Facts of the Case

The assessee, Anil Kumar Jain, proprietor of M/s Gehna 58, Bada Bazar, Udaipur, filed his return of income for Assessment Year 2017-18. During assessment proceedings, the Assessing Officer made an addition of ₹74,96,658 on account of cash sales deposited in the bank during the demonetisation period, alleging that the assessee failed to substantiate the genuineness and source of such cash sales. The addition was confirmed by the National Faceless Appeal Centre (CIT(A)) vide order dated 06.03.2024. Aggrieved, the assessee filed an appeal before the Income Tax Appellate Tribunal, Jodhpur Bench.

Issues Involved

Whether the CIT(A) was justified in confirming the addition of ₹74,96,658 on account of cash sales during demonetisation without proper adjudication on merits, whether the appellate authority discharged its quasi-judicial duty under Section 250(6), and whether the matter required restoration for fresh consideration in accordance with principles of natural justice.

Petitioner’s Arguments

The assessee contended that the CIT(A) passed the order in a summary manner without application of mind and without dealing with the documentary evidence and written submissions filed to explain the source and genuineness of cash sales during demonetisation. It was argued that the Assessing Officer himself had discussed the evidence filed during assessment proceedings, yet neither the AO nor the CIT(A) rebutted the explanations with cogent reasons. The assessee submitted that confirmation of addition without reasoned adjudication violated principles of natural justice.

Respondent’s Arguments

The Revenue relied upon the orders of the Assessing Officer and the CIT(A) and contended that the assessee failed to establish the creditworthiness and genuineness of cash sales during the demonetisation period, justifying the addition.

Court Order / Findings

The ITAT Jodhpur observed that the CIT(A) confirmed the addition merely by stating that the assessee failed to substantiate the source of cash deposits, without discussing how the explanation and documentary evidence furnished by the assessee were insufficient or incorrect. The Tribunal noted that the CIT(A) did not adjudicate the issue in the manner expected of a quasi-judicial authority and failed to address or rebut the written submissions placed on record. The Tribunal further held that if the CIT(A) was not satisfied with the assessee’s explanation, he ought to have confronted the assessee with specific reasons or issued a show-cause notice before drawing adverse conclusions. In view of the violation of principles of natural justice, the Tribunal set aside the appellate order and restored the matter to the file of the CIT(A) for fresh adjudication on merits after granting adequate opportunity of hearing.

Important Clarification

The Tribunal clarified that appellate authorities are duty-bound to pass reasoned and speaking orders in compliance with Section 250(6). Summary confirmation of additions without addressing the assessee’s evidence and submissions defeats the principles of natural justice and renders the appellate order unsustainable.

Final Outcome

The appeal filed by the assessee was allowed for statistical purposes. The order of the CIT(A) was set aside and the matter was remanded back to the CIT(A) for fresh adjudication on merits in accordance with law after providing adequate opportunity of being heard to the assessee.

Link to Download Order- https://www.mytaxexpert.co.in/uploads/1768993626_ANILKUMARJAINUDAIPURVS.ITOWARD12UDAIPURUDAIPUR.pdf

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