2022 (9) TMI 813 - AT - Income Tax

Penalty levied u/s 271(1)(c) - Addition u/s 68 - unexplained cash deposited in the bank account of manager of the assessee company - as submitted assessee is not aware of the bank account no. ending with 355 with the Saraswat Co-op Bank - HELD THAT - As on a perusal of the bank-statement filed before us of this account number ending with SBPUB/355 it is noted that it is of Aamil Reza Hemani and there are transaction wherein assessee s name is found wherein he has been transferred Rs. 5000/- on 12.10.2000 and Rs. 1,00,000/- on 21.10.2009. From the facts narrated we are of the considered opinion, in the interest of justice for both side and taking into account the facts that the similar addition has been made in the hands of M/s. Kareem s Hospitality Pvt. Ltd and in the light of the additional information noted by us according to us denovo assessment is required after verification of the fact discussed (supra). Therefore, we set aside the impugned order of the Ld. CIT(A) and remand the same back to the file of AO with a direction to frame denovo assessment. Needless to say that if the cash deposited in assessee s bank account has already been taxed in the hands of M/s. Kareem s Hospitality Pvt. Ltd (employer of assessee) or in the hands of the director of the assessee company Mr. Kareem Dhanani then no addition is warranted in the hands of the assessee who was performing the duty of manager in M/s. Kareem Restaurant. Appeal of the assessee is allowed for statistical purposes. Penalty levied u/s 271(1)(c) - We taking note of the fact that we have already remanded the assessment back to AO for denovo assessment for AY. 2010-11, the penalty levied also does not survive. Therefore, the impugned penalty needs to be cancelled; and later after the assessment is reframed by the AO, he is at liberty to take action in accordance to the law.

Summary

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Addition of cash deposits as unexplained income under Section 68 of the Income Tax Act, 1961.
3. Validity of penalty levied under Section 271(1)(c) of the Income Tax Act, 1961.

Detailed Analysis:

1. Condonation of Delay in Filing the Appeal:
The main grievance of the assessee for AY 2010-11 was the dismissal of the appeal by the CIT(A) due to a delay of 761 days in filing without considering the reasons for the delay. The assessee argued that the delay was due to the shifting of residence, which resulted in the late receipt of the assessment order. The Tribunal noted that the assessment order was indeed returned by the postal authority and later handed over to the assessee. The Tribunal held that the CIT(A)'s action of dismissing the appeal without considering the reasonable cause for the delay was not justified. Therefore, the delay was condoned.

2. Addition of Cash Deposits as Unexplained Income:
For AY 2010-11, the AO added Rs. 36,69,295/- as unexplained income under Section 68 due to cash deposits in the assessee's bank accounts. The assessee contended that these deposits were made by the director of M/s. Kareem's Hospitality Pvt. Ltd. and were already taxed in the company's assessment. The Tribunal found that the AO had indeed taxed the same amount in the hands of the company, which was confirmed by the director's admission. Consequently, the Tribunal remanded the matter back to the AO for a denovo assessment to verify if the cash deposits had already been taxed in the company's hands, and if so, to delete the addition in the assessee's hands.

For AY 2011-12, the AO added Rs. 2,89,850/- as unexplained income based on cash deposits in the assessee's HDFC bank account. The Tribunal noted that this amount was also taxed in the hands of M/s. Kareem's Hospitality Pvt. Ltd. The Tribunal remanded the matter back to the AO with instructions to verify the facts and delete the addition in the assessee's hands if the amount was already taxed in the company's hands.

3. Validity of Penalty Levied Under Section 271(1)(c):
For both AY 2010-11 and AY 2011-12, the AO had levied penalties under Section 271(1)(c) for concealment of income, which were confirmed by the CIT(A). Given that the Tribunal remanded the quantum assessments back to the AO for denovo assessment, it held that the penalties could not survive. The Tribunal canceled the penalties but allowed the AO to initiate penalty proceedings afresh based on the outcome of the reassessment.

Conclusion:

The Tribunal allowed the appeals for statistical purposes, remanding the matters back to the AO for denovo assessment and verification of facts. The Tribunal emphasized that if the cash deposits were already taxed in the hands of M/s. Kareem's Hospitality Pvt. Ltd., no addition should be made in the hands of the assessee. The penalties under Section 271(1)(c) were canceled, with liberty to the AO to reinitiate penalty proceedings based on the reassessment results.