Ex-parte order confirming addition remanded back as major cash deposits were prior demonetization

Vijay Odhabhai Lalu Vs ITO (ITAT Surat)

ITAT Surat held that addition on account of cash deposit during demonetization confirmed by both AO and CIT(A) by passing ex-parte order. However, majority of cash deposits are prior to demonetization period. Hence, matter remanded back for fresh verification.

Facts- AO made addition of Rs. 57,22,000/- on account of cash deposit. AO held that the assessee made cash deposit during demonetization period, but factual position is something different. During demonetization period, the assessee has made deposit of Rs. 60,000/- only and rest of the amount deposited by assessee in his three bank accounts i.e. in Surat District Cooperative Bank Ltd., Axis Bank and Varachha Cooperative Bank Ltd. are prior to demonetization period. AO taxed the addition u/s. 115BBE of the Income Tax Act, 1961 at the enhanced rate at 77.25%.

Assessee mainly contested that both AO and CIT(A) passed ex parte orders without giving fair and reasonable opportunity to the assessee.

Conclusion- Held that the Assessing Officer made addition of Rs. 57,22,000/- by taking view that assessee was asked to submits the source of Cash deposit during demonetisation and the assessee failed to provide source of cash deposits. The Assessing Officer passed assessment order under Section 144 of the Act on 10/12/2019. The ld. CIT(A) confirmed the action of Assessing Officer in an ex parte order. Before us, the ld. AR of the assesse vehemently argued that the assessee may be given one more opportunity. Considering the details of cash deposit filed by the assessee, which shows that the majority of the cash deposits are prior to demonetisation period, which was not available before the Assessing Officer at the time of original assessment, therefore, keeping in view the nature and time of deposit, we deem it appropriate to restore the matter back to the file of Assessing Officer to verify the facts and pass order in accordance with law.

FULL TEXT OF THE ORDER OF ITAT SURAT

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 10/10/2023 for the Assessment Year (AY) 2017­18, wherein the assessee has raised following grounds of appeal:

“1. On the facts and in circumstances of the case as well as law on the subject, the learned CIT(A) has erred in passing ex-parte order when the assessee was prevented by reasonable cause for not complying with the notices.

2. On the facts and circumstances of the case as well as law on the subject, the learned CIT(A) has erred in confirming the action of Assessing Officer in making the addition of Rs. 57,22,000/- u/s. 69A of the Income Tax Act, 1961 for alleged cash deposit into bank, when no high denomination cash was deposited during the demonetization period of 09.11.2016 to 30.12.2016.

3. Even otherwise, on the facts and circumstances of the case as well as law on the subject the assessing officer has erred in taxing the income u/s. 69A of the Income tax Act, 1961 for alleged cash deposit of Rs. 57,22,000/- during the year when it was explained out of agricultural income.

4. On the facts and circumstances of the case as well as law on the subject, the assessing officer has erred in taxing the income u/s. 115BBE when assessee income cannot be taxed u/s. 69A as the assessee has got no source of income other than agricultural income and interest income.

5. Even otherwise, on the facts and circumstances of the case as well as law on the subject, the assessing officer has erred in taxing the income u/s 115BBE @ 77.25 % in a retrospective manner by applying the duly substituted S.115BBE inserted retrospectively instead of taxing it at 35.54 % as per the old provisions of S.115BBE.

6. It is therefore prayed that addition made by assessing officer and confirmed by CIT(A) may please be deleted.

7. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of hearing of the appeal.”

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 without giving fair and reasonable opportunity to the assessee. The Assessing Officer made addition of Rs. 57,22,000/- on account of cash deposit. The Assessing Officer held that the assessee made cash deposit during demonetization period, but factual position is something different. During demonetization period, the assessee has made deposit of Rs. 60,000/- only and rest of the amount deposited by assessee in his three bank accounts i.e. in Surat District Cooperative Bank Ltd., Axis Bank and Varachha Cooperative Bank Ltd. are prior to demonetization period. The Assessing Officer taxed the addition under Section 115BBE of the Income Tax Act, 1961 (in short, the Act) at the enhanced rate at 77.25%. The ld. AR of the assessee filed copy of statement of cash deposit and would submit that since the lower authorities have not verified such details, therefore, the matter may be restored back to the file of Assessing Officer with direction for verification of fact and for allowing appropriate relief to the assessee. The ld. AR of the assessee submits that the ld. CIT(A) has not made his decision as per mandate of Section 250(6) of the Act. The ld. AR of the assessee submits that, though he accepts that there is certain lapses on the part of assessee in not making timely compliance of various notices issued by the ld. CIT(A), however, he undertakes on behalf of assessee to be more vigilant in future in making compliance before the lower authorities and would submit that at least one more opportunity may be given to him to explain the facts and substantiate the source of cash deposit including the cash deposit during demonetization period. The ld. AR of the assessee submits that in a series of decisions, Surat Bench and other Benches of the Tribunals held that provisions of Section 115BBE of the Act is not applicable for the A.Y. 2017-18.

3. On the other hand, the learned Senior Departmental Representative (ld. Sr. DR) for the revenue submits that the assessee was given ample opportunities by the lower authorities, it is the assessee who has not availed such opportunities. The assessee does not deserve any further opportunity. The ld. Sr. DR for the revenue submits that in case, the Bench is of the view that the assessee deserve one more opportunity, such opportunity may be allowed subject to payment of cost.

4. We have considered the submissions of both the parties and have gone through the orders of the lower authorities carefully. We find that the Assessing Officer made addition of Rs. 57,22,000/- by taking view that assessee was asked to submits the source of Cash deposit during demonetisation and the assessee failed to provide source of cash deposits. The Assessing Officer passed assessment order under Section 144 of the Act on 10/12/2019. The ld. CIT(A) confirmed the action of Assessing Officer in an ex parte order. Before us, the ld. AR of the assesse vehemently argued that the assessee may be given one more opportunity. Considering the details of cash deposit filed by the assessee, which shows that the majority of the cash deposits are prior to demonetisation period, which was not available before the Assessing Officer at the time of original assessment, therefore, keeping in view the nature and time of deposit, we deem it appropriate to restore the matter back to the file of Assessing Officer to verify the facts and pass order in accordance with law. The assessee is also given liberty to raise all factual and legal plea before the Assessing Officer. 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.

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

Order announced in open court on 8^th October, 2024.