ITAT Chandigarh Remanded Cash Deposit Additions Over Multiple PAN Issue

Kailash Brick Traders Vs ITO (ITAT Chandigarh)

The ITAT Chandigarh considered an appeal filed by Kailash Brick Traders against the order of the CIT(A) under section 250 of the Income Tax Act, 1961, concerning AY 2017-18. The assessment order dated 19/12/2019 had computed the assessee’s taxable income at Rs.38,85,500/- under section 144. This comprised Rs.3,00,000/- as undisclosed business income under section 69, Rs.24,00,000/- as unexplained cash credits under section 69, and Rs.11,85,500/- as unexplained cash credits under section 68. The assessee challenged the additions and also contended that the proceedings had been initiated under a non-operational PAN, despite the assessee having another operational PAN.

The assessee was a partnership firm engaged in brick kiln business at Village Togan, District Ropar, Punjab, with Raj Kumar Dua and Promila Dua as partners. The assessee stated that it had been carrying on the business since 01/04/1992 and stopped operations around March 2017. It claimed that two PANs had inadvertently been allotted to the firm: AADFK9113H, stated to be the operational PAN, and AAEFK9376R, stated to be the non-operational PAN. The proceedings leading to the assessment under section 144 were initiated under the non-operational PAN.

The assessee had filed its first appeal before the CIT(A). During those proceedings, it produced a return of income for AY 2017-18 filed on 13/07/2017 under PAN AADFK9113H. The CIT(A) accepted that both PANs belonged to the assessee and, based on the return, reduced the business income addition from Rs.3,00,000/- to Rs.2,05,320/-, granting relief of Rs.94,680/-. However, the CIT(A) sustained the additions relating to cash deposits of Rs.24,00,000/- before demonetisation and Rs.11,85,000/- after demonetisation in the Punjab National Bank account. The CIT(A) held that the assessee had not explained the nature and source of these deposits and that the amounts remained unexplained irrespective of the PAN under which the proceedings were conducted.

Before the Tribunal, the assessee argued that the entire cash deposits of Rs.35,85,500/- were generated from sales already disclosed in the return filed under the operational PAN. It relied upon total turnover of Rs.53,59,285/- stated to have been disclosed in that return and contended that the cash deposits formed part of the disclosed sales. It therefore argued that sustaining the cash-deposit additions, as well as the business-income addition, resulted in double taxation. The assessee also challenged the assessment on the ground that notices under sections 142(1) and 144 had not been served.

The Revenue disputed the assessee’s reliance on the return. The Departmental Representative pointed out that the return placed in the paper book appeared to pertain to PAN ABNPD1149B and was verified by Raj Kumar Dua in his individual capacity, rather than on behalf of the partnership firm. It was also submitted that the firm had not produced documents such as its partnership deed or dissolution deed. According to the Revenue, the record disclosed three PANs and did not contain sufficient documents to establish the correct position concerning the firm and its income. The Revenue therefore sought remand of the matter to the CIT(A) for proper determination of the income.

The Tribunal examined the rival contentions and the record. It noted that the assessee had been issued two PANs, one operational and one non-operational, but that nothing had been placed on record to establish that either PAN had subsequently been cancelled or withdrawn. The Tribunal considered it just, fair and convenient, and in the interest of justice, to have the entire issue reconsidered by the CIT(A) afresh. It expressly refrained from making observations on the merits so as not to prejudice the proceedings before the first appellate authority.

Accordingly, the Tribunal set aside the impugned CIT(A) order and remanded the matter to the CIT(A) for fresh adjudication on a denovo basis. The CIT(A) was directed to pass a reasoned order on merits after examining the issues afresh. The assessee was directed to produce all relevant papers and documents pertaining to the firm for proper adjudication. The Tribunal further directed that the appeal should preferably be decided within six months from receipt of its order. The assessee’s appeal was allowed for statistical purposes.

FULL TEXT OF THE ORDER OF ITAT CHANDIGARH

This is an appeal filed by the Assessee under section 253 of the Income Tax Act, 1961 (hereinafter referred to as the Act for sake of convenience and ease) before this Tribunal. The Assessee is aggrieved by the order bearing number ITBA/NFAC/S/250/2024-25/1067258373(1) dated 02/08/2024 passed by the Ld. CIT(A) under section 250 of the Act. Which is hereinafter referred to as the “impugned order”. The relevant assessment year is 2017-18 and the corresponding previous year period is from 01/04/2016 to 31/03/2017.

2. Factual Matrix

2.1 That by an assessment order bearing Number ITBA/AST/S/144/2019-20/1022664738(1) dt. 19/12/2019 which is hereinafter referred to as the “ impugned assessment order” the assessable taxable income of assessee of Rs. 38,85,500/- was computed in terms of section 144 of the Act. The following are the components of the aforesaid income.

2.2 The above assessment order pertains to PAN No. AAEFK9376R(Non operational PAN).

2.3 The assessee is a partnership firm and is having works of Brickkinl(Bhatta) at Village Togan, Dist: Ropar, Punjab-160047, For the year under consideration the assessee had two partners (1) Raj Kumar Dua (2) Promila Dua. That he assessee was running the above said business from the year 01/04/1992 but had to stop its operation on or after March 2017, on account of area of operation being converted into residential and commercial by GMADA. The assesse claims is regular filer of ITR but inadvertently the assessee was allotted two(2) PAN No. being AADFK9113H(operational PAN) and AAEFK9376R which was (non operational PAN). The present proceedings under consideration was initiated by Income Tax Department under non operational PAN.

2.4 That the assessee being aggrieved by the aforesaid assessment order dt. 19/12/2019 preferred first appeal under section 246A before Ld. CIT(A) who by the “impugned order” has partly allowed the appeal.

2.5 That the assessee being aggrieved by the “impugned order” has filed the present appeal and has raised following grounds:

1. Whether Ld CIT(A) has erred in upholding the assessment order for AY 2017-18 against the PAN-AADFK.9113H contrary to the factual matrix wherein the Assessee has self-assessed income against PAN-AAEFK9376R after duly considering all credits”

2. Whether the impugned order results in double taxation and is in violation of article 265 of the constitution of India.’

3. Whether service of notice under section I42( I) and 144 of the Income Tax Act. 1961 is a sinequa non to the initiation of proceedings for assessment and the non-service makes the assessment order void ab initio and liable to be quashed.

4. Whether in the facts and circumstances of the case addition of Rs, 2,05,320/- under section 69 of the Income Tax Act, 1961 is bad in law and the liability should be set aside?

5. Whether in the facts and circumstances of the case addition of Rs 35,85,500/- under section 68/69A of the Income Tax Act, 1961 is bad in law and the liability should be set aside?

3. Record of Hearing

3.1 The hearing in the matter took place on 20/01/2025 when the Ld. AR appeared for the assessee and Ld. DR appeared for the Revenue. The Ld. AR contended that the assessee is regular filer of ITR and that inadvertently two PAN Nos came to be issued to the assessee which were (1) AADFK9113H (operational PAN No.) (2) AAEFK9376R (non operational PAN No. ). The present proceedings for the year under consideration has been initiated by Revenue over non operational PAN number.

3.2 The Ld.AR has placed on record of this Tribunal a brief synopsis / argument of case pages 1 to 26 and a paper book containing pages 1 to 75, in support of his contentions.

3.3 The Ld AR interalia contended before us that the “impugned assessment order dt. 19/12/2019” is made in respect of non operational PAN No. and it was due to non operational PAN Number, Notice(s) issued were not attendedto and the assessment order came to be passed (supra). That there is cash deposit of Rs. 24,00,000/- prior to Demonetization and Rs. 11,85,500/- being cash deposit during demonetization period. Total cash deposit comes to Rs. 35,85,500/- in PNB (Punjab National Bank). The account number is 1418002100014309. The business income of Rs. 3,00,000/- was determined too. The aggregate assessed taxable income was quantified at Rs. 38,85,500/-. That in the first appellate proceedings the assessee placed on record of CIT(A) a copy of return of income for A.Y. 2017-18 filed on 13/07/2017 under PAN No. AADFK9113H (operational PAN)wherein it is claimed that business named ‘M/s Kalash Bricks Traders’ and its income of the year under consideration is covered. The Ld. CIT(A) duly considered the submission of the assessee and in particular return filed for A.Y. 2017-18 (PAN No. AADFK9113H) wherein gross total income was declared by the assessee at Rs. 2,05,318/-. It was recorded by the Ld. CIT(A) that the assessee had two PAN Nos. (1) AAEFK9376R & (2) AADFK9113H and both belonged to them (the Assessee firm). Hence the Ld. CIT(A) basis ROI filed for A.Y. 2017-18(supra) took business income of Rs. 2,05,320/- against estimation made by Ld. AO of Rs. 3,00,000/-. The relief of Rs. 94,680/- was thus granted to the assessee. The Ld. CIT(A) with regard to addition of Rs. 24,00,000/- in PNB A/c No. 1418002100014309 held that said account belongs to assessee herein irrespective of PAN Nos (supra) wherein there is cash prior to demonetization. Cash post demonetization is of Rs. 11,85,000/- which too belongs to assessee irrespective of PAN Nos. (supra). No relief on this count was granted.

3.4 The Ld. CIT(A) in the impugned order has observed that assessee has not submitted any explanation about nature and source of cash deposits (supra) in PNB Account No. (supra). The Ld. CIT(A) in final analysis concluded that both PAN Nos. (supra) belongs to M/s Kailaash Brick Traders the assesse herein and bank account concerned is not disputed. Form No. 35 is filed under PAN No. AAEFK9376R (non operational PAN No.). Therefore amount of Rs. 24,00,000/- prior to demonetization and Rs. 11,85,000/-post Demonetization stands unexplained in return of income filed for A.Y. 2017-18 on 13/07/2017 under PAN No. AADFK9113H & has sustained the additions.

3.5 Keeping in view the above background the Ld. AR has now contended that sum of Rs. 53,59,285/- as per ITR placed on record under operational PAN No. (AADFK9113H) total turnover stands duly disclosed which interalia includes all of the sales so made by the assessee from which cash under consideration was generated and deposited by the assessee in its bank account during the year under consideration to the tune of Rs. 35,85,500/- (Rs. 24,00,000 + Rs. 11,85,500/-). The assessee has disclosed source of cash so made by it in ITR being sales hence addition made by Ld. AO and sustained by CIT(A) are all wrong as it amounts to double taxation. The addition of Rs. 2,05,320/- is too challenged as same stands offered for tax. In sum and substance it is contended that entire amount i.e Rs. 3,00,000/- as business income reduced to 2,05,318/- and so also sum of Rs. 35,85,500/- (cash deposit) are part and parcel of Rs. 53,59,285/- and stands disclosed. Hence orders of lower authorities are bad in law.

3.6 Per contra Ld. DR at the outset has brought to our notice that so called return for A.Y. 2017-18 placed on record in paper book from pages 1 to 47 pertains to PAN No. ABNPD1149B (verification clause of ITR)and that the same is verified by one Raj Kumar Dua in individual capacity and not on firm’s behalf as partner or managing partner nor firms name is written in the verification clause of ROI alongwith PAN numbers of the firm. It was further contended that besides two PAN Nos discussed the return of A.Y. 2017-18 is filed by one Raj Kmar Dua under PAN No. ABNPD1149B. The assessee has not placed on record document relating to firm called “Kailash Brick Traders” like partnership deed, Dissolution Deed if any. The entire issue revolves around PAN Numbers and in the ultimate analysis it is noticed that in allthere are total 3 PAN Nos (supra). It was contended that the matter be remanded back to the file of CIT(A) for correct determination of income on real time basis as in PB nothing is shown save and except return of income for A.Y. 2017-18. No documents, papers etc. in support of the contention for purposes of real determination of income are there in paper book. Real nature of income is unexplainable and is required to be determined and computed finally in accordance with law.

4. Observations, findings & Conclusions

4.1 We now have to examine legality, validity and proprietary of the impugned order basis record of the case and rival contentions / submissions canvassed before us during the course of hearing.

4.2 We are of the considered view that how assessee Kailash Brick Traders have been issued two PAN Nos. i.e one operational PAN No. [AADFK9113H] and another non operational PAN No. [AAEFK9376R]. If two PAN No’s are issued to the assessee which is a known fact to the assessee then nothing is placed on record to establish till date that out of two, one is cancelled / withdrawn. Be that as it may we are of the considered view basis contentions advanced before us now that it would be just, fair and convenient and in the interest of justice the entire issue be relooked by CIT(A) a fresh on denovo basis. We are restraining ourself’s from making any comments on merits of the case as we do not intent to prejudice the mind of anyone. Suffice to say we have minutely and carefully examined the Records of the case including ROI filed before the Ld. CIT(A) (page 1 to 47 of paper book).

4.3 In the premises drawn up by this Tribunal as aforesaid we set aside the impugned order and remand the case back to the file of CIT(A) to examine the issue afresh on denovo basis and pass a fresh order on merits of the case which should be a reasoned order one. The assessee is directed to produce all the relevant papers, documents pertaining to assessee firm for proper adjudication of first appeal which should be decided by Ld. CIT(A) as expeditiously as possible preferably with in six months from date of receipt of this order.

5. Order

5.1 The impugned order is set aside as and by way of remand back to the file of CIT(A) on denovo basis.

5.2 Appeal of the assessee is allowed for statistical purposes.

Order pronounced in the open Court on 24/02/2025