Assessment Was Based Solely On Existence Of Cash Deposits Linked To Incorrect PAN: Ahmedabad ITAT Deletes Addition U/S 69A Of IT Act

The Bench of T.R. Senthil Kumar (Judicial Member) and Makarand V. Mahadeokar (Accountant Member) observed that “the AO could not verify the books of account, tax audit report, or the return of income filed under original PAN-AFBPV2339B. This failure led to an unsustainable assessment u/s 69A of the Act, based solely on the existence of substantial cash deposits linked to the second PAN”. (Para 6.1)

Facts of the case

The assessee, engaged in the business of petroleum products dealership under the name & style of Bapa Sitaram Petroleum, operating as a dealer of Indian Oil Corporation Limited (IOCL), filed her return declaring income of Rs. 3,73,000/- based on the audited books of account.

Based on AIMS module of ITBA application, the AO found that assessee had deposited cash of Rs. 33,58,500/- in her SBI bank account during the window period of demonetisation. Since the assessee failed to file any explanation regarding same and also failed to file her return, under one PAN, a show-cause notice was issued proposing to pass order u/s 144. The AO noted that the assessee failed to provide evidence that the issuance of PANAQHPV6393E was a result of an application for a duplicate PAN due to the loss of the original PAN. The AO observed that the appellant's use of two PANs appeared to be intentional, to handle substantial cash deposits, thereby avoiding full disclosure in the return filed.

Due to the assessee's failure to furnish any explanation about the cash deposits, the AO invoked Section 144 to make a best judgment assessment, and treated the cash deposits and credit entries amounting to Rs.2,64,72,058/- in the assessee's bank account as unexplained money u/s 69A. Later, the AO initiated penalty proceedings u/s 272B for holding two PANs, as possession of multiple PANs without proper justification or cancellation of the duplicate was seen as a violation of the law.

Observation of the Tribunal

The Bench found that the primary dispute revolves around the use of two PANs and the resulting addition u/s 69A, treating the cash deposits as unexplained money.

Even though AO initiated assessment proceedings under second PAN and observed significant cash deposits in bank account linked to said PAN during demonetization period, the Bench found that AO failed to properly correlate the PAN related facts, especially after becoming aware that the assessee had consistently filed her returns under original PAN, where all business transactions were duly recorded.

The AO's assessment lacked a proper verification process that should have involved cross referencing the deposits with the appellant's audited financial statements, which were maintained under the original PAN, added the Bench.

The Bench also found that the AO did not make necessary inquiries with the PAN issuing authority (UTI) to ascertain whether the second PAN was inadvertently issued as a duplicate or whether steps were taken to cancel the second PAN.

The Bench observed that the omission of AO to verify the return filed under original PAN and consider appellant's submissions regarding regular business operations and accounting of cash deposits, had let to unsustainable assessment.

Since, the addition u/s 69A was made without proper examination of the appellant's books of account, the ITAT directed the AO to provide reasonable opportunity to assessee to submit additional evidence.

Thus, the ITAT remanded the matter for assessment afresh.

Counsel for Appellant/ Assessee: B.R. Popat

Counsel for Respondent/ Revenue: Rignesh Das

Case Title: Kamakshiben Mayashankar Vyas versus ITO

Case Number: ITA No.408/Ahd/2024

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