2024 (6) TMI 1279 - AT - Income Tax

CIT(A) order set aside for violating natural justice in Section 69A unexplained cash deposits case

ITAT Surat set aside CIT(A)'s ex-parte order regarding Section 69A addition for unexplained cash deposits in bank accounts. The tribunal found that CIT(A) ... Ex-parte order passed by CIT(A) - denial of natural justice - Addition u/s 69A - cash deposited in bank accounts - Revenue has argued that during the appellate proceedings the assessee submitted addition evidences which were sent to Assessing Officer for remand report, however, ld CIT(A) did not remind the Assessing Officer to send the remand report, and pass the order without providing sufficient opportunity to the Assessing Officer, which is against the principle of natural justice - HELD THAT:- CIT(A) did not take effort, at least to send the reminder letter to the Assessing Officer to submit remand report before him. We note that the Hon’ble Supreme Court in M.S.Gill [1977 (12) TMI 138 - SUPREME COURT] held “The dichotomy between administrative and quasi-judicial function vis-à-vis the doctrine of natural justice is presumably obsolescent after Kraipak (A.K. Kraipak vs UOI [1969 (4) TMI 103 - SUPREME COURT] which makes the water-shed in the application of natural justice to administrative proceedings. The rules of natural justice are rooted in all legal systems and are not any new theology. They are manifested in the twin principles of nemo judex in parte sua (no person shall be a judge in his own case) and audi alterem partem (the right to be heard). It has been pointed out that the aim of natural justice is to secure justice. It is a settled principle of law that justice not only to be done, it is seen to be done. Therefore, we find merit in the arguments advances by ld DR for the Revenue to the effect that at least one reminder should be sent to the assessing officer to submit the remand report, however, ld CIT(A) failed to do so. Therefore, we are of the view that assessing officer did not get sufficient opportunity to submit remand report, hence it is against the principle of natural justice. We also find merit in the arguments of ld DR for the Revenue that if the order of ld CIT(A) is an ex-parte order and there is no adjudication on merit, then this Tribunal always send the matter back to the file of the ld CIT(A) for fresh adjudication on merit. Thus both these appeals, one relates to father wherein substantive addition was made and second relates to protective addition, which was made in the hands of son, should be remitted back to the file of ld CIT(A) for fresh adjudication - Appeals filed by the assessee are allowed for statistical purposes Issues Involved1. Condonation of delay in filing the appeal.2. Substantive addition of Rs. 16,50,000/- under Section 69A.3. Addition of Rs. 1,943/- as interest income.4. Reopening of assessment.5. Framing of assessment under Section 144.6. Protective addition of Rs. 18,51,736/- and Rs. 2,08,118/- in the hands of the son.Detailed Analysis1. Condonation of Delay in Filing the AppealThe assessee's appeal for AY 2010-11 was delayed by 327 days. The assessee attributed the delay to his wife's severe illness, supported by medical documents and a doctor's certificate. The Tribunal found the reasons convincing and condoned the delay, admitting the appeal for hearing.2. Substantive Addition of Rs. 16,50,000/- Under Section 69AThe Assessing Officer (AO) noted cash deposits of Rs. 16,50,000/- in the assessee's bank account, which were unexplained. The assessee claimed the cash was from previous years' agricultural income but failed to provide supporting evidence. The AO treated the amount as unexplained money under Section 69A and added it to the assessee's income.The CIT(A) upheld the AO's decision, noting inconsistencies in the assessee's claims about cash withdrawals and agricultural income. The CIT(A) applied the Human Probability test from the Supreme Court cases of CIT v. Durga Prasad More and Sumati Dayal v. CIT, concluding that the assessee failed to satisfactorily explain the source of the cash deposits.3. Addition of Rs. 1,943/- as Interest IncomeThe AO added Rs. 1,943/- as interest income from the savings bank account, which the assessee had not declared. The CIT(A) upheld this addition, linking it to the unexplained cash deposits.4. Reopening of AssessmentThe assessee challenged the reopening of the assessment, but the Tribunal did not specifically address this issue in the final judgment.5. Framing of Assessment Under Section 144The assessee also contested the framing of the assessment under Section 144, but this issue was not separately adjudicated in the final judgment.6. Protective Addition of Rs. 18,51,736/- and Rs. 2,08,118/- in the Hands of the SonThe AO made a protective addition of Rs. 18,51,736/- and Rs. 2,08,118/- in the hands of the assessee's son. The CIT(A) passed an ex-parte order without addressing the merits. The Tribunal found that the CIT(A) failed to send a reminder to the AO for a remand report, violating the principles of natural justice.ConclusionThe Tribunal noted procedural lapses and remitted both appeals (substantive and protective additions) back to the CIT(A) for fresh adjudication. The CIT(A) was directed to decide both appeals together, considering the same issue of cash deposits. The Tribunal emphasized the need for the CIT(A) to provide sufficient opportunity to the AO and the assessee to present relevant documents and details.Final OrderBoth appeals were allowed for statistical purposes, and the CIT(A)'s orders were set aside for fresh adjudication on merits. The Tribunal directed the registry to place a copy of the order in all appeal folders.Order pronounced on 23/02/2024.