2021 (1) TMI 457 - AT - Income Tax

Unexplained cash deposits in Standard Chartered Bank - unexplained investment and income from undisclosed source - HELD THAT - Assessee had duly substantiated on the basis of supporting documentary evidence that was filed with the lower authorities the availability of cash with him on 28.03.2007 i.e. on refund of earnest money pursuant to cancellation of the 'agreement', dated 09.01.2005. Although, the CIT(A) in the course of the appellate proceedings had forwarded the additional documentary evidence that was filed by the assessee in order to support his claim as regards the source of the cash deposits of ₹ 18 lac in his bank account with Standard Chartered Bank, Jalandhar, however, we find that there is no whisper of any rebuttal of the said claim of the assessee in the 'remand report' dated 02/03.12.2016 filed by the A.O. If the A.O. in the course of the remand proceedings would had any doubts as regards the veracity of the aforesaid claim of cancellation of the 'agreement, dated 09.01.2005, then he would have cross-verified the same and/or called for further details from the assessee. In the backdrop of our aforesaid observations, we are unable to persuade ourselves to subscribe to the view taken by the CIT(A) that the assessee had failed to substantiate the availability of funds with him pursuant to the cancellation of the aforesaid 'agreement', dated 09.01.2005. Assessee had sufficient amount available with him on 28.03.2007 for making of cash deposits of ₹ 9 lacs each in his bank account with Standard Chartered Bank, Jalandhar on 04.04.2007 and 05.04.2007, therefore, the same could not have been added as an unexplained investment in his hands - Decided in favour of assessee.

Issues Involved:
1. Legality of ex-parte assessment under Section 144 of the Income Tax Act.
2. Justification of the addition of ?18,00,000 as unexplained investment.
3. Sufficiency of opportunity provided to the assessee to present additional evidence.
4. Validity of interest charges under Sections 234A, 234B, and 234C.
5. Procedural adherence to the pronouncement of the order beyond 90 days due to exceptional circumstances.

Detailed Analysis:

1. Legality of Ex-parte Assessment under Section 144 of the Income Tax Act:
The assessee challenged the ex-parte assessment order passed by the Assessing Officer (AO) under Section 144, arguing that it was done without affording sufficient opportunity of being heard. The AO had observed cash deposits of ?18,00,000 in the assessee's bank account with Standard Chartered Bank, Jalandhar, which were treated as unexplained investments due to the absence of any explanation from the assessee. The CIT(A) upheld the AO's decision, stating that the assessee failed to furnish the requisite information during the assessment proceeding. However, the Tribunal noted that the assessee had provided additional documentary evidence during the appellate proceedings, which was not properly considered by the CIT(A).

2. Justification of the Addition of ?18,00,000 as Unexplained Investment:
The assessee claimed that the cash deposits were from the refund of earnest money of ?25 lacs, which was initially given for the purchase of a property. The Tribunal examined the documentary evidence, including the agreement dated 09.01.2005 and its cancellation on 28.03.2007, which substantiated the source of the cash deposits. The Tribunal found that the CIT(A) failed to acknowledge the cancellation terms mentioned on the backside of the agreement, which were signed by both parties and witnessed by a third party. The Tribunal concluded that the assessee had duly substantiated the availability of cash and vacated the addition of ?18,00,000 made by the AO.

3. Sufficiency of Opportunity Provided to the Assessee to Present Additional Evidence:
The Tribunal observed that the CIT(A) had forwarded the additional evidence to the AO for examination and called for a remand report. The AO did not raise any objections or provide adverse comments regarding the additional evidence. The Tribunal found that the CIT(A) did not properly consider the additional evidence, which clearly substantiated the source of the cash deposits. Hence, the Tribunal concluded that the assessee was not given a fair opportunity to present his case.

4. Validity of Interest Charges under Sections 234A, 234B, and 234C:
The assessee contended that the interest charges under Sections 234A, 234B, and 234C were not sustainable. However, the Tribunal did not specifically address this issue in detail, as the primary focus was on the unexplained investment addition.

5. Procedural Adherence to the Pronouncement of the Order Beyond 90 Days Due to Exceptional Circumstances:
The Tribunal addressed the procedural issue of pronouncing the order beyond 90 days from the date of hearing. It referred to the exceptional circumstances due to the COVID-19 pandemic and the nationwide lockdown, which disrupted the judicial work. The Tribunal cited the Supreme Court's and Bombay High Court's orders extending the limitation period during the lockdown. It concluded that the period during which the lockdown was in force should be excluded for computing the 90-day time limit for pronouncement of orders, thus justifying the delay in pronouncing the order.

Conclusion:
The Tribunal allowed the appeal filed by the assessee, vacating the addition of ?18,00,000 as unexplained investment and setting aside the order of the CIT(A). The Tribunal emphasized the importance of considering additional evidence and providing a fair opportunity to the assessee. The procedural delay in pronouncing the order was justified due to the exceptional circumstances of the COVID-19 pandemic.

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