Case Law Details
Harekrishna Medical Store Vs ITO (ITAT Ahmedabad)
ITAT Ahmedabad held that addition towards entire cash deposits during demonetization period by passing ex-parte order due to non-compliance by assessee without examining on merits unjustified. Accordingly, matter restored back to AO for fresh examination.
Facts- The assessee is a partnership firm running a medical store. In the course of assessment, the AO found that the assessee had made cash deposit of Rs.10,90,000/- during demonetization period. In the course of assessment, no compliance was made by the assessee in response to the notices issued by the AO and the assessment was completed ex-parte u/s.144 of the Act on 23.12.2019 at total income of Rs.59,52,030/.
The First Appellate Authority dismissed the appeal. Being aggrieved, the present appeal is filed by the assessee.
Conclusion- Held that even if there was no compliance on the part of the assess, the AO was not correct in treating the entire credit entries in the bank account as income of the assessee without considering the debit entries. The Ld. CIT(A) too had dismissed the appeal of the assessee without giving any finding on the merit of the case. It is found that the Ld. CIT(A) had allowed three opportunities to the assessee on 29.01.2021, 05.09.2023 & 14.09.2023 in response to which, no compliance was made by the assessee. Since, the matter was not properly examined on merits by the AO and not examined, at all, by the Ld. CIT(A), we deem it proper to set aside the matter to the file of the AO to allow another opportunity to the assessee to explain the cash deposits and credit entries as appearing in the bank statement. The AO is directed to re-examine the matter after allowing a proper opportunity of being heard to the assessee. The assessee is also directed to make compliance before the AO and not to seek unnecessary adjournment. If the assessee fails to comply, the AO will be free to pass the order in the matter as deemed fit after considering the entire transactions of the bank account and the nature of business of the assessee.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
This appeal is filed by the assessee against the order of the National Faceless Appeal Centre (NFAC), Delhi, (in short ‘the CIT(A)’),dated 16.10.2023for the Assessment Year 2017-18.
2. There was a delay of 220 days in filing of this appeal. The assessee has filed an affidavit explaining that the e-mail ID mentioned in the Form No.35 was of the Chartered Accountant who had filed the appeal. The assessee had not received any physical notice from the CIT(A) and all the communications were sent on the e-mail ID of the Chartered Accountant who neither responded to the emails nor brought the final order of the CIT(A) to its notice. It was explained that the assessee was unaware about the passing of the order by the Ld. CIT(A) and that while visiting the Income Tax portal on 01.07.2024 it came to know that the order of Ld. CIT(A) was already passed on 16/10/2023. It was further explained that due to non-compliance by the Chartered Accountant, the Ld. CIT(A) has passed exparte order resulting in creation of huge demand. It is found from Form No.35 that the e-mail ID mentioned therein was [email protected] an option was given to receive notices/communications on the email. As explained, the delay was caused due to default on the part of the Chartered Accountant. Further, considering the merits of the additions, which will be dealt subsequently and which requires to be adjudicated afresh, we deem it proper to condone the delay.
3. The brief facts of the case are that the assessee is a partnership firm running a medical store. No original return of income for this year was filed by the assessee. The AO had issued notice under Section 142(1) of the Income Tax Act, 1961 (in short ‘the Act’) on 12.03.20 18 calling for the assessee to file the return. The assessee had filed a return on 23.09.2019 showing loss of Rs.5790/-. In the course of assessment, the AO found that the assessee had made cash deposit of Rs.10,90,000/- during demonetization period. In the course of assessment, no compliance was made by the assessee in response to the notices issued by the AO and the assessment was completed ex-parte u/s.144 of the Act on 23.12.2019 at total income of Rs.59,52,030/.
4. Aggrieved with the order of the AO, the assessee had filed an appeal before the First Appellate Authority, which has been decided vide the impugned order and the appeal of the assessee was dismissed.
5. Now, the assessee is in second appeal before us. The following grounds of appeal have been taken in this appeal:
“1.1 The order passed u/s 144 for AY 2017-18 on 23-12-2019 by ITO, Ward- 6(1)(5) A’bad, holding cash deposits to the extent of Rs. 59.52,030/- deposited in Bank accounts as unaccounted cash and thereby making addition of Rs. 59,52,030/-is wholly illegal, unlawful and against the principles of natural justice.
21 The Ld. AO has grossly erred in law and or on facts in not providing sufficient opportunity before holding the cash deposits to the extent of Rs 59,52,030/- deposited in Bank accounts as unaccounted cash and thereby making addition of Rs.59,52,030/- Thus, there was gross violation of the principles of natural justice and assessment is liable to be quashed. The appellant may be allowed to produce additional evidence as per Rule 46A and it may be admitted.
3.1 The Ld. AO has grievously erred in law and or on facts in holding cash deposits to the extent of Rs.59,52,030/- deposited in Bank accounts as unaccounted cash and thereby making addition of Rs. 59,52,030/-
3.2 That in the facts and circumstances of the case as well as in law, the Ld. AO has grievously erred in holding cash deposits to the extent of Rs. 59,52,030/- deposited in Bank accounts as unaccounted cash and thereby making addition of Rs. 59,52,030/-
3.3 The Ld. AO has grievously erred in law and or on facts in making addition invoking section-69A though the condition precedent were not satisfied.
3.4 Without prejudice to the above and in alternative the impugned addition made by AO is highly excessive and calls for reduction.”
6. Shri Bhavik Dilipbhai Mehta, Ld. AR appearing for the assessee explained that the AO had made addition of 59,52,030/- in respect of entire cash deposit of Rs.45,54,500/- made in the bank account during the F.Y. 2016- 17 and also in respect of the credit entries of Rs.13,97,529/- as appearing in the bank statement. Thus, the AO had added the entire turnover of the assessee without allowing any relief for the debit entries appearing in the bank statement, which was not correct. According to the Ld. AR, only the profit of the assessee was liable to taxed and not the entire turnover. The ld. AR further submitted that in the course of assessment, the assessee had furnished reply on 23.09.2019 and 06.11.2019 through online response system, which was not considered by the AO. It was submitted that due to default on the part of the Chartered Accountant, no compliance could be made before the Ld. CIT(A) who had dismissed the appeal of the assessee exparte. He, therefore, requested that the matter may be set aside with a direction to allow another opportunity to the assessee to explain the cash deposits and credit transactions of the bank account.
7. Per contra, Shri Rignesh Das, the Ld. Sr. DR supported the orders of the AO & the Ld.CIT(A). He submitted that the assessee did not make any compliance either before the AO or before the Ld. CIT(A).
8. We have carefully considered the rival submissions. It is found that the assessee had made certain submissions alongwith the return of income filed on 23.09.2019. This fact was acknowledged by the AO in the assessment order. However, the submission of the assessee is not found discussed in the assessment order. In the course of assessment, the AO had made enquiries u/s.133(6) of the Act from Dena Bank, Amraiwadi, Ahmedabad and on the basis of the bank statement, he had added the entire credit entries in the form of cash deposits, RTGS/NEFT/Cheque deposits to the income of the assessee. Even if there was no compliance on the part of the assess, the AO was not correct in treating the entire credit entries in the bank account as income of the assessee without considering the debit entries. The Ld. CIT(A) too had dismissed the appeal of the assessee without giving any finding on the merit of the case. It is found that the Ld. CIT(A) had allowed three opportunities to the assessee on 29.01.2021, 05.09.2023 & 14.09.2023 in response to which, no compliance was made by the assessee. Since, the matter was not properly examined on merits by the AO and not examined, at all, by the Ld. CIT(A), we deem it proper to set aside the matter to the file of the AO to allow another opportunity to the assessee to explain the cash deposits and credit entries as appearing in the bank statement. The AO is directed to re-examine the matter after allowing a proper opportunity of being heard to the assessee. The assessee is also directed to make compliance before the AO and not to seek unnecessary adjournment. If the assessee fails to comply, the AO will be free to pass the order in the matter as deemed fit after considering the entire transactions of the bank account and the nature of business of the assessee.
9. The assessee has not properly explained the reason for non-compliance before the AO as well as before the Ld. CIT(A). Theplea taken that no physical notices were received and that no compliance was made by the Chartered Accountant who had received the notices on his e-mail, cannot be considered as a sufficient explanation. When the appeal was filed by the assessee, it was his duty to ensure proper compliance before the CIT(A). No evidence or affirmation for non-compliance on the part of the Chartered Accountant has been brought on record. Even the name of the Chartered Accountant has not been brought on record. Neither any action has been taken by the assessee against the errant practitioner for his default. In the absence of any proper explanation for the non-compliance before the AO and the CIT(A), we deem it proper to impose a cost of Rs.20,000/- (Rupees twenty thousand only)on the assessee, to which the Ld. AR agreed. The assessee shall deposit the cost to the Income Tax Department within two weeks of receipt of this order. The AO will proceed in the matter only after verifying that the assessee has paid the cost as
10. In the result, the appeal filed by the assessee is allowed for statistical purposes.
This Order pronounced on 08/11/2024
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