JIGNESH SHAH,SURAT V. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 1 , BHAVNAGAR

ITA 1837/AHD/2024

AI Insights

The case involves Jignesh Shah, an individual engaged in building construction, who appealed against the order of the Commissioner of Income Tax (Appeals), which confirmed the additions made by the Assessing Officer under Sections 69A and 69C of the Income Tax Act, 1961 for the Assessment Year 2022-23. The additions were related to unexplained cash deposits, credit card payments, and unsecured loans. The Tribunal found that the CIT(A) had dismissed the appeal ex-parte without adequate consideration of the assessee's submissions and evidence, leading to a violation of the principles of natural justice. The Tribunal also noted that the Assessing Officer had not properly examined the explanations and supporting documents provided by the assessee, which necessitated a fresh adjudication.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 472255 (ITAT-AHMEDABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-02-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2022-2023
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RIGNESH DAS
• Assessee Lawyers: SHRTI MEHUL SHAH
• Keywords: Set aside; Opportunity of being heard; Corroborative evidences; Unexplained cash credit; Unexplained investment; Onus to prove; Principle of natural justice; Source of fund
• Section: 143(2); 69C; 69A

Judgement Text

" आयकर अपीलीय अिधकरण, अहमदाबाद \u0011ायपीठ “सी“,अहमदाबाद । IN THE INCOME TAX APPELLATE TRIBUNAL “ C” BENCH, AHMEDABAD \u0015ी टी.आर. से\u0018\u0019ल क ुमार, \u0011ाियक सद\u001b एवं \u0015ी मकरंद वसंत महादेवकर, लेखा सद\u001b क े सम!। ] ] BEFORE SHRI T.R. SENTHIL KUMAR, JUDICIAL MEMBER AND SHRI MAKARAND V. MAHADEOKAR, ACCOUNTANT MEMBER आयकर अपील सं /ITA No.1837/Ahd/2024 िनधा \u000fरण वष\u000f /Assessment Year : 2022-23 Jignesh Shah, D-604, Indraprastha Apartment Near Maheshwari Bhawan City Light Road, Surat – 395 007 बनाम / v/s. The Asst.CIT Circle-1 Bhavnagar \u0013थायी लेखा सं./PAN: AGYPS 8575 Q (अपीलाथ$/ Appellant) (%& यथ$/ Respondent) Assessee by : Shrti Mehul Shah, AR Revenue by : Shri Rignesh Das, Sr.DR सुनवाई की तारीख/Date of Hearing : 30 /01/2025 घोषणा की तारीख /Date of Pronouncement: 06/02/2025 आदेश/O R D E R PER MAKARAND V. MAHADEOKAR, AM: This appeal by the assessee is directed against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as “CIT(A)”] , dated 23/08/2024, confirming the additions made by the Assessing Officer [hereinafter referred to as “AO”] under Sections 69A and 69C of the Income Tax Act, 1961[hereinafter referred to as “the Act”] for the Assessment Year 2022-23. ITA No.1837/Ahd/2024 Jignesh vs. The Asst.CIT Asst. Year : 2022-23 2 Facts of the Case: 2. The assessee is an individual engaged in the business of building construction, filed his return of income for A.Y. 2022-23 on 31/12/2022, declaring total income of Rs.64,87,610/. The case was selected for scrutiny assessment under CASS, and multiple notices under Sections 143(2) and 142(1) of the Act were issued between 01/06/2023 and 07/03/2024. Despite multiple notices, the assessee failed to submit complete information within the stipulated time. Repeated adjournments were sought, and certain crucial details, such as loan confirmations and reconciliation of cash deposits, were not furnished. A Show Cause Notice (SCN) was issued on 21/03/2024, proposing additions. 2.1. The cash deposits of Rs.64,25,000/- in Mehsana Urban Co-op Bank Ltd. were claimed to have originated from earlier withdrawals, but no clear reconciliation was provided, leading the AO to treat them as unexplained money under Section 69A of the Act. Similarly, the credit card payments of Rs.3,74,148/- were initially proposed for addition at Rs.21,54,879/- based on insight portal data, but later corrected, and in the absence of any proper explanation regarding the source of funds, the expenditure was treated as unexplained under Section 69C of the Act. Further, the assessee failed to provide confirmations for unsecured loans amounting to Rs.17,20,96,112/-, citing financial constraints and strained relations with creditors, but made no efforts to substantiate the transactions. Given the lack of identity, creditworthiness, and genuineness of the loan creditors, the AO treated the entire amount as unexplained money under Section 69A of the Act. Consequently, the assessed income was determined at Rs.18,53,82,870/-, ITA No.1837/Ahd/2024 Jignesh vs. The Asst.CIT Asst. Year : 2022-23 3 incorporating these additions. Interest was levied under Sections 234A, 234B, 234C, and 234D of the Act, and penalty proceedings under Section 271AAC of the Act were initiated separately for the additions under Sections 69A and 69C of the Act. Due to the assessee’s non-compliance and failure to discharge the burden of proof, the AO concluded the assessment accordingly. 3. The assessee preferred appeal before CIT(A), who dismissed the appeal ex-parte, citing non-compliance by the assessee and failure to provide supporting documentary evidence despite multiple opportunities. The assessee contended that the cash deposits of Rs.64,25,000/- were sourced from earlier bank withdrawals, as reflected in the bank statements and books of accounts, but the CIT(A) upheld the AO’s addition under Section 69A of the Act, stating that no proper reconciliation was provided. Regarding credit card payments of Rs.3,74,148/-, the assessee argued that the AO had initially misstated the amount in the SCN and that the source of funds was never questioned earlier, depriving him of a reasonable opportunity to explain, but the CIT(A) rejected this contention and sustained the addition under Section 69C of the Act. On the unsecured loans of Rs.17,20,96,112/-, the assessee claimed financial distress prevented the timely collection of confirmations, but since no efforts were made to substantiate the identity, creditworthiness, and genuineness of creditors, the CIT(A) upheld the AO’s addition under Section 69A of the Act. The CIT(A) observed that the assessee had merely sought repeated adjournments, including requests to keep the appeal in abeyance under the proposed Vivad Se Vishwas Scheme 2024, without providing substantive explanations. Citing Supreme Court and High Court judgments, the CIT(A) concluded that the burden of proof rested on the ITA No.1837/Ahd/2024 Jignesh vs. The Asst.CIT Asst. Year : 2022-23 4 assessee, which remained unfulfilled, and accordingly, all additions made by the AO were confirmed, and the appeal was dismissed. 4. Aggrieved by the order of CIT(A), the assessee is in appeal before us with following grounds of appeal: 1. On the facts and circumstances of the case as well as law on the subject, the learned CIT(A) has erred in passing ex-parte order without giving reasonable and sufficient opportunity of being heard. 2. On the facts and circumstances of the case as well as law on the subject, the learned CIT(A) has erred in dismissing the appeal without passing speaking order. 3. On the facts and circumstances of the case as well as law on the subject, the learned CIT(A) has erred in confirming the action of assessing officer in making addition of cash deposits in bank account amounting to Rs.64,25,000/- by treating the same as unexplained investment u/s. 69A of the Act. 4. On the facts and circumstances of the case as well as law on the subject, the learned CIT(A) has erred in confirming the action of assessing officer in making addition of credit card payments amounting to Rs.3,74,148/- by treating the same as unexplained payments u/s. 69C of the Act. 5. On the facts and circumstances of the case as well as law on the subject, the learned CIT(A) has erred in confirming the action of assessing officer in making addition of unsecured loans amounting to Rs.17,20,96,112/ - by treating the same as unexplained money u/s. 69A of the Act. 6. It is therefore prayed that the above addition/(s) made by the Assessing Officer and confirmed by learned CIT(A) may please be deleted. 7. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of hearing of the appeal. 5. During the course of haring before us, the Authorized Representative (AR) contended that the addition of Rs.64,25,000/- u/s 69A of the Act as unexplained cash deposits was erroneous, as the bank book and bank statements clearly showed that the deposits were sourced from earlier bank withdrawals, and the balance sheet in ITR-3 reflected cash on hand and bank ITA No.1837/Ahd/2024 Jignesh vs. The Asst.CIT Asst. Year : 2022-23 5 balances, which the AO ignored. The AR further stated that in case of addition of Rs.3,74,148/- u/s.69C of the Act for unexplained credit card payments, the AO initially misstated the amount as Rs.21,54,879/- in the Show Cause Notice (SCN), creating confusion, and only corrected it at the final stage, depriving the assessee of a reasonable opportunity to explain. Further, AR stated that the addition of Rs.17,20,96,112/- u/s.69A of the Act as unexplained unsecured loans was made arbitrarily, as the assessee had explained financial distress and strained relations with lenders, which delayed obtaining confirmations. Despite seeking additional time and a virtual hearing, the AR stated that, the AO ignored the request and added the entire outstanding loan balance, failing to verify whether these loans were from prior years or received during the year under consideration. The AR argued that the AO’s approach violated the principles of natural justice, as genuine explanations and documentary evidence were not properly considered, and the high-pitched additions were made without adequate justification. 6. The AR contended that the CIT(A) failed to apply independent reasoning and merely reproduced the order of the AO without addressing the submissions and contentions of the assessee. It was further argued that the CIT(A) denied the assessee a fair opportunity of being heard, despite a specific request for adjournment made vide response dated 17.08.2024, wherein the assessee had requested that the appeal hearing be kept in abeyance pending the implementation of the proposed Vivad Se Vishwas Scheme 2024. Instead of considering this request, the CIT(A) proceeded to dismiss the appeal ex-parte, without granting a reasonable hearing or passing a speaking order, thereby violating the principles of ITA No.1837/Ahd/2024 Jignesh vs. The Asst.CIT Asst. Year : 2022-23 6 natural justice. The AR emphasized that both the AO and CIT(A) ignored genuine explanations and supporting evidence, leading to high-pitched additions, and therefore prayed that the entire assessment be set aside for fresh adjudication after granting the assessee a fair and reasonable opportunity. 7. The Departmental Representative (DR), on the other hand, relied on the order of lower authorities and reiterated that the assessee was noncompliant. 8. We have carefully considered the submissions made by the AR and the DR, as well as the materials available on record. It is evident that the CIT(A) passed an ex-parte order without adequately addressing the contentions of the assessee and merely reproduced the findings of the AO. The assessee had made a specific request for adjournment vide its response dated 17.08.2024, seeking time due to the potential implementation of the Direct Tax Vivad Se Vishwas Scheme 2024, which was not considered by the CIT(A). This, in our view, amounts to a denial of a fair opportunity to be heard, thereby violating the principles of natural justice. 8.1. Further, with respect to the additions made under Sections 69A and 69C of the Act, the assessee had furnished explanations and supporting documents, including bank statements, books of accounts, and balance sheets, which were not properly examined by the AO. The unexplained cash deposits of Rs.64,25,000/-, which were claimed to have been sourced from earlier bank withdrawals, were disregarded without proper reconciliation. Similarly, the credit card payments of Rs.3,74,148/- were initially misstated ITA No.1837/Ahd/2024 Jignesh vs. The Asst.CIT Asst. Year : 2022-23 7 in the SCN as Rs.21,54,879/-, leading to confusion and depriving the assessee of a reasonable opportunity to explain the correct amount. The addition of Rs.17,20,96,112/- as unexplained unsecured loans was made without verifying whether the loans were carried forward from earlier years or received during the year under consideration, and despite the assessee citing financial constraints and strained relations with lenders as reasons for the delay in furnishing confirmations, the AO ignored the request for additional time and a virtual hearing. 8.2. Considering the above, we find that the assessment has been completed without providing reasonable opportunity to the assessee and without properly examining the documentary evidence submitted. We are, therefore, of the view that the entire assessment requires fresh adjudication. Accordingly, we set aside the order of CIT(A) and restore the matter to the file of the AO with a direction to reconsider the issues afresh after granting the assessee a reasonable opportunity of being heard and allowing sufficient time to furnish the necessary evidence. 9. In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the Open Court on 6th February, 2025 at Ahmedabad. Sd/- Sd/- (T.R. SENTHIL KUMAR) JUDICIAL MEMBER (MAKARAND V. MAHADEOKAR) ACCOUNTANT MEMBER अहमदाबाद/Ahmedabad, िदनांक/Dated 06/02/2025 टी.सी.नायर, व.िन.स./T.C. NAIR, Sr. PS ITA No.1837/Ahd/2024 Jignesh vs. The Asst.CIT Asst. Year : 2022-23 8 आदेश की \"ितिलिप अ#ेिषत/Copy of the Order forwarded to : 1. अपीलाथ$ / The Appellant 2. \"%थ$ / The Respondent. 3. संबंिधत आयकर आयु& / Concerned CIT 4. आयकर आयु& ) अपील ( / The CIT(A)- 5. िवभागीय \"ितिनिध , अिधकरण अपीलीय आयकर , राजोकट/DR,ITAT, Ahmedabad, 6. गाड\u000f फाईल / Guard file. आदेशानुसार/ BY ORDER, स%ािपत \"ित //True Copy// सहायक पंजीकार (Asstt. Registrar) आयकर अपीलीय अिधकरण, ITAT, Ahmedabad 1. Date of dictation (word processed by Hon’ble AM in his laptop) : 31.1.2025 2. Date on which the typed draft is placed before the Dictating Member. : 31.1.2025 3. Date on which the approved draft comes to the Sr.P.S./P.S : 4. Date on which the fair order is placed before the Dictating Member for pronouncement. : 5. Date on which fair order placed before Other Member : 6. Date on which the fair order comes back to the Sr.P.S./P.S. : 06.2.25 7. Date on which the file goes to the Bench Clerk. : 06.2.25 8. Date on which the file goes to the Head Clerk. : 9. The date on which the file goes to the Assistant Registrar for signature on the order. : 10. Date of Despatch of the Order : "