Facts of the Case

The assessee did not file her return of income for Assessment Year 2017-18. The Income Tax Department issued a notice under section 142(1) of the Income-tax Act, 1961, requiring the assessee to file a return of income. As there was no compliance, the Assessing Officer obtained bank account details under section 133(6) from State Bank of India, Jagdishpur Branch. It was noticed that the assessee had made cash deposits aggregating to ₹16,50,000 during the period from 09.11.2016 to 31.12.2016. Since the assessee failed to explain the source of these deposits, the amount was treated as unexplained money under section 69A of the Act.

The assessee later admitted having business turnover of ₹1,26,88,021. The Assessing Officer computed business receipts after excluding cash deposits and further enhanced the turnover by estimating possible suppression of sales. Applying a net profit rate of 8%, the Assessing Officer determined additional business income and completed the assessment under section 144, assessing total income at ₹26,34,000.

 Issues Involved

  1. Whether cash deposits made during the demonetisation period could be treated as unexplained money under section 69A.
  2. Whether the ex-parte assessment framed under section 144 without adequate opportunity was legally sustainable.
  3. Whether the NFAC was justified in sustaining the addition under section 69A while deleting the estimated business income.

 Petitioner’s (Assessee’s) Arguments

The assessee contended that the proceedings were void ab initio as the notice under section 142(1) was not issued by the jurisdictional Assessing Officer. It was further argued that the assessee was a senior citizen, not technically proficient, and was unaware of notices uploaded on the e-portal. The assessee submitted that she was carrying on a small trading business and that the cash deposits were linked to business receipts, which were sufficient to cover the deposits made during the demonetisation period. It was also contended that section 69A could not be invoked where business receipts had already been accepted.

 Respondent’s (Revenue’s) Arguments

The Department opposed the condonation of delay in filing the appeal and also objected to the restoration of the matter to the file of the Assessing Officer. It was submitted that the assessee had failed to furnish documentary evidence to explain the cash deposits and had not complied with statutory notices during the assessment proceedings.

 Court Order / Findings

The Tribunal condoned the delay of 414 days in filing the appeal, considering the assessee’s status as an illiterate senior citizen and the reasons stated in the affidavit. On merits, the Tribunal observed that the assessment as well as the appellate order were ex-parte in nature. Considering the overall facts and circumstances, the Tribunal held that the assessee deserved one more opportunity to explain the source of cash deposits. Accordingly, the matter was restored to the file of the Assessing Officer with directions to provide reasonable opportunity of being heard and to decide the issue afresh in accordance with law.

 Important Clarification

The Tribunal clearly cautioned that the assessee must fully comply with the directions of the Assessing Officer in the set-aside proceedings. Failure to do so would empower the Assessing Officer to pass an order on the basis of material available on record, even on an ex-parte basis. The appeal was allowed for statistical purposes.

Link to download the order - https://www.mytaxexpert.co.in/uploads/1770627473_HUSHNJAHANAMETHIVS.INCOMETAXOFFICERAMETHIAMETHI.pdf 

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