2025 (5) TMI 2093 - AT - Income Tax

Addition u/s 68 r.w.s. 115BBE - unexplained cash deposit made in the bank account - existence of two PAN with the assessee - HELD THAT - There is nothing brought on record to demonstrate that one of the PAN has been surrendered by the assessee after coming to his knowledge of there being two PAN in his name. The only document furnished is of requesting the bank to update the regular PAN which is made by the assessee after passing of the impugned assessment order with the bank. Even if the submissions made by the assessee have to be considered that part of the deposit of cash relates to business receipts on account of data processing fees and sale of leather items there is no documentary evidence to establish such a fact. In respect of claim that the balance amount other than the business receipts is out of saving of the assessee and his spouse there is nothing to substantiate the claim justifying the savings available with the assessee and his spouse. Perusal of the bank statement available in the paper book also does not bring any clarity as to frequency and nature of transactions reflected in the said bank statement. The submissions made by the assessee are not adequate and evasive in nature. We also take note of provisions u/s.139A of the Act whereby subsection (7) provides that no person who has already been allotted a PAN under the new series shall apply obtain or possess another PAN. In the present case assessee holds two PAN and has not brought on record any documentary evidence of surrendering one of the two PAN possessed by him which is claimed to have been inadvertently allotted to him. Detailed exercise under taken by CIT(A) including calling of remand report from the Ld.AO we do not find any reason to interfere with the findings arrived at by Ld.CIT(A). Additions made towards deposit of cash in Standard Chartered Bank having another PAN as stated by the assessee remains unexplained and therefore is sustained. Accordingly grounds raised by the assessee are dismissed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Tribunal in this appeal are:

(a) Whether the addition of Rs. 12,02,500/- under section 68 read with section 115BBE of the Income-tax Act, 1961 (the Act) on account of unexplained cash deposits in the assessee's bank account was justified, considering the explanations and documents submitted by the assessee.

(b) Whether the addition to the extent of Rs. 6,49,430/- representing business receipts was rightly made, or whether it amounts to double taxation since the same amount was declared as business income in the Profit and Loss Account.

(c) Whether the invocation of section 68 of the Act was erroneous in the facts of the case, particularly regarding the unexplained cash deposits.

(d) Whether the Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) [CIT(A)] erred in rejecting the assessee's explanation that part of the cash deposit was from business receipts and the balance from personal and spouse's savings.

(e) Whether the CIT(A) erred in refusing admission of additional evidence under Rule 46A of the Income Tax Rules, 1962, especially when the assessee claimed not to have received the statutory notices under sections 143(2) and 142(1) of the Act.

(f) Whether the reassessment completed under section 144 of the Act was valid, given the alleged non-receipt of notices and the resultant lack of opportunity to the assessee to produce evidence.

(g) Whether the CIT(A) erred in holding that the assessee did not surrender the second PAN ("AIVPM1766C") which was erroneously furnished to the bank, despite the claim that this PAN was deactivated and not in use.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (a), (b), (c) & (d): Legitimacy of addition under section 68 r.w.s 115BBE on unexplained cash deposits including business receipts

The legal framework involves section 68 of the Income-tax Act, which deals with unexplained cash credits, and section 115BBE, which prescribes tax on unexplained income or cash credits. The AO relied on the Annual Information Report (AIR) data showing cash deposits of Rs. 12,02,500/- in the assessee's bank account. Since the assessee did not file return for the relevant year initially and failed to satisfactorily explain the source of the deposits, the AO issued notice under section 148 and proceeded with reassessment.

The assessee claimed that Rs. 6,49,430/- of the deposits represented business receipts-Rs. 2,70,480/- as data processing fees and Rs. 3,78,950/- as gross sales of leather items-and the balance Rs. 5,53,070/- was from personal and spouse's savings. However, no documentary evidence such as bills, invoices, or work completion certificates were furnished to substantiate business income. The AO's remand report emphasized the absence of cogent material to verify the source of spouse's cash, the illogical nature of withdrawing cash only to redeposit it, and lack of documentary proof for cash sales and data processing fees.

The CIT(A) considered the remand report and the assessee's rejoinder but found no corroborative evidence to support the claims. The CIT(A) also noted that the assessee had not surrendered the second PAN used in the bank account, which raised further doubts on the genuineness of the transactions.

The Tribunal observed that the assessee failed to provide any documentary evidence to establish the business receipts or the savings claimed. The bank statement did not clarify the nature or frequency of transactions. The Tribunal also highlighted section 139A(7) of the Act, which prohibits possession of multiple PANs, noting the assessee's failure to surrender the second PAN despite its deactivation claim. The Tribunal concluded that the additions under section 68 r.w.s 115BBE were justified as the cash deposits remained unexplained.

Issue (e): Admission of additional evidence under Rule 46A

The assessee contended that the CIT(A) erred in refusing to admit additional evidence under Rule 46A, as the assessee was not in receipt of notices under sections 143(2) and 142(1), which had prevented the production of evidence explaining the cash deposits. The legal principle under Rule 46A allows admission of additional evidence if the appellant was prevented by sufficient cause from producing it earlier.

The Tribunal found that the assessee did not substantiate the claim of non-receipt of notices with any material evidence. Furthermore, the assessee's failure to produce evidence despite ample opportunity during reassessment and appellate proceedings indicated no sufficient cause for admission of additional evidence. Thus, the Tribunal upheld the CIT(A)'s decision to reject the additional evidence.

Issue (f): Validity of reassessment under section 144 without proper notice

The assessee argued that the reassessment order under section 144 was passed to the best of AO's judgment without proper notice, depriving the assessee of opportunity to produce evidence. The legal requirement is that the AO must issue proper notices under sections 143(2) and 142(1) before passing such an order.

The Tribunal noted the assessee's failure to prove non-receipt of notices. The record indicated that notices were issued, and the assessee was given opportunities to explain the source of deposits. The Tribunal held that the reassessment was valid and not vitiated by lack of notice or opportunity.

Issue (g): Non-surrender of second PAN and its implications

The assessee claimed that the PAN "AIVPM1766C" was deactivated and not in use, and that the valid PAN "AQAPK7595C" was regularly used for filing returns. The CIT(A) and Tribunal found that the assessee had not surrendered the second PAN as required under section 139A(7) of the Act, which prohibits possession of multiple PANs. The Tribunal emphasized that the mere submission of a letter to the bank to update the PAN after the assessment order was insufficient to negate the existence of two PANs during the assessment year.

This failure undermined the assessee's credibility and supported the conclusion that the cash deposits in the bank account linked to the second PAN were unexplained.

3. SIGNIFICANT HOLDINGS

The Tribunal held:

"Considering the overall factual matrix, the additions made towards deposit of cash in Standard Chartered Bank having another PAN as stated by the assessee, remains unexplained and therefore, is sustained."

It was established that possession of two PANs without surrendering one contravenes the statutory provisions under section 139A(7) and affects the credibility of the assessee's explanation.

The Tribunal upheld the addition under section 68 read with section 115BBE on unexplained cash deposits, rejecting the claim of double taxation since the purported business income was not substantiated by documentary evidence.

The Tribunal affirmed the validity of reassessment under section 144, noting the absence of proof of non-receipt of statutory notices and adequate opportunity provided to the assessee.

Admission of additional evidence under Rule 46A was properly declined due to lack of sufficient cause.

In sum, the Tribunal dismissed the appeal, sustaining the additions and confirming the order of the CIT(A).