On February 20, 2020, Suresh Kumar of Delhi filed an appeal against the order dated December 5, 2019, passed by the Commissioner of Income-tax (Appeals) [CIT(A)], New Delhi. The case pertained to the assessment year 2011-12 and involved a dispute over the addition of Rs. 25 lacs made by the Income Tax Officer (ITO), Ward-37(1), New Delhi, on account of cash deposits in the assessee’s bank account. The original assessment order was issued under Section 144 read with Section 147 of the Income Tax Act, 1961.
Appellant: Suresh Kumar, Delhi
Respondent: ITO, Ward-37(1), New Delhi
Assessment Year: 2011-12
Case Filed On: February 20, 2020
Order Type: Final Tribunal Order
Date of Order: May 18, 2021
Date of Pronouncement: May 18, 2021
The appellant, Suresh Kumar, represented himself, while the respondent was represented by Shri R.K. Gupta, Senior Departmental Representative (DR).
The case arose when the assessee, Suresh Kumar, made a cash deposit of Rs. 25 lacs in his savings bank account with State Bank of India during the financial year 2010-11, relevant to the assessment year 2011-12. Based on Annual Information Return (AIR) information, the case was selected for scrutiny assessment. Records indicated that the assessee had not filed his income tax return (ITR) for the assessment year 2011-12, prompting the issuance of a notice under Section 148 of the Income Tax Act, 1961, on March 29, 2018. Despite the notice, the assessee did not file a return of income for the assessment year 2011-12.
Several statutory notices were issued under Section 142(1) of the Act, fixing dates for hearings, but the assessee failed to respond or appear. Consequently, a penalty show cause notice under Section 271(1)(b) was issued, followed by a final show cause notice under Section 144 of the Act. Despite these notices, there was no compliance from the assessee. The Assessing Officer (AO) proceeded to complete the assessment on the merits based on the available material, resulting in the addition of Rs. 25 lacs to the assessee’s income.
Aggrieved by the AO’s order, the assessee appealed to the CIT(A), who, after considering the submissions, dismissed the appeal. The CIT(A) upheld the addition, concluding that the assessee failed to provide a satisfactory explanation for the cash deposits.
The assessee raised the following grounds of appeal before the Income Tax Appellate Tribunal (ITAT):
Suresh Kumar argued that the CIT(A) failed to admit additional evidence that was material for the adjudication of the case. He contended that the principles of natural justice were violated as he was not given a fair opportunity to present his case. The appellant requested the ITAT to remand the matter back to the AO after admitting the additional evidence.
The respondent’s representative, Shri R.K. Gupta, supported the orders of the lower authorities and argued that the addition was justified based on the material available on record. He contended that the assessee repeatedly failed to comply with statutory notices and did not provide any credible explanation for the cash deposits.
The case was heard on April 8, 2021, via video conferencing by a bench comprising Shri Kul Bharat, Judicial Member. After considering the arguments and evidence presented, the tribunal observed that the CIT(A) had rejected the request for admission of additional evidence. However, the ITAT noted that the additional evidence was not available at the time of the assessment proceedings, and the principles of natural justice warranted its consideration.
The tribunal set aside the impugned order and restored the assessment to the AO, directing the AO to consider the additional evidence after giving due opportunity to the assessee and frame the assessment afresh. The grounds raised by the assessee were allowed for statistical purposes.
The decision in ITA No.865/DEL/2020 highlights the importance of the principles of natural justice and the need for fair opportunity in tax proceedings. The case underscores the necessity for taxpayers to comply with statutory notices and provide timely responses to avoid adverse assessments. It also emphasizes the role of additional evidence in ensuring a just and fair assessment process.
This case has broader implications for taxpayers and tax professionals, particularly concerning the treatment of unexplained cash deposits and the importance of adhering to procedural requirements. The key takeaways include:
This section provides a detailed analysis of the judicial precedents cited during the case, their implications, and how they influenced the tribunal’s decision.
The principles of natural justice mandate that individuals should have a fair opportunity to present their case and defend themselves against any adverse actions. This principle was central to the tribunal’s decision to remand the case back to the AO for fresh assessment, ensuring that the assessee had the chance to present additional evidence.
Section 69 of the Income Tax Act deals with unexplained investments and provides for the addition of such investments to the income of the taxpayer. However, the tribunal noted that cash deposits in a savings account do not fall under the purview of undisclosed investments, highlighting the need for precise application of tax provisions.
The case of ITA No.865/DEL/2020 serves as an important case study for understanding the complexities of tax compliance, particularly concerning unexplained cash deposits and the principles of natural justice. Taxpayers and tax professionals must prioritize timely compliance with statutory requirements, maintain robust documentation, and stay informed about relevant judicial precedents. These practices will help ensure accurate tax filings, defend against potential additions, and achieve favorable outcomes in tax litigation.
ITA No.865/DEL/2020: Suresh Kumar Challenges Addition of Rs. 25 Lacs
Manage the increasing number of hearings effortlessly by leveraging the legal AI revolution We are India's Leading revolutionary AI-powered legal platform where you can get enough insights into top cases and judgements.
Research Platform