Assessment under section 69A denied where audited books showed daily member deposits and Revenue failed to disprove those deposits.

ITAT PUNE - AT dismissed the Revenue's appeal, upholding the CIT(A)'s decision that unexplained money u/s 69A could not be assessed where amounts were duly recorded in the assessee's audited books as daily deposits by society members and Revenue produced no evidence to show the deposits were not made by those members.

---

---

ISSUES PRESENTED AND CONSIDERED

1. Whether the Commissioner (Appeals) was justified in admitting and deciding the additional evidence filed by the assessee under Rule 46A of the Income Tax Rules where the Assessing Officer failed to file the verification/report despite multiple opportunities.

2. Whether additions made by the Assessing Officer under section 69A (unexplained money) in respect of cash deposits and cash withdrawals can be sustained where the assessee is a cooperative credit society and the cash deposits/withdrawals are recorded in books of account (cash book, bank book, ledger) and audited accounts have been produced.

3. Whether, instead of deciding the appeal on the basis of filed evidence, the Commissioner (Appeals) ought to have set aside the assessment made under section 144 to the Assessing Officer for fresh assessment as permitted by the proviso to clause (a) of sub-section (1) of section 251.

ISSUE-WISE DETAILED ANALYSIS

Issue 1: Admissibility and consideration of additional evidence under Rule 46A where Assessing Officer failed to file report

Legal framework: Rule 46A of the Income Tax Rules permits the admission of additional evidence by the Commissioner (Appeals) but mandates that the Assessing Officer be allowed a reasonable opportunity to examine the evidence or cross-examine witnesses and to produce rebuttal evidence or report.

Precedent Treatment: The order follows the procedural mandate of Rule 46A-that additional evidence, once admitted, must be forwarded to the AO for verification/report and that the AO must be given reasonable opportunity to respond. (No conflicting precedent was invoked or overruled in the judgment.)

Interpretation and reasoning: The Commissioner (Appeals) admitted the additional evidence and repeatedly forwarded it to the AO seeking report under Rule 46A. Multiple reminders and extensions (with dates and follow-ups documented) were issued to the AO; despite this, the AO failed to file the report. There is no material on record to show that delay in furnishing the report was caused by non-compliance or obstruction by the assessee. Given the AO's inaction after being afforded reasonable opportunities, the Commissioner (Appeals) was entitled to decide the appeal on the basis of the admitted documents.

Ratio vs. Obiter: Ratio - where the AO is given reasonable opportunity under Rule 46A but fails to respond, the Commissioner (Appeals) may decide the appeal on the basis of the additional evidence filed by the appellant. Obiter - none beyond the procedural application.

Conclusions: The Commissioner (Appeals) did not violate Rule 46A by deciding the appeal on the basis of the additional evidence; Ground No.1 of the Revenue is dismissed.

Issue 2: Validity of additions under section 69A for cash deposits and withdrawals recorded in books of a cooperative credit society

Legal framework: Section 69A deems unexplained money, bullion, jewellery or other valuable articles to be the income of the assessee if such items are not recorded in the books of account and the assessee offers no satisfactory explanation about the nature and source of acquisition. Section 144 allows best judgment assessment where the assessee fails to participate in proceedings.

Precedent Treatment: The Tribunal applied the statutory test in section 69A-existence in books of account and adequacy/sufficiency of explanation. No precedent was expressly followed, distinguished or overruled; the decision rests on statutory application to facts.

Interpretation and reasoning: The assessee is a registered cooperative credit society engaged in receiving daily cash deposits from members and maintaining accounts. The assessee produced registration certificate, audited books, cash book, bank book and ledgers demonstrating that cash deposits were recorded. Revenue did not controvert the existence or authenticity of these records nor produce evidence to show the deposits were not made by members. The Assessing Officer also added cash withdrawals without explanation of how withdrawals constitute income; Revenue's representative could not justify treating withdrawals as income. Under section 69A the threshold for deeming is absence from books or unsatisfactory explanation; here the amounts were recorded and an explanation was furnished and supported by audited accounts filed with the competent registrar (Dy. Registrar of Co-operative Societies). The AO/Revenue failed to point out defects in the documents or offer contrary evidence; mere non-filing by the assessee (non-filer status) does not, without more, displace recorded transactions supported by books and audit report.

Ratio vs. Obiter: Ratio - where a cooperative society records cash receipts in its books and furnishes audited accounts and supporting ledgers, and Revenue fails to show defect or produce rebuttal evidence, additions under section 69A cannot be sustained. Obiter - commentary that cash withdrawals, absent explanation, cannot be treated as income (illustrative of AQ of additions).

Conclusions: The Commissioner (Appeals) correctly deleted the addition of Rs.1,06,48,800/-, and Ground Nos.2 and 3 of the Revenue are dismissed as devoid of merit.

Issue 3: Whether the Commissioner (Appeals) ought to have set aside the section 144 assessment to AO under proviso to section 251(1)(a)

Legal framework: The proviso to clause (a) of sub-section (1) of section 251 permits the Commissioner (Appeals) to set aside an assessment made under section 144 to the Assessing Officer for making a fresh assessment where appropriate.

Precedent Treatment: The order considers the power under the proviso but applies it in light of the factual matrix-availability of documents and AO's failure to verify/respond-rather than invoking a general requirement to remit.

Interpretation and reasoning: Setting aside under the proviso is discretionary and appropriate where further factual enquiry is needed or where procedural defect requires fresh assessment. Here, the assessee had produced documentary evidence that was admitted by the Commissioner (Appeals) and forwarded to the AO for verification; the AO repeatedly failed to act. Since the appellate authority had on record detailed books, audited accounts and registration proof and no contrary material was produced by Revenue, remitting the matter for fresh assessment would have been unnecessary formality and could have rewarded AO's inaction by prolonging resolution. The Commissioner (Appeals) therefore properly exercised discretion to decide the appeal on available evidence rather than set aside the assessment.

Ratio vs. Obiter: Ratio - where the AO is given reasonable opportunity to verify additional evidence and fails to do so, the appellate authority may refuse to set aside the assessment and may decide the appeal on the documents on record. Obiter - emphasis on discretion being exercised in context of AO's inaction.

Conclusions: The Commissioner (Appeals) was not obliged to set aside the section 144 assessment to the AO; Ground No.3 (as framed) is unsustainable and dismissed (cross-ref Issue 1 and Issue 2).

Other procedural/factual findings of the Court

1. The Assessing Officer initiated proceedings under section 148 read with section 144/144B on account of information from the Department's INSIGHT portal about substantial cash deposits and withdrawals and non-filing of return; AO proceeded to best judgment assessment after assessee's non-participation.

2. The Commissioner (Appeals) admitted assessee's documentary evidence, complied with Rule 46A by forwarding evidence to AO, pursued AO for report via reminders and superior authority, and documented extensions; AO's persistent non-compliance is central to the Tribunal's acceptance of appellate disposal without AO report.

3. Revenue failed to produce evidence showing defects in the books or that the deposits were not from members; the burden to contradict the documentary explanation rested with Revenue but was unmet.

Final Conclusion

The Tribunal upholds the Commissioner (Appeals)'s decision to admit and act on additional evidence under Rule 46A in absence of AO's report, affirms deletion of additions under section 69A given recorded books and satisfactory explanation, and declines to remit the matter under section 251 proviso; the Revenue's appeal is dismissed.

---