2024 (12) TMI 145 - AT - Income Tax

Addition u/s 69A - cash deposit in the bank accounts (both the above bank accounts) during the demonetization period - HELD THAT - As incumbent upon the authorities below to have issued summons to Mr. Neeraj Kumar u/s. 131 or ought to have made enquiries u/s. 133(6) with said Neeraj Kumar, to unravel complete truth. It is true that the assessee did not participated in the assessment proceedings, but the assessee duly participated in appellate proceedings conducted by ld. CIT(A). The powers of CIT(Appeals) are co-terminus with the powers of the Assessing Officer including power of enhancement. It is also explained by the ld. Counsel for the assessee that no proceedings have been initiated u/s. 143(2) or 147 against said Neeraj Kumar and his return of income has been accepted by Revenue. In these circumstances, it is only in the case when said Mr. Neeraj Kumar disown the aforesaid transactions, the Revenue could have proceeded against the assessee. No merit in the addition being made in the hands of the assessee on account of cash deposited on 10.11.2016, 13.11.2016 and 29.11.2016 in the demonetization currency of Rs. 500/- and Rs. 1000/- in the bank account maintained with Union Bank of India, Railway Road, Kasganj, as the said bank account belongs to Mr. Neeraj Kumar, proprietor of Anurag Kumar Neeraj Kumar. The Revenue has also not filed any C.O. with ITAT, thus, the Revenue is not aggrieved with the appellate order passed by ld. CIT(A). This addition as was made by the AO and later sustained by ld. CIT(A) is not sustainable and directed to be deleted. Other deposits during the year, which in total are not exceeding Rs. 50,000/- . The assessee has owned up these cash deposits, and declaration has also been made in ITR filed with Revenue. The assessee has already declared income of Rs. 2,84,600/- in the return of income filed with the department. Under these facts and circumstances. There is no such adverse finding by the authorities below that the said cash deposits are not accounted for by the assessee. No merit in the addition being made in the hands of the assessee. Therefore, order deletion of the additions made by the AO as income in the hands of the assessee which was later sustained by ld. CIT(A). Addition in the hands of the assessee on account of presumptive scheme of taxation u/s 44AD , as the said deposits are also in the bank account of Neeraj Kumar namely Anurag Kumar Neeraj Kumar, and the said bank account is owned by Shri Neeraj Kumar - If the department wanted to proceed, It ought to have proceeded against Mr. Neeraj Kumar, wherein department could have invoked provisions of Section 143(2) and/or Section 148. The department also did not find it relevant to issue summons u/s 131 or make enquiry u/s 133(6) with said Mr. Neeraj Kumar. It is true that the assessee did not participated in the assessment proceedings, but the assessee duly participated in appellate proceedings conducted by ld. CIT(A). The power of ld. CIT(A) are co-terminus with the powers of the AO. It is not the case of the Revenue that the said Mr. Neeraj Kumar did not own the said deposits in the bank account. The Revenue has also not filed any C.O. with ITAT, thus, the Revenue is not aggrieved with the appellate order passed by ld. CIT(A). The Assessing Officer is directed to delete the additions in the hands of the assessee.

Summary

Issues Involved:

1. Condonation of delay in filing the appeal.
2. Addition of Rs. 7,11,500/- under Section 69A of the Income-tax Act.
3. Treatment of bank account ownership and related cash deposits.
4. Addition of Rs. 4,97,810/- as net profit on a presumptive basis under Section 44AD.
5. Compliance with procedural requirements during assessment and appellate proceedings.

Issue-wise Detailed Analysis:

1. Condonation of Delay:

The appeal was filed 174 days late. The assessee argued that the delay was due to non-communication of the CIT(A) order by the counsel's staff, as the email ID registered was not monitored. The Tribunal condoned the delay, emphasizing that the assessee should not be penalized for procedural lapses during the transition to electronic communication. The Tribunal cited the principle that substantial justice should prevail over technicalities, referencing the Supreme Court decision in Collector Land Acquisition, Anantnag & Ors. vs Mst. Katiji & Ors.

2. Addition of Rs. 7,11,500/- under Section 69A:

The Assessing Officer (AO) added Rs. 7,11,500/- as unexplained money under Section 69A due to cash deposits in demonetized currency in two bank accounts. The assessee contended that one account (No. 384601010011133) belonged to his brother's proprietorship, M/s Anurag Kumar Neeraj Kumar, and not to him. The Tribunal found that the account was indeed owned by the brother, supported by a bank certificate and the brother's tax return, which declared the turnover and availed of the presumptive taxation scheme. The Tribunal concluded that the department should have proceeded against the brother, not the assessee, and ordered the deletion of the addition.

3. Treatment of Bank Account Ownership and Related Cash Deposits:

The Tribunal examined the ownership of the bank account No. 384601010011133, which was in the name of M/s Anurag Kumar Neeraj Kumar. The assessee's brother, Neeraj Kumar, was identified as the proprietor. The Tribunal noted that the department did not issue summons or conduct inquiries with Neeraj Kumar, who had declared the transactions in his tax return. The Tribunal determined that the addition was wrongly made in the assessee's hands and should be deleted.

4. Addition of Rs. 4,97,810/- as Net Profit on Presumptive Basis:

The AO applied an 8% profit rate on deposits totaling Rs. 62,22,636/- in the bank accounts, treating it as the assessee's turnover. The Tribunal found that these deposits were in the brother's account, and the brother had already declared the turnover under Section 44AD. The Tribunal held that the department should have scrutinized the brother's return if necessary, rather than attributing the income to the assessee. The addition was ordered to be deleted.

5. Compliance with Procedural Requirements:

The Tribunal noted that the assessee did not participate in the assessment proceedings but did engage during the appellate stage. The Tribunal emphasized that the CIT(A)'s powers are co-terminus with those of the AO, including the power of enhancement. The Tribunal criticized the department for not pursuing inquiries with Neeraj Kumar, which could have clarified the ownership and source of the deposits.

Conclusion:

The Tribunal allowed the appeal, directing the deletion of all additions made by the AO and sustained by the CIT(A). The Tribunal emphasized that the department should have proceeded against the correct party, Neeraj Kumar, and not the assessee. The decision underscores the importance of correctly identifying the taxpayer responsible for the income and ensuring procedural fairness during assessments.