W.P.No.1732 of 2020 IN HIGH COURT OF JUDICATURE AT MADRAS Reserved On 28.01.2020 Pronounced On 04.02.2020 CORAM HONOURABLE MR. JUSTICE C. SARAVANAN W.P.No.1732 of 2020 and W.M.P.Nos.2006 & 2007 of 2020 Salem Sree Ramavilas Chit Company, Private Limited, Rep. by its President, Mr.N.K.Ramalingam, S/o.N. V. Krishnamurthy Chettiar, aged about 66 years, 28, Sree Raamanivasam, Arya Vysyal Street, Shevapet, Salem 636 002. Petitioner Vs. Deputy Commissioner of Income Tax, Circle 1(1), Income Tax Office, No.3, Gandhi Road, Salem 636 007. Respondent Prayer: Writ Petition filed under Article 226 of Constitution of India, to issue Writ of Certiorari, calling for records in ITBA/AST/S/143(3)2019-20/1023185233(1) dated 27.12.2019 on file of respondent relating to Assessment Year 2017-18 and quash same. http://www.judis.nic.in Page No 1 of 12 W.P.No.1732 of 2020 For Petitioner : Mr. G. Baskar For Respondent : Mr. A. P. Srinivas Standing Counsel. ORDER In Writ Petition, petitioner has challenged impugned order passed by respondent on 27.12.2019 in respect of amount received by petitioner post demonetization i.e., between 09.11.2016 and 31.12.2016. 2.The learned counsel for petitioner submits that regular returns were filed for Assessment Year 2017-18 on 07.11.2017. After returns were filed, proceedings were taken up and notice for completing assessment was issued under Section 143(2) of Act on 09.08.2018 followed by notices under Section 142(1) of Income Tax Act on 20.06.2019 and 29.10.2019 to which petitioner responded on 22.11.2019, 26.11.2019 and 16.12.2019, respectively pursuant to which impugned assessment order has been passed. 3.It is contention of petitioner that in impugned order, respondent Deputy Commissioner has erroneously came to conclusion that petitioner has not properly explained http://www.judis.nic.in Page No 2 of 12 W.P.No.1732 of 2020 deposit of cash amounting Rs.67,37,500/- collected during demonetization into their account and that petitioner has claimed source of cash deposit during demonetization as accumulated cash balance as on 08.11.2016 wrongly. In impugned order, it has been concluded that petitioner has not properly explained source and purpose of huge cash along with party wise break up as was requested vide notice dated 20.06.2019 and 29.10.2019 under Section 142(1) of Income Tax Act, 1961. 4.The learned counsel for petitioner submits that informations were furnished as early as on 17.02.2017 and thereafter as per formats requested by respondent. He further submits that petitioner had closing balance of cash on hand as on 31.10.2016 for sum Rs.38,72,374/- which would consist of both demonetized and non-demonetized cash until then and thereafter, petitioner received further cash deposit from various subscribers amounting to Rs.57,85,655/- out of which sum of Rs.26,77,716/- had already been deposited before demonetization. http://www.judis.nic.in Page No 3 of 12 W.P.No.1732 of 2020 5.It is therefore contented that amount which was not deposited before demonetization amounting to Rs.67,37,500/- was explained in terms of details furnished on 17.02.2017 in compliance with requirements of Reserve Bank of India, pursuant to demonetization of ue curency on 08.11.2016. 6.The learned counsel for petitioner further submits that collection of amount by petitioner during period proceedings eight months was also not in variance with amounts collected by petitioner. petitioner had collected approximately sum of Rs.57,85,655/- during first week of November 2016, which is in case of chit business is as usual collection was made during aforesaid period. In any event, according to petitioner, details which were called for by respondent were furnished. He therefore submits that observation made in impugned order that petitioner has not properly explained cannot be countenanced. He further submits that petitioner is governed by Provisions of Chit Fund Act, 1982 and Tamil Nadu Chit Funds Rules, 1984, as per which petitioner required to maintain ledger details for each of subscribers and amount deposited by petitioner is only out of amounts collected which are reflected in register under Act http://www.judis.nic.in Page No 4 of 12 W.P.No.1732 of 2020 and rules made therein. He therefore submits that amount of Rs.67,37,500/-, which is sought to be treated as unexplained income in impugned order is nothing but collection made from regular chit fund business of petitioner. 7.The learned counsel for petitioner therefore submits that impugned order can be set aside and case be remitted back to concerned officer to pass fresh orders after considering records filed by petitioner on 17.02.2017. petitioner further submits that if respondent so require, petitioner shall also furnish further details of ledgers for verification by officer to conclude said proceedings. 8.The learned counsel counsel for petitioner would submit that if opportunity to be given to petitioner, petitioner would explain entire transaction pertaining to case flow upto 08.11.2016. 9.Per contra, learned Standing Counsel for respondent submits that impugned order is well reasoned and therefore, no requires no interference. He further submits that petitioner has alternate remedy by way of appeal before Commissioner http://www.judis.nic.in Page No 5 of 12 W.P.No.1732 of 2020 (Appeals) under Income Tax Act, 1961. He further submits that before passing any order, Commissioner (Appeals) may call for enquiry report and pass appropriate orders. 10.The learned Standing Counsel for respondent submits that though power of Commissioner (Appeals) to remit case back to original authority has been taken away with effect from 01.06.2001, nevertheless Commissioner (Appeals) can call for records from Officer and pass appropriate orders under Section 250 r/w 251 of Income Tax Act, 1961. He submits that while undertaking such exercise, Commissioner (Appeals) would act like Original Authority after getting necessary report from assessing officer. 11.The learned Standing Counsel for respondent further submits that Assessment Year 2017-18 onwards, assessments are through e-proceedings. He submits that Income Tax Department has developed e-proceedings facility, wherein simple method of communication between department and assessee has been devised negating visit by assessee or his representatives to Department. information which are loaded will be scrutinized and appropriate orders will be passed. He http://www.judis.nic.in Page No 6 of 12 W.P.No.1732 of 2020 further submits that is was open for petitioner to call for report of respondent as per note on e-proceedings and Commissioner (Appeals) has ample powers to pass appropriate orders. 12.I have considered arguments advanced on behalf of petitioner and respondent. 13.I have also perused records filed by petitioner which precede passing of impugned order. As on 31.10.2016 petitioner has claimed closing cash of Rs.38,72,374/-. closing cash on hand during preceding months of same year is not much invariance with closing cash on hand as on 31.10.2016. Similarly, during same period in 2015 also petitioner has declared amounts similar to closing cash on hand. For comparison, closing cash on hand for two periods are expected as under:- Cash Collection Cash Deposited Closing cash on hand Rs. Rs. Rs. Month 2015 2016 2015 2016 2015 2016 April 9777272 2298947 8074280 8007495 348565 219545 http://www.judis.nic.in Page No 7 of 12 W.P.No.1732 of 2020 Cash Collection Cash Deposited Closing cash on hand Rs. Rs. Rs. May 10323853 9416184 8609412 8318302 482349 275223 June 10111274 9874688 8420104 8945100 259214 365133 July 10050864 9350936 7853584 8668592 297132 433907 August 9556583 9061621 7825801 8517878 250891 463886 September 10320523 8997606 8820844 8295792 233493 251029 October 11245212 12330140 9057158 7586046 263149 3872374 November 2191998 5785655 1729735 2677716 504612 6911913 14.The Government of India demonetized Rs.500 and Rs.1000 notes on 08.11.2016. Between 01.11.2016 and 08.11.2016, petitioner had collected sum of Rs.57,85,655/-which is also does not appear to be usual as compared to collections made during November 2015. Out of total collection of Rs.57,85,655/-and closing cash of Rs.38,72,374/- as on 31.10.2016, petitioner deposited amount of Rs.26,77,716/- which is also not in variance with cash deposits made by petitioner during preceding financial year. Collection of monthly subscription/dues by petitioner during aforesaid period appear to be reasonable as compared to be same period during 2015. http://www.judis.nic.in Page No 8 of 12 W.P.No.1732 of 2020 15.The Government of India has introduced E-Governance for conduct of assessment proceedings electronically. It is laudable steps taken by Income Tax Department to pave way for objective assessment without human interaction. At same time, such proceedings can lead to erroneous assessment if officers are not able to understand transactions and statement of accounts of assessee without personal hearing. respondent should have to be therefore at least called for explanation in writing before proceeding to conclude that amount collected by petitioner was unusual. 16.In my view, petitioner has prima facie demonstrated that assessment proceeding has resulted in distorted conclusion on facts that amount collected by petitioner during period was huge and remained unexplained by petitioner and therefore same was liable to be treated as unaccounted money in hands of petitioner under Section 69A of Income Tax Act, 1961. Therefore, impugned order making petitioner liable to tax at maximum marginal rate of tax by invoking Section 115BBE of Income Tax Act, 1961 placing reliance on decision of Honourable Supreme Court in Smt. Shrilekha Banerjee Vs. CIT, http://www.judis.nic.in Page No 9 of 12 W.P.No.1732 of 2020 1964 AIR SC 697 appears to be misplaced.. 17.Since assessment proceedings no longer involve human interaction and is based on records alone, assessment proceeding should have commenced much earlier so that before passing assessment order, respondent assessing officer could have come to definite conclusion on facts after fully understanding nature of business of petitioner. It appears that return of income was filed by petitioner on 02.11.2017. However, assessment proceeding commenced much later towards end of period prescribed under section 153 of Income Tax Act, 1961. In my view, assessment proceeding under changed scenario would require proper determination of facts by proper exchange and flow of correspondence between petitioner and respondent Assessing Officer. 18.Under these circumstances, impugned order is set aside and case is remitted back to respondent to pass fresh order within period of sixty days from date of receipt of copy of this order. Petitioner shall file additional representation if any by treating impugned order as show cause notice within http://www.judis.nic.in Page No 10 of 12 W.P.No.1732 of 2020 period of thirty days from date of receipt of copy of this order. Since Government of India has done away with human interaction during assessment proceedings, it is expected that petitioner will clearly explain its stand in writing so that respondent assessing officer can come to objective conclusion on facts based on records alone. It is made clear that respondent will have to come to independent conclusion on facts uninfluenced by any of observation contained herein. 19.The Writ Petition stands allowed with above observation. No cost. Consequently, connected Miscellaneous Petitions are accordingly closed. 04.02.2020 Index :Yes/No Internet :Yes/No jen To Deputy Commissioner of Income Tax, Circle 1(1), Income Tax Office, No.3, Gandhi Road, Salem 636 007. C. SARAVANAN, J. http://www.judis.nic.in Page No 11 of 12 W.P.No.1732 of 2020 Jen Pre-Delivery Order in W.P.No.1732 of 2020 and W.M.P.Nos.2006 & 2007 of 2020 04.02.2020 http://www.judis.nic.in Page No 12 of 12 Salem Sree Ramavilas Chit Company Private Limited v. Deputy Commissioner of Income-tax, Circle-1(1), Salem