Facts of the Case

The assessee, Shri Ganesh Bio Diesel Kisan Sewa Kendra, filed its return of income declaring a total income of Rs. 3,240 for Assessment Year 2017-18. The case was selected for scrutiny, and notices under Sections 143(2) and 142(1) of the Income Tax Act, 1961 were issued. Subsequently, jurisdiction was transferred to ITO Ward 4(3)(3), Kasganj.

Due to non-compliance with several notices, the Assessing Officer completed the assessment under Section 144 (best judgment assessment). During demonetization, the assessee had deposited cash amounting to Rs. 27,07,090 in its bank account, out of which Rs. 25,04,000 consisted of demonetized specified bank notes. In the absence of satisfactory explanation, the AO treated this amount as unexplained money under Section 69A and taxed it under Section 115BBE. Penalty under Section 272A(1)(d) was also levied.

The assessee contended that it operated a petrol pump and was legally permitted to accept specified bank notes during the demonetization period. The CIT(A) dismissed the appeal summarily by relying on the judgment of the Madhya Pradesh High Court in PCIT v. Regent Beers & Wines Ltd. The assessee then approached the ITAT.

Additionally, the assessee requested remand for reassessment with face-to-face hearing, citing inability to properly represent the case under the faceless scheme.

 

Issues Involved

  1. Whether cash deposits made in demonetized currency by a petrol pump during the demonetization period could be treated as unexplained money under Section 69A.
  2. Whether the assessment completed under Section 144 without proper consideration of the assessee’s business nature was justified.
  3. Whether the assessee was entitled to a face-to-face hearing instead of faceless proceedings.
  4. Whether the CIT(A) was justified in dismissing the appeal without independent findings.

 

Petitioner’s Arguments (Assessee)

  • The cash deposits represented genuine business receipts from sale of fuel and lubricants.
  • Petrol pumps were specifically permitted by the Government to accept demonetized currency during the notified period.
  • Therefore, deposits in specified bank notes could not be treated as unexplained income.
  • The assessee also claimed inability to properly present the case under the faceless assessment scheme and sought physical hearing before the jurisdictional AO.

 

Respondent’s Arguments (Revenue)

  • The assessee failed to comply with statutory notices and did not furnish required details during assessment proceedings.
  • In the absence of supporting evidence, the AO rightly invoked Section 69A and completed best judgment assessment under Section 144.
  • The CIT(A) upheld the assessment relying on judicial precedent.

 

Court Order / Findings (ITAT Allahabad)

  • Under the faceless assessment scheme, physical hearings are allowed only in notified categories; hence, the ITAT cannot direct that a case be heard in face-to-face mode. The additional ground seeking such relief was rejected.
  • However, the Tribunal noted that the assessee had specifically pleaded that it operated a petrol pump and that acceptance of specified bank notes during demonetization was permitted by the Government.
  • The AO had not examined this crucial aspect due to lack of compliance by the assessee.
  • In the interest of justice, the matter was restored to the Assessing Officer for fresh (de novo) assessment.
  • The assessee was directed to fully cooperate and produce books of account to demonstrate that the deposits were derived from genuine fuel sales.

 

Important Clarification

  • The Tribunal did not grant relief on merits but remanded the case for fresh verification.
  • It clarified that faceless assessment is the norm unless specifically exempted by CBDT notifications.
  • Assessees claiming that demonetization deposits arise from permitted business transactions must substantiate such claims with proper books, records, and evidence.
  • Non-compliance during assessment can lead to adverse inference, but authorities must still examine material facts relevant to the nature of business.

 

Link to download the order -  https://www.mytaxexpert.co.in/uploads/1771221956_SHRIGANESHBIODIESELKISANSEWAKENDRAETAHVS.INCOMETAXOFFICERWARD433KASGANJKASGANJ.pdf

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.