2024 (5) TMI 1412 - AT - Income Tax

Unexplained money u/s 69A - Unexplained cash deposits more than turnover - deposit of cash sourced from the sales proceeds or not is in combination of loan and turnover made by the assessee from his medical retail store - assessee derived income from retail store of medicines, managed/controlled by the assessee herself, after the death of her husband with the assistance of employees of the shop even though she was suffering from Neuro disease HELD THAT - Assessee is earning income from this only source of income and fighting for survival even though she has medical challenges for her health. We are aware that the assessee has not sincerely filed the return of income and has solely relied upon the accountant who has declared the turnover incorrectly. Though it was not correct state of affairs of the assessee and was wrongly declared by her accountant as confirmed by the assessee in her affidavit and supporting evidence. Even the assessee is dependent on the employee due to her neuron disease. Based on those facts we are of the considered view that the turnover of the assessee reflected in the bank account cannot be considered partly loan amount and partly turnover. Therefore, considering that fact placed before us by the assessee in person as well as duly supported by an affidavit filed by her along with related corroborative evidence like ledger for purchase sales and CA certificate, we admit those additional evidences based on the contention raised by the assessee, though the contention of the assessee contradict with that of placed before the ld. AO but considering the peculiar aspect of the matter we admit those additional evidence. AO shall compute the total credit of cash deposited into the bank account of the assessee viz a viz with the turnover with the evidence. Turnover declared by the assessee needs to be examined based on the corroborative evidence we direct the assessing officer to tax profit / income @ 8% of the total turnover under the provision of section 44AD of the act in the absence of any comparative chart, presently available by both the parties and law provide 8 % for retail trade. Therefore, we direct the assessing officer to verify the correct turnover based on the bank statement and other supporting evidence and at the same time assessee is directed to supply the related ledger for purchase, sale and CA certificate to assist the assessing officer. Accordingly, the appeal of the assessee is allowed.

Summary

Issues Involved:
1. Legality of reassessment proceedings u/s 148 of the Income Tax Act.
2. Addition towards unexplained cash credit u/s 69A of the Income Tax Act.
3. Admission of additional evidence during appellate proceedings.

Summary:

Issue 1: Legality of reassessment proceedings u/s 148 of the Income Tax Act
In ITA No. 412/JPR/2023, the assessee challenged the legality of the reassessment proceedings on the grounds that the Assessing Officer (AO) did not provide the reasons recorded for reopening the assessment proceedings. The Tribunal noted that despite a specific request by the assessee, the AO failed to provide the reasons recorded for issuing the notice u/s 148. The Tribunal relied on the Supreme Court's decision in GKN Driveshafts (I) Ltd. v. ITO, which mandates that the reasons recorded must be furnished to the assessee within a reasonable time. Consequently, the Tribunal quashed the reassessment order due to the AO's failure to provide the reasons, thereby allowing ground no. 1 & 1.1 raised by the assessee.

Issue 2: Addition towards unexplained cash credit u/s 69A of the Income Tax Act
In ITA No. 412/JPR/2023, the AO added Rs. 61,87,000 as unexplained cash credit u/s 69A after accepting Rs. 25,00,000 from the assessee's medical business. The CIT(A) upheld this addition, noting discrepancies between the explanations provided during the assessment and appellate proceedings. However, the Tribunal did not adjudicate on the merits of the case since the reassessment order was quashed on legal grounds.

In ITA No. 413/JPR/2023, the AO added Rs. 67,55,100 as unexplained cash credit u/s 69A, accepting Rs. 60,00,000 from cash sales and disallowing Rs. 30,57,000 claimed as cash loans. The CIT(A) rejected the additional evidence submitted by the assessee, considering it an afterthought. The Tribunal admitted the additional evidence, considering the peculiar facts of the case, including the assessee's medical condition and reliance on an accountant. The Tribunal directed the AO to verify the turnover and tax profit/income @ 8% of the total turnover under section 44AD.

Issue 3: Admission of additional evidence during appellate proceedings
In both ITA No. 412/JPR/2023 and ITA No. 413/JPR/2023, the assessee submitted additional evidence during the appellate proceedings, claiming errors by the accountant. The CIT(A) rejected this additional evidence, considering it an afterthought. However, the Tribunal admitted the additional evidence in ITA No. 413/JPR/2023, considering the assessee's medical condition and the reliance on the accountant. The Tribunal directed the AO to verify the turnover and compute the income accordingly.

Conclusion:
The appeals were allowed in favor of the assessee. The reassessment order in ITA No. 412/JPR/2023 was quashed due to the AO's failure to provide reasons for reopening the assessment. In ITA No. 413/JPR/2023, the Tribunal admitted the additional evidence and directed the AO to verify the turnover and compute the income @ 8% under section 44AD.