effect necessary compliance and did not file his return of income. Also, the assessee did not comply with the notices/letters which were issued by the A.O in the course of the 4 Jagjeet Singh Malhotra Vs. ACIT, Raipur ITA No. 281/RPR/2024 assessment proceedings u/s. 142(1) of the Act. Accordingly, the A.O proceeded with and framed the assessment vide an ex-parte order u/s. 144 of the Act. 3. The A.O called for the requisite information i.e. bank account of the assessee with State Bank of India, Branch : Ramsagarpara u/s. 133(6) of the Act. As the assessee who had made cash deposits of Rs.13,48,090/- in his aforesaid bank account failed to come forth with any explanation as regards the “nature” and “source” of the aforesaid cash deposits, the A.O, held the same as his unexplained investment u/s. 69 of the Act. Accordingly, the A.O vide his order passed u/s. 147 r.w.s. 144 of the Act, dated 17.12.2018, after making the aforesaid addition, determined the income of the assessee at Rs.13,48,090/-. 4. Aggrieved, the assessee carried the matter in appeal before the CIT(Appeals). As the assessee despite having been afforded four opportunities i.e. on 08.01.2021, 30.08.2021, 01.04.2022 and 27.04.2022 failed to participate in the proceedings before the CIT(Appeals), therefore, the CIT(Appeals) was constrained to proceed with and dismiss the appeal vide an ex-parte order, observing as under: “5.2 Ground No.1 and 2 The AO has made addition of Rs.13,48,090/- being unexplained cash deposit in bank account of the assessee by holding as under: \"The case was reopened on-the basis of information available with the department that assessee has deposited an amount of 5 Jagjeet Singh Malhotra Vs. ACIT, Raipur ITA No. 281/RPR/2024 Rs.13,48,090/- during the F.Y. 2010-11 with the State Bank of India, Ramsgarpara relevant to assessment year under consideration. No return of income was filed by the assessee. On the basis of above, case was reopened and notice u/s Ida was issued after obtaining approval of the competent authority. The said notice was served upon the assessee. Meanwhile information was sought u/s.133(6) of the IT.Act, 1961 from the State Bank of India, Ramsagarpara, Raipur. From the bank statements bearing A/c no. 30079690919, it is seen that you have deposited cash amounting to Rs.13,48,090/-. In view of the natural justice, assessee was granted one more final opportunity before passing the best judgement assessment, explaining the income proposed to be assessed in his case. The final show cause notice was issued on 19/11/2018 fixing the case for hearing on 26.11.2018. However, the assessee did not avail the last opportunity, neither made any compliances. Therefore, the non compliance attitude points to the fact that the sources of cash deposit is unexplained and hence the same is added back as you unexplained investment u/s. 69 of IT Act, 1961.” 5.3 The appellant has not been able to explain source of cash deposit in the above bank account. The appellant has also not been able to show that cash deposits of Rs. 13,48,090/- made in FY 2010-11 are out of sale consideration from his business of tent and tent accessory. Also no return of income has been filed by the appellant. It is further to be stated no addition has been made by the Assessing Officer on protective basis. Therefore, addition made by AO is justified and upheld. Ground No. and 2 are dismissed. 5.4 Ground No.3 is general in nature and is not adjudicated upon. 6 In the result, the appeal is dismissed.” 5. The assessee being aggrieved with the order of the CIT(Appeals) has carried the matter in appeal before the Tribunal. 6 Jagjeet Singh Malhotra Vs. ACIT, Raipur ITA No. 281/RPR/2024 6. I have heard the Ld. Authorized Representatives of both the parties, perused the orders of the lower authorities and the material available on record. 7. Shri Ayush Garg, Ld. Authorized Representative (for short ‘AR’) for the assessee, at the threshold, submitted that the assessee had filed an application dated 05.11.2024 under Rule 29 of the Income Tax Appellate Tribunal Rules, 1962 seeking admission of certain documents as additional evidence. The Ld. AR had taken me through the copies of the documents, viz. (i) copies of the bills/invoices issued to the assessee by M/s. Ajanta Tent Suppliers, Page 4 to 13 of application; (ii) copies of the certificates of diploma/marksheets evidencing that the assessee during the year was pursuing education at Delhi/Raipur, Page 14 & 15 of the application; (iii) copy of completion certificate of training program in studio recording, music programming and mixing engineer at Mumbai issued by Wibe Studio, Oshiwara, Mumbai, Page 16 of the application; (iv) rent agreement dated 06.06.2022 evidencing that the assessee along with licensee No.2 was residing at: Flat No.301, 3rd Floor, Shree Gensh CHS Ltd., Andheri West, Mumbai w.e.f. 06.06.2022, Page 19 to 22 of the application; and (v) other miscellaneous documents evidencing that the assessee during the subsequent years was staying in Mumbai, Page 25 to 34 of the application. The Ld. AR had further drawn my attention to an “affidavit” dated 28.11.2024 filed by the assessee wherein he had, inter 7 Jagjeet Singh Malhotra Vs. ACIT, Raipur ITA No. 281/RPR/2024 alia, stated that though in the memorandum of appeal i.e. “Form 35” filed before the CIT(Appeals) that though he had opted out of service of notices /communications though email, but on neither of the four occasions, the notices intimating the fixation of the appeal was ever received by him physically. Ld. AR further submitted that as the assessee during the subject year who was pursuing education, and thus, had remained unaware about the assessment proceedings, therefore, for the said reason, he had been visited with an ex-parte order by the A.O u/s. 147 r.w.s. 144 of the Act, dated 17.12.2018. The Ld. AR submitted that as the aforesaid documents will have a strong bearing on adjudicating the issue involved in the present appeal, therefore, the same in all fairness be admitted. 8. Dr. Priyanka Patel, Ld. Sr. DR in all fairness did not object to the admission of the additional evidence. At the same time, it was submitted by her that as the aforesaid documents were filed for the first time before the Tribunal, therefore, the same would require necessary verification on the part of the A.O. 9. I have given thoughtful consideration to the contentions advanced by the Ld. Authorized Representatives of both the parties, in the backdrop of the orders of the lower authorities. I am of the view, that as the assessee had remained oblivion of the assessment proceedings and was not validly put to notice about hearing of the appeal by the CIT(Appeals), therefore, 8 Jagjeet Singh Malhotra Vs. ACIT, Raipur ITA No. 281/RPR/2024 the said additional documentary evidence filed before me merits to be admitted for fair disposal of the present appeal. 10. As regards the merits of the case, the Ld. AR submitted that as the cash deposits made by the assessee in his bank account No.30079690919 with State Bank of India, Branch: Ramsagarpara, Raipur were sourced out of his business receipts, therefore, there was no justification for the A.O to have held the same as unexplained investment u/s. 69 of the Act. The Ld. AR to buttress his contention had taken me through the aforesaid bank account of the assessee, which revealed that the cash deposits made during the year under consideration was followed by substantial amount of corresponding withdrawals. The Ld. AR had specifically drawn my attention to a “chart” that was prepared by the assessee regarding the cash deposits of Rs.13,48,090/- a/w. with cash withdrawals of Rs.9,45,000/- made in the assessee’s bank account during the year under consideration, Page 1 & 2 of the application. Carrying his contention further, the Ld. AR submitted that as the aforementioned invoices/bills of the supplier viz. M/s. Ajanta Tent suppliers issued to the assessee evidenced that the latter was engaged in the business of trading in tent material, therefore, the fact that the cash deposits in his bank account were sourced out of his said business receipts stood duly established. The Ld. AR submitted that it was only the profit/surplus derived by the assessee from the aforesaid business which could have been brought to tax. The Ld. AR submitted that 9 Jagjeet Singh Malhotra Vs. ACIT, Raipur ITA No. 281/RPR/2024 as the treating of the entire amount of cash deposits of Rs.13,48,090/- by the A.O as an unexplained investment of the assessee u/s. 69 of the Act, defied all logic and reasoning, therefore, the same was liable to be struck down. 11. Dr. Priyanka Patel, Ld. Senior Departmental Representative (for short ‘DR’) relied on the orders of the lower authorities. 12. Admittedly, it is a matter of fact borne from record that the A.O in absence of any explanation forth coming from the assessee as regards the “source” of the cash deposits of Rs.13,48,090/- (supra) had vide an ex- parte order passed u/s.147 r.w.s. 144 of the Act, dated 17.12.2018 held the entire amount of cash deposits as an unexplained investment u/s. 69 of the Act. Also, the CIT(Appeals) vide his order dated, 01.06.2022 had summarily dismissed the appeal for want of prosecution and approved the addition made by the A.O. 13. Ostensibly, the dismissal of the appeal by the CIT(Appeals) without validly putting the assessee to notice does not find favour with me. As stated by the Ld. AR, and rightly so, the assessee had specifically memorandum of appeal i.e. “Form 35” filed before the CIT(Appeals) had though opted out of service of notices/communications though email, but on neither of the four occasions when the hearing of the appeal was fixed any notice intimating the fixation of the appeal was ever physically served 10 Jagjeet Singh Malhotra Vs. ACIT, Raipur ITA No. 281/RPR/2024 upon him. Accordingly, the assessee had remained divested of an opportunity to put up his case on merits before the first appellate authority. Considering the aforesaid facts, I am of the view, that as the assessee was not validly put to notice about the fixation of hearing of the appeal by the CIT(Appeals), which, thus, had divested him to defend his case before him along with the fact that the assessee had filed before me certain additional documentary evidence seeking liberty for admission of the same under Rule 29 of the Income Tax Appellate Tribunal Rules, 1962, therefore, the matter in all fairness requires to be restored to the file of the CIT(Appeals) with a direction to re-adjudicate the issue in the backdrop of the aforesaid additional documentary evidence filed before me, viz. (i) purchase bills/invoices issued by M/s. Ajanta Tent Suppliers to the assessee, Page 4 to 13 of the application; and (ii) chart disclosing cash deposits/withdrawals made by the assessee during the subject year, Page 1 & 2 of the application after calling for a “remand report” from the A.O. Needless to say, the CIT(Appeals) shall in the course of the set-aside proceedings afford a reasonable opportunity of being heard to the assessee. 14. As I have restored the matter to the file of the CIT(Appeals) for fresh adjudication, therefore, I refrain from adverting to the merits of the addition as have been assailed by the assessee before me, which, thus, is left open. 11 Jagjeet Singh Malhotra Vs. ACIT, Raipur ITA No. 281/RPR/2024 15. In the result, appeal of the assessee is allowed for statistical purposes in terms of the aforesaid observations. Order pronounced in open court on 09th day of December, 2024. Sd/- (रवीश सूद /RAVISH SOOD) ÛयाǓयक सदèय/JUDICIAL MEMBER रायपुर/ RAIPUR ; Ǒदनांक / Dated : 09th December, 2024. ***SB, Sr. PS. आदेश कȧ ĤǓतͧलͪप अĒेͪषत / Copy of the Order forwarded to : 1. अपीलाथȸ / The Appellant. 2. Ĥ×यथȸ / The Respondent. 3. The CIT(Appeals)-1, Raipur (C.G) 4. The Pr. CIT-1, Raipur (C.G) 5. ͪवभागीय ĤǓतǓनͬध, आयकर अपीलȣय अͬधकरण,रायपुर बɅच, रायपुर / DR, ITAT, Raipur Bench, Raipur. 6. गाड[ फ़ाइल / Guard File. आदेशानुसार / BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलȣय अͬधकरण, रायपुर / ITAT, Raipur. "