SRI RAVI SERVICE STATION,KRISHNA DIST vs. INCOME TAX OFFICER, WARD-1, GUDIWADA

In the above captioned appeal, the appellant raised a main ground stating that the Ld.AO/Ld.CIT(A) has wrongly treated the cash deposits as unexplained, without noticing that the bank account was mistakenly linked to the old PAN obtained in the year 2000, under which, no business was done. It was stated that the appellant had obtained a new PAN under which, all business transactions were properly recorded and the cash deposits actually relate to that particular business. The mistake of quoting old PAN while opening the bank account led to the additions made by the Ld.AO, which was subsequently confirmed by the Ld.CIT(A). In this appeal, the appellant has stated that the Revenue has completed scrutiny assessment under the provisions of best judgment assessment and added 8% of the total credits as profit earned in its business as there is no representation by appellant. In this case, it is observed that the Ld.CIT(A) dismissed the appeal of the assessee ex-parte, as there was no compliance to the notices issued by the First Appellate Authority. It is further observed that there is no compliance to the notices issued by the Ld.AO also. In fact, the Ld.AO has sent an Inspector of Income Tax to serve the notice through affixture at the premises in the presence of two witnesses and a panchanama was drawn and kept on records as there was no response from appellant. The appellant did not furnish any explanation about the cash deposits of Rs.4.82 crores despite several notices. There was no compliance to the final show cause notice issued by the Ld.AO, requesting the appellant to furnish explanation, as to why the entire cash deposits should not be treated as unexplained money u/s 69A of the Act. Since there was no response to any of these notices, after affixture of final notice, the Ld.AO completed the assessment as best judgment assessment u/s 144 of the Act. From the record, it is observed that the Ld.CIT(A) confirmed the action of the Ld.AO in making best judgment assessment on all the total credits of Rs.4.82 crores and the action of the Ld.AO, estimating 8% profit thereon was sustained. Before the Ld.CIT(A) also, there was no compliance by the appellant.

Aggrieved by the orders of the Ld.AO and Ld.CIT(A), the appellant filed present appeal before the ITAT with the following grounds of appeal :

Before the Bench, the Ld.AR of the appellant has stated that the Ld.AO and the First Appellate Authority have treated the cash deposits as unexplained, without noticing that the bank account was mistakenly linked to the old PAN, which was obtained in the year 2000, under which, no business was done. The Ld.AR of the appellant has stated that the assessee has obtained a new PAN, under which all these business transactions were properly recorded and the cash deposits actually relate to that particular business. The assessee did a mistake in quoting the old PAN, while opening the bank account, which led to this huge addition. In view of the same, the Ld.AR of the appellant has pleaded that the best judgment assessment order passed by the Ld.AO, which was confirmed by the Ld.CIT(A) may be vacated. As mentioned above, the Ld.AR of the appellant has requested the Bench to admit the fresh evidences, which contained the ledger extracts, books of account, bank statement and reconciliation of cash sales with the deposits etc. It was also pleaded that the reassessment was done by the Ld.AO based on assumption that cash deposits represent unexplained income, whereas, the same were regular business receipts, which was duly recorded, audited and offered to tax under new PAN. The Ld.AR has also argued that the Ld.CIT(A), despite having assessment records, failed to conduct even basic verification of PAN mismatch and passed non-speaking order, which is violation of 250(6) of the Act. Since the admission of the above additional evidence is essential for proper adjudication of the appeal and the denial thereof would cause gross miscarriage of justice and hence the appellant respectfully submitted before the Bench, that the case squarely falls within Rule 29 of Income Tax (Appellate Tribunal) Rules, 1963. As the appellant was prevented by sufficient cause from producing these evidences earlier and as these evidences go to the root of the matter, it was requested to take all these fresh evidences on record and adjudicate the matter. As all these deposits were properly reflected under new PAN and the return of income based on new PAN, the entire addition made by the Ld.AO should be deleted.

The Ld.DR has vehemently argued by stating that the appellant from the beginning is non-cooperative and it can be seen from the assessment order that there was no response to the notices, which were issued to the firm. The Ld.AO did everything to contact the appellant and since there was no response to the notices and final show cause notice, the Ld.AO has resorted to affixture of the notice on the address given by the appellant firm. Even after affixture, the appellant did not respond and hence, the best judgment assessment is only recourse available to the Revenue. It was argued by the Ld.DR that the entire cash deposits were not added as income. The Ld.AO has taken a balanced view and treated all the cash deposits as business receipts and 8% of the total deposits were treated as net profit and tax demand was raised only on this amount. The Ld.DR further argued that there was no compliance at all before the Ld.CIT(A) also. As there is no alternate for the Ld.CIT(A), the addition made by the Ld.AO was confirmed. Thus, there is total non compliance to the notices issued by the Ld.AO/Ld.CIT(A) and hence, the new evidences which are being furnished now before the Bench should not be entertained. The Ld.AR of the appellant did not say anything about the reasons for non- compliance of the notices issued to the appellant firm. In view of the same, the appellant should not be given further opportunities and the additions made by the Revenue should be confirmed in view of the peculiar facts and circumstances of this case.

After hearing both sides and perusing the assessment order, CIT(A) order, grounds of appeal and the additional evidences filed by the appellant, the Bench decides that the best judgment assessment passed u/s 144 of the Act is the only recourse available to the Revenue. But taking overall view, facts and circumstances, the Bench decided to take a lenient view and also decided to admit the fresh evidences filed under Rule 29 of Income Tax (Appellate Tribunal) Rules, 1963, as they go to the root of the matter. It is a cardinal principle of taxation that no person should be taxed twice on the same income. Prima facie, the cash deposits, which were treated as income by the Ld.AO were already taxed by the Department as the assessee filed the return of income with the new PAN. But whether all these cash deposits and transactions were incorporated in the return of income filed with new PAN are to be verified by the Ld.AO. Admittedly, none of these statements and documents were filed before the lower authorities. As all these documents are required for proper adjudication of the matter, the Bench decides to remit the matter back to the file of the Ld.AO. The Ld.AO is directed to take into consideration all these documents and pass an order afresh as per law, after giving effective opportunity to the appellant. In view of the above, the appeal of the assessee is allowed for statistical purpose.

In the result, appeal filed by the Assessee is allowed for statistical purpose.