Widow's medical store turnover error corrected, unexplained cash deposits under section 69A reversed after additional evidence admitted

ITAT Jaipur allowed the appeal in a case involving unexplained cash deposits under section 69A. The assessee, a widow operating a medical retail store while suffering from neurological disease, had incorrectly declared turnover through her accountant. The tribunal admitted additional evidence including ledgers and CA certificate, directing the AO to verify correct turnover against bank statements and tax profit at 8% under section 44AD provisions for retail trade, rather than treating deposits as unexplained money.

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Issues Involved:
1. Legality of reassessment proceedings u/s 148 of the Income Tax Act.
2. Addition towards unexplained cash credit u/s 69A of the Income Tax Act.
3. Admission of additional evidence during appellate proceedings.

Summary:

Issue 1: Legality of reassessment proceedings u/s 148 of the Income Tax Act
In ITA No. 412/JPR/2023, the assessee challenged the legality of the reassessment proceedings on the grounds that the Assessing Officer (AO) did not provide the reasons recorded for reopening the assessment proceedings. The Tribunal noted that despite a specific request by the assessee, the AO failed to provide the reasons recorded for issuing the notice u/s 148. The Tribunal relied on the Supreme Court's decision in GKN Driveshafts (I) Ltd. v. ITO, which mandates that the reasons recorded must be furnished to the assessee within a reasonable time. Consequently, the Tribunal quashed the reassessment order due to the AO's failure to provide the reasons, thereby allowing ground no. 1 & 1.1 raised by the assessee.

Issue 2: Addition towards unexplained cash credit u/s 69A of the Income Tax Act
In ITA No. 412/JPR/2023, the AO added Rs. 61,87,000 as unexplained cash credit u/s 69A after accepting Rs. 25,00,000 from the assessee's medical business. The CIT(A) upheld this addition, noting discrepancies between the explanations provided during the assessment and appellate proceedings. However, the Tribunal did not adjudicate on the merits of the case since the reassessment order was quashed on legal grounds.

In ITA No. 413/JPR/2023, the AO added Rs. 67,55,100 as unexplained cash credit u/s 69A, accepting Rs. 60,00,000 from cash sales and disallowing Rs. 30,57,000 claimed as cash loans. The CIT(A) rejected the additional evidence submitted by the assessee, considering it an afterthought. The Tribunal admitted the additional evidence, considering the peculiar facts of the case, including the assessee's medical condition and reliance on an accountant. The Tribunal directed the AO to verify the turnover and tax profit/income @ 8% of the total turnover under section 44AD.

Issue 3: Admission of additional evidence during appellate proceedings
In both ITA No. 412/JPR/2023 and ITA No. 413/JPR/2023, the assessee submitted additional evidence during the appellate proceedings, claiming errors by the accountant. The CIT(A) rejected this additional evidence, considering it an afterthought. However, the Tribunal admitted the additional evidence in ITA No. 413/JPR/2023, considering the assessee's medical condition and the reliance on the accountant. The Tribunal directed the AO to verify the turnover and compute the income accordingly.

Conclusion:
The appeals were allowed in favor of the assessee. The reassessment order in ITA No. 412/JPR/2023 was quashed due to the AO's failure to provide reasons for reopening the assessment. In ITA No. 413/JPR/2023, the Tribunal admitted the additional evidence and directed the AO to verify the turnover and compute the income @ 8% under section 44AD.

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