Ajay Jain, CA for the Assessee. Meenakshi Vohra, Addl. CIT for the Revenue.

This is an appeal by the assessee against the order dated 18.10.2019 of the ld. CIT(A) Patiala. The following grounds have been raised in this appeal :

1. That the order of Learned Assessing Officer is bad, and against law and facts.

2. That the Learned Assessing Officer has wrongly made addition amounting to Rs. 20.00 Lakhs, without appreciating the fact that the assessee had deposited Rs. 10.00 Lakhs in cash in his bank account.

3. That the Learned Assessing Officer, is not justified in treating the bank deposit as income of the assessee as the deposit was made out of the sale proceeds of agricultural land.

4. That the appellant craves leave to add, amend, alter or withdraw any ground of appeal before final hearing.

2. The only grievance of the assessee in this appeal relates to the sustenance of addition of Rs. 20 lacs made by the AO. The facts of the case in brief are that the AO on the basis of information that the assessee had made cash deposits of Rs. 20 lacs with HDFC Bank during the Financial Year 2010-11 relevant to the assessment year under consideration initiated the proceedings within the meaning of Section 147 (of Income Tax Act, 1961) read with Section 148 (of Income Tax Act, 1961) (hereinafter referred to as ‘the Act’ ). Since no return of income was received in response to the notice u/s 148 (of Income Tax Act, 1961), the AO assessed the income of Rs. 20 lacs treating the same as undisclosed income.

3. Being aggrieved, the assessee carried the matter to the ld. CIT(A) and furnished the written submissions which has been incorporated in para 2 of the impugned order, which reads as under.

"Sub: Appellate proceedings in the case of Sh. Govinderjit Singh r/o village Hiana Kalna, Nabha A.Y. 2011-12 -PAN: CLVPS4520B Facts in brief:

Case of the appellant has been reopened to verify the cash deposit of Rs.20,00,000/- in his HDFC bank account. The appellant did not attend the assessment proceedings.

Accordingly, the learned assessing officer completed the assessment u/s 144 (of Income Tax Act, 1961) and charged the amount of Rs.20 Lakhs to tax as unexplained deposit whereas there is deposit of Rs. 10 Lakhs only.

Grounds of appeal

The Ld. Assessing Officer passed a non-speaking order and did not verify the information received by her under Non-filer System of the department from the concerned bank; order so passed deserves to be remanded back for disposal afresh.

1. It is submitted that the assessee is an agriculturist. A notice u/s 148 (of Income Tax Act, 1961) dated 30.03.2018 was issued to him for the A.Y. 2011-12. As per para 1.2 of the assessment order, case of the assessee has been re-opened to verify the source of cash deposits of Rs.20,00,000/- in HDFC Bank. As the appellant did not respond to the notices issued by the learned assessing officer, she completed the assessment ex-parte under the provisions of section 144 (of Income Tax Act, 1961) and charged the amount of cash deposit of Rs.20 Lakh in his HDFC Bank account as unexplained deposit.

2. It is submitted that the learned Assessing Officer passed a non-speaking order which does not disclose date-wise details of the cash deposits made by the assessee in his bank account. The learned Assessing Officer has concluded her assessment of assessee's income on the basis of vague, uncertain, indefinite and unclear information.

It is submitted the learned assessing officer without verifying the information received by her under Non-filer System of the department from the concerned bank, made an addition of Rs.20 Lakhs whereas the assessee has deposited cash amounting to Rs.10,00,000/-only on 18.03.2011 in his HDFC Bank a/c No. 01561000199117. A copy of the bank account is enclosed here with at page 4.

3. It is submitted that as per the provisions of section 144(1) (of Income Tax Act, 1961), the Assessing Officer, after taking into account all relevant material which the A.O has gathered, shall make the assessment of the total income or loss to the best of his Judgment and determine the sum payable by the assessee on the basis of such assessment. It is a trite law that though there is an element of guess work in a best judgment', it shall not be a wild one but shall have reasonable nexus to the available material and the circumstances of each case. It is submitted that the assessing officer has gathered information that the appellant had deposited Rs.20 Lakh in HDFC Bank but she has neither taken into account bank statement of the appellant on her record nor verify the cash deposit from the concerned bank to make the assessment of total income of the appellant.

Assessment order is not a speaking order as it does not disclose the detail of cash deposits. In this regard the appellant relies upon the following judgments:

Case Laws

CIT v. Ranicherra Tea Co. Ltd. [l994] 207 ITR 979 (Cal.) In this case, it was held that in making a best judgment assessment, the Assessing Officer does not possess absolute arbitrary authority to assess any figure he likes.

Although he is not bound by strict judicial principles, he should be guided by rules of justice, equity and good conscience. Though there is an element of guess work in a 'best judgment', it shall not be wild one but shall have reasonable nexus to the available material and circumstances of each case.

ITO v. Jitender Mehra (1995) 53 ITD 396 (Del-Trib.)

It was held that even ex-parte assessment made under section 144 (of Income Tax Act, 1961) must conform to rules of justice, equity and good conscience and cannot be arbitrary and capricious. There may be some guess work, but still there should be nexus between material available on record and income taken for assessment.

4. Reliance was placed on the following case laws :

1. CIT v. Ranicherra Tea Co. Ltd. [l994] 207 ITR 979 (Cal.)

2. ITO v. Jitender Mehra (1995) 53 ITD 396 (Del-Trib.) )

5. It was further submitted as under :

“4. It is submitted that notices are being issued to the assessee without verifying the facts from the concerned banks. A similar case has been reported in the daily Tribune dated 04.02.2019 that a notice has been issued by the income tax officer, Sangrur for cash transaction of Rs.1.3 crore to an assessee whereas he has not made any transaction in his account. Similarly, notices were issued by the Ld. A.O. Nabha in the following cases to verify cash deposits but after enquiry from the concerned banks, deposits were found at a very lower amount which shows that the data collecting agencies of the department are supplying figures of cash deposits which are much higher than the actual deposits:

Name of the assessee Case decided on

Amount to be verified Actual deposit

Sukhwinder Singh r/o village Hiana Kalana PAN: CTXPS9138K A.Y. 2011-12

09.10.2018 19,35,000 4,25,000

Jagtar Singh r/o v. Hiana Kalan PAN:CQGPS4969E A.Y. 2011-12

14.12.2018 67,10,000 16,77,220

Dayal Singh s/o Narata Singh, village Ramgarh PAN: DHDPS5123P

13.12.2018 55,51,000 32,51,000

Rajinder Kumar s/o Megh Raj v. Allowal PAN: BVHPK5816M A.Y. 2011-12

28.11.2018 26,00,000 3,95,000

Shri Bhan Jindal, Nabha PAN:AIQPJ7871C A.Y. 2011-12

26.12.2018 45,96,831 38,44,015

6. The aforesaid submission of the assessee was forwarded by the ld. CIT(A) to the AO for his comments. In response, the AO submitted as under :

“Kindly refer to your good-self's letter No. CIT(A)/PTA/2019-20/2398 dated 22.03.2019 on the above subject.

2. AT the outset, it is submitted that as per facts on record, the assessee is maintaining a bank account with HDFC bank during the F.Y. 2010-11, relevant to the A.Y. 2011-12. An information was received on AIR that the assessee during the period under reference has deposited an amount of Rs. 10,00,000/- in his bank account with HDFC Bank. Another information was also received through CIB that there is a deposit of Rs. 10,00,000/- in his bank account with HDFC Bank. On the basis of such NMS information, a notice under section 133(6) (of Income Tax Act, 1961) of the IT. Act was issued inter-alia asking the assessee to explain the source of deposit of Rs,20,00,000/- in his HDFC Bank account.

The notice was sent vide registered post and was not received back undelivered. As no communication was received from the assessee another show cause notice dated 05.01.2018 was again issued. However,this notice again remained un-complied with. In the interest of natural justice, a final opportunity was allowed to the assessee as per notice dated 13.03.2018 vide which a copy of the notice dated 28.11.2017, which was earlier sent through registered post, was also enclosed. The notice was duly served on the assessee.

Despite affording reasonable opportunity, the assessee failed to comply with the terms of notice issued on 28.11.2017, 05.01.2018 and 13.03.2018. Therefore, on the basis of information available on record, the proceedings within the meanings of section 147 (of Income Tax Act, 1961) were initiated accordingly, a notice under section 148 (of Income Tax Act, 1961) of the IT. Act dated 30.03.2018 vide RI_A RP 763089958IN which was not received back undelivered. However, no return of income was receive in response to such notice.

3. Subsequent to the initiation of proceedings under section 148 (of Income Tax Act, 1961) of the IT. Act and no receipt of return of income a notice under section 142(1) (of Income Tax Act, 1961) dated 13.06.2018 along with a show cause notice, requiring the assessee to furnish his return of income, was issued. However, the assessee refused to received the said notice, as is evident from the report of the Process Server dated 19.06.2018 on the notice itself. However, no compliance was made.

3.1 Again a show cause notice under section 142(1) (of Income Tax Act, 1961) dated 23.07.2018 was issued requiring the assessee to furnish his return of income. It was also made clear in the notice itself that failure to file the return of income and furnishing of requisite clarification/information and details supported with documentary evidence, the undersigned will be left with no alternate but to complete the assessment on the basis of facts available on record. However, no compliance was made.

3.2 Subsequently, another notice under section 142(1) (of Income Tax Act, 1961) dated 05.09.2018 was issued which was duly served on the assessee on 11.09.2018. In this notice reference of all the previous notices issued was mentioned and a last opportunity to furnish the return of income for the assessment year under consideration was given.

However, no compliance was made.

3.3 Another notice under section 142(1) (of Income Tax Act, 1961) dated 09.10.2018 was again issued but remained un-complied with.

3.4 Despite non-compliance of notices issued previously, as discussed above, a final show cause notice dated 01.11.2018 was issued and served on the assessee on 02.11.2018. In this notice it was proposed to make an addition of Rs.20,00,000/- in the absence of requisite clarifications and documents. However, this notice again remained un-complied with.

3.5 Though no further communication was justifiable due to non-compliance on the part of the assessee, but in the interest justice an opportunity as per notice under section 142(1) (of Income Tax Act, 1961) dated 22.11.2018 was issued fixing the case for 28.11.2018 which was served on the assessee never complied with the notices issued resulting in completion of assessment at the far end of the limitation period, as per order dated 05.12.2018 under section 144 (of Income Tax Act, 1961) of the IT. Act thereby making an addition of Rs.20,00,000/- as proposed in the show cause notice.

4. Being aggrieved of the order dated 05.12.2018 of the assessing officer, the assessee has preferred an appeal before your good-self which is under consideration. In his appeal the assessee has admitted the cash deposit of Rs.10,00,000/- on 18.03.2011 and has accordingly, made a request for confirming an addition of Rs.10,00,000/-, as against Rs.20,00,000/- made as per order dated 05.12.2018.In support of his contention, the assessee has also filed a copy of his bank statement of A/c No. 01561000199117 with HDFC Bank. As per the bank statement, this account was opened on 25.01.2011 and there is a cash deposit of Rs.10,00,000/-on 18.03.2011, as i evident from his bank statement. However, the assessee has not disclosed as to whether he is maintaining any other bank account except a bank account No.01561000199117 with HDFC Bank.

4.1 In his appeal filed before your good-self, the assessee has virtually admitted that he source of cash deposit in his bank account is unexplained. He further admitted the fact of non-compliance of notice received by him from time to time in the course of assessment proceedings. However, no plausible explanation has been given for noncompliance of such notice where the deposit of Rs.20,00,000/- in his bank account with HDFC Bank was confronted to him. Consequently, non-submission of return of income and requisite documents though the information of cash deposit of Rs.20,00,000/- was made available to him in the course of assessment proceedings was made available to him in the course of assessment proceedings does not authorize the assessee to agitate during appellate proceedings, the amount of addition made. In the light of these facts, there is no merit in his contention and the same is liable to be dismissed.

5. From the facts adduced above, it is evident that the assessee either continued to resort to non-compliance of notices despite affording of reasonable opportunities, from time to time, as discussed supra, or to establish the genuineness of the source of deposit in his bank account. As the assessee was deliberately avoiding the furnishing of requisite documents/details and failed to establish the genuineness of the cash deposit in his bank account, being left with no alternate, the assessment was ultimately completed at the fag end of the limitation period, as per order dated 05.12.2018 by making addition of Rs.20,00,000/- as proposed in the show cause notice. Therefore, in the given circumstances, the assessee is not entitled to any relief, as sought for and his request for admission of additional evidence requires no consideration.

6. In this connection, it would not be out of place to mention here that as per provisions of Rule-46A (of Income Tax Rules, 1962), it is provided that the assessee is not entitled to produce any evidence, at the appellate stage, other than the evidence produced by him during the course of proceedings, before the assessing officer, except in the following circumstances, namely ;

a) Where the (Assessing Officer) has refused to admit evidence which ought to have been admitted,

b) Where he appellant was prevented by sufficient cause from producing the evidence which he was called upon to produce by the (Assessing Officer) or

c) Where the appellant was prevented by sufficient cause from producing before the assessing officer) any evidence which is relevant to any ground of appeal; or

d) Where the (Assessing Officer) has made the order appealed against without giving sufficient opportunity against without giving sufficient opportunity to the appellant to adduce evidence relevant to any ground of appeal.

6.1 The submission of the assessee, if it is viewed w.r.t. the circumstances discussed above, it is evident that his request for admission of additional evidence does not fall in any of exception provided under rules 46A (of Income Tax Rules, 1962). Even on merits, from the facts adduced above, it is evident that during the entire assessment proceedings, a number of opportunities were provided to the assessee to establish the genuineness of the source of deposit but he failed to avail such opportunities. This rather indicates that the assessee was purposely avoiding the compliance of notice to deprive the assessing officer for making through investigation in the matter. It is settled law that when the assessment is getting barred by limitation and the assessee is using dielectric tactics in furnishing the required information and details etc., the assessing officer is within his jurisdiction to complete the assessment to the best of his judgement on the basis of facts available on record. In view of these facts, there is no merit in the contention of the assessee and the same is liable to be rejected. However, your kind direction in the matter are solicited."

7. The ld. CIT(A) forwarded the report of the AO to the assessee for his comments. In response, it was submitted as under :

2.2 A copy of the above report was sent to the appellant for comments. In response the AR submitted his arguments as under:

'Sub: Appellate proceedings in the case of Sh. Govinderjit Singh r/o village Hiana Kalna, Nabha A.Y. 2011-12 -PAN: CLVPS4520B Kindly refer to your notice of hearing No. 948 dated 13.09.2019 and the counter comments of the Assessing Officer attached with the notice.

1. Regarding Ground of Appeal No. 1, it is submitted that case of the appellant was reopened to verify cash deposit of Rs.20,00,000/- in his HDFC bank account.

The appellant is an agriculturist. He neither furnished his income tax return nor attended the assessment proceedings. Accordingly, the learned assessing officer completed the assessment u/s 144 (of Income Tax Act, 1961) and charged the amount of Rs.20 Lakhs to tax as unexplained deposit. However, a perusal of the bank account statement available on the record of assessing officer reveals that there is cash deposit of Rs.10 Lakhs only. The appellant vide his written submissions dated 20.03.2019 contended that the assessing officer did not pass a speaking order as it does not disclose the detail of cash deposited in the bank account. Provisions of section 144 (of Income Tax Act, 1961) were referred to wherein it is provided that "the Assessing Officer, after taking into account all relevant material which the A.O has gathered, shall make the assessment of the total income or loss to the best of his judgment and determine the sum payable by the assessee on the basis of such assessment". It is submitted that account statement of the appellant is available with the assessing officer which discloses that cash amounting to Rs. 10,00,000/- has been deposited but the learned assessing officer ignored the account statement while making the addition of Rs.20,00,000/- and has thus violated the provisions of section 144 (of Income Tax Act, 1961).

2. In the counter comments, the learned assessing officer has confirmed that information regarding cash transaction was received from AIR and CIB and both these sources reveal that the assessee has deposited cash amounting to Rs.10,00,000/- in his bank account. On the basis this information, the assessing officer concluded that the appellant has deposited Rs.20,00,000/-in his bank. Accordingly,notices were issued to the appellant for verification of source of cash deposit of Rs.20,00,000/-. The assessing officer has pointed out in para 2 to 6 of her comments that various notices were issued to the appellant but he did not attend the proceedings. It is admitted that the assessee did not attend the proceedings.

3. In para 6 of the comments submitted by the assessing officer that the assessee is not entitled to file additional evidence under Rule 46A (of Income Tax Rules, 1962). In this regard it is submitted that the appellant assessee has not filed any additional evidence under rule 46A (of Income Tax Rules, 1962). The assessee has only submitted his bank account statement which is already on record of the assessing officer on the basis of which assessment has been completed.

4. In para 6.1 of her comments, the assessing officer has contended that "when the assessment is getting barred by limitation and the assessee is using dielectric tactics in furnishing the required information and details etc., the assessing officer is within his jurisdiction to complete the assessment to the best of His judgment on the facts available on record." Sir, I fully agree with observations made by the learned assessing officer. However, the learned assessing officer did not consider the bank statement of the appellant available on her record. In the following cases, it was held that in making a best judgment assessment, the Assessing Officer does not possess absolute arbitrary authority to assess any figure he likes but shall have reasonable nexus to the available material and circumstances of each case.

8. Reliance was placed on the following case laws :

1. CIT v. Ranicherra Tea Co. Ltd. [l994] 207 ITR 979 (Cal.)

2. ITO v. Jitender Mehra (1995) 53 ITD 396 (Del-Trib.)

9. The ld. CIT(A) after considering the submissions of the assessee and the report of the AO, sustained the addition by observing as under :

“3.1 Ground of Appeal No. 1 relates to addition of Rs. 20,00,000/- on account of cash deposited in the bank account of the assessee. The AO has mentioned that as per information, the assessee has deposited cash of Rs. 20,00,000/- with HDFC Bank during the Financial Year 2010-11 relevant to Assessment Year 2011-12. The case was reopened and notice u/s 148 (of Income Tax Act, 1961) was issued after recording the reasons/following the procedure as per law. In response, as per the AO, no return was filed and no compliance was made to the various notices as mentioned in the assessment order. The AO therefore proceeded to complete the assessment u/s 144 (of Income Tax Act, 1961) by treating the deposit of Rs. 20 lacs as income of the assessee since the assessee has no explanation to offer about the source of cash which remained unexplained,to be treated as income in the hands of the assessee.

The facts of the case, basis of addition made by the AO and the arguments of the AR during the course of appellate proceedings have been considered. The AR as submitted that the AO made addition of Rs. 20 lacs whereas the assessee has deposited cash amounting to Rs. 10 lacs only on 18.03.2011 in his HDFC Bank Account No. 01561000199117. However, it is relevant to mention that nothing has been stated about the source of cash deposit in the submission filed during the appellate proceedings. The AR submitted that no additional evidence are being filed and contended that the bank account statement is already on the record of the Assessing Officer on the basis of which the assessment has been completed. It is claimed that the AO made addition on the basis of information from two different sources i.e. AIR & CIB and argued that the AO without verifying the facts from the account statement of the appellant, made addition of Rs. 20 lacs and the AR prayed that the addition may be restricted to actual deposit of Rs. 10 lacs. The AR has mentioned that similar other instances have incurred in the area and tabulated some cases claiming that the actual cash deposit in those cases was less than the addition made by the AO. It is however relevant to note that this cannot be the basis for allowing the relief to the assessee, as the facts of each case are different and it is not necessary that the mistake which occurred in other cases has occurred in this case also. The AO has categorically stated that there was information about the deposit of Rs. 20 lacs in the HDFC Bank Account of the assessee and the AR has not been able to explain the source of the same. In the absence of the justification, the cash deposit remains unexplained, to be treated as income of the assessee.

Under the facts & circumstances of the case, the addition made by the AO is confirmed.

Accordingly, this ground of appeal is dismissed.”

10. The assessee also raised another ground before the ld. CIT(A) which read as under :

“The learned assessing officer is not justified in treating the bank deposit as income of assessee as the deposit was made out of the sale proceeds of agricultural land.”

11. The aforesaid ground was rejected by the ld. CIT(A) by observing that no arguments had been put forward by the assessee. Now the assessee is in appeal.

12. The ld. counsel for the assessee furnished an application of the assessee for admission of the additional evidences, which read as under :

I wish to submit the following documents during the course of appellate proceedings before your honour: -

1. The copy of Agreement to Sell entered by me for purchase of Plot along with translated copy in English.

2. The copy of my bank account statement and my mother Smt. Avtar Kaur from which payments for purchase of above said plot was made.

3. Affidavit received from the buyer, to whom the above said plot was further sold on the basis of his Agreement to Sell with original seller, along with translated copy in English.

4. The copy of Registered Deed of the above said plot in favor of ultimate buyer along with translated copy in English.

The brief facts of the case are that I am is an agriculturist and had deposited Rs 10.00 Lakhs in my bank account number 01561000199117 with HDFC Bank. The Learned Assessing Officer had received information, regarding cash transaction, from two sources, i.e. AIR and CIB, and both these sources had revealed that I had deposited cash amounting to Rs. 10.00 Lakhs in my bank account and therefore the Learned Assessing Officer had made an addition of Rs.20.00 Lakhs in my case. The Learned Assessing Officer had reopened the case to verify the cash deposition of Rs.20.00 Lakhs whereas I had deposited Rs. 10.00 Lakhs only in my bank account with HDFC Bank. Since I am an agriculturist and is not aware of the proceedings of the Income Tax Act, I had given the notices of income tax to my counsel Advocate Shahi. However, he neither gave any information about the proceedings to me nor demanded any information from me regarding the case. Therefore, the Learned Assessing Officer, completed the assessment ex-parte under the provisions of Section 144 (of Income Tax Act, 1961) and charged the amount of cash deposit of Rs.20.00 Lakhs, as per information of AIR and CIB, as unexplained deposit. Also, the Learned Assessing Officer did not disclose the date wise details of cash deposited by me in my bank account. Infact the Learned Assessing Officer had confirmed in his remand report to the Commissioner of Income Tax(Appeals) that the department had received information in this case, regarding cash transaction, from AIR and CIB and both these sources had revealed that I had deposited cash amounting to 3.00 Lakhs in my bank account and therefore an addition of Rs.20.00 lakhs was made in my case.

The reliance is also placed on jurisdictional Punjab & Haryana High Court in case of Land Acquisition Collector Vs Addl. CIT Jalandhar, Income Tax Appeal no 54 of 2010 date of order dated 29-07-2016. The Hon'ble High Court in para 17 held that the decision of rejecting the application for admission of additional evidence in form of revenue record is incorrect & cased on incorrect finding of law & of fact. We also submit that the Chandigarh ITAT has given series of judgments for admission of additional evidence as additional evidence goes to the root of case & in the interest of justice and therefore it should be admitted.

In view of above I submit that there was reasonable & sufficient cause for not submitting the documents during the course of assessment proceedings.

The reliance is placed on the jurisdictional Punjab & Haryana High Court judgment in case of CIT vs. Mukta Metal Works, 336 ITR 555 (P&H).

In view of above I request your honour to please admit the additional evidence give me the relief as per the Act.

Thanking you,

Yours faithfully,

Sd/-

Govinderjit Singh

13. During the course of hearing, the ld. counsel for the assessee submitted that the AO framed the assessment u/s 144 (of Income Tax Act, 1961) without providing due and reasonable opportunity of being heard to the assessee and the ld. CIT(A) also sustained the addition without considering the facts in right perspective. It was submitted that new evidences now furnished go to the root of the matter and that the assessee was not able to procure the same earlier, therefore, these additional evidences may be admitted in the interest of justice.

The reliance was placed on the judgement of the Hon'ble jurisdictional High Court in the case of CIT Vs Mukta Metal Works reported at 336 ITR 555. In her rival submissions, the ld. Sr.DR supported the orders of the authorities below and further submitted that the ample opportunities were given by the AO and the ld. CIT(A) but the assessee did not furnish the evidences which were furnished now, therefore, the same may not be admitted.

14. We have heard the submissions of both the parties and perused the material available on record. In the present case, it is an admitted fact that the assessment was framed by the AO ex-parte u/s 144 (of Income Tax Act, 1961) and the assessee had furnished new evidences which were not available either to the AO or the ld. CIT(A), however, these documents now furnished as additional evidence by the assessee go to the root of the matter, therefore, keeping in view the principles of natural justice, the same are to be admitted. However, as these documents were not before the AO or the ld. CIT(A), we deem it appropriate to set aside this case back to the file of the AO to be adjudicated afresh in accordance with law after providing due and reasonable opportunity of being heard to the assessee.

15. In the result, appeal of the assessee is allowed for statistical purposes.

Order pronounced on 18th November,2020.

Sd/- Sd/-

( RAJPAL YADAV) ( N.K. SAINI)

VICE PRESIDENT ICE PRESIDENT

Dated : 18th November,2020.