2025 (2) TMI 940 - AT - Income Tax

Addition u/s 69A - Addition based on single concept of cash deposit in bank - CIT(A) has discussed non-compliance on the part of the assessee before the Ld. AO as the notices sent were not complied with but he has not adjudicated the appeal on merit - HELD THAT -Section 250(6) of the Act casts a duty on the Ld. CIT(A) to pass an order in appeal which should state the points for determination and the decision as well as the reason for arriving at such decision. In the present case before us the Ld. CIT(A) has not mentioned the reasons after examining the records while disposing of the appeal. CIT(A) has neither adjudicated upon various grounds of appeal nor has passed a reasoned order for arriving at the decision as is required u/s 250(6) of the Act. We further note that in Ajji Basha 2019 (12) TMI 320 - MADRAS HIGH COURT it has been held that a speaking order on merits with reasons and findings is to be passed by Commissioner (Appeals) on basis of ground raised in assessee s appeal; he cannot dispose the assessee s appeal merely by holding that Assessing Officer s order is a self-speaking order which requires no interference. It has also been held in the case of Premkumar Arjundas Luthra 2016 (5) TMI 290 - BOMBAY HIGH COURT that the law does not empower the CIT(A) to dismiss the appeal for non-prosecution as is evident from the provisions of the Act. There is an option available to the assessee to file an application before the Ld. CIT(A) who may dispense with the requirement of payment of advance tax on the basis of facts. Apparently no such application was filed by the assessee and therefore the appeal was dismissed. Liability to pay the advance tax - Since the Ld. CIT(A) has not mentioned as to how much advance tax was payable by the assessee which has not been paid and the assessee had the option of filing an application before the Ld. CIT(A) which however was not filed and consequently the discretion available to the Ld. CIT(A) to exempt the assessee from the applicability of the rigours of section 249(4) could not be exercised by him and the appeal has also not been decided on merit therefore in the interest of justice the order of the Ld. CIT(A) is set aside to be done afresh. The assessee may file an application for exemption from the requirement of payment of advance tax which shall be decided by the CIT(A) in accordance with law and considering the totality of facts. Accordingly the grounds taken by the assessee in his appeal are allowed for statistical purposes.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment are:

• Whether the cash deposits in the assessee's bank account should be treated as unexplained income under Section 69A of the Income Tax Act, 1961.
• Whether the Commissioner of Income Tax (Appeals) [CIT(A)] was justified in dismissing the appeal for non-compliance with Section 249(4)(b) concerning the payment of advance tax.
• Whether the CIT(A) failed to adjudicate the appeal on its merits as required under Section 250(6) of the Act.
• Whether the assessee was liable to pay advance tax under the provisions of Chapter XVII-C, specifically Sections 208 and 209 of the Act.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Treatment of Cash Deposits as Unexplained Income

• Relevant legal framework and precedents: Section 69A of the Income Tax Act deals with unexplained money, where any money found to be owned by the assessee and not recorded in the books of account is deemed to be the income of the assessee.
• Court's interpretation and reasoning: The Tribunal noted that the assessee claimed the cash deposits were receipts from microfinance beneficiaries, which were immediately transferred to the microfinance company.
• Key evidence and findings: The assessee provided evidence of cash transfers to the microfinance company and claimed a commission from the transactions.
• Application of law to facts: The Tribunal observed that the CIT(A) did not examine the merits of the case or the evidence provided by the assessee.
• Treatment of competing arguments: The Tribunal acknowledged the assessee's argument that the cash deposits were not unexplained income but part of the business transactions.
• Conclusions: The Tribunal found that the CIT(A) failed to provide a reasoned order considering the merits of the case and the evidence presented.

Issue 2: Dismissal of Appeal for Non-Compliance with Section 249(4)(b)

• Relevant legal framework and precedents: Section 249(4)(b) requires the payment of advance tax for an appeal to be admitted if no return has been filed.
• Court's interpretation and reasoning: The Tribunal noted that the CIT(A) dismissed the appeal without considering whether the assessee was liable to pay advance tax.
• Key evidence and findings: The assessee argued that his income was below the taxable limit, thus not requiring advance tax payment.
• Application of law to facts: The Tribunal found that the CIT(A) did not determine the applicability of Section 208 regarding the advance tax liability.
• Treatment of competing arguments: The Tribunal considered the assessee's argument that the income was below the taxable threshold, thus exempting him from advance tax obligations.
• Conclusions: The Tribunal held that the CIT(A) should have considered the merits of the case and the applicability of Section 249(4)(b) in light of the assessee's income.

Issue 3: Failure to Adjudicate on Merits

• Relevant legal framework and precedents: Section 250(6) requires the CIT(A) to pass a reasoned order stating the points for determination and the decision thereon.
• Court's interpretation and reasoning: The Tribunal emphasized the duty of the CIT(A) to consider the merits of the appeal and provide a reasoned decision.
• Key evidence and findings: The CIT(A) dismissed the appeal without examining the substantive grounds raised by the assessee.
• Application of law to facts: The CIT(A)'s order was found lacking in reasoning and did not address the grounds of appeal.
• Treatment of competing arguments: The Tribunal noted the requirement for a speaking order that addresses the issues raised by the assessee.
• Conclusions: The Tribunal concluded that the CIT(A) failed to fulfill the statutory obligation to adjudicate on the merits.

3. SIGNIFICANT HOLDINGS

• Core principles established: The Tribunal reiterated the requirement for CIT(A) to adjudicate appeals on their merits and provide reasoned orders as per Section 250(6).
• Final determinations on each issue: The Tribunal set aside the order of the CIT(A) and remanded the case for fresh adjudication, directing the CIT(A) to consider the merits and allow the assessee to file an application for exemption from advance tax payment under Section 249(4)(b).
• Verbatim quotes of crucial legal reasoning: "The order of the Commissioner (Appeals) disposing of the appeal shall be in writing and shall state the points for determination, the decision thereon and the reason for the decision."