The Bangalore Bench of Income Tax Appellate Tribunal (ITAT has directed the Assessing Officer (AO) to reconsider using the Central Board of Direct Taxes (CBDT) circular for the addition of Rs. 1.06 crore as unexplained cash deposits made by the assessee during the demonetization period.
JB Dairy Farms Pvt. Ltd., (assessee) engaged in dairy farming did not file its Income Tax Return for the assessment year (AY) 2017-18. During the assessment proceedings, the AO observed a cash deposit of Rs. 1.06 crore in the company’s Syndicate Bank account, of which Rs. 89 lakh was deposited during the demonetization period.
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Despite being issued notices under Section 142(1) of the Income Tax Act, the company failed to provide an explanation for the source of these deposits. Therefore, the AO under Section 69A of the Income Tax Act, treated the deposits as unexplained income, and taxed them at the rate prescribed under Section 115BBE.
The assessee filed an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)]. The assessee failed to give explanations and furnish details after giving many opportunities. Therefore the CIT(A) dismissed the appeal of the assessee due to non-compliance and lack of documentary evidence.
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Aggrieved by the order, the assessee filed an appeal before the ITAT.
The two member bench comprising Shri Keshav Dubey (Judicial Member) and Shri Waseem Ahmed (Accountant Member), observed that the AO and the CIT(A) failed to consider the CBDT circulars which were specifically issued to handle cash deposits during the demonetization period.
The tribunal observed that the lower authorities failed to give the assessee a reasonable opportunity to present the case. The tribunal also highlighted several CBDT instructions which were relevant to the case.
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The tribunal observed that in the interest of Principles of Natural Justice and equity the assessee should be given one more opportunity in order to substantiate his claim.
Therefore, the tribunal set aside the order of CIT(A). The tribunal further directed the AO to conduct a de novo assessment, considering the relevant CBDT circulars. The tribunal directed the AO to give the assessee a reasonable opportunity to explain the cash deposits and provide supporting evidence.
However, the tribunal also directed the assessee to submit all evidence for proper adjudication of the case. The tribunal clarified that in case of further defaults the assessee shall not be entitled for any leniency. The appeal of the assessee was partly allowed for statistical purposes.
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