Case Law Details
Santosh Tukaram Varade Vs ITO (ITAT Pune)
The Income Tax Appellate Tribunal (ITAT) Pune addressed appeals filed by Santosh Tukaram Varade concerning assessment years 2013-14 and 2017-18. The core issue revolved around income additions made by the Assessing Officer (AO) based on discrepancies between declared income and bank account transactions. For the 2013-14 assessment, the AO applied an 8% profit rate to gross receipts, resulting in an addition of Rs. 27,97,934. For 2017-18, the AO added the entire bank credit of Rs. 2,86,93,336 as unexplained money. The assessee, a commission agent for agricultural produce, argued that his income was consistently accepted in assessment years 2014-15 to 2016-17, despite similar bank transactions. However, the Commissioner of Income Tax (Appeals) [CIT(A)] dismissed both appeals for non-prosecution, without addressing the merits of the case. The ITAT emphasized that the CIT(A) is obligated to decide appeals on merit, even in ex parte situations, citing a precedent from the Bombay High Court. Consequently, the ITAT remitted the cases back to the CIT(A) for a fresh adjudication, directing a thorough examination of the facts, including the assessment orders for 2014-15 to 2016-17. The assessee was instructed to cooperate and avoid unnecessary adjournments, with the CIT(A) authorized to proceed as per law if compliance was lacking.
The ITAT’s decision highlighted the procedural necessity for appellate authorities to consider the merits of a case, regardless of the appellant’s presence or submission of detailed arguments. The case stemmed from the AO’s assessment of Varade’s business transactions, where substantial cash deposits in bank accounts prompted reassessment notices. For 2013-14, the AO concluded that Varade had suppressed income by not maintaining proper books of accounts and failing to get them audited, leading to the 8% profit rate calculation. In 2017-18, the entire bank credit was deemed unexplained, differing significantly from the treatment of similar transactions in adjacent assessment years. The CIT(A)’s dismissal without substantive review contradicted the statutory requirement to adjudicate on the issues raised. The ITAT, therefore, intervened to ensure a fair hearing, mandating the CIT(A) to reconsider the appeals with due regard to the preceding assessment years and the legal principles governing appellate procedures. This decision underscores the importance of substantive justice over procedural technicalities in income tax dispute resolution.
FULL TEXT OF THE ORDER OF ITAT PUNE
These two appeals filed by the assessee pertaining to the Assessment Years (in short “AYs”) 2013-14 and 2017-18 are directed against the separate orders passed by National Faceless Appeal Centre, Delhi u/s.250 of the Income Tax Act, 1961 [in short “the Act”] dated 16.07.2024 and 05.08.2024 which in turn are arising out of the respective Assessment orders.
2. Since identical grounds have been taken by the assessee in these appeals we proceed to dispose of the appeals by this consolidated order for the sake of convenience.
3. The facts apropos to the appeal for A.Y. 2013-14 are that the assessee is an individual stated to be engaged in the business as ‘Commission agent’ of agricultural produce especially potatoes. It is also stated that the sale proceeds received from the parties are credited in the bank account of the assessee and after deducting commission and other expenses, the payment will be made to farmers. Income of Rs.3,68,040/- was disclosed in the return of income for the A.Y. 2013-14 on 09.12.2015. Based on the information that the assessee made huge cash deposits in the bank accounts maintained with ICICI bank and the receipts in the bank accounts are not being matched with the gross receipts claimed in the return, the case was reopened by issuance of notice
u/s.148 of the Act. During the course of assessment proceedings, the assessee furnished the requisite details as called for by the AO. The AO after considering the submissions made by the AO made addition of Rs.27,97,934/- @8% of the gross receipts by holding as under :
“4.3 Conclusion drawn :
From the above observation and discussion it is crystal clear that during the financial year the assessee was engaged in business activities and the total credit made in both the bank accounts were his turnover/sale/gross receipt for the financial year and he suppressed his income from business and he should have shown profit from the business and should have kept and maintained Books of accounts and other documents u/s.44AA and he should have got his accounts audited by an accountant before the specific date as his gross receipts for the financial year exceeds the monetary limit of Rs.60,00,000/- in the previous year. In absence of maintaining books of accounts and failed to get his accounts audited, the income of the assessee is computed @8% of gross sale/turnover/gross receipt i.e. (8% of Rs.3,49,74,177/-) Rs.27,97,934/- and any deduction allowable under the provisions of sections 30 to 38 of the Act is deemed to have already been given and addition of income is computed as under with initiation of penalty proceedings u/s.271(1)(c) of the Act for concealment of income. Penalty proceedings u/s 271B is initiated for not getting his audited as the total turnover exceeds the monetary limit.”
4. Aggrieved assessee preferred appeal before the ld.CIT(A) who vide impugned order dismissed the appeal in limine for non-prosecution. Finding of ld.CIT(A) is reproduced below :
“5.5 It is, thus, evident that the appellant has no evidence to substantiate the grounds taken and it has not even once argued with any supporting, relevant and cogent arguments/averments, constraining me to, therefore, go through the extremely brief nonspeaking submission appearing in the grounds of appeal and statement of facts filed along with the impugned appeal to decide on the merits while adjudicating the same. But the narrative submission/contention made vide the statement of facts/grounds of appeal is by and large on the very same made at the time of instant assessment which the AO after considering, has duly rejected or found without much merit leading him/her to add the same i.e., the disallowance/additions made in the said assessment order and enumerated in the impugned grounds against which I am constrained to concur with the AO’s findings of fact and decisions thereof, more particularly in the absence of any meaningful and worthwhile submissions/documentations even during the instant appellate proceedings in this case to counter effectively the position adopted by the AO on the concerned issues and reduced in writing in the assessment order. I find no infirmity in the action of the AO of making addition of Rs.24,59,894/-to the income of the appellant. In this view of the matter, the decision of the AO is upheld. Consequently, the Ground of appeal are dismissed.”
5. Similar situation prevailed in the A.Y. 2017-18 as well but the AO made the addition of entire credits appearing in the bank accounts as unexplained money u/s.69A at Rs.2,86,93,336/-.
6. At the outset, Ld. Counsel for the assessee submitted that the assessee is an individual engaged in the business of Commission Agents of Agricultural produce mainly Potatoes. The cases were selected for scrutiny and assessee was served with notices u/s.148 of the Act for A.Yrs. 2013-14 and 2017-18 on the common reason of having turnover less than that appearing the bank accounts. He submitted that for A.Yrs.2014-15 to 2016-17 returned income of the assessee was accepted treating the assessee as a ‘Commission Agent’. However, for the A.Yrs. 2013-14 and 2017-18 the Revenue authorities took a different view. For A.Y. 2013-14, the AO computed the income applying 8% net profit rate on the gross receipt appearing in the bank account. For A.Y. 2017-18, the AO added the entire gross receipts in the hands of assessee. He further contended that though the assessee has a very strong case on merits considering the assessment proceedings for A.Yrs. 2014-15 to 2016-17 but still the ld.CIT(A) has dismissed the appeals for want of necessary details and the assessee was not given proper opportunity of hearing before him. He therefore prayed that the Hon’ble Tribunal if deemed fit can remit the issues to the file of ld.CIT(A) for necessary examination of the facts considering the assessment proceedings for A.Yrs. 2014-15 to 2016-17 as the assessee has a very strong case on merits.
7. Ld. Departmental Representative vehemently argued supporting the orders of the authorities below.
8. We have heard the rival submissions and perused the record placed before us. On perusal of the impugned orders passed by the ld.CIT(A) for both the years under appeal, it would be evident that the ld.CIT(A) has dismissed the appeal in limine without discussing any merits of the case as contemplated u/s.250(6) of the Act. Further, in AY. 2013-14, the AO made addition @ 8% of the cash credits appearing in the bank accounts whereas in AY 2017-18 the made addition of the entire credits appearing in the bank accounts, however for A.Y. 2014-15 to 2016-17 the returned income has been accepted even though the reassessment proceedings were carried out after recording similar reasons.
9. The settled position of law mandates the ld.CIT(A)/NFAC to dispose of the appeal by adjudicating the issues raised in appeal on merits. In this regard, reference is being made to a decision of the Hon’ble Bombay High Court in the case of CIT(Central) Vs. Premkumar Arjundas Luthra (HUF) Bombay)/[2017] 297 CTR 614 (Bombay) wherein it was held that ld.CIT(A) NFAC is obliged to dispose of the appeal on merits even in an exparte order.
10. Considering the totality of the case and the submissions made by ld. Counsel for the assessee, we are of the considered opinion that the issues on merit for both the years under appeal deserve to be remitted back to the ld.CIT(A)/NFAC for denovo adjudication on due consideration of our observation made hereinabove and also considering the assessee’s reassessment orders for A.Y. 2014-15 to 2016-17 framed by the Assessing Officer. In view thereof, without dwelling into merits of the issue, the issues on merits are being remitted to the file of ld.CIT(A)/NFAC. The assessee is also directed to remain vigilant and not to take adjournment unless otherwise required for reasonable cause, failing which the ld.CIT(A)/NFAC shall be free to proceed in accordance with law. Findings of the CIT(A)/NFAC for both the A.Yrs. 2013-14 and 2017-18 are set aside and Grounds of appeal raised by the assessee are allowed for statistical purposes.
11. In the result, both the appeals of the assessee are allowed for statistical purposes.
Order pronounced on this 10th day of January, 2025.
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