2021 (2) TMI 413 - AT - Income Tax

Unexplained deposits in bank account - cash flow submitted by the assessee did not explain the bank deposits of the assessee in Punjab National Bank - HELD THAT - As per the chart given the deposits remaining unexplained by the assessee are also having cheque deposit entries. Before us, the Ld. AR has not submitted any break-up or details received by the assessee. AR could not co-relate the bank deposits with the cash deposits. CIT (A) has also referred the remand report of the Assessing Officer and has pointed out that the assessee was specifically required to explain the amount of ₹ 14,50,000/- deposited in the bank account but the assessee did not furnish any corroborative evidences regarding these deposits. CIT (A) has also stated that the rejoinder of the assessee was vague and did not throw any light on the issue. The assessee could not explain the source of deposits by co-relating the same to the advances received on various dates. All the same, looking into the facts of the case and in view of the interest of substantial justice, we deem it fit to restore this appeal to the file of the Ld. CIT (A) with a direction to the assessee to substantiate the impugned amount with documentary evidences before the Ld. CIT (A). The Ld. CIT (A) is directed to examine the issue afresh based on the evidences being furnished by the assessee to substantiate his claim. Appeal of the assessee stands allowed for statistical purposes.

Summary

Issues:
1. Validity of assessment under Section 144 without proper notice under Section 148
2. Explanation for cash deposits in bank account
3. Treatment of sale proceeds of agricultural land for income tax
4. Validity of penalty proceedings under Section 271(1)(c)
5. Right to add, modify, or delete grounds in appeal proceedings

Issue 1: Validity of assessment under Section 144 without proper notice under Section 148
The appellant challenged the assessment under Section 144, contending that no notice under Section 148 was served, rendering the assessment invalid. However, the AO had issued a notice under Section 148 due to unexplained cash deposits in the appellant's bank account. The AO proceeded with the assessment under Section 147 as the appellant did not respond to the notice. The CIT (A) partially allowed the appeal, limiting the addition to the unexplained cash deposits of ?14,50,000. The Tribunal noted the grounds raised by the appellant but did not delve into the validity of the notice under Section 148.

Issue 2: Explanation for cash deposits in bank account
The main dispute revolved around the appellant's explanation for cash deposits in the bank account. The appellant claimed that the amount related to an advance received against the sale of agricultural land, supported by a sale deed. However, the AO and the CIT (A) found the explanation unsubstantiated due to the lack of corroborative evidence. The Tribunal observed discrepancies in the cash and cheque deposits, indicating a failure to correlate the bank deposits with the advance received. Consequently, the Tribunal directed the appellant to provide documentary evidence to substantiate the cash deposits before the CIT (A) for a fresh examination.

Issue 3: Treatment of sale proceeds of agricultural land for income tax
The appellant argued that the sale proceeds from agricultural land, situated beyond municipal limits, should not attract income tax. However, the focus of the dispute was on explaining the cash deposits rather than the taxability of the sale proceeds. The Tribunal did not address this issue specifically, as the primary concern was the source of the cash deposits.

Issue 4: Validity of penalty proceedings under Section 271(1)(c)
The appellant contended that the penalty proceedings initiated by the AO were routine and mechanical, lacking legal basis. However, the Tribunal did not delve into this issue in the judgment, as the appeal was primarily concerned with the assessment of unexplained cash deposits.

Issue 5: Right to add, modify, or delete grounds in appeal proceedings
The appellant reserved the right to add, modify, or delete grounds in the appeal proceedings. This issue did not impact the Tribunal's decision on the primary dispute regarding the unexplained cash deposits. The Tribunal allowed the appeal for statistical purposes, directing the appellant to substantiate the cash deposits with documentary evidence before the CIT (A) for a fresh assessment.

In conclusion, the Tribunal's judgment focused on the appellant's failure to substantiate the cash deposits in the bank account with adequate evidence. The Tribunal directed a fresh examination by the CIT (A) based on the documentary evidence to be provided by the appellant. The judgment did not address all issues raised in the grounds of appeal, emphasizing the need for proper documentation to support claims in income tax assessments.