Additions for bank credits and demonetisation deposits overturned after recorded disclosures; procedural notice defect found but rendered academic, interest still payable

Dismissal of an appeal decided ex parte was improper because uploaded submissions and evidence required consideration, so the appellate order was set aside. Notices issued for reopening assessments lacked prescribed approval and were therefore invalid, though that defect became academic after merits disposal. Additions under the provision targeting unrecorded money were deleted because the contested bank credits and cash deposits were recorded in books and disclosed; consequently, corresponding additions under the provision for unexplained credits were also deleted as the taxpayer discharged the onus with confirmations, ledgers and bank records. Tax at an enhanced rate became inapplicable; interest under mandatory provisions remains chargeable and must be applied.

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ISSUES:

Whether the dismissal of the appeal on ex-parte basis by the Commissioner of Income-tax (Appeal) without considering submissions and evidences was erroneous.Validity of the deemed notice issued under section 148A(b) and notice under section 148 of the Income-tax Act, 1961.Whether additions made under section 69A of the Act in respect of credited amounts in bank accounts and cash deposits during demonetization period were justified.Applicability of section 69A to money recorded in books of account and whether the additions under section 68 were warranted.Legality of charging tax at the higher rate under section 115BBE of the Act.Validity of interest levied under sections 234A and 234B of the Act.Requirement of proper approval under section 151(ii) of the Act for issuance of notice under section 148 and order under section 148A(d) after the expiry of three years from the end of the assessment year.

RULINGS / HOLDINGS:

The dismissal of the appeal on ex-parte basis without considering submissions and evidences was improper; the appellant's submissions and evidences uploaded on the ITBA portal warranted consideration.The order passed under section 147 read with section 144B and notices under sections 148A(d) and 148 issued with approval of PCIT-1 instead of PCCIT/CCIT as required under section 151(ii) were invalid and bad in law; however, this issue became academic after deletion of additions on merits.Additions of Rs. 1,42,38,500/- and Rs. 7,97,000/- made under section 69A of the Act were unjustified and liable to be deleted as the amounts were "duly accounted for in the books of account" and reflected in the return of income.Section 69A applies only where money is "not recorded in the books of account"; here, the foundational requirement was absent, making additions under section 69A legally untenable.The appellant discharged the onus under section 68 by furnishing account confirmations, ledgers, contra accounts, PAN details, and bank statements of lenders, supported by authoritative precedents, thus additions under section 68 were not warranted.The levy of tax at the enhanced rate under section 115BBE became infructuous following deletion of additions under section 69A.Interest levied under sections 234A and 234B is mandatory as per Supreme Court precedent and shall be levied after giving effect to this order.

RATIONALE:

The Court applied the statutory provisions of the Income-tax Act, 1961, specifically sections 69A, 68, 148, 148A, 115BBE, 234A, 234B, and 151(ii).Section 69A requires that the money or valuables must be "not recorded in the books of account" for the provision to apply; since the amounts were recorded and explanations furnished, the addition was not sustainable.The onus under section 68 to explain the nature and source of credited amounts was discharged by the appellant through documentary evidence and corroborated by authoritative Supreme Court and High Court decisions.The Court noted that mere deposit in bank accounts does not trigger addition under section 69A if properly accounted for and disclosed.Regarding procedural validity, the Court acknowledged the requirement of approval under section 151(ii) for reopening assessments beyond three years but deemed the issue academic after merit-based disposal.Interest under sections 234A and 234B is mandatory irrespective of deletion of additions, following binding Supreme Court authority.

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