2025 (5) TMI 1942 - AT - Income Tax

Addition u/s 69A and section 69C - CIT(A) dismissed the appeal filed by the assessee in the absence of any written submission and evidence being produced by the assessee against the additions made by the AO. HELD THAT - CIT(A) after considering the findings of the AO has dismissed the appeal filed by the assessee in the absence of any written submission and evidence filed by the assessee in response to various notices issued during the appellate proceedings. In the appeal before us also no one appeared for or on behalf of the assessee despite the fact that this appeal has been listed for hearing before the Tribunal on three occasions. Thus in the absence of any contradictory material being available on record we are of the considered view that the impugned order passed by the learned CIT(A) requires no interference - Appeal by the assessee is dismissed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Appellate Tribunal (AT) in this appeal are:

• Whether the Assessing Officer (AO) was justified in initiating reassessment proceedings under section 148 of the Income Tax Act, 1961, on the basis of unexplained cash deposits and withdrawals in the assessee's bank accounts for the assessment year 2018-19.
• Whether the additions made by the AO under sections 69A and 69C of the Act, treating the cash deposits and withdrawals as unexplained money and unexplained expenditure respectively, were legally sustainable in the absence of satisfactory evidence or explanation from the assessee.
• Whether the learned Commissioner of Income Tax (Appeals) [CIT(A)] was correct in dismissing the appeal filed by the assessee for failure to produce evidence or written submissions during the appellate proceedings.
• Whether the principles of natural justice and fair hearing were complied with, given the repeated non-appearance of the assessee before the authorities and the Tribunal.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Justification for Initiation of Reassessment Proceedings under Section 148

Relevant Legal Framework and Precedents: Section 148 of the Income Tax Act empowers the AO to reopen an assessment if there is reason to believe that income chargeable to tax has escaped assessment. Section 148A mandates issuance of a show cause notice before issuance of notice under section 148. The reopening must be based on tangible material or information indicating escapement of income.

Court's Interpretation and Reasoning: The AO issued a notice under section 148A after observing substantial cash deposits and withdrawals in the assessee's Federal Bank and South Indian Bank accounts. The assessee failed to respond to the show cause notice under section 148A. Consequently, the AO was justified in issuing notice under section 148 for reassessment.

Key Evidence and Findings: The AO noted cash deposits of INR 78,28,050 and withdrawals of INR 91,09,000 in Federal Bank account, and deposits of INR 29,20,670 and withdrawals of INR 29,42,000 in South Indian Bank account. The assessee did not file return of income and did not respond to notices under section 148A.

Application of Law to Facts: The AO's belief that income had escaped assessment was supported by the unexplained cash transactions and non-filing of returns, justifying reopening under section 148.

Treatment of Competing Arguments: The assessee claimed to be a small dealer in lottery tickets, with cash deposits arising from ticket sales. However, the AO found this explanation unsatisfactory due to lack of corroborative evidence.

Conclusion: The reopening of assessment under section 148 was legally valid and based on sufficient material.

Issue 2: Validity of Additions under Sections 69A and 69C

Relevant Legal Framework and Precedents: Section 69C deals with unexplained expenditure, allowing the AO to treat such expenditure as income if the assessee fails to satisfactorily explain the source. Section 69A deals with unexplained money, where unexplained cash deposits can be added to income.

Court's Interpretation and Reasoning: The AO found that the assessee failed to furnish names, PAN details, ledger accounts, or invoices of wholesale lottery ticket distributors. The certificate produced by the assessee was dated much later than the year under consideration and thus irrelevant. The AO treated the cash withdrawals as unexplained expenditure under section 69C and the cash deposits as unexplained money under section 69A.

Key Evidence and Findings: Absence of documentary evidence such as purchase invoices, PAN details of distributors, and ledger accounts. The certificate submitted was dated 20/01/2023, whereas the assessment year was 2018-19, thus not supporting the claim.

Application of Law to Facts: The failure to provide credible documentary evidence to substantiate the source of cash transactions justified the additions under sections 69A and 69C.

Treatment of Competing Arguments: The assessee's claim of being a lottery ticket dealer was not supported by evidence. The AO's reliance on lack of documentation and non-production of PAN details was upheld.

Conclusion: The additions under sections 69A and 69C were justified and sustainable.

Issue 3: Dismissal of Appeal by CIT(A) due to Non-Compliance by Assessee

Relevant Legal Framework and Precedents: Principles of natural justice require that an assessee be given opportunity to be heard and produce evidence. However, failure to respond to notices or appear can justify dismissal of appeal.

Court's Interpretation and Reasoning: The CIT(A) issued four notices to the assessee during appellate proceedings, all of which went unanswered. No written submissions or evidence were filed. The CIT(A) dismissed the appeal accordingly.

Key Evidence and Findings: Non-appearance of the assessee during appellate proceedings and failure to file any response or evidence.

Application of Law to Facts: The CIT(A) was justified in dismissing the appeal as the assessee failed to avail the opportunity to contest the additions.

Treatment of Competing Arguments: No arguments or submissions were made by the assessee at the appellate stage.

Conclusion: The dismissal of the appeal by the CIT(A) was appropriate.

Issue 4: Compliance with Principles of Natural Justice and Fair Hearing

Relevant Legal Framework and Precedents: The right to be heard is a fundamental principle. However, repeated non-appearance and non-compliance by a party can lead to ex-parte disposal.

Court's Interpretation and Reasoning: The assessee did not appear before the Tribunal despite three listings and did not file any application for adjournment. The Tribunal proceeded ex-parte and relied on material on record and submissions of the Departmental Representative.

Key Evidence and Findings: Repeated non-appearance and failure to respond to notices at all levels.

Application of Law to Facts: The Tribunal's ex-parte disposal was justified due to the assessee's inaction.

Treatment of Competing Arguments: None presented due to non-appearance.

Conclusion: Principles of natural justice were complied with to the extent possible; the assessee's failure to participate justified ex-parte disposal.

3. SIGNIFICANT HOLDINGS

The Tribunal held that:

"In the absence of any contradictory material being available on record, we are of the considered view that the impugned order passed by the learned CIT(A) requires no interference and, therefore, is upheld."

Core principles established include:

• Reassessment proceedings under section 148 are valid when based on credible material indicating escapement of income, especially when the assessee fails to respond to show cause notices under section 148A.
• Additions under sections 69A and 69C are sustainable where the assessee fails to provide satisfactory evidence or explanation regarding unexplained cash deposits and withdrawals.
• Failure to participate in appellate proceedings and non-production of evidence justifies dismissal of appeal by the CIT(A).
• Repeated non-appearance before the Tribunal permits ex-parte disposal without violating principles of natural justice.

Final determinations:

• The initiation of reassessment proceedings and subsequent additions under sections 69A and 69C were upheld.
• The dismissal of the appeal by the CIT(A) was confirmed.
• The appeal before the Tribunal was dismissed due to non-appearance and lack of evidence from the assessee.