Case Law Details
Asrafkhan Kalndrkhan Pathan Vs ACIT (ITAT Ahmedabad)
ITAT Ahmedabad held that CA took complete responsibility for non-compliance with notices hence, additional evidences submitted at appellate stage needs verification and examination by AO. Thus, matter remanded back.
Facts-
The assessee, a senior citizen regularly assessed to tax. The case of the assessee was selected for scrutiny under the Computer Assisted Scrutiny Selection (CASS) for verifying the cash deposits made by the assessee during the demonetization period.
A notice u/s. 143(2) of the Act was issued by the AO, requiring the assessee to produce details and documents supporting the income returned. Subsequently, the AO issued multiple notices u/s. 142(1) of the Act calling for specific details about the cash deposits made during the demonetization period. The assessee did not provide sufficient evidence or explanations in response to these notices. As a result, the AO made the following additions in the assessment order passed u/s 143(3) of the Act on 21/12/2019. Rs.17,97,500/- was added as unexplained cash credits u/s. 68, representing cash deposits made during the demonetization period. Rs.11,74,780/- was disallowed as unexplained agricultural income u/s. 68 of the Act. Rs.32,67,800/-was added as unexplained investment u/s. 69 of the Act, representing the purchase of a vehicle, including registration fees and insurance.
CIT(A) dismissed the appeal. Being aggrieved, the present appeal is filed.
Conclusion-
Held that the assessee was unaware of the non-compliance with notices due to failures on the part of his CAs. The failures were attributed to reasons mentioned in the affidavit of CA Dhaval Shah. The AR requested to admit additional evidence to ensure justice. CA Dhaval Shah affirmed that he and his grandfather were entrusted with handling the assessment and appellate proceedings for the assessee. He further affirmed that there was an unintentional lapse in performing professional obligations due to medical condition of his maternal grandmother, who eventually passed away during the assessment proceedings. Extreme stress faced by CA Dhaval Shah during the appellate proceedings due to being involved in a criminal case initiated by the CBI against a government official The CA took complete responsibility for the non-compliance and non-furnishing of documentary evidence, absolving the assessee of any fault.
The assessee has now furnished substantial evidence supporting his claims. Considering the principles of natural justice, we find it appropriate to admit the additional evidence. The additional evidence submitted by the assessee requires verification and examination by the AO including but not limited to verification of land ownership and agricultural activities, examination of bank statements and transactions related to cash deposits and vehicle purchase, verification of the source of funds used for the purchase of the vehicle, including the sale of the old car.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
This appeal by the assessee challenges the order of the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC) [hereinafter referred to as “CIT(A)”], dated 19/03/2024, for the Assessment Year (AY) 2017-18, confirming the additions made by the Assessing Officer (AO) under sections 68 and 69 of the Income Tax Act, 1961 [hereinafter referred to as “the Act”] as per the order of AO passed u/s.143(3) of the Act.
Facts of the Case:
2. The assessee, a senior citizen regularly assessed to tax, filed his return of income for the Assessment Year 2017-18 on 29/03/2018, declaring a total income of Rs.67,06,240/-. The case of the assessee was selected for scrutiny under the Computer Assisted Scrutiny Selection (CASS) for verifying the cash deposits made by the assessee during the demonetization period (i.e., 9th November 2016 to 30th December 2016). The CASS parameters highlighted the need for further investigation into the source of these deposits, as well as scrutiny of agricultural income and other financial transactions. A notice under section 143(2) of the Act was issued by the AO on 09/08/2018, requiring the assessee to produce details and documents supporting the income returned. Subsequently, the AO issued multiple notices under section 142(1) of the Act calling for specific details about the cash deposits made during the demonetization period. On 29/11/2019, the AO, issued notice u/s 142(1) of the Act, again requesting explanations for the cash deposits, as well as documentary evidence to support the agricultural income and the source of funds for the purchase of a new vehicle. The assessee did not provide sufficient evidence or explanations in response to these notices. As a result, the AO made the following additions in the assessment order passed u/s 143(3) of the Act on 21/12/2019. Rs.17,97,500/- was added as unexplained cash credits under section 68, representing cash deposits made during the demonetization period. Rs.11,74,780/- was disallowed as unexplained agricultural income under section 68 of the Act. Rs.32,67,800/-was added as unexplained investment under section 69 of the Act, representing the purchase of a vehicle, including registration fees and insurance.
3. The assessee filed an appeal before the CIT(A), challenging the additions made by the AO. The appeal was migrated to the National Faceless Appeal Centre (NFAC). The CIT(A) issued notices dated 21.10.2023, 07.12.2023, and 04.03.2024 to the assessee to furnish submissions. But the assessee failed to respond to these notices except for an adjournment request on 22.11.2022. Consequently, the CIT(A), in its order dated 19/03/2024, confirmed the additions made by the AO, stating that no new evidence or valid explanation was provided by the assessee.
4. Aggrieved by the order of the CIT(A), the assessee is in appeal before us with following grounds of appeal:
1. The learned CIT(A) erred in law and on facts in confirming the addition of Rs.17,97,500/- made by the AO, which was done by treating certain bank deposits as unexplained cash credits, thus chargeable to tax under section 68 of the Act.
2. The learned CIT(A) erred in law and on facts in confirming the addition of Rs.11,74,780/-made by the AO, which was done by treating the net agricultural income as subject matter of unexplained cash credit, thus chargeable to tax under section 68 of the Act.
3. The learned CIT(A) erred in law and on facts in confirming the addition of Rs.32,67,800/-made by the AO, which was done by treating purchase of a vehicle as unexplained investment, thus chargeable to tax under section 69 of the Act.
4. Without prejudice and assuming though not admitting about even slightest justification for the AO to draw adverse inferences while passing the assessment order, the learned CIT(A) erred in law and on facts in not appreciating that since the AO had made additions on income as well as on application sides, the same could not have been simultaneously confirmed without granting the benefit of corresponding telescoping against each other.
5. Before us, the Authorised Representative (AR) of the assessee submitted additional evidence that was not furnished during the assessment and appellate proceedings due to certain personal and professional challenges faced by the assessee’s Chartered Accountant, as outlined in the affidavits submitted by the assessee and his CA. The AR submitted that the assessee had consistently declared agricultural income in prior years, and the CIT(A) had accepted the agricultural income in the assessment order for AY 2009-10. The AR placed the copy of the assessment order for AY 2009-10 on record, which showed the acceptance of agricultural income by the department. The AR submitted a copy of the invoice for the purchase of the new vehicle, showing that the purchase was made through banking channels, and that a significant portion of the payment was made from traceable bank transactions. The bank statements were submitted, highlighting the transactions relating to the payment for the vehicle. Additionally, the AR provided a copy of the agreement of sale of the old vehicle, demonstrating that the sale proceeds were part of the funds used for purchasing the new car. The AR argued that since these documents were not verified during the assessment or appellate proceedings, the matter should be remanded to the file of the AO for a fresh examination.
6. The learned DR raised no objection to the request of the AR to restore the matter to the AO for proper verification of the newly submitted evidence. The DR agreed that the case required reconsideration in light of the fresh documentary evidence presented by the assessee.
7. We have heard the submissions of both the learned AR and the DR and carefully considered the material placed on record, including the affidavits filed by the assessee and his Chartered Accountant, explaining the reasons for the non-compliance during the assessment and appellate stages. The assessee declared that he is a senior citizen and illiterate for all practical purposes and he relied entirely on his Chartered Accountants, for tax compliances. The assessee was unaware of the non-compliance with notices due to failures on the part of his CAs. The failures were attributed to reasons mentioned in the affidavit of CA Dhaval Shah. The AR requested to admit additional evidence to ensure justice. CA Dhaval Shah affirmed that he and his grandfather were entrusted with handling the assessment and appellate proceedings for the assessee. He further affirmed that there was an unintentional lapse in performing professional obligations due to medical condition of his maternal grandmother, who eventually passed away during the assessment proceedings. Extreme stress faced by CA Dhaval Shah during the appellate proceedings due to being involved in a criminal case initiated by the CBI against a government official The CA took complete responsibility for the non-compliance and non-furnishing of documentary evidence, absolving the assessee of any fault.
7.1. The assessee has now furnished substantial evidence supporting his claims. Considering the principles of natural justice, we find it appropriate to admit the additional evidence. The additional evidence submitted by the assessee requires verification and examination by the AO including but not limited to verification of land ownership and agricultural activities, examination of bank statements and transactions related to cash deposits and vehicle purchase, verification of the source of funds used for the purchase of the vehicle, including the sale of the old car.
7.2. In the interest of justice and fair play, we deem it fit to set aside the order of the CIT(A) and restore the matter back to the file of the AO for de novo consideration. The AO is directed to admit the additional evidence submitted by the assessee, provide a reasonable opportunity to the assessee to present his case, verify the evidence and explanations provided and re-adjudicate the issues in accordance with the law. The assessee is directed to cooperate with the AO and furnish all necessary documents and information promptly.
8. In the result, the appeal filed by the assessee is treated as allowed for statistical purposes.
Order pronounced in the Open Court on 16th October, 2024 at Ahmedabad.
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