2015 (10) TMI 2249 - AT - Income Tax

Unaccounted cash deposits - peak cash deposits in the said Savings Bank A/c - CIT(A) deleted the addition relying upon the additional evidence - Held that - There was total non-compliance of the assessee before the Assessing Officer. The assessee failed to appear on any of the dates of hearing, except on one date to seek adjournment of the hearing. The Assessing Officer had issued show cause notice to the assessee, which was not replied to by the assessee during the course of assessment proceedings. The Assessing Officer had AIR information of cash deposit of ₹ 17,04,000/- in savings account of assessee with Axis Bank. In the absence of any explanation received from the assessee, the said sum was added as income of the assessee for the year under consideration. The CIT(A) in the appellate proceedings notes that though the Assessing Officer had issued show cause notice, but had not raised any query about the said deposit of cash of ₹ 17,04,000/-. The CIT(A) thus, proceeded to decide the issue after examining the relevant facts. The facts as brought out by the assessee before the CIT(A) were that he was running a pathology lab and was also looking after the land of his family. The case of the assessee before the CIT(A) that Axis bank was used for deposits and withdrawals of amount in respect of agricultural activity of the family. A summary of receipts and payments in the said bank account have been filed before the CIT(A), which have been accepted in toto. We find that the CIT(A) has failed to comply with the provisions of Rule 46A of the Rules i.e. before admitting any additional evidence, the conditions prescribed in the said Rule have to be looked into and in case, the assessee satisfy the same then, such additional evidence can be admitted. Rule 46A of the Rules further provides that on such admission of the evidence, the same should be confronted to the Assessing Officer for verification. The CIT(A) on its own can make certain enquiries, but then the enquiries should be complete and the explanation of the assessee should not be accepted on its face. On perusal of the order of CIT(A) reflects that no proper enquiry has been made by the CIT(A) and in the absence of the same and in view of violation of Rule 46A of the Rules, the matter needs to be adjudicated after following the procedure as envisaged in the Statute. However, since no information was filed before the Assessing Officer and in the absence of the assessee appearing before the Assessing Officer, no proceedings had taken place. We deem it fit to restore the matter back to the file of Assessing Officer to adjudicate the assessment in the hands of assessee de novo, after providing reasonable opportunity of hearing to the assessee. - Decided in favour of revenue for statistical purposes.

Summary

Issues Involved:
1. Deletion of addition of Rs. 17,04,000/-.
2. Justification of CIT(A) in deciding the issue of peak cash deposits and net agricultural income.
3. Admission of additional evidence by CIT(A) in violation of Rule 46A of the IT Rules.
4. Treatment of agricultural income belonging to HUF as the appellant's income.

Issue-wise Detailed Analysis:

1. Deletion of Addition of Rs. 17,04,000/-:
The primary issue raised by the Revenue is whether the CIT(A) was justified in deleting the addition of Rs. 17,04,000/- made by the Assessing Officer (AO). The AO had added this amount to the total income of the assessee due to unexplained cash deposits in the savings account with Axis Bank. The assessee failed to provide the source of these cash deposits during the assessment proceedings, leading to the addition under section 144 of the Income Tax Act, 1961.

2. Justification of CIT(A) in Deciding the Issue of Peak Cash Deposits and Net Agricultural Income:
The CIT(A) accepted the assessee's explanation that the cash deposits were from agricultural receipts and cash receipts from debtors, which were deposited in the bank account from time to time. The CIT(A) noted that the peak of the cash deposits and withdrawals was Rs. 5,78,100/-. After giving credit for agricultural income of Rs. 3,93,750/-, the CIT(A) made an addition of Rs. 1,84,350/- as unexplained deposits, thereby reducing the original addition made by the AO.

3. Admission of Additional Evidence by CIT(A) in Violation of Rule 46A of the IT Rules:
The Revenue contended that the CIT(A) admitted additional evidence without following the provisions of Rule 46A, which mandates that any additional evidence should be forwarded to the AO for verification. The CIT(A) admitted the evidence based on the assessee's submission that the AO did not raise any specific query regarding the cash deposits. However, the Tribunal found that the CIT(A) failed to comply with Rule 46A, which requires recording reasons for admitting additional evidence and giving the AO an opportunity to examine and rebut the evidence.

4. Treatment of Agricultural Income Belonging to HUF as the Appellant's Income:
The assessee raised a cross-objection, arguing that the agricultural income belonging to the Hindu Undivided Family (HUF) was incorrectly treated as the appellant's individual income. However, the Tribunal did not delve into this issue in detail, as the main appeal was set aside for a fresh assessment.

Conclusion:
The Tribunal concluded that the CIT(A) did not follow the proper procedure under Rule 46A while admitting additional evidence. The Tribunal restored the matter to the AO for a de novo assessment, ensuring that the AO is given a reasonable opportunity to verify the additional evidence. Consequently, the Revenue's appeal was allowed for statistical purposes, and the assessee's cross-objection was dismissed as academic.