SHESHARAM KUMAWAT,HYDERABAD V. ITO., WARD-8(2), HYDERABAD

ITA 191/HYD/2025

AI Insights

The case involves Shesharam Kumawat, the appellant, who contested the order of the Commissioner of Income-Tax (Appeals) which upheld the addition of Rs.73,08,803 as unexplained money under section 69A of the Income Tax Act, 1961. The addition was initially made by the Assessing Officer (A.O.) based on information from 'Operation Clean Money' during the demonetization period, which revealed unexplained cash deposits in the appellant's bank accounts. The appellant argued that these deposits were business receipts and that the failure to file a return was due to the negligence of his accountant. The CIT(A) rejected the admission of additional evidence on the grounds that the appellant failed to explain why it was not submitted earlier. The Tribunal found that the CIT(A) erred in not admitting the additional evidence and remanded the case for a fresh assessment.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 314492 (ITAT-HYDERABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-05-2025
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB-B
• Assessment Year: 2017-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Set aside; Business income; Opportunity of being heard; Additional evidence
• Section: 144; 142(1); 133(6)

Judgement Text

"आयकर अपीलीय न्यायाधिकरण में, हैदराबाद ‘बी’ बेंच, हैदराबाद IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘B‘ Bench, Hyderabad श्री रवीश सूद, माननीय न्याययक सदस्य एवं श्री मिुसूदन सावडिया, माननीय लेखा सदस्य SHRI RAVISH SOOD, HON’BLE JUDICIAL MEMBER AND SHRI MADHUSUDAN SAWDIA, ACCOUNTANT MEMBER आयकरअपीलसं./I.T.A.No.191/Hyd/2025 (निर्धारण वर्ा/ Assessment Year : 2017-18) Shesharam Kumawat, Ranga Reddy District. Telangana. PAN : BMMPK4085J Income Tax Officer, Ward – 8(2), Hyderabad. (अपीलार्थी/ Appellant) (प्रत्यर्थी/ Respondent) करदाता का प्रतततितित्व/ Assessee Represented by : Shri A.V. Raghuram, Advocate. राजस्व का प्रतततितित्व/ Department Represented by : Ms. Reema Yadav. Sr.D.R सुिवाई समाप्त होिे की ततति/ Date of Conclusion of Hearing : 29.04.2025 घोर्णध की तधरीख/Date of Pronouncement : 06.05.2025 O R D E R प्रनत रवीश सूद, जे.एम./PER RAVISH SOOD, J.M. The present appeal filed by the assessee is directed against the order passed by the Commissioner of Income-Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, dated 08.01.2025, 2 ITA No.191/Hyd/2025 which in turn arises from the order passed by the Assessing Officer (for short “A.O.”) u/s 144 of the Income Tax Act, 1961 (for short “the Act”) dated 28.11.2019 for A.Y. 2017-18. The assessee has assailed the impugned order on the following grounds of appeal before us : “1. On the facts and in law, the order passed by the Ld. CIT(A)/NFAC is erroneous and unsustainable. 2. The Ld. CIT(A)/NFAC erred in rejecting the additional evidence filed by the Appellant on the alleged ground that the Appellant failed to explain as to why the additional evidence was not filed before the AO/explained to the AO. The Ld. CIT(A)/NFAC failed to appreciate that the Appellant in para 4 of the Petition filed for admission of additional evidence explained the reasons for not being able to furnish the evidences before the AO. 3. The Ld. CIT(A)/NFAC erred in not dealing with the reasons submitted by the Appellant for not filing the evidences before the AO, and in applying the decisions of Hon'ble ITAT, Hon'ble High Courts and Hon'ble Supreme Court which could not have been made applicable to the facts of the present case. 4. Without prejudice to the above grounds, the Ld. CIT(A) erred in upholding the addition of Rs.73,08,803 made as unexplained money under section 69A of the Act. The Ld. CIT(A) failed to appreciate that the best judgement assessment made by the AO is erroneous and unsustainable on facts and in law as the AO failed to consider the essential fact that the Appellant has filed returns for the past and subsequent years, and the return relating to the earlier years evidently establishes the nature of business of the Appellant. 5. On the facts and in the circumstances of the case, neither the AO nor the Ld. CIT(A) have considered the evidence on record which includes the returns filed for all other asst. years. Both the authorities erred in holding the amount of Rs.73,08,803/- as unexplained money under section 69A of the Act.” 3 ITA No.191/Hyd/2025 2. Succinctly stated, the A.O. based on information gathered during the phase of online verification under ‘Operation Clean Money’, that the assessee during the demonetization period had made cash deposits of Rs. 19.42 lacs but had not filed his return of income for the subject year, issued notice u/s 142(1) of the Act, calling upon the assessee to file his return of income. As the assessee despite sufficient opportunity, failed to file his return of income and also comply with the notices issued u/s 142(1) of the Act dated, 25.12.2017, 06.09.2019, 03.10.2019 and 01.11.2019, therefore, the A.O. was constrained to proceed with and frame the assessment to the best of his judgment u/s 144 of the Act. 3. The A.O. based on the AIR information that had formed the basis for initiating the proceedings issued notices u/s 133(6) of the Act to the banks with which the assessee was holding his bank accounts. In reply, as per the information shared by the banks, there were total credits of Rs. 73,08,803/- in the bank accounts of the assessee, as under : 4 ITA No.191/Hyd/2025 4. As the assessee had failed to come forth with any explanation regarding the source of the aforesaid credits in his bank accounts, therefore, the A.O. vide his order passed u/s 144 of the Act, dated 28.11.2019 held the same as his unexplained money u/s 69A of the Act and assessed his income at the same amount. 5 ITA No.191/Hyd/2025 5. Aggrieved, the assessee carried the matter in appeal before the CIT(A). As is discernible from the record, it was the assessee’s claim before the CIT(A) that the subject credits in his bank accounts during the year were sourced from his business of trading in Asian Paints, sanitary items and electrical goods. It was submitted by him that though he had for the subject year maintained his books of account and also filed his VAT returns, but it was due to the negligence of his Accountant to whom he had entrusted his accounting and tax matters that the return for the year under consideration had remained omitted to be filed. Also, it was the assessee’s claim that he had remained oblivion about the fixation of his case for scrutiny assessment and also the tax notices which were stated to have been sent to him. Elaborating further, the assessee had stated that it was only when he was in receipt of notice on 02.11.2019 i.e. at the fag end of the assessment proceedings, that he had immediately got in touch with his accountant and engaged a Chartered Accountant to look into the matter. It was further stated by him that though the Chartered Accountant and his accountant had appeared before the A.O. and sought for some time for collecting, collating and 6 ITA No.191/Hyd/2025 submitting the requisite details, but the A.O. had proceeded with and framed the assessment vide an ex parte order u/s 144 of the Act. 6. Apropos the cash deposits and other credits in the bank account of the assessee for the subject year, it was the assessee’s claim that the same was sourced from his business receipts for the subject year which as per his audited accounts and VAT Returns, was in excess of Rs.1 crore. Although, the assessee, to fortify his aforesaid claim that the cash deposits/credits in his bank account during the year under consideration were sourced out of his business receipts, had in the Memorandum of Appeal i.e., Form No.35, at Column no.12, answered in the affirmative that additional evidence was being filed as per Rule 46A of the Income Tax Rules, 1962, but it was observed by the CIT(A) that the same comprised of only the extracts of the bank accounts. The CIT(A) considering the fact that the assessee had failed to substantiate his claim of having filed fresh evidence before him with valid reasons and also not explained as to why the same was not filed before the A.O. despite having been provided a sufficient 7 ITA No.191/Hyd/2025 opportunity, declined to admit the same with a specific observation that his case was not covered under sub-rule (a), (b), (c) and (d) of Section 46A of Income Tax Rules, 1962. Thereafter, the CIT(A) relying upon a host of judicial pronouncements, concluded that as the assessee had failed to satisfy the conditions prescribed under Rule 46A, therefore, the fresh documentary evidence that was filed/uploaded before him in the course of the appellate proceedings did not merit admission. Accordingly, the CIT(A) finding no infirmity in the view taken by the A.O. upheld the addition of Rs.73,08,803/- that was made by him u/s 69A of the Act. 7. The assessee being aggrieved with the order of CIT(A), has carried the matter in appeal before us. 8. Shri A.V. Raghuram Advocate, learned Authorized Representative (for short “ld.AR”) for the assessee, at the threshold of hearing of the appeal, submitted that the CIT(A) had grossly erred in law and on facts of the case in declining to admit the additional documentary evidence that was filed/uploaded by the assessee during the course of proceedings before him vide his 8 ITA No.191/Hyd/2025 letter dt.07.09.2020 Pages 6 to 9 of APB. Elaborating on his contention, the ld.AR submitted that the assessee who is a small- time trader in paints, sanitary items and electrical goods had entrusted the responsibility of looking into his accounts and tax matters to his accountant. The ld.AR submitted that it was due to the negligence of the assessee’s accountant that no return of income for the subject year was filed. It was further stated by him that the assessee initially had not received any of the notices intimating the fixation of his case for scrutiny assessment and also the subsequent proceedings, but had gathered about the same only when notice to the said effect was received in his mobile phone on 02.11.2019. The ld.AR submitted that the assessee on learning about his ongoing assessment proceedings, had categorically brought the said fact to the knowledge of his accountant and also engaged a Chartered Accountant for putting up an appearance and carrying out necessary compliance before the A.O. Carrying his contention further, ld.AR submitted that though the Chartered Accountant and his Accountant had initially appeared before the A.O. and requested him for some time for collecting, collating and submitting the requisite details, but the latter had brushed aside 9 ITA No.191/Hyd/2025 the said request and framed the assessment vide an ex parte order u/s 144 of the Act. The ld.AR submitted that the assessee had suffered an addition of Rs.73,08,803/- of cash deposits/credits in his bank accounts despite the fact that the same was sourced from his business receipts. Elaborating further on his contention, the ld.AR submitted that the fact that the cash deposits/credits in the bank account of the assessee for the subject year were sourced from his business receipts could safely be gathered from a perusal of his audited profit and loss account for the said year which revealed sales of Rs.1.29 crores (approx..), Page 13 of the APB. Apart from that, the ld.AR submitted that the fact that the bank accounts in question are disclosed by the assessee in his audited balance sheet for the subject year further evidences that the cash deposits/credits in the said bank accounts were duly explained. The ld.AR submitted that as the failure of the assessee to file his return of income and participate in the assessment proceedings had occasioned because of the negligence of his accountant and not for any malafide conduct or lackadaisical approach of the assessee, therefore, the matter in all fairness be restored to the file 10 ITA No.191/Hyd/2025 of A.O. with a direction to reframe the assessment after affording a reasonable opportunity of being heard to him. 9. Per contra, Ms. Reema Yadav, the learned Senior Departmental Representative (for short “ld.DR”) had though relied upon the orders of lower authorities but at the same time, candidly submitted that in all fairness, the assessee may be allowed an opportunity to substantiate, based on cogent material, his claim that the cash deposits/credits in his bank accounts for the subject year were sourced from his business receipts. 10. We have heard the learned Authorized Representatives of both parties and perused the orders of the lower authorities and the material available on record. 11. Controversy involved in the present appeal lies in a narrow compass i.e., sustainability of the view taken by the CIT(A), who had declined to admit the additional documentary evidence that was produced by the assessee/appellant in the course of the proceedings before him and had summarily approved the addition of Rs. Rs.73,08,803/- made by the A.O. u/s 69A of the Act. 11 ITA No.191/Hyd/2025 12. Before proceeding any further, we deem it fit to cull out Rule 46A which contemplates the admission of additional evidence before the CIT(A), as under : 46A. (1) The appellant shall not be entitled to produce before the Joint Commissioner] (Appeals)] [or, as the case may be, the Commissioner (Appeals)], any evidence, whether oral or documentary, other than the evidence produced by him during the course of proceedings before the Assessing Officer], except in the following circumstances, namely :- (a) where the Assessing Officer has refused to admit evidence which ought to have been admitted; or (b) where the appellant was prevented by sufficient cause from producing the evidence which he was called upon to produce by the Assessing Officer; or (c) where the appellant was prevented by sufficient cause from producing before the Assessing Officer any evidence which is relevant to any ground of appeal; or (d) where the Assessing Officer has made the order appealed against without giving sufficient opportunity to the appellant to adduce evidence relevant to any ground of appeal. (2) No evidence shall be admitted under sub-rule (1) unless the Joint Commissioner) (Appeals)] [or, as the case may be, the Commissioner (Appeals)) records in writing the reasons for its admission. 3) The Joint Commissioner) (Appeals)][or, as the case may be, the Commissioner (Appeals)] shall not take into account any evidence produced under sub-rule (1) unless the Assessing Officer) has been allowed a reasonable opportunity- (a) to examine the evidence or document or to cross- examine the witness produced by the appellant, or (b) to 12 ITA No.191/Hyd/2025 produce any evidence or document or any witness in rebuttal of the additional evidence produced by the appellant. 4) Nothing contained in this rule shall affect the power of the Joint Commissioner) (Appeals)] [or, as the case may be, the Commissioner (Appeals)] to direct the production of any document, or the examination of any witness, to enable him. On a careful perusal of Rule 46A, it transpires that the same contemplates a set of four independent circumstances where the assessee is entitled to produce additional evidence in the course of the proceedings before the first appellate authority. 13. Ostensibly, the assessee in the course of the proceedings before the CIT(A) had filed an application dt.07.09.2020 seeking admission of certain additional documentary evidence under Rule 46A of IT Rules, 1962, which comprised of the following documents : 1. Copy of audited financial statements of Ramdev Enterprises, the proprietary concern of the appellant for the year ended 31.3.2017. 2. Copy of audit report of Ramdev Enterprises in Form 3CB for financial year 2016-17. 3. Copy of tax audit report of Ramdev Enterprises in Form 3CD for financial year 2016-17. 4. Copy of computation of income for the AY 2017-18. 13 ITA No.191/Hyd/2025 5. Copies of monthly VAT returns filed for the period 1.4.2016- 31.03.2017. 6. Copy of account statement of the appellant with State Bank of India, Manikonda Branch -A/c #20080873040, for the period 01.04.2016 - 31.03.2017 7. Copy of account statement of the appellant with Corporation Bank, Manikonda Branch -A/c #98, for the period 01.04.2016 - 31.03.2017. However, it transpires that the CIT(A) had declined to admit the aforesaid additional evidence, inter alia, for the reason that the assessee/appellant had failed to explain as to why the same were not uploaded/filed and explained before the A.O., despite the fact that sufficient opportunities were afforded by him. Although at first blush, the observations of the CIT(A) appear to be convincing, but in the backdrop of the totality of the facts due to which the assessee had failed to produce the aforesaid documents in the course of the proceedings, we are unable to persuade ourselves to concur with the same. 14. As observed hereinabove, the assessee had claimed that as he had entrusted his accountant with the responsibility of looking into his accounts and tax matters and therefore, it was due to the 14 ITA No.191/Hyd/2025 latter’s negligence that the return of income for the year under consideration could not be filed. Also, it is the assessee’s claim that he had remained unaware about the selection of his case for scrutiny assessment and the ongoing proceedings before the A.O. till 02.11.2019, i.e., on which date a notice was received on his mobile number. Also, it is the assessee’s claim that on learning about the ongoing proceedings in his case, he had immediately brought the same to the notice of his accountant and also engaged a Chartered Accountant for participating in the said proceedings. However, it is claimed that though, the Accountant and the Chartered Accountant had thereafter appeared before the A.O. and requested him for some time for collecting, collating and submitting the requisite details, but he had proceeded with and framed the assessment vide an ex parte order u/s 144 of the Act. 15. After giving thoughtful consideration, we find substance in the ld.AR’s claim that as the assessee who had initially remained unaware about the proceedings, on learning about the same, had through his counsel sought for some time for placing on record the requisite details, but the same was declined by the A.O. The Ld. 15 ITA No.191/Hyd/2025 DR on being confronted with the aforesaid fact could neither place on record any material proving to the contrary nor rebut the same. 16. Considering the aforesaid facts, we are of the firm conviction that as the A.O. had visited the assessee with an ex-parte order u/s 144 of the Act, dated 28.11.2019 without giving him sufficient opportunity to collect, collate and submit the requisite details which he had requested for through his counsel, though at the fag end of the assessment proceedings, therefore, his case squarely falls within the meaning of clause (d) of sub-rule (1) of Rule 46A of the Income Tax Rules, 1962. 17. Be that as it may, we are further of the view that as the assessee had, inter alia, sought for admission of his monthly VAT returns, audited financial statements, etc for admission of additional evidence under Rule 46A, which would have a strong bearing on the adjudication of the core issue involved in the present case, i.e sustainability of the addition of Rs.73,08,803/- made by the A.O. u/s 69A of the Act, therefore, the CIT(A), in all 16 ITA No.191/Hyd/2025 fairness, specifically in the backdrop of the aforesaid peculiar facts involved in the case before him, ought to have admitted the same. 18. We thus, in terms of our aforesaid observations, set aside the order passed by the CIT(A) with a direction to him to admit the additional documentary evidence that were filed by the assessee vide his letter dt.07.09.2020 in the course of the proceedings before him and re-decide the appeal. Needless to say, the CIT(A), in the course of the set-aside proceedings, shall afford a reasonable opportunity of being heard to the assessee. The Grounds of appeal Nos.2, 3 and 5 are allowed for statistical purposes, in terms of our aforesaid observations. 19. As we have restored the matter to the file of CIT(A), therefore, we refrain from adverting to and adjudicating the merits of the case based on which the impugned addition has been assailed before us, which, thus is left open. Ground of Appeal No.4 is dismissed in terms of our aforesaid observation. 20. The Grounds of appeal nos.1 and 6 being general in nature are dismissed as not pressed. 17 ITA No.191/Hyd/2025 21. Resultantly, the appeal filed by the assessee is allowed for statistical purposes in terms of our aforesaid observations. Order pronounced in the Open Court on 6th May, 2025. Sd/- Sd/- Sd/- (श्री मिुसूदन सावडिया) (MADHUSUDAN SAWDIA) लेखा सदस्य/ACCOUNTANT MEMBER Sd/- Sd/- (श्री रवीश सूद) (RAVISH SOOD) न्यायिक सदस्य/JUDICIAL MEMBER Sd/- Hyderabad, dated 06.05.2025. TYNM/sps आदेशकी प्रनतनलनप अग्रेनर्त/ Copy of the order forwarded to:- 1. निर्धाररती/The Assessee : Shesharam Kumawat, 3-128, Puppalaguda, Rajendra Nagar, Ranga Reddy District – 500089, Telangana. 2. रधजस्व/ The Revenue : Income Tax Officer, Ward – 8(2), Hyderabad. 3. The Principal Commissioner of Income Tax, Hyderabad. 4. नवभधगीयप्रनतनिनर्, आयकर अपीलीय अनर्करण, हैदरधबधद / DR, ITAT, Hyderabad 5. गधर्ाफ़धईल / Guard file आदेशधिुसधर / BY ORDER Sr. Private Secretary ITAT, Hyderabad "