Ex-parte order – addition For unexplained cash – ITAT restore matter to CIT(A)

Satyabhama Avadhanula Karimnagar Vs ACIT (ITAT Hyderabad)

I find the Assessing Officer on the basis of inquiry conducted u/s 131(1)(d) made addition of Rs.22.00 lakhs being unexplained cash found from the possession of the assessee and made addition of the same u/s 69A rws 115BBE of the I.T. Act. I find the learned CIT (A) upheld the action of the Assessing Officer the reasons of which have already been reproduced in the preceding paragraphs. It is the submission of the learned Counsel for the assessee that the learned CIT (A) has passed an ex-parte order and in the interest of justice, the assessee should be given one more opportunity to substantiate the cash so found. Considering the totality of the facts of the case and in the interest of justice, I deem it proper to restore the issue to the file of the learned CIT (A) with a direction to grant one last more opportunity to the assessee to substantiate her case and decide the issue as per fact and law. The assessee is also hereby directed to appear before the learned CIT (A) and to substantiate her case without seeking any adjournment under any pretext failing which the learned CIT (A) is at liberty to pass appropriate order as per law. I hold and direct accordingly. The grounds raised by the assessee are accordingly allowed for statistical purposes.

FULL TEXT OF THE ORDER OF ITAT HYDERABAD

This appeal filed by the assessee is directed against the order dated 25.02.2022 of the learned CIT (A)-11, relating to A.Y 2019-20.

2. Facts of the case, in brief, are that the assessee is an individual working as Anganwadi Teacher at Gumnoor Village, Manthani Mandal, Karimnagar District and was deriving income from salary during the year under consideration. The assessee has not filed original return of income u/s 139(1) for the AY under consideration. Based on the information received from Control Room, Income Tax Department, Hyderabad on 22.10.2018 about the availability of cash in the premises of the assessee, a commission u/s 131(1)(d) of the Act was issued to ITO Ward-4, Karimnagar to carry out necessary enquiries. In course of enquiry, it was found that the assessee Smt. Satyabhama Avadhanula, along with her son Sri Varahala Surendar, who is working as Village Revenue Officer at Mallaram Village, Malhalrao Mandal, Jayashankar Bhupalpally District were in possession of cash of Rs.22,50,500/- out of which the assessee was not able to explain the sources satisfactorily to the extent of Rs.22,OO,OOO/. Therefore, a warrant u/s 132 of the Act was executed on 23.10.2018 and cash of RS.22,OO,000/- was seized from the assessee.

3) Based on the commission issued, the ITO Ward-4, Karimnagar carried out the necessary enquiries and a statement was recorded u/s 131 on 23.10.2018 from Shri Surender Varahala, S/o Smt. Satyabhama Avadhanula, wherein it was stated by Shri Surender Varahala that Rs.50,000/- pertains to his salary withdrawals and cumulative savings over a period of time and balance amount of RS.22,OO,500/- pertains to his mother Smt.Satyabhama. Thereafter, a statement was recorded u/s 131 on 23.10.2018 from the assessee wherein she stated that the sources for RS.22,50,500/- are on account of repayments received from money lending activity and accumulated salary savings of her son. However, the assessee failed to substantiate her claim with any documentary evidence.

4) Subsequently, the case was transferred from ITO, Ward-2, Karimnagar to the’ DCIT Central Circle-1 (4), Hyderabad vide order u/s 127 of the Act in F.No.lTBNCOM/F/17/2020-21/1 028631099(1), dated 17/11/2020 of the Pr. CIT-2, Hyderabad. Accordingly the Assessing Officer issued notice u/s 142(1) of the I.T. Act to furnish return of income and also asked the assessee to explain as to why the cash receipt of Rs.22.00 lakhs should not be brought to tax as unexplained income. The assessee explained that the above amount of cash receipts are out of accumulated savings over the years, moneylending business and house property income. Since the claim made by the assessee was not supported by any evidence, the Assessing Officer rejected the explanation given by the assessee and made addition of Rs.22.00 lakhs u/s 69A/115BBE of the I.T. Act.

5. Since despite giving number of opportunities by the CIT (A), the assessee did not appear before him, the learned CIT (A) in his ex-parte order upheld the action of the Assessing Officer.

5.1. Aggrieved with such order of the learned CIT (A), the assessee is in appeal before the Tribunal by raising the following grounds of appeal:

“1. The order of the learned CIT (A) is erroneous both on facts and circumstances of the case and in law.

2. The learned CIT (A) erred in passing ex-parte order without properly serving the hearing notice thereby not providing proper opportunity to the appellant to present her case. The learned CIT (A) ought to have provided proper opportunity to the assessee.

3. The learned CIT (A) erred in confirming the order of the Assessing Officer and confirming the addition of Rs.22,00,000 as unexplained money of the appellant u/s 69A of the Act.

4. The learned CIT (A) ought to have considered that provisions of section 69A of the Act have no application to the assessee’s case.

5. The learned CIT (A) ought to have considered that the Assessing Officer has wrongly taxed the cash seized under the provisions of section 115BBE of the Act.

6. Any other ground(s) that may be urged at the time of hearing with the leave o the Hon’ble ITAT”.

6. The learned Counsel for the assessee submitted that the learned CIT (A) has passed an ex-parte order and the assessee was not given proper opportunity of being heard. He submitted that in the interest of justice, the assessee should be given one more opportunity to substantiate the source of such cash found during the course of inquiry u/s 131(1)(d) of the Act.

7. The learned DR, on the other hand, referring to the order of the learned CIT (A) drew the attention of the Bench to para 6.1 of the order wherein the learned CIT (A) has given the chronology of the dates:

8. He accordingly submitted that the assessee did not appear before the learned CIT (A) despite number of opportunities granted and therefore, the order of the learned CIT (A) should be upheld.

9. I have heard the rival arguments made by both sides, perused the orders of the Assessing Officer and the learned CIT (A) and the paper book filed on behalf of the assessee. I find the Assessing Officer on the basis of inquiry conducted u/s 131(1)(d) made addition of Rs.22.00 lakhs being unexplained cash found from the possession of the assessee and made addition of the same u/s 69A rws 115BBE of the I.T. Act. I find the learned CIT (A) upheld the action of the Assessing Officer the reasons of which have already been reproduced in the preceding paragraphs. It is the submission of the learned Counsel for the assessee that the learned CIT (A) has passed an ex-parte order and in the interest of justice, the assessee should be given one more opportunity to substantiate the cash so found. Considering the totality of the facts of the case and in the interest of justice, I deem it proper to restore the issue to the file of the learned CIT (A) with a direction to grant one last more opportunity to the assessee to substantiate her case and decide the issue as per fact and law. The assessee is also hereby directed to appear before the learned CIT (A) and to substantiate her case without seeking any adjournment under any pretext failing which the learned CIT (A) is at liberty to pass appropriate order as per law. I hold and direct accordingly. The grounds raised by the assessee are accordingly allowed for statistical purposes.

10. In the result, appeal filed by the assessee is allowed for statistical purposes.

Order pronounced in the Open Court on 22nd June, 2022.