PAN Linking Error by bank Leads to Addition: ITAT Directs reconsideration

Ambasa Babansa Raibagi Vs ITO (ITAT Bangalore)

In the case of Ambasa Babansa Raibagi Vs ITO (ITAT Bangalore), the assessee challenged an order from the CIT(A) confirming an addition of Rs. 25,66,195 under section 69A of the Income Tax Act. The addition was made due to cash deposits in the assessee’s bank account during the demonetisation period, but the assessee did not file the return of income on time. Despite being issued notices under section 142(1) and 144, the assessee failed to substantiate the source of the deposits or provide the required documents. As a result, the assessment was completed based on available material, leading to the addition. The First Appellate Authority (FAA) upheld the assessment, dismissing the assessee’s arguments, which led the assessee to appeal to the Income Tax Appellate Tribunal (ITAT).

The assessee’s key defense was that the cash deposits belonged to a partnership firm and that the PAN was erroneously linked to the bank account. The assessee also pointed out that their association with the partnership firm had ended before the relevant period, as per the deed of partnership. ITAT acknowledged that the PAN of the assessee was linked to the partnership’s bank account during demonetisation, which may have led to the erroneous addition. Additionally, the FAA was criticized for passing a cryptic order without properly considering the submissions of the assessee. In light of these factors, ITAT remitted the matter back to the Assessing Officer (AO) for fresh examination, directing the AO to reconsider the case in a fair and just manner and provide the assessee with a reasonable opportunity to present all necessary documents. The case was allowed for statistical purposes.

FULL TEXT OF THE ORDER OF ITAT BANGALORE

This appeal is filed by the assessee against the order dated 17.07.2024 of the CIT(Appeals), National Faceless Appeal Centre, Delhi [NFAC], for the AY 2017-18 confirming the order of the Assessing Officer.

2. Briefly stated the facts of the case are that the assessee did not file return of income within the time limit u/s. 139(1) of the Act. As per information with the department, it was noticed that the assessee has deposited cash in his bank account during the demonetisation period. Under operation clean money the assessee was issued notice u/s. 142(1) and provided opportunity to file return of income, but the assessee did not file. Accordingly show cause notice was issued to the assessee and assessee submitted reply as per para 8 of the assessment order. The AO noted that the assessee did not provide the details and documents in respect of cash deposits. Accordingly the case was completed u/s. 144 on the basis of material available and addition u/s. 69A was made to the tune of Rs.25,66,195. Aggrieved from the above order, the assessee filed appeal before the First Appellate Authority (FAA).

3. In the appellate proceedings the assessee filed submissions in response to the notice of the ld. FAA. The ld. FAA has brushed aside the submissions of the assessee which is evident from pg. 1 to 3 of the appeal set and dismissed the appeal of the assessee. Aggrieved, the assessee is in appeal before the ITAT.

4. The ld. AR of the assessee strongly objected the order passed by the ld. FAA without considering the submissions of the assessee. He submitted that the money belongs to partnership firm and the bank has issued certificate which is placed at page 10 of appeal set. He further submitted that as per Deed of Partnership, the assessee has retired since 02.04.2016 and he is not concerned with the activity of the partnership firm and the assessee’s PAN was linked to the bank account and now it has been changed. The assessment must have been made in the hands of the partnership firm.

5. The ld. DR strongly relied on the order of lower authorities and submitted that the assessee could not substantiate with credible evidence regarding source of cash deposits during the demonetisation period during the course of assessment as well as appellate proceedings.

6. Considering the rival submissions, we note that, cash was deposited in the bank account during demonetisaton period and PAN of the assessee was linked with the bank account of the firm. The assessee was issued notice for filing return of income. The Bank has issued certificate which is placed at page 10 regarding wrong linking of assessee’s PAN. We also note that the ld. FAA has not considered the submissions of the assessee and he has passed a cryptic order. Since the assessment was completed u/s. 144 and considering the totality of the facts of the case and in the interest of justice, we remit the issue back to the AO for fresh consideration and decision as per law. The assessee is directed to file necessary documents that would be essential and required for substantiating his case for proper adjudication by the revenue authorities. Needless to say that reasonable opportunity of being heard be given to the assessee. The assessee is directed to cooperate with the proceedings for early disposal of the case.

7. In the result, the appeal of the assessee is allowed for statistical purposes.

Pronounced in the open court on this 21^st day of October, 2024.