2025 (2) TMI 939 - AT - Income Tax

Addition u/s 68 - assessee failed to explain the source of cash deposited in his bank account - HELD THAT - On perusal of the bank statement of the assessee it is seen that there are both deposits as well as corresponding withdrawals made by the assessee from the same bank account during the impugned year under consideration. While entire deposits/credits have been added as unexplained income of the assessee corresponding credit for withdrawals has not been given to the assessee. Thus on perusal of the bank statement of the assessee for the impugned year under consideration in our considered view the additions made by AO are not liable to be sustained looking into the assessee s particular set of facts. Decided in favour of assessee. Penalty u/s 271(1)(b) - non-appearance in response to notice issued asking the assessee to cause appearance - HELD THAT -Only a very short period of one day was granted by the AO to cause appearance before him in the interest penalty under Section 271(1)(b) of the Act for a sum of Rs. 10, 000/- is liable to be deleted. It is a fit case where penalty under Section 271(1)(b) for causing non-appearance is liable to be deleted looking into the assessee s facts as highlighted above. Decided in favour of assessee.

ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment include:

Whether the delay in filing the appeal by the assessee should be condoned.
Whether the Assessing Officer (AO) had the jurisdiction to issue notice under Section 148 of the Income Tax Act, 1961.
Whether the notice issued under Section 148 was valid and whether the procedure for reopening the assessment was followed.
Whether the addition of cash deposits as unexplained income was justified.
Whether the penalty imposed under Sections 271(1)(b), 271(1)(c), and 271F was valid.

ISSUE-WISE DETAILED ANALYSIS

Condonation of Delay

Relevant Legal Framework and Precedents: The principle of natural justice allows for the condonation of delay if the delay is not due to any malafide intention and is supported by a reasonable cause.
Court's Interpretation and Reasoning: The Tribunal observed that the delay was due to the assessee's relocation and lack of awareness of the order. There was no malafide intention.
Conclusion: The delay was condoned, allowing the appeal to proceed.

Jurisdiction of the Assessing Officer

Relevant Legal Framework and Precedents: Jurisdiction is determined by the location of the assessee's residence or place of filing returns.
Court's Interpretation and Reasoning: The Tribunal noted that the AO in Alwar did not have jurisdiction as the assessee had never resided or filed returns there.
Conclusion: The proceedings initiated by the AO were deemed void ab initio.

Validity of Notice under Section 148

Relevant Legal Framework and Precedents: Notices under Section 148 must be issued with proper jurisdiction and within the time limits prescribed by law.
Court's Interpretation and Reasoning: The notice was issued without proper jurisdiction and was not physically served, rendering it invalid.
Conclusion: The notice was considered void, and the assessment proceedings were invalid.

Addition of Cash Deposits as Unexplained Income

Relevant Legal Framework and Precedents: The burden of proof lies on the assessee to explain cash deposits in their bank account.
Court's Interpretation and Reasoning: The Tribunal observed that the assessee acted as a collection agent and provided evidence of corresponding withdrawals, which the AO failed to consider.
Conclusion: The addition of cash deposits as unexplained income was not justified, and the Tribunal directed the deletion of these additions.

Penalty under Sections 271(1)(b), 271(1)(c), and 271F

Relevant Legal Framework and Precedents: Penalties are imposed for non-compliance with notices and concealment of income, but reasonable cause can be a defense.
Court's Interpretation and Reasoning: The Tribunal found that the assessee had reasonable cause due to relocation and short notice periods, which justified non-compliance.
Conclusion: The penalties imposed were deleted.

SIGNIFICANT HOLDINGS

Core Principles Established: The importance of jurisdiction and proper service of notices in tax proceedings was reinforced. The Tribunal emphasized the need to consider the specific circumstances of the assessee, such as relocation and procedural fairness.
Final Determinations on Each Issue: The delay in filing was condoned, the jurisdiction of the AO was found lacking, the notice under Section 148 was deemed invalid, the addition of cash deposits was deleted, and the penalties were removed.

The Tribunal's decision underscores the necessity for tax authorities to adhere to procedural requirements and respect the rights of taxpayers, particularly in matters of jurisdiction and notice service.

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