AO cannot sit back with folded hands in not issuing summons u/s 131 of Income Tax Act in quest for the truth. ITAT deleted additions made on account of cash deposits
ABCAUS Case Law Citation:
ABCAUS 3227 (2020) (01) ITAT
In the instant case, appeal was filed by the assessee against the order of the CIT(A) in sustaining addition made by the Assessing Officer (AO) as unexplained deposit in Bank.
The return of income of the assessee was selected for scrutiny under CASS. The notices u/s 143(2) & 142(1) of the Income Tax Act, 1961 (the Act) and other statutory notice had been issued to the assessee.
On verification of the return filed by the assessee, the AO noticed that the assessee had shown salary income, claimed deduction u/s 80C of the Act. On further verification of bank statements, it was noticed that the large amount of cash had been deposited in his bank account on various dates, which were not disclosed in the return of income filed by the assessee.
The assessee filed written submission and furnished bank statements. Accordingly, the AO framed the assessment u/s.143(3) of the Act making various additions representing cash deposits as unexplained cash credits.
Feeling aggrieved from the assessment order, the assessee preferred appeal before the CIT(A) assailing the additions made by the AO. The CIT(A) observed that though the assessee had filed confirmations of two persons however, these documents were not filed before the AO nor any application of additional evidence had been filed by the assessee during the appellate proceedings.
Accordingly, the CIT(A) dismissed the appeal of the assessee upholding the action of AO in making all the above additions.
Before the Tribunal, the assessee submitted that the assessee was looking after the construction of house of a person who had deposited cash in his bank account to execute the constructions works of the house and the assessee after withdrawing the same incurred the expenditure towards construction expenses.
In this regard, the assessee had also furnished to the AO the confirmation given by the said person towards cash deposit in the bank account of the assessee. The assessee submitted that the confirmation was also produced before the CIT(A), however, the CIT(A) without considering the same had confirmed the action of AO.
It was also contended by the assessee that during the course of assessment proceedings the assessee had submitted that the impugned amount was received from the said person for execution of his construction of house building, which had been incorporated by the AO in his assessment order. However, both the authorities below had overlooked the above confirmation submitted by the assessee.
It was also the contention of the assessee that when the assessee had already submitted the confirmation of the depositor before both the authorities below, then the assessee had completely discharged his onus to prove the source of receipt.
It was further contended by the assessee that if the AO was not satisfied with the explanation furnished by the assessee along with the confirmation of the depositor, the AO should have issued notice u/s 131 of the Act to the said person, however, nowhere the assessment order had spoken that the AO had taken such step.
The Tribunal questioned that when before both the authorities below the assessee had explained that the amount had been received from specified person, why the AO had not invoked the provisions of section 131 of the Act available to the income tax authorities for the personal presence of the depositor.
The Tribunal stated that from the provisions of the Act, it is vividly clear that section 131 of the Income Tax Act empowers the income tax authorities to conduct inquiries. It provides powers to summon persons/witnesses, examine them under oath, compel production of books of account and documents, and issue commissions.
The Tribunal pointed out that the power of enforcing attendance of a person under this section is the same as available under the Code of Civil Procedure, 1908. If summons are issued and served on a person for personal attendance under section 131 of the Act, it is binding on him to attend in person as he cannot be represented by a lawyer or an authorized representative.
The Tribunal opined that when a very powerful tool was available to the income tax authorities in their quest for the truth, the AO cannot sit back with folded hands in not issuing summons u/s.131 of the Act. Meaning thereby, that in the instant case, the Assessing Officer had also not bothered to enforce the presence of depositor by issuing summons u/s 131 of the Act.
The Tribunal further opined that merely because the assessee had not filed an application for additional evidence, the claim of the assessee could not be rejected. If the CIT(A) had found that the assessee had furnished evidence which short of only an application for admission of additional evidences, it was always open for the CIT(A) to direct the assessee to file the additional evidences along with application for admission of the same and after accepting the same, he could have called for remand report or place the issue back before the AO for passing an appropriate order.
Accordingly, the Tribunal opined that the addition made by the AO and confirmed by the CIT(A) in this regard deserved to be deleted and accordingly, it directed the AO to delete the same.
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