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2021 (3) TMI 226 - AT - Income TaxValidity of enhancement order of CIT-A u/s 251 - Violation of principles of natural justice - CIT(A) has enhanced the addition under section 251(2) - Unexplained cash deposits in the Bank accounts - HELD THAT - CIT(A) has given a specific notice to assessee under section 251(2) of the Income Tax Act, 1961 for enhancing the assessment and such fact is mentioned in the Order Sheets Dated 05.11.2018 and 15.11.2018 as is mentioned in paras-8 and 9 of the appellate order. Therefore, when the fact of showing cause why enhancement to the assessed income be not made under section 251(2) is recorded in the Order Sheet at the appellate stage, there is no violation of section 251(2) - CIT(A) has given sufficient notice to the assessee before enhancing the assessment and that Ld. CIT(A) has also given several adjournments to the Counsel for Assessee for hearing of the appeals, but, the Assessee or his Counsel did not avail the opportunity of being heard of the appeals before him. Therefore, contention of Learned Counsel for the Assessee has no merit that no reasonable opportunity of being heard have been given by the Ld. CIT(A). This issue is, therefore, decided against the assessee and contention of Learned Counsel for the Assessee is rejected. Addition of new source of income while enhancing the income of the assessee - A.O. has made addition on account of commission income estimated on Bank deposits in several Bank accounts maintained by assessee - Assessee submitted that Ld. CIT(A) cannot enhance the income by considering the new source i.e., entire Bank deposits as unexplained - HELD THAT - Since the A.O. in the absence of any evidence on record did not make addition of unexplained cash deposits in the Bank accounts of the assessee and even no details were filed before the Ld. CIT(A), the Ld. CIT(A) was justified in considering the same source of income at appellate stage and was justified in making enhancement. Notice to the assessee as to show cause why income should not be enhanced by making the addition on account of entire cash deposited in the Bank accounts of the assessee clearly support his findings that it was same source considered. CIT(A), thus, did not consider a new source of income while making enhancement to the income of the assessee at the appellate stage. The decisions relied upon by the Learned Counsel for the Assessee would not support the case of the assessee and are clearly distinguishable on facts. We, therefore, reject the contention of the Learned Counsel for the Assessee and decide this issue against the assessee. Unexplained cash deposit in the Bank accounts of the assessee - Assessee submitted that A.O. has accepted that assessee earned commission income on the cash deposits in the Bank accounts of the assessee, therefore, there was no justification for the Ld. CIT(A) to enhance the addition on account of unexplained cash deposit in the Bank accounts - HELD THAT - Assessee failed to give even name and address of any factory owner or businessman who have given cash to the assessee. In the absence of any details the assessee failed to explain source of the cash deposits in his Bank accounts. It appears that the A.O. in collusion with the assessee did not make addition on account of unexplained cash deposits in his Bank account in both the assessment years under appeal and without any reason and justification accepted the explanation of assessee that assessee received commission income only. The assessee also did not produce any evidence or explanation before the Ld. CIT(A) with regard to source of the cash deposits in his Bank accounts despite show cause was given to him for enhancement to the returned income. Even before the Tribunal no evidence is produced to support the explanation of assessee that it was the amount of other factory owners or businessman which were deposited in the Bank accounts of assessee for making further payment on their behalf. In the absence of any evidence, material or explanation in this regard, we are of the view that assessee failed to substantiate the explanation given before the authorities below, therefore, assessee failed to establish the source of the cash deposits in the Bank accounts of the assessee - Decided against assessee. Maintainability of addition u/s 68 on account of cash deposits in the Bank accounts - Assessee submitted that Ld. CIT(A) has made addition under section 68 despite assessee did not maintain any books of accounts, therefore, addition under section 68 of the Income Tax Act is not sustainable - HELD THAT - We do not agree with the contention of Learned Counsel for the Assessee. The Ld. CIT(A) while considering the issue on merit has held that assessee failed to furnish the evidence to explain the source of the cash deposits in the Bank accounts of the assessee, therefore, entire cash deposits in the Bank accounts becomes unexplained money in the hands of the assessee under section 69A of the Income Tax Act, 1961. The Ld. CIT(A) also alternatively held that since the amount is credited into the books of the assessee, the amount is liable to be added under section 68 also. Thus, the finding of fact given by Ld. CIT(A) as reproduced above clearly show that Ld. CIT(A) correctly made addition under section 69A. Validity of reopening of assessment - as argued no reasons recorded under section 148 have been supplied to the assessee - HELD THAT - CIT(A) also reproduced the Order Sheet Dated 05.11.2018 for the A.Y. 2008-09 in the appellate order in which Ld. CIT(A) has specifically mentioned the submission of the assessee that assessee never asked for the reasons for reopening of assessment as well as did not challenge the reopening of assessment in the matter. These background of the facts clearly show that assessee and A.O. were in collusion with each other and A.O. made a very small addition against cash deposits in Crores of Rupees in the Bank accounts of the assessee. Therefore, assessee himself defaulted in not asking for copy of the reasons from the A.O. It is well settled Law that validity of the reassessment proceedings is to be judged with reference to the reasons recorded for reopening of the assessment. The assessee even now failed to produce copy of the reasons recorded for reopening of assessment so as to challenge the reopening of the assessment in the matter. In the absence of any material on record in support of the contention of the assessee, we do not find any infirmity in the orders of the authorities below for reopening of assessment. This contention of Learned Counsel for the Assessee is, therefore, rejected. In the result, this issue is decided against the assessee.
Issues Involved:
1. Violation of principles of natural justice. 2. Addition of new source of income while enhancing the income. 3. Justification of addition on account of unexplained cash deposits. 4. Applicability of section 68 for cash deposits. 5. Validity of reopening of assessment due to non-supply of reasons. Issue-wise Detailed Analysis: Issue No. 1: Violation of principles of natural justice Learned Counsel for the Assessee argued that the Ld. CIT(A) enhanced the assessment without giving a separate notice or reasonable opportunity. However, it was found that the Ld. CIT(A) had given specific notice under section 251(2) of the Income Tax Act, 1961, and provided multiple adjournments. The appellate order recorded that the assessee's counsel had been informed of the hearing dates. Therefore, the contention that no reasonable opportunity was given was rejected, and it was concluded that there was no violation of section 251(2). Issue No. 2: Addition of new source of income while enhancing the incomeLearned Counsel for the Assessee contended that the Ld. CIT(A) considered a new source of income by treating the entire bank deposits as unexplained, whereas the A.O. had only added commission income. However, it was noted that the A.O. had reopened the assessment due to unexplained cash deposits, and the Ld. CIT(A) was justified in enhancing the assessment based on the same source of income. The Ld. CIT(A) did not consider a new source but merely corrected the A.O.'s oversight in not adding the unexplained cash deposits. The contention of the assessee was rejected, and the issue was decided against the assessee. Issue No. 3: Justification of addition on account of unexplained cash depositsLearned Counsel for the Assessee argued that the A.O. had accepted the commission income explanation, so the Ld. CIT(A) should not have enhanced the addition. However, it was found that the assessee failed to provide any evidence or details of the factory owners or businessmen who allegedly provided the cash. The A.O. had initially accepted the explanation without justification, and the Ld. CIT(A) corrected this by treating the cash deposits as unexplained. The Tribunal found no merit in the assessee's argument and upheld the addition on account of unexplained cash deposits. Issue No. 4: Applicability of section 68 for cash depositsLearned Counsel for the Assessee contended that section 68 was not applicable as the assessee did not maintain books of accounts. However, the Ld. CIT(A) had alternatively held that the deposits could be added under section 68 as the amounts were credited into the books. The primary addition was made under section 69A for unexplained money. The Tribunal upheld the addition under section 69A and rejected the assessee's contention, citing the Allahabad High Court's judgment in CIT vs. Jauharimal Goyal, which held that deposits in bank accounts amount to investment under section 69. Issue No. 5: Validity of reopening of assessment due to non-supply of reasonsLearned Counsel for the Assessee argued that the reopening was invalid as the reasons were not supplied. However, the remand report indicated that the assessee never requested the reasons. The Tribunal noted that the reopening was based on information about unexplained cash deposits, which the assessee failed to substantiate. The assessee's conduct suggested collusion with the A.O., who made minimal additions despite substantial deposits. The Tribunal found no merit in the assessee's argument and upheld the reopening of the assessment, concluding that the assessee had defaulted by not requesting the reasons. Conclusion:The Tribunal dismissed both appeals, upholding the Ld. CIT(A)'s enhancement of the assessment and the additions on account of unexplained cash deposits. The Tribunal found no violation of natural justice, no consideration of a new source of income, justified the additions on merit, upheld the applicability of section 69A, and validated the reopening of the assessment.
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