RAHUL GUPTA,HARDOI vs. ITO, WARD 3(), HARDOI, HARDOI

at the time of its hearing.”

2. The facts of the case are that the Department received information that the assessee had deposited Rs.64,37,840/- in his savings bank account maintained with the State Bank of India during the period of demonetization. Since, no return of income had been filed by the assessee, a notice under section 142(1) of the Income Tax Act was issued by the Assessing Officer on 27.11.2017. The ld. AO records that the assessee did not make compliance to that notice and therefore, the assessment was liable to be completed under section 144 of the Income Tax Act. Subsequently, the ld. AO obtained details from the bank and found that there were two accounts which were operated by the assessee, Sh. Rahul Gupta and he was the ultimate beneficiary of the cash deposited in two bank accounts. Therefore, the ld. AO issued a show cause notice to the assessee asking why the assessment may not be completed in a best judgment manner according to the provisions of section 144. In response to this show cause notice, the assessee submitted reply in which it was stated that he had filed his ITR and photocopies of final accounts and therefore the case may be dropped. However, since he had failed to submit any explanation or documentary evidence regarding cash deposited, another notice under section 142(1) was issued to him. Since the assessee did not submit a reply, a draft assessment order was issued in which the income of the assessee was proposed to be assessed at Rs. 2,59,41,250/-. In response thereof, the assessee filed the details of his computation of income and a copy of the VAT return. However, ld. AO, ongoing through the responses observed that the so called ITR filed by the assessee was beyond the time permitted by the notice under section 142(1) and therefore, he held it to be nonest. Examination of the final accounts submitted by the assessee in Rahul Gupta A.Y. 2017-18 comparison to the VAT return revealed that there was a difference in the total sales recorded in both, amounting to Rs. 65,42,745/-. There was also a difference of Rs. 20,18,429/- in purchases. The ld. AO was therefore, clear that the assessee had disclosed different figures to different taxing authorities. Thereafter, he observed that in the P&L account furnished by the assessee, the gross profit had been disclosed at 10.68%. Applying those figures to the VAT return, he calculated the gross profit to be Rs.55,04,965/-. He further observed that sum of Rs. 8,21,500/- had been deposited in the bank account during the demonetization period in SBNs and total deposits made were of Rs.67,05,740/-. The ld. AO held that the assessee had no explanation to the cash which had been deposited in his bank account, considering that he had not filed his return of income and therefore, he held that a sum of Rs. 7,66,500/- was unexplained money under section 69A. Thereafter, after allowing expenditure claimed of Rs. 6,46,797/- in the profit & loss account, he brought the sum of Rs. 40,91,668/-, which was the balance remaining of the gross profit to tax in the hands of the assessee. Thus, after making the said additions, the assessee was assessed at an income of Rs. 48,58,168/- and penalty proceedings were initiated.

3. Aggrieved with this order, the assessee went before the ld. CIT(A). Before the ld. CIT(A), it was submitted that the assessee was proprietor of the firm M/s Rahul Sales Corporation previously his father was the proprietor of the firm and he had died on 20.07.2016. Thereafter, the assessee took over the business. It was pointed out that the assessee was engaged in FMCG products. Being new to business, the assessee was not aware of income tax matters. He had engaged an Advocate, Sh. Ritesh Shrivastava, who looked after income tax matters and the said Advocate had neither handed over the copy of the assessment order to the assessee nor informed him as a result of the same, the appeal was delayed. With regard to the decision of the ld. AO to disregard the return filed by him in response to the notice under section 142(1), it was submitted that the VAT return and the P&L account that were filed by the assessee, were made use of by the ld. AO. It was Rahul Gupta A.Y. 2017-18 submitted that the source of deposit of Rs. 8,21,500/- of SBNs on 17.11.2016 was connected to the business of the assessee and the sum of Rs. 40,91,668/- had been assessed his income from business and therefore, there was no justification in applying section 115BBE. The ld. CIT(A) accepted these arguments of the assessee and even while he confirmed both the additions, he held that the assessee ought to be taxed under the normal provisions of the Act.

4. The assessee is aggrieved at this sustenance of additions made by the ld. CIT(A) and has accordingly come before us. Sh. Pranav Pandey, C.A. (hereinafter referred to as the ld. AR) appearing on behalf of the assessee submitted that the assessee’s father Sh. Sushil Kumar Gupta, who was the proprietor of the firm M/s Rahul Sales Corporation had died on 20.07.2016. The assessee became the proprietor of the firm from 1.08.2016 and therefore, only income from 1.8.2016 to 31.03.2017 could be considered as the income of the assessee as per the law. Due to the lapses of the Accountant as well as the C.A. the audited balance-sheet of the full year had been prepared and submitted. A copy of the death certificate as well as the amended VAT registration certificate was attached to demonstrate that the proprietor of M/s Rahul Sales Corporation for the different parts of the year were different. It was, therefore, prayed that the death certificate, balance-sheets for the different period and the copy of the amended VAT registration may kindly be admitted, as additional evidence, so that the case could be decided as per the law. Furthermore, the assessee had also filed a copy of declaration from the State Bank of India regarding the closure of the earlier current account of Rahul Sales Corporation, after the death of Sh. Sushil Kumar Gupta and the transfer of the balance for the same to the current account operated by the assessee. He also prayed that this evidence may be kindly admitted. Regarding the admissibility of the evidence, it was submitted that the assessee was in the first year of his business and was totally dependent upon his counsel, who had not advised him properly in this regard. However, upon change of counsel, it has been noticed that the assessee was only liable to be assessed in his individual capacity, in respect of the income Rahul Gupta A.Y. 2017-18 pertaining to the period when he became the proprietor of M/s Rahul Sales Corporation. For the previous period, it was submitted that Smt. Manju Gupta, Sh. Rahul Gupta (the assessee), Sh. Shambhu Gupta and Sh. Adarsh Gupta (brothers of the assessee) had all been jointly certified as the legal heirs of Sh. Sushil Kumar Gupta, vide certificate issued by District Magistrate, Hardoi on 27.09.2016. A copy of the same had been attached in the paper book which was also filed as additional evidence. In the light of these materials, it was submitted that the matter may kindly be send back to the ld. AO so that the additions may be made in the hands of the assessee, as per law.

5. Sh. R.R.N. Shukla, Sr. DR (hereinafter referred to as the ld. DR) arguing on behalf of the Department submitted that the assessee had himself filed a statement showing himself to be the recipient of the income for the entire year and therefore, there was no mistake in the order of the ld. AO. In fact, the ld. AO had been generous in allowing all necessary deductions to the assessee while assessing his income. He, therefore, prayed that interference in this matter was not warranted.

6. We have duly considered the facts and circumstances of the case. It is fairly clear that the liability for paying tax on the income of Sh. Sushil Kumar Gupta, pertaining to the period when he was the proprietor of M/s Rahul Sales Corporation, vested with him and after his death upon his legal heirs. The assessee is only one among four legal heirs of Sh. Sushil Kumar Gupta and therefore, cannot be taxed on the income for the entire year. However, the assessee is liable to pay tax on the income that has been earned and to give explanation for deposits made by him during the period in which he was the proprietor of the said firm i.e. after 1.08.2016. In view of the fact that the additional evidence is essential to determine the liability of the assessee to tax as per the law, and could not be submitted earlier due to the advice of the then counsel, we admit this additional evidence and we restore the matter back to the file of the ld. AO so that he may consider the