2022 (4) TMI 1382 - AT - Income Tax

Unexplained cash credit u/s 68 - Addition by CIT- A in view of the provisions of section 251(2) - cash and cheque deposit in the bank account of the assessee on the ground that the assessee could not substantiate the source of such deposit - CIT-A sustained addition - - HELD THAT - CIT(A) shall not enhance the assessment without giving a reasonable opportunity to the assessee to show-cause against such enhancement, which is a mandatory requirement. However, the Ld. CIT(A) in the instant case has not followed the mandatory requirement of law. Therefore, we find merit in the argument of the ld. counsel for the assessee that the addition as deposited through various cheques, which was accepted by the AO as no addition has been made on this issue has to be deleted. We accordingly direct the AO to delete the addition sustained by the ld. CIT(A). Unexplained cash deposit in the bank account - We do not find merit in the arguments of the ld. Counsel for the assessee that no addition should be made on this account. However, at the same time, the entire addition of the cash deposit in the bank account cannot be made in the instant case especially when the purchases have been made through banking channel and sales have been made in cash and at the end of the year all the shares purchased have been sold leaving no balance. The assessee in the instant case in our opinion has typically acted as broker/mediator/commission agent. The various Coordinate Benches of the Tribunal under such type of bogus purchases/sales are estimating the profit ranging from 0.25% to 3% of the purchases/sales as the case may be. Considering the totality of the facts of the case and in the interest of justice, we are of the considered opinion that adoption of profit @ 2.5% of the total cash deposit of ₹ 1,84,45,000/- in the instant case as against entire addition of ₹ 1,84,45,000/- will meet the ends of justice. We hold and direct accordingly. The order of the Ld. CIT(A) is accordingly modified and the grounds raised by the assessee are partly allowed.

Issues Involved:

1. Whether the CIT(A) was justified in passing an ex-parte order without providing a reasonable opportunity for a hearing.
2. Whether the CIT(A) was justified in upholding the AO's order without properly considering the explanations and evidence provided by the assessee.
3. Whether the CIT(A) was justified in treating all credit entries in the bank account as unexplained under section 68.
4. Whether the CIT(A) was justified in dismissing the appeal without considering the grounds of appeal in detail.
5. Whether the CIT(A) was justified in upholding the AO's order based on various citations without considering the evidence/explanations on record.
6. Whether the CIT(A) was justified in passing the order in a mechanical manner by deciding only one ground.

Issue-wise Detailed Analysis:

1. Ex-parte Order Without Providing a Reasonable Opportunity:
The assessee contended that the CIT(A) passed an ex-parte order dated 11.10.2018 without providing a reasonable opportunity for a hearing. The Tribunal noted that the CIT(A) should have ensured that the assessee was given a fair chance to present their case. This procedural lapse was significant and warranted consideration.

2. Upheld AO's Order Without Proper Consideration:
The assessee argued that the CIT(A) upheld the AO's order dated 28.12.2017 without disputing the explanations and evidence on record. The Tribunal observed that the CIT(A) appeared to have repeated the earlier order passed by his predecessor, which was challenged before the Tribunal and subsequently remanded back to the AO. The Tribunal emphasized that the CIT(A) should have independently assessed the evidence and explanations provided by the assessee.

3. Treating All Credit Entries as Unexplained Under Section 68:
The CIT(A) upheld the addition of ?2,29,23,400 as unexplained cash credit under section 68. The AO had initially made an addition of ?2,29,23,400, including cash deposits of ?1,84,45,000 and cheque deposits of ?44,78,400. Upon remand, the AO accepted the cheque deposits but retained the addition of cash deposits. The Tribunal noted that the CIT(A) without issuing an enhancement notice, sustained the entire addition, which was not justified. The Tribunal directed the AO to delete the addition of ?44,78,400, as it was already accepted by the AO.

4. Dismissing the Appeal Without Detailed Consideration:
The assessee contended that the CIT(A) dismissed the appeal by arriving at a suo-motto conclusion without considering the grounds of appeal in detail. The Tribunal noted that the CIT(A) should have considered each ground of appeal raised by the assessee and provided a reasoned order addressing those grounds.

5. Upholding AO's Order Based on Citations Without Considering Evidence:
The CIT(A) upheld the AO's order based on various citations without considering the evidence and explanations on record. The Tribunal emphasized that the CIT(A) should have considered the specific facts and evidence of the case rather than solely relying on citations. The Tribunal found that the CIT(A) failed to provide a balanced assessment of the evidence and explanations provided by the assessee.

6. Passing the Order in a Mechanical Manner:
The assessee argued that the CIT(A) passed the order in a mechanical manner by deciding only one ground instead of addressing all grounds of appeal. The Tribunal observed that the CIT(A) should have provided a comprehensive order addressing each ground raised by the assessee. The Tribunal found merit in the assessee's argument that the CIT(A) did not follow the mandatory requirement of law by not issuing an enhancement notice before sustaining the addition.

Conclusion:
The Tribunal concluded that the CIT(A) was not justified in sustaining the addition of ?2,29,23,400 without issuing an enhancement notice and without properly considering the evidence and explanations provided by the assessee. The Tribunal directed the AO to delete the addition of ?44,78,400 accepted by the AO and modified the order by estimating a profit of 2.5% on the total cash deposit of ?1,84,45,000, thereby partly allowing the appeal filed by the assessee.

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