Facts of the Case

The assessee firm is engaged in the business of medicine and surgical items. The return of income was filed on 20.09.2017 declaring total income of Rs.38,750/-.

The case was selected for scrutiny under CASS. Notice under Section 143(2) was issued on 10.08.2018 but no compliance was made. Subsequently, notices under Section 142(1) dated 22.07.2019, 31.08.2019 and 12.11.2019 and show cause notice dated 04.12.2019 were issued requiring the assessee to furnish details and explain the source of deposits made in bank accounts, including cash deposited during demonetization period.

The assessee failed to comply with the statutory notices. Accordingly, the Assessing Officer completed the assessment under Section 144 and determined total income at Rs.23,63,070/-.

Aggrieved, the assessee preferred an appeal before the learned CIT(A). It was submitted that the opportunity provided by the Assessing Officer could not be availed as the main partner was out of station during November and December 2019 and the other partner had no knowledge of accounts and income tax matters.

The learned CIT(A), after issuing notices and considering written submissions, dismissed the appeal.

Issues Involved

  1. Whether the assessment under Section 144 was justified due to non-compliance of notices.
  2. Whether addition relating to cash deposits during demonetization period was sustainable.
  3. Whether the matter required restoration for fresh adjudication after providing reasonable opportunity.

 Petitioner’s Arguments

The learned Counsel for the assessee submitted that:

  • There was no adverse material against the assessee before the Revenue.
  • The Assessing Officer erroneously presumed that cash deposits made during the year were unexplained.
  • The cash deposits were realization from debtors and constituted sale proceeds.
  • The addition was wrongly confirmed by the CIT(A).
  • The non-compliance occurred because the main partner was out of station and the other partner lacked knowledge of accounts and income tax procedures.

 Respondent’s Arguments

The learned Departmental Representative supported the orders of the Assessing Officer and the CIT(A), contending that the assessment under Section 144 was necessitated due to repeated non-compliance by the assessee.

 Court Order / Findings

The Tribunal observed that:

  • Multiple notices issued by the Assessing Officer remained uncomplied.
  • The assessment was completed under Section 144 due to such non-compliance.
  • The assessee had admitted before the CIT(A) that the opportunity could not be availed because the main partner was out of station and the other partner lacked knowledge of accounts.

Considering the facts and circumstances, the Tribunal deemed it appropriate to grant one more opportunity to the assessee.

Accordingly:

  • The order of the learned CIT(A) was set aside.
  • The matter was remanded to the file of the Assessing Officer.
  • The Assessing Officer was directed to pass a de novo assessment order after providing due and reasonable opportunity of being heard to the assessee.

 Important Clarification

The Tribunal did not adjudicate the merits of the addition relating to cash deposits during demonetization. The matter was remanded solely to ensure that the assessee is granted reasonable opportunity to present evidence and explanations.

Link to download the order – https://www.mytaxexpert.co.in/uploads/1770884865_NEWJAIDURGAENTERPRISESALLAHABADVS.INCOMETAXOFFICERWARD14ALLAHABADALLAHABAD.pdf  

 

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