Addition on account of cash deposit: ITAT Orders Fresh Assessment  

Mahesh Mohanlal Desai Vs ITO (ITAT Surat)

In the income tax appeal case Mahesh Mohanlal Desai vs. ITO (ITAT Surat), the Income Tax Appellate Tribunal (ITAT) ruled to return the case to the Assessing Officer (AO) for a fresh assessment, emphasizing that the taxpayer should be given a fair opportunity to present evidence substantiating cash deposits in his bank account. The appeal contested the National Faceless Appeal Centre (NFAC) and AO’s previous ex parte decisions, where Mr. Desai’s inability to fully respond due to procedural delays led to an addition of Rs. 12,03,000 under Section 144. This addition was based on unexplained cash deposits, with both the AO and the Commissioner of Income Tax (Appeals) denying relief to Mr. Desai due to perceived non-compliance.

Mr. Desai’s representative argued that he had made genuine efforts to comply with notices but sought adjournments due to unforeseen delays. The Tribunal acknowledged these arguments, highlighting the importance of natural justice principles and ruling that the AO should conduct a new assessment after granting Mr. Desai a fair opportunity to submit all required documentation and evidence. The Tribunal also reminded Mr. Desai to avoid unnecessary delays in the future and to prepare for prompt submission of materials when requested. This decision allows Mr. Desai to present his case fully, with the Tribunal directing the AO to conduct a comprehensive review before making any final determinations. The appeal was thereby allowed for statistical purposes, pending the outcome of the reassessment.

1. This appeal by the assessee is directed against the order of the National Faceless Appeal Centre, Delhi (NFAC)/learned Commissioner of Income Tax (Appeals), [in short, the ld. CIT(A)] dated 15/03/2024 for the Assessment Year (AY) 2017-18.

2. Rival submission of both the parties have been heard and record perused. The learned Authorised Representative (ld. AR) of the assessee submits that the Assessing Officer as well as the ld. CIT(A) passed ex parte orders making high pitch assessment. No fair and reasonable opportunity was given to the assessee. Before Assessing Officer, the assessee filed certain details in response to the show cause notices, yet assessment order is passed under section 144. Before ld CIT(A), the assessee filed appeal in 2019, first notice of hearing was issued for filing reply / submission by 29.01.2021, the assessee sought adjournment, which was allowed. Further, the notice under section 250 was issued for filing submission by 09.01.2022 and again vide notice dated 21.02.2022, the assessee filed application for adjournment, copy of screen shot of ITBA portal is filed. The assessee sought one-month time and thereafter no notice was received by the assessee. the ld AR of the assessee submits that it is not the case where the assessee has not made compliance. Rather, the assessee is interest in pursuing his appeal. The ld AR of the assessee prayed that in the interest of justice, matter may be restored back to the file of Assessing Officer to allow the assessee to file submissions and evidence in support of his claim and to pass order afresh after giving fair and reasonable opportunity to the assessee. He undertakes on behalf of the assessee to be more vigilant in future and will file all required submissions on first date of hearing.

3. On the other hand, the learned Senior Departmental Representative (ld. Sr. DR) for the revenue supported the orders of the lower authorities. The ld. Sr. DR for the revenue submits that more than reasonable and sufficient opportunity was provided to the assessee as evident from the contents of orders of lower authorities itself. The ld. AR of the assessee unable to explain the circumstances which resulted in non-compliance on the part of assessee. The ld. Sr. DR for the revenue submits that even before the Tribunal, neither the assessee has disclosed reasonable and plausible reason for non-appearance nor filed any evidence. The assessee does not deserve any leniency and addition made in the assessment may be upheld. In alternative submissions, the ld SR DR of the revenue submits that in case this bench is of the view, that the assessee deserve any leniency, the matter may be restored to the file of ld CIT(A).

4. In the short rejoinder submission, the ld. AR of the assessee submits that both the authorities below have passed ex parte order, and in the event of filing written submissions and evidences to substantiate the cash deposit, such evidence may require verification at the end of Assessing Officer, so to avoid the long drawn process of remand report the matter may be restored to the file of Assessing Officer.

5. I have considered the submissions of both the parties and have gone through the orders of the lower authorities carefully. I find that the Assessing Officer completed the assessment under Section 144 on 11/10/2019. I find that during the assessment, the Assessing Officer issued three show cause notices as recorded in para 4 of assessment order. The assessee was also asked in the show cause notice that in case of non-compliance, assessment will be finalised under Section 144 of the Act. The Assessing Officer recorded that despite such show cause notice, neither the assessee furnished any reply nor any evidence to substantiate the cash deposit. The Assessing Officer find that there was cash deposit of Rs. 12,03,000/- in the bank account. The Assessing Officer made addition on account of cash deposit in absence of evidence. On appeal before the ld. CIT(A), the assessee was served with four notices to substantiate various grounds of appeal as recorded in para 4 of order of ld. CIT(A). No compliance was made by assessee, thus, the ld. CIT(A) in absence of any submission or evidence, confirmed the addition. Now before us, the ld. AR of the assessee explained that notice under section 250 was issued by ld CIT(A) for filing submission by 09.01.2022 and again vide notice dated 21.02.2022, the assessee filed application for adjournment, copy of screen shot of ITBA portal is filed. The assessee sought one-month time and thereafter no notice was received by the assessee. It was also explained the that it is not the case where the assessee has not made compliance, rather, the assessee is interest in pursuing his appeal and prayed that in the interest of justice, matter may be restored back to the file of Assessing Officer to allow the assessee to file submissions and evidence in support of cash deposit. Considering the facts and circumstances of the case and keeping in view the principles of natural justice, I restore the matter back to the file of Assessing officer to decide the issue afresh. The matter is restored to the file of Assessing Officer keeping in view of the facts that assessment was also completed under section 144. Needless to direct that before passing the order, the Assessing Officer shall grant opportunity of hearing to the assessee. The assessee is also directed to be more vigilant in future and not to cause further delay and seek adjournment without any valid reason and to furnish all the details and his submissions and evidences on various grounds of appeal raised by it, as soon as possible, if so desired without any further delay. In the result, the grounds of appeal raised by the assessee are allowed for statistical purposes.

6. In the result, this appeal of assessee is allowed for statistical purposes only.

Order announced in open court on 21^st October, 2024.