2025 (1) TMI 1200 - AT - Income Tax

Unexplained cash deposits - treating the deposits with the bank unexplained - HELD THAT - During the course of appeal proceedings the assessee had filed details of land records before the ld. CIT(A) as well as bank statements. It was claimed by the assessee before the ld. CIT(A) that cash deposit to the tune of Rs. 10 lakhs was arising either out of cash withdrawals from the bank accounts and/or withdrawal from KCC(Kisan Credit Card)and/or from the sale of crops. Assessee had also enclosed bank statements and land records. Assessee claimed that his only son Mrityunjay was looking after the record keeping who was suffering from prolonged illness (who ultimately died) and the assessee was not aware of the assessment proceedings. The assessee being an aged person and illiterate farmer was not having smart phone and the assessee was not aware of the proceedings before the AO. Assessee also claimed that the assessee s only source of income is from agriculture which is exempt from tax. Despite all the information as well evidences furnished by the assessee CIT(Appeals) did not consider the aforesaid evidences in proper perspective which were in the nature of additional evidences filed for the first time before ld. CIT(A) as the CIT(A) did not made any verification and/or enquiry wrt additional evidences filed by the assessee nor does the CIT(A) called for any remand report from the AO and dismissed the appeal of the assessee. CIT(Appeals) of his own even did not deem it necessary to conduct any enquiry/verification as is required u/s. 250(4) of the Act despite that land records as well bank statements were filed by the assessee before ld. CIT(A) as additional evidences nor it was considered fit by ld. CIT(A) to direct AO to make necessary verifications /enquiries as to the claims contentions and additional evidences filed by the assessee. contentions and additional evidences filed by the assessee ought to have been admitted by the ld. CIT(A) and proper verification/enquiry ought to have been done by the CIT(A) as is required u/s 250(4) or the CIT(A) ought to have directed the Assessing Officer to make proper enquiry with respect to additional evidence filed by the assessee such as records of land holding details of sale of crops bank statements etc. and furnish remand report to the ld. CIT(A)(Rule 46A) - Appeal of the assessee is allowed for statistical purposes.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment include:

• Whether the addition of Rs. 10 lakhs by the Assessing Officer (AO) as unexplained cash deposits was justified.
• Whether the Commissioner of Income-tax (Appeals) [CIT(A)] properly considered the evidence and contentions presented by the assessee.
• Whether the CIT(A) erred in not conducting further inquiry or directing the AO to verify the additional evidence presented by the assessee.
• Whether the procedural requirements under Sections 250(4) and 250(6) of the Income Tax Act were adhered to in the appellate proceedings.

ISSUE-WISE DETAILED ANALYSIS

1. Justification of the Addition of Rs. 10 Lakhs as Unexplained Cash Deposits

• Legal Framework and Precedents: The assessment was conducted under Section 144 of the Income-tax Act, which allows for a best judgment assessment when the assessee fails to comply with notices. The unexplained cash deposits were treated as income under the provisions of the Act.
• Court's Interpretation and Reasoning: The Tribunal noted that the AO had issued multiple notices under Section 142(1), which the assessee failed to respond to. The AO proceeded with an ex-parte assessment, treating the cash deposits during the demonetization period as unexplained income.
• Key Evidence and Findings: The AO relied on information from the AIR/OCM indicating cash deposits of Rs. 10 lakhs during the demonetization period. The assessee claimed these were from agricultural income and previous withdrawals.
• Application of Law to Facts: The Tribunal observed that the AO did not have the benefit of the assessee's explanation or evidence during the assessment proceedings due to non-compliance by the assessee.
• Treatment of Competing Arguments: The assessee argued that the deposits were from agricultural income, which is exempt, and previous cash withdrawals. The CIT(A) did not adequately consider these explanations or the evidence provided.
• Conclusions: The Tribunal found that the CIT(A) had not properly evaluated the evidence or conducted necessary inquiries, leading to the decision to set aside the appellate order.

2. Consideration of Evidence and Conduct of Further Inquiry by CIT(A)

• Legal Framework and Precedents: Under Sections 250(4) and 250(6) of the Income Tax Act, the CIT(A) is required to make further inquiries if necessary and provide a reasoned order.
• Court's Interpretation and Reasoning: The Tribunal noted that the CIT(A) dismissed the appeal without directing further inquiry or considering additional evidence, such as land records and bank statements.
• Key Evidence and Findings: The assessee provided evidence of agricultural land holdings and claimed that the deposits were from agricultural proceeds and previous withdrawals.
• Application of Law to Facts: The Tribunal emphasized the need for the CIT(A) to verify the additional evidence and consider the assessee's explanations, which were not adequately addressed in the appellate proceedings.
• Treatment of Competing Arguments: The Tribunal found merit in the assessee's argument that the CIT(A) failed to conduct a proper inquiry or seek a remand report from the AO.
• Conclusions: The Tribunal concluded that the CIT(A)'s failure to conduct necessary inquiries or consider additional evidence warranted setting aside the appellate order for de novo adjudication.

SIGNIFICANT HOLDINGS

• Preserve Verbatim Quotes of Crucial Legal Reasoning: The Tribunal stated, "The appellate order of the CIT(Appeals) is not sustainable in the eyes of law and the said order is set aside, and the matter is restored back to the file of ld. CIT(Appeals) for de novo adjudication of the appeal of the assessee."
• Core Principles Established: The judgment reinforces the principle that appellate authorities must conduct thorough inquiries and consider all evidence before making a determination, especially when new evidence is presented.
• Final Determinations on Each Issue: The Tribunal set aside the appellate order and remanded the case back to the CIT(A) for fresh adjudication, emphasizing the need for proper inquiry and consideration of additional evidence.