The Ahmedabad bench of The Income Tax Appellate Tribunal ( ITAT ) recently allowed an appeal preferred by the Revenue against the decision made by Commissioner of Income Tax (Appeals) [ CIT (A) ] without considering the proper evidence in a case concerning unexplained cash deposits made during the demonetization period.
The assessee/ respondent, Rajeshkumar T. Christie, deposited Rs. 12,82,000 in Development Credit Bank Limited, Vejalpur, Ahmedabad, during the demonetization period. No return of income was filed for the relevant assessment year 2017-18, and consequently a notice under Section 142(1) of Income Tax Act 1961 ( ITA ) was issued by the Assessing Officer ( AO ) on 09.03.2018 asking the assessee to file the return, which the assessee didn’t comply with. Despite multiple notices issued by the AO since then, there was no compliance from the assessee. The AO, through bank enquiry, discovered a total credit of Rs. 7,30,32,566, including Rs.23,78,505 in cash deposits in the assessee’s bank account.
The entire amount was treated as unexplained and added to the income under Section 69A. Accordingly, the assessment was completed under Section 144 of the Act on 30.11.2019 at total
income of Rs.7,30,32,570/-.
Aggrieved with the order of the AO, the assessee filed an appeal before the First Appellate Authority, which has been
decided by the CIT (A) vide the impugned order. The CIT(A) reduced the addition as made by the AO to Rs.37,91,586/- .
Dissatisfied with this decision, it was appealed before ITAT by the Revenue.
The counsel for the appellant/Revenue, represented by Dr. Darsi Suman Ratnam, argued that that the CIT(A) admitted additional evidence under Rule 46
of the Income Tax Rules without a remand report from the AO and incorrectly estimated the assessee’s commission income at 2% of the turnover, despite evidence that the assessee was engaged in purchase and sale transactions as opposed to the assessee’s claim that the assessee was providing accommodation entries. The counsel also highlighted that the assessee didn’t appear for the hearing or comply during the assessment proceedings in spite of multiple notices.
After examining the appellant’s arguments, the bench comprising Mr Siddhartha Nautiyal and Mr Narendra Prasad Sinha observed that no compliance was made by the assessee in the course of assessment proceeding in spite of numerous opportunities provided by the AO. At the same time, the addition of Rs.7,30,32,566/- as made by the AO in respect of the entire credit transactions appearing in the bank account of the assessee was held not correct , as evidence gathered by AO through independent inquiries found the assessee made a payment of Rs.83,76,698/- in respect of purchase of Board CNG Steel Cylinders, which made it apparent that the assessee was engaged in certain purchase and sale transactions.
It was further observed that the total cash deposit in the bank account of the assessee was to the extent of Rs.23,78,505/- only and addition to this extent was sustained by the CIT(A). So, there is no dispute so far as this addition was concerned. On the balance turnover/ credit in the bank account of Rs.7,06,54,061/-, the CIT(A) estimated commission income at 2% and sustained the addition to the extent of Rs.14,13,081/- only.
This action of the CIT(A) was also held incorrect, as the assessee’s claim that the assessee was providing accommodation entries, rather than engaging in purchase and sale transactions as suggested by the AO, was not verified. Thereby the CIT(A) was incorrect in estimating the income at 2% only.
By virtue of the observations made, The tribunal remanded the case to the CIT(A) for a fresh decision after calling for a remand report from the AO, and by considering all the evidence and findings properly.
In the result, appeal preferred by the Revenue was allowed for statistical purposes.
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