MRS. REHANA ABDUL WAHAB SAIN ,KHED, RATNAGIRI V. ITO, WARD-4, RATNAGIRI, RATNAGIRI

ITA 2277/PUN/2024

AI Insights

The case involves Mrs. Rehana Abdul Wahab Sain, who appealed against the assessment order for the Assessment Year 2011-12, which included an addition of Rs. 16,23,000 as unexplained cash deposits. The Income Tax Officer (ITO) had initiated reassessment proceedings under section 147 of the Income Tax Act after noticing unfiled returns and substantial cash deposits in the assessee's bank account. The CIT(A)/NFAC upheld the ITO's decision, leading to the appeal before the Tribunal. The Tribunal examined the legal and factual basis of the reassessment and the additions made, considering the assessee's business activities in trading cashew seeds and the evidence provided during the appellate proceedings.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 471149 (ITAT-PUNE)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-02-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Laws Referred To: Income Tax Act
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SANJAY DHIVARE
• Assessee Lawyers: BHUVANESH KANKANI
• Keywords: Business income; Additional evidence; Reassessment proceedings; Reopening of assessment; Source of fund; Competent authority; Reason to believe; Presumptive income
• Section: 147; 148; 144; 142(1); 143(2); 133(6); 69A; 139

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “SMC”, PUNE BEFORE SHRI MANISH BORAD, ACCOUNTANT MEMBER आयकर अपील सं. / ITA No.2277/PUN/2024 िनधाᭅरण वषᭅ / Assessment Year : 2011-12 Mrs. Rehana Abdul Wahab Sain, Ashti Mohalla No.2, Ashti, Khed, Ratnagiri- 415709. PAN : DPNPS6572G Vs. ITO, Ward-4, Ratnagiri. Appellant Respondent आदेश / ORDER PER MANISH BORAD, AM: This appeal filed at the instance of assessee is directed against the order of Ld. CIT(A)/NFAC dated 04.08.2024 which is arising out of the assessment order u/s 144 r.w.s. 147 of the Act for Assessment Year 2011-12 framed on 27.11.2018 by the ITO, Ward- 4, Ratnagiri. 2. The assessee has raised following grounds of appeal :- “1. On facts and circumstances prevailing in the case and as per provisions and scheme of the Act it be held that the addition of Rs. 16,23,000/- so made by Ld. AO and that upheld by Ld. CIT(A)-NFAC is Incorrect and not according to the provisions of the Act including section 69A of the Act. Accordingly, the additions so made and that upheld by Ld. CIT(A)-NFAC be Assessee by : Shri Bhuvanesh Kankani Revenue by : Shri Sanjay Dhivare Date of hearing : 03.02.2025 Date of pronouncement : 05.02.2025 ITA No.2277/PUN/2024 2 kindly deleted and appellant be granted just and proper relief in this respect. 2. Without prejudice to other grounds and on the facts and circumstances prevailing in the case and as per provisions and scheme of the Act it be held that Ld. AO and Ld. CIT(A)-NFAC both erred in not considering the cash withdrawals being the source of cash deposits. That is, at the most addition of peak credit could have been done. Accordingly, addition made in excess of cash withdrawal be kindly deleted and Appellant be granted just and proper relief in this respect. 3. Without prejudice to other grounds and on the facts and circumstances prevailing in the case and as per provisions and scheme of the Act it be held that income to the tune of Rs.2,02,640/- has been charged to tax twice. Accordingly, income to that extent be kindly deleted and Appellant be granted just and proper relief in this respect. 4. Without prejudice to other grounds, on facts and circumstances prevailing in the case and as per provisions and scheme of the Act it be held that the assessment proceedings initiated by Ld. AO are not in accordance with the provisions of Act in relation to re-assessment proceedings. Thus, the assessment proceedings so initiated u/s 147 of the Act be kindly quashed and Appellant be kindly given appropriate relief in this regard. 5. Without prejudice to other grounds, on facts and circumstances prevailing in the case and as per provisions and scheme of the Act it be held that the interest computed u/s 243A, B and C of the Act be kindly deleted since the same is dependent on the incorrect and invalid additions so made by Ld. AO and that upheld by Ld. CIT(A)-NFAC. Accordingly, the Appellant be kindly given appropriate relief in this regard 6. It is humbly prayed that the Appellant be kindly allowed to file any additional evidences in the interest of justice. 7. The appellant prays to be allowed to add, amend, modify, rectify, delete, raise any grounds of appeal at the time of hearing.” 3. Facts in brief are that the assessee is an individual and she did not file her return of income u/s 139 for Assessment Year 2011-12. On the basis of information received from AIR, it was noticed that cash of Rs.15,07,000/- has been deposited in the bank account. ITA No.2277/PUN/2024 3 Since return of income was not filed, Ld. Assessing Officer issued a letter to the assessee on 18.01.2018 but no response was filed. In absence of any reply from the assessee, Ld. Assessing Officer has reason to believe that the cash deposit from undisclosed sources and thus issued notice u/s 148 of the Act. In response to which, the assessee furnished the return on 18.09.2018 declaring income of Rs.2,02,644/- which included income declared under presumptive taxation scheme for the business of trading in Cashew Seeds at Rs.1,96,800/- on the turnover of Rs.18,00,420/- and income from other sources of Rs.5,844/-. Subsequently, Ld. Assessing Officer issued valid notices u/s 143(2) and 142(1) of the Act. Thereafter, Ld. Assessing Officer also issued notice u/s 133(6) to the Branch Manager, Kokan Mercantile Co-operative Bank Ltd. and observed that there is a cash deposit of Rs.16,23,000/- but the assessee failed to satisfy the Assessing Officer to explain the source of alleged sum and since on the final date of hearing could not file any further details, Ld. Assessing Officer concluded the proceedings passing the best judgement of assessment u/s 144 of the Act making addition of unexplained cash u/s 69A of Rs.16,23,000/- and assessed income at Rs.18,25,640/-. ITA No.2277/PUN/2024 4 4. Aggrieved assessee preferred appeal before Ld. CIT(A)/NFAC challenging the validity of reassessment proceedings and also on the merits of the case. The assessee furnished certain additional evidences during the course of appellate proceedings claiming that the assessee is trading in Cashew Seeds and certificate from Gram Panchayat to this effect was also furnished along with bank statements, Cashew Purchase and Sale Register. Ld. CIT(A)/NFAC called for the remand report and copy is placed at page no.23 to 28 of the paper book and also it has been reproduced in the impugned order. After considering the submission of the assessee and remand report, Ld. CIT(A)/NFAC failed to find any merit and dismissed the assessee’s appeal raising the legal issues as well as quantum addition. 5. Now, the assessee is in appeal before the Tribunal. 6. Before me, assessee filed a paper book running into 51 pages, however, the details filed at Sl. No.10, 11 and 12 i.e. diary maintained by the appellant, latest Gram Panchayat Letter endorsing fact that appellant was into trading of Cashew Seeds and affidavit of sellers of Cashew Seeds have been filed first time before this Tribunal. Firstly, Ld. Counsel of the assessee made submission on the legal ground stating that the reopening of assessment has been ITA No.2277/PUN/2024 5 carried out after lapse of 4 years and Ld. Assessing Officer had failed to carry out any independent enquiry in the form of getting bank statements and cross-examination of the transactions which could have clearly demonstrated that there have been cash withdrawal on various occasions. So far as merits of the case is concerned, he submitted that the assessee is carrying on the business activity in remote village and she make regular purchases from farmers and sells them in the market and since in the past business income earned below taxable limit she did not file the return. It was submitted that the assessee has filed relevant documents to prove that she is in the business of trading in Cashew Seeds and therefore the income offered under presumptive taxation scheme may be accepted. 7. Ld. AR also referred to the ground no.3 which is without prejudice to the other grounds stating that Ld. Assessing Officer ought not to have taxed the income of Rs.1,96,800/- twice since the assessee has offered the same in income tax return and the same has been earned from alleged cash deposit only. 8. On the other hand, Ld. Departmental Representative vehemently argued supporting the orders of the lower authorities ITA No.2277/PUN/2024 6 and also took us to the relevant observation of Ld. CIT(A)/NFAC in para 4 to 8 of the impugned order. 9. I have heard rival submissions and perused the record placed before me. First, I take up the legal issue raised in ground no.4 challenging the validity of reassessment proceedings. I notice that the assessee did not furnish any income tax return. The information was received by the Income Tax Department from the bank about certain cash deposits in the assessee’s account. Prior to notice issued u/s 148 of the Act, Ld. Assessing Officer asked the assessee to file response to the letter dated 18.01.2018 but there was no reply received till 31.01.2018 as asked by Ld. Assessing Officer. Under these circumstances, on one hand the assessee has not furnished the return of income and secondly she did not respond to the communication of the Assessing Officer. Ld. Assessing Officer had reason to believe that the cash deposits can be from unexplained sources of income. In my considered opinion, under given facts and circumstances, a valid notice u/s 148 of the Act was issued after getting prior approval from the competent authority because there was a valid information from the bank account about cash deposit, no return was filed by the assessee and no further information was ITA No.2277/PUN/2024 7 given by the assessee in response to the letter dated 18.01.2018. I therefore dismiss the legal ground raised in ground no.4. 10. Now, coming to the merits of the case raised in ground nos.1 and 2 about the alleged addition for unexplained cash deposit of Rs.16,23,000/-, I find that the assessee has furnished the bank statements of Kokan Mercantile Co-operative Bank Ltd. and also letter from Gram Panchayat and purchase and sale register placed at page no.8 and 9 of the paper book indicating that there have been consistent cash deposits and withdrawals. The withdrawals as claimed by the assessee, some of are made towards payment of purchase and certain withdrawals are regarding amounts given to the assessee’s husband and also at the year end the cash has been deposited in the bank which have immediately utilized for making the investments for purchase of flat/immovable property amounting to Rs.4,00,000/-. In support of the cash deposits, the assessee has furnished sales register and total sales are of Rs.18,00,420/- and the purchases both through cash and cheque modes amounting to Rs.14,46,290/-. However, in support of purchases which claimed to have been partly paid through banking channel no proof has been filed before the lower authorities. However, before me affidavit of two vendors namely, Mr. Jainuddin I. Parkar and Mr. Vaibhav K. ITA No.2277/PUN/2024 8 Bhoi have been furnished but they did not clearly mention the details of payments made by them to the assessee and that they have received the part consideration through the banking channel. Considering all these aspects, facts and circumstances of the case, details filed before the lower authorities and also the letter from Gram Panchayat and taking a liberal approach, I hold that the alleged sum is part of the sale consideration received by the assessee during the year from the business of trading in Cashew Seeds. So far as estimation of net profit is concerned, apart from placing the purchase and sale register, no other documents supporting the expenditure has been furnished and also the cash received has mostly being utilized either for purchase or for making payment to husband and purchase of immovable property. Therefore, certainly the margin of profit of the assessee is on much higher side as has been declared in the income tax return. In the absence of any details about opening and closing stock (if any) difference of purchase and sales as given by the assessee is Rs.3,54,130/-. Though there are certain withdrawals during the year and the same includes household drawings utilized by the assessee, I estimate net profit of Rs.3,00,000/- as against Rs.1,96,800/- declared by the assessee. Accordingly, addition of Rs.1,03,200 is sustained in the hands of the ITA No.2277/PUN/2024 9 assessee and remaining addition is hereby deleted. Thus ground nos.1 and 2 are partly allowed. 11. Ground no.3 being alternate ground becomes academic in nature and therefore needs no adjudication, hence the same is dismissed as infructous. 12. Ground nos.5 and 6 being general and consequential in nature needs no adjudication. Accordingly, grounds of appeal raised by the assessee are partly allowed. 13. In the result, the appeal of the assessee is partly allowed. Order pronounced on this 05th day of February, 2025. Sd/- Sd/- (S. S. VISWANETHRA RAVI) (MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे / Pune; ᳰदनांक / Dated : 05th February, 2025. Sujeet आदेश कᳱ ᮧितिलिप अᮕेिषत / Copy of the Order forwarded to : 1. अपीलाथᱮ / The Appellant. 2. ᮧ᭜यथᱮ / The Respondent. 3. The Pr. CIT concerned. 4. िवभागीय ᮧितिनिध, आयकर अपीलीय अिधकरण, “SMC” बᱶच, पुणे / DR, ITAT, “SMC” Bench, Pune. 5. गाडᭅ फ़ाइल / Guard File. आदेशानुसार / BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे / ITAT, Pune. "