2023 (1) TMI 914 - AT - Income Tax

Addition u/s 68 - cash deposited in bank account unexplained - HELD THAT - Assessee was not provided adequate opportunity by the ld. CIT(A) while disposing off the case. It will be in the interest of equity and justice to restore the matter to the file of the AO to verify the revised computation filed by the assessee before us and give the relief in accordance with law. The assessee is also directed to produce the documentary evidences concerning the issue in question and will cooperate the AO. Thus the appeal of the assessee is allowed for statistical purposes.

Summary

Issues Involved:
1. Violation of the principle of faceless appeal.
2. Validity of the order passed by the AO.
3. Invocation of Section 69 instead of Section 68 by the AO.
4. Sustaining addition of Rs. 1,59,789/- for unexplained cash deposits.
5. Analysis of the nature of transactions and principles of natural justice.
6. Invocation of Section 69A by the AO.
7. Erroneous and irrelevant findings by the CIT(A).
8. Levy of interest under Sections 234A, 234B, and 234C.
9. Initiation of penalty proceedings under Section 271(1)(c).

Detailed Analysis:

1. Violation of the Principle of Faceless Appeal:
The assessee contended that the CIT(A) violated the principle of faceless appeal, which aims to ensure justice for honest taxpayers and avoid unnecessary litigation. The appeal process should be conducted in an honest and judicial manner.

2. Validity of the Order Passed by the AO:
The assessee challenged the validity of the order passed by the AO, which was upheld by the CIT(A), NFAC. The AO made an addition of Rs. 11,59,789/- under Section 68 of the Income Tax Act, 1961, towards unexplained cash deposits in the bank accounts.

3. Invocation of Section 69 Instead of Section 68 by the AO:
The CIT(A), NFAC, was criticized for invoking Section 69 of the Act instead of Section 68, as applied by the AO. The assessee argued that this substitution was erroneous.

4. Sustaining Addition of Rs. 1,59,789/- for Unexplained Cash Deposits:
The CIT(A) sustained the addition of Rs. 1,59,789/- for cash deposits in the bank account, despite the assessee providing explanations and evidence regarding the nature and source of these deposits. The assessee claimed that the cash deposits were from LIC premium collections, supported by the authorization letter from LIC and details from the Premium Collection Portal.

5. Analysis of the Nature of Transactions and Principles of Natural Justice:
The assessee argued that the CIT(A) failed to analyze the nature of transactions judiciously and sustained the addition in a hypothetical manner, violating the principles of natural justice. The AO observed discrepancies in the cash book, noting that the cash balance was less than the deposited amount on 38 days, totaling Rs. 11,59,789/-. The assessee explained that temporary cash borrowings from friends or relatives were not recorded in the cash book, but failed to provide details of these borrowings.

6. Invocation of Section 69A by the AO:
The CIT(A) invoked Section 69A of the Act for sustaining the addition, despite the AO not making a case for an addition under this section. The CIT(A) held that the assessee failed to provide a satisfactory explanation for the cash deposits, making the amount liable for addition as unexplained money.

7. Erroneous and Irrelevant Findings by the CIT(A):
The assessee claimed that the CIT(A) made erroneous and irrelevant findings, leading to arbitrary additions and causing harassment and inconvenience. The CIT(A) dismissed the grounds of appeal, sustaining the addition of Rs. 11,59,789/-.

8. Levy of Interest under Sections 234A, 234B, and 234C:
The assessee disputed the levy of interest under Sections 234A, 234B, and 234C, but did not provide specific contentions during the appellate proceedings. The CIT(A) held that the levy of interest is mandatory upon satisfying the conditions specified in the respective sections and dismissed this ground of appeal.

9. Initiation of Penalty Proceedings under Section 271(1)(c):
The assessee contested the initiation of penalty proceedings under Section 271(1)(c), arguing that no prejudice is caused by mere initiation. The CIT(A) dismissed this ground, stating that penalty proceedings are separate and not automatic after initiation.

Conclusion:
The appellate tribunal found that the assessee was not provided adequate opportunity by the CIT(A) and restored the matter to the AO for verification of the revised computation and documentary evidence. The appeal was allowed for statistical purposes, directing the AO to give relief in accordance with the law, and the assessee to cooperate and produce relevant evidence. The appeal was pronounced in the open Court on 20/01/2023.