YATINBHAI PRAMUKHBHAI PATEL,AHMEDABAD V. THE ACIT, CIRCLE-3(3), AHMEDABAD

ITA 434/AHD/2024

AI Insights

The case involves Yatinbhai Pramukhbhai Patel, the appellant, who contested the additions made to his income by the Assessing Officer (AO) under Section 144 of the Income Tax Act, 1961, for the Assessment Year 2017-18. The AO had treated Rs. 11,00,000 as unexplained cash credit and Rs. 36,88,500 as undisclosed agricultural income, both additions being contested. The Commissioner of Income Tax (Appeals) upheld these additions, leading to the appeal before the Income Tax Appellate Tribunal. The Tribunal found that the AO had exceeded his jurisdiction by expanding the scope of scrutiny beyond the specific issue of cash deposits during the demonetization period without prior approval from the Principal Commissioner of Income Tax. The Tribunal also noted that the assessee's submissions were not adequately considered by the AO or the CIT(A), leading to a violation of the principles of natural justice.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 29614 (ITAT-AHMEDABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-01-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2017-2018
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RIGNESH DAS
• Assessee Lawyers: MEHUL THAKKAR
• Keywords: Set aside; Opportunity of being heard; Unexplained cash credit; Principle of natural justice
• Section: 144; 143(2); 68

Judgement Text

" आयकर अपीलीय अिधकरण, अहमदा बा द \u0012ा यपीठ “सी“, अहमदा बा द । IN THE INCOME TAX APPELLATE TRIBUNAL “ C ” BENCH, AHMEDABAD सु\u0017ी सुिच\u0019ा का \u001aले, \u0012ा ियक सद एवं \u0017ी मकरंद वसंत महा देवकर, लेखा सद क े सम\"। ] ] BEFORE MS. SUCHITRA KAMBLE, JUDICIAL MEMBER AND SHRI MAKARAND V. MAHADEOKAR, ACCOUNTANT MEMBER आयकर अपील सं /ITA No.434/Ahd/2024 िनधा \u0010रण वष\u0010 /Assessment Year : 2017-18 Yatinbhai Pramukhbhai Patel 2, Parivar Society Part-2 Near Premchand Nagar Row-House, Ahmedabad – 380 015 बनाम/ v/s. The ACIT Circle-3(3) Ahmedabad – 380 015 \u0014थायी लेखा सं./PAN: ADRPP 8846 K अपीलाथ%/ (Appellant) &' यथ%/ (Respondent) Assessee by : Shri Mehul Thakkar, AR Revenue by : Shri Rignesh Das, Sr.DR सुनवाई की तारीख/Date of Hearing : 07/01/2025 घोषणा की तारीख /Date of Pronouncement: 09/01/2025 आदेश/O R D E R PER MAKARAND V. MAHADEOKAR, AM: This appeal by the assessee arises out of the order dated 09/01/2024 passed by the Commissioner of Income Tax (Appeal), National Faceless Appeal Centre, Delhi (NFAC) [hereinafter referred to as “CIT(A)”] confirming the order passed by the Assessing Officer (hereinafter referred to as \"AO\") under Section 144 of the Income Tax Act, 1961 (hereinafter referred to as \"the Act\") for the Assessment Year 2017-18. ITA No.434/Ahd/2024 Yatinbhai Pramukhbhai Patel vs. ACIT Asst. Year : 2017-18 2 Facts of the Case: 2. The assessee filed the return of income on 13/01/2018 declaring a total income of Rs.25,44,020/-. The case was selected for limited scrutiny under CASS (Computer-Assisted Scrutiny Selection) with the specific issue of verifying cash deposits during the demonetization period. The AO issued a notice under Section 143(2) dated 13/08/2018 and subsequent notices under Section 142(1)of the Act for calling details regarding cash deposits. The assessee failed to respond to multiple notices and show-cause notices, leading to an ex-parte assessment under Section 144 of the Act. In the assessment order dated 09/12/2019, the AO made the following additions: Unexplained Cash Deposits: 2.1. Rs.11,00,000/- was treated as unexplained cash credit under Section 68 r.w.s.115BBE of the Act on the ground that no valid explanation or documentary evidence regarding the cash deposits was provided. Agricultural Income: 2.2. The AO noted that the assessee declared agricultural income of Rs.36,88,500/- but failed to furnish details of landholding, sale bills, and expenses. 2.3. Consequently, the AO treated the entire amount of Rs.36,88,500/- as undisclosed income under Section 68 of the Act. ITA No.434/Ahd/2024 Yatinbhai Pramukhbhai Patel vs. ACIT Asst. Year : 2017-18 3 3. The assessee filed an appeal before the CIT(A). Despite notices issued by the CIT(A) through the ITBA portal on multiple occasions, the assessee failed to provide any submission or appear for hearings. The CIT(A) noted that sufficient opportunities were granted but went unheeded by the assessee. Consequently, the CIT(A) passed an ex-parte order on 09/01/2024, upholding the additions made by the AO, observing that the AO’s findings were based on the available information in the absence of compliance by the assessee. 4. Aggrieved by the order of the CIT(A), the assessee is in appeal before us with following grounds of appeal: 1. Ld. Commissioner of Income Tax ( Appeals) grievously erred in law as well as facts while upholding the addition on account of cash deposit of Rs.11,00,000 made by Ld. Respondent without considering the cash details available with him. 2. Ld. Commissioner of Income Tax (Appeals) has erred in confirming the addition of Rs. 11,00,000 of cash deposited in bank u/s 68 of the Act in the absence of books of accounts which are not required to be maintained by Assessee. 3. Ld. Commissioner of Income Tax (Appeals) was not justified in upholding the addition of Rs. 36,88,500 of Agricultural Income without considering various details regarding agricultural income including Form no 7/12, Sale Bills, Expenses Bills which were available with Ld. Respondent as well as Ld. Commissioner of Income Tax (Appeals). 4. The Assessee prays to add, alter or delete any of the grounds at the time of hearing. 4.1. The assessee also filed following additional grounds of appeal: ITA No.434/Ahd/2024 Yatinbhai Pramukhbhai Patel vs. ACIT Asst. Year : 2017-18 4 In view of the facts and circumstances of the case, the learned CIT(A) has erred in confirming the addition of Rs.36,88,500/- towards agricultural income without appreciating that the Assessing Officer exceeded the scope of jurisdiction by making the said addition, as the appellant's case was selected for limited scrutiny specifically for the verification of cash deposits during the demonetization period. 5. During the course of the hearing before us, the Authorized Representative (AR) submitted that the case was selected for limited scrutiny solely for examining cash deposits during the demonetization period and therefore the AO exceeded the jurisdiction by making an addition of Rs. 36,88,500/- towards agricultural income without obtaining prior approval from the Principal Commissioner of Income Tax (PCIT) as mandated by CBDT Instruction No. 20/2015. The AR further stated that the orders are passed by both AO and CIT(A) without considering the replies of the assessee. The AR presented detailed evidence before us regarding the submissions made by the assessee during the assessment and appellate proceedings as tabulated below: Mode Date Details Provided e- Portal 27/11/2019 Copy of return of income, computation of income, bank statements. Mail 07/12/2019 Form 7/12 (land records), sales invoices for agricultural produce, expense bills for agricultural operations. e- Portal 08/01/2020 Grounds of appeal, submissions to AO, supporting documents. 5.1 The AR also stated that in response to the show cause notice dated 01/12/2019, the assessee explained the cash deposit of Rs.11,00,000/- and provided supporting documents, including land records, sales invoices, and ITA No.434/Ahd/2024 Yatinbhai Pramukhbhai Patel vs. ACIT Asst. Year : 2017-18 5 expense vouchers to substantiate the agricultural income and the assessee requested a personal hearing and even offered to facilitate physical verification of the agricultural land if required. 5.2. The AR submitted that despite submitting the paper book on the e-portal, the CIT(A) did not consider the submissions or provide a reasonable opportunity of being heard. 6. The Departmental Representative (DR) conceded that both the AO and CIT(A) passed ex-parte orders but contended that the assessee failed to appear despite repeated notices. However, the DR suggested that the matter be restored to the AO to ensure a fair opportunity for the assessee to present evidence. 7. Considering the submissions, facts and circumstances, and contentions of the parties, we find that the case was selected for limited scrutiny solely to examine cash deposits during the demonetization period. The AO, however, proceeded to make an addition of Rs.36,88,500/- by treating the declared agricultural income as undisclosed income. As per CBDT Instruction No. 20/2015, the AO cannot expand the scope of scrutiny without obtaining prior approval from the Principal Commissioner of Income Tax (PCIT). Judicial precedents have consistently held that such unauthorized expansion is invalid. 7.1. We find that there was no material placed on record indicating that the AO obtained approval to expand the scope of scrutiny. Therefore, the addition of Rs.36,88,500/- was beyond the jurisdiction of the AO and cannot be sustained. The AR contended that the assessee had responded to the AO's ITA No.434/Ahd/2024 Yatinbhai Pramukhbhai Patel vs. ACIT Asst. Year : 2017-18 6 notices through detailed submissions, including e-mails sent on 27/11/2019 and 07/12/2019 and a paper book filed before the CIT(A) on 08/01/2020. The contents of these submissions included: • Return of income and computation of total income. • Bank statements explaining the cash deposits of Rs.11,00,000/-. • Form 7/12 (land records) substantiating the ownership of agricultural land. • Sales invoices for agricultural produce and expense vouchers for agricultural operations. 7.2. We find merit in the assessee's submissions that the AO and CIT(A) failed to consider the evidence furnished during the proceedings. We observe that both the AO and CIT(A) passed ex-parte orders despite the assessee’s attempts to furnish evidence and seek a personal hearing. The principle of natural justice mandates that a reasonable opportunity must be given before adverse conclusions are drawn. The failure to consider the submissions filed by the assessee constitutes a violation of this principle. 7.3. In light of the above findings, the order of the CIT(A) is set aside, and the matter is restored to the file of the AO for fresh adjudication. The AO shall follow the CBDT Instructions meticulously while passing the fresh order and shall not travel beyond the scope of limited scrutiny without obtaining prior approval as required. The AO shall consider the submissions and supporting documents furnished by the assessee and provide a reasonable opportunity of hearing. ITA No.434/Ahd/2024 Yatinbhai Pramukhbhai Patel vs. ACIT Asst. Year : 2017-18 7 8. In the result, the appeal of the assessee is partly allowed for statistical purposes. Order pronounced in the Open Court on January, 2025 at Ahmedabad. Sd/- Sd/- (SUCHITRA KAMBLE) JUDICIAL MEMBER (MAKARAND V. MAHADEOKAR) ACCOUNTANT MEMBER अहमदाबाद/Ahmedabad, िदनांक/Dated 09/01/2025 टी.सी.नायर, व.िन.स./T.C. NAIR, Sr. PS 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)-(NFAC), Delhi 5. िवभागीय #ितिनिध , अिधकरण आयकर अपीलीय , राजोकट/DR,ITAT, Ahmedabad, 6. गाड\u0010 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) : 8.1.2025 2. Date on which the typed draft is placed before the Dictating Member. : 8.1.2025 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. : 9.1.25 7. Date on which the file goes to the Bench Clerk. : 9.1.25 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 : "