2012 (10) TMI 671 - AT - Income Tax

Tribunal upholds cash deposit addition, remands for proof of business receipts connection.

The Tribunal dismissed the appellant's grounds challenging the assessment under Section 144 and upheld the addition of Rs. 12,99,850 under Section 68 for ... Ex parte assessment u/s 144 - addition on unexplained cash deposited in his bank account - Held that:- The medical certificate dated 12.3.2010 for the period 4.10.2009 to 28.2.2010 mentioned complete bed rest. It is mentioned in the said certificate that the certificate is not valid for medicolegal purpose. In any case, this certificate does not explain the absence on 17.7.2009 as also how could the assessee appear before the AO on 22.10.2009, despite being advised bed rest. The factum of illness and bed rest was never communicated to the AO during the course of assessment proceedings nor it was explained as to what prevented the assessee from explaining entries in his bank account .Even in the documents submitted by way of additional evidence, the assessee did not furnish any evidence regarding source of cash deposited in his bank account. In these circumstances, the CIT(A) while discarding the aforesaid medical certificate,upheld the completion of best judgment assessment and in the absence of any evidence regarding source of cash deposited in the bank, upheld the addition made by the AO. Thus the authorities were justified in proceeding to make best judgment in terms of provisions of sec. 144 of the Act in view of persistence non-compliance of the notices over a period of one yea - against assessee. Before the AO assessee did not put forth any explanation nor furnished any evidence regarding the source of such cash. On appeal,, the assessee pleaded that deposits and withdrawals in the said bank account ,related to his business however, the assessee did not place any evidence before the AO or the CIT(A),establishing nexus of cash deposited in the bank with his receipts from business. Whether the entire turnover in cash was deposited in the bank, has not been established by the assessee. The onus is on the assesseee to establish that the cash deposited in the bank ,originated from his turnover of the business. In these circumstances when the complete facts are not present it fair and appropriate to vacate the findings of the CIT(A) and restore the matter to the file of the AO with the directions to allow one final opportunity to the assessee to establish the nexus of his business receipts with cash deposited in the bank as also to explain the nature of transactions in the said account and thereafter, pass appropriate orders in accordance with law - in favour of assessee for statistical purposes. Issues Involved:1. Justification of ex parte assessment under Section 144 of the Income-tax Act.2. Addition of Rs. 12,99,850/- under Section 68 of the Income-tax Act due to unexplained cash deposits.3. Observations and conclusions of the CIT(A) regarding the appellant's non-appearance and the sufficiency of opportunities given.4. The appellant's illness as a reason for non-appearance.5. Validity of the reasons provided by the Assessing Officer for upholding the ex parte assessment and the addition of Rs. 12,99,850/-.6. General appeal against the CIT(A)'s order.Detailed Analysis:1. Justification of Ex Parte Assessment under Section 144:The appellant contended that the CIT(A) was unjustified in upholding the ex parte assessment under Section 144. The facts reveal that after the return was filed, the Assessing Officer (AO) issued several notices under Section 143(2) and 271(1)(b), which went unresponded. Consequently, the AO completed the assessment under Section 144, adding Rs. 12,99,850/- as unexplained cash credit under Section 68. The CIT(A) upheld this assessment, noting that the appellant failed to attend multiple hearings and did not provide sufficient cause for non-appearance.2. Addition of Rs. 12,99,850/- under Section 68:The appellant challenged the addition of Rs. 12,99,850/- made by the AO. The CIT(A) noted that the appellant declared income under Section 44AF and was not required to maintain books of account. However, the source of the cash deposits in the savings bank account was not explained. The CIT(A) concluded that the appellant failed to establish a nexus between the business receipts and the cash deposits, thereby justifying the AO's addition under Section 68.3. Observations and Conclusions of the CIT(A):The CIT(A) observed that the appellant had multiple opportunities to present his case but failed to do so. The appellant's claim of illness was not considered a sufficient cause for non-appearance as he could have appointed an Authorized Representative (AR). The CIT(A) also noted that the appellant appeared before the AO when a penalty notice was issued, indicating selective compliance.4. The Appellant's Illness as a Reason for Non-Appearance:The appellant argued that his illness prevented him from attending the assessment proceedings. The CIT(A) and the Tribunal noted that the appellant did not communicate his illness to the AO during the assessment period. Additionally, the medical certificate provided was not deemed sufficient to explain the non-appearance, especially since the appellant managed to appear in response to a penalty notice.5. Validity of the Reasons Provided by the AO:The appellant contended that the reasons given by the AO for upholding the ex parte assessment and the addition were misconceived. The Tribunal found that the AO followed due process by issuing multiple notices and providing opportunities to the appellant. The appellant's failure to respond justified the ex parte assessment under Section 144.6. General Appeal Against the CIT(A)'s Order:The appellant's general appeal against the CIT(A)'s order was dismissed as it was found to be contrary to the facts and law of the case. The Tribunal upheld the CIT(A)'s findings, noting that the appellant did not provide sufficient evidence to explain the cash deposits and failed to comply with the assessment proceedings.Conclusion:The Tribunal dismissed the grounds related to the completion of assessment under Section 144 and upheld the addition of Rs. 12,99,850/- under Section 68 due to unexplained cash deposits. The matter was remanded to the AO to allow the appellant one final opportunity to establish the nexus between business receipts and cash deposits. The appeal was partly allowed for statistical purposes, with specific directions for the AO to pass appropriate orders based on the appellant's evidence.