Loading judgment…
Facts
The assessee failed to file income tax returns for AY 2017-18. The AO initiated reassessment proceedings under section 147 based on information about significant cash deposits in the assessee's bank account. Despite multiple notices, the assessee remained non-compliant, leading the AO to make a best judgment assessment and add the entire deposit amount as income.
Held
The Tribunal held that the AO had valid reasons to reopen the assessment due to the assessee's non-compliance and failure to provide explanations for the cash deposits. The Tribunal found no merit in the assessee's contentions regarding the invalidity of the reopening and the assessment order. The ground challenging the addition was remanded to the AO for fresh consideration after the assessee furnished additional evidence.
Key Issues
1. Whether the reassessment proceedings initiated under section 147 were valid, considering the assessee's non-compliance and the AO's reasons for belief. 2. Whether the assessment order passed under section 144 without issuing a notice under section 143(2) was valid. 3. Whether the addition of cash deposits as unexplained income was justified on merits.
Sections Cited
147, 148, 143(2), 143(3), 144, 144B, 139, 69A, 115BBE, 271AAC, 274, 151
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI B.M. BIYANI & SHRI PARESH M. JOSHI
आदेश/ O R D E R
Per B.M. Biyani, A.M.:
Feeling aggrieved by order of first appeal dated 21.01.2025 passed by learned Commissioner of Income-Tax (Appeals)-National Faceless Appeal Centre, Delhi [“CIT(A)”] which in turn arises out of assessment-order dated 26.03.2022 passed by learned National Faceless Assessment Centre [“AO”] u/s 147 r.w.s 144 & 144B of Income-tax Act, 1961 [“the Act”] for Assessment-Year [“AY”] 2017-18, the assessee has filed this appeal.
The background facts leading to present appeal are such that the assessee-individual did not file any return of income u/s 139 of the Act. The Page 1 of 23 AO, based on information in his possession that the assessee had deposited a total cash of Rs. 1,19,77,876/- in bank a/c during previous year 2016-17 relevant to AY 2017-18, initiated proceeding u/s 147 through a notice dated 25.03.2021 u/s 148 calling the assessee to file return within 30 days.
However, the assessee did not obey the notice u/s 148 and did not file return within the time designated by AO. Thereafter, the AO also issued various notices u/s 142(1) to assessee but the assessee remained non- compliant [Para 2 and 3 of assessment-order]. Ultimately, the AO stepped to make assessment to the best of his judgement and issued a show-cause notice dated 19.03.2022 alongwith draft assessment order to assessee. In response, the assessee filed reply dated 25.03.2022 which is re-produced in Para 5 of assessment-order. However, the AO rejected assessee’s reply citing various reasons in Para 6 of assessment-order. Finally, the AO assessed the entire amount of deposits in bank a/c i.e. Rs. 1,19,77,876/- as taxable/total income of assessee. Aggrieved, the assessee carried matter in first-appeal before CIT(A) and challenged the legality of assessment framed by AO u/s 147 as well as the merits of addition. The assessee also filed various additional evidences under Rule 46A of Income-tax Rules, 1962. The CIT(A) rejected assessee’s legal claim but, however, remanded matter to AO for re- adjudication of merit after examining the evidences filed by assessee. Still aggrieved, the assessee has come in next appeal before us.
3. The grounds raised by assessee are as under:
Page 2 of 23 “1. That the notice issued u/s 148 of the Act is illegal, wrong, without jurisdiction and authority of law.
2. That the assessment order passed without issuance of notice under section 143(2) of the Act is illegal, wrong and bad-in-law.
3. That the assessment order passed u/s 147 of the Act is illegal, wrong and bad-in-law.
That the addition made of Rs. 1,19,77,876/- u/s 69A of the Act is illegal, wrong and bad-in-law.
5. That the appellant craves leave to add, alter, amend and/or withdraw any ground of appeal on or before the hearing of appeal.” Ground No. 1 to 3:
4. By means of these three grounds, the assessee has challenged the legality of assessment framed by AO. In Ground No. 1, the assessee claims that the notice issued u/s 148 is illegal and without authority of law. In Ground No. 2, the assessee claims that the assessment-order passed without issuance of notice u/s 143(2) is illegal. Ld. AR submitted that Ground No. 3 is a consequential ground of Ground No. 1 & 2.
5. At first, we deem it fit to re-produce the relevant portion of orders passed by lower-authorities for an immediate reference:
Assessment-order passed by AO:
“2. In this case, numerous specified opportunities were offered by way of issuance of notice u/s 142(1) of the I.T. Act, but no information/details/ documents have been filed, to explain the source of cash deposits of Rs. 1,19,77,876/-/- in his bank account. Details of the notices issued to the assessee are given as under- S.No Notice Issued date Compliance date Remarks u/s 1 148 25.03.2021 Within 30 days No ITR filed in compliance 2 142(1) 02.12.2021 17.12.2021 No compliance made
Page 3 of 23 3 142(1) 21.01.2022 07.02.2022 No compliance made 4 142(1) 10.02.2022 16.02.2022 No compliance made As the assessee has not complied with the noticed issued to him, a reference was also made to Verification Unit on 31.01.2022 to serve the notice issued to him and same was delivered to assessee on 04.02.2022 as per data available on website of Postal Department. Despite providing enough opportunities to assessee, he choose to remain silent and not answered any of notices issued in his case.
Even till date neither anybody attended the proceedings nor any reply has been filed. From the above scenario, I am led to concede that the assessee is avoiding the assessment proceedings for the reasons best known to him and does not seem in a mood to co-operate the Revenue in finalization of the assessment pending in his case. It would be apt to mention that it is a time barring assessment. The assessment proceedings cannot be allowed to prolong no more.
The assessee is maintaining bank account with Bank of Baroda. It was gathered from the record that the assessee has made cash deposit of Rs. 1,19,77,876/-. In view of all these facts, amount of Rs. 1,19,77,876/- is treated as cash deposit out of undisclosed sources. Thus, the assessee has failed to furnish any explanation regarding the source of deposits of Rs. 1,19,77,876/-. Thus, the assessee has failed to discharge his onus. 5.1 When an assessee does not produce evidence, tries to avoid and digress the issue before the Assessing Officer, it necessarily creates difficulties and prevents ascertainment of true and correct facts as the Assessing Officer is denied the advantage of scrutinizing the factual assertion and claim of the assessee. In case where the assessee deliberately and intentionally fails to produce evidence, creates hurdles to any inquiry or investigation, an adverse view might be justified. 5.2 Silence on the part of the assessee goes to suggest that the assessee has nothing to say and he has admitted his default regarding deposits in his bank account during the year under consideration amounting to Rs. 1,19,77,876/-, out of income from undisclosed sources. The aforesaid circumstances show that the assessee is not interested to pursue its assessment proceedings. In the absence of any reply from the assessee, the matter is being decided ex- parte. The maxim 'vigilantibus non-determinentibus jura subvenunt’ i.e. ‘the law assist those who are vigilant and not those who sleep over their rights' is applicable in this case. The final show cause notice was issued to assessee on 19.03.2022 alongwith draft assessment order to file explanation regarding the proposed additions till 25.03.2022. The assessee has filed his reply on 25.03.2022 which is reproduced as under: XXX (assessee’s reply not produced)
6. The reply filed by the assessee has been considered but not found convincing due to following reasons: (i) However, the assessee has claimed that he filed his ITR in compliance to notice u/s 148 on 25.03.2019 but no copy of ITR has been filed by the assessee and no details of ITR is available on e- filing portal till date. (ii) The assessee has not filed copy of his bank statement to substantiate the respective withdrawal which required for a rotational business model of vegetables. (iii) Assessee has not filed details of customers from whom he has claimed to received the advance amounting to Rs. 36,03,721/-. (iv) Assessee could not file copy of VAT return or other documentary evidence which can substantiate that assessee has done the vegetable business during the year under consideration. (v) Assessee has not filed copy of Cash-book related to his business to substantiate the cash deposits made by him in his bank account during the year. Therefore, in view of all the facts and circumstances of the case, amount of Rs. 1,19,77,876/- is treated as the amount deposited in his bank account out of undisclosed sources as the assessee has failed plausible explanation regarding these deposits made in the bank account maintained by him. It was obligatory on the part of the assessee to disclose fully and truly all the facts in the ITR. But the assessee has failed to do so. It is, thus, ample clear from the attitude of the assessee that the assessee has willfully and intentionally concealed the income of Rs. 1,19,77,876/-. Therefore, addition of Rs. 1,19,77,876/- on account of unexplained money u/s 69A of the IT Act, 1961 is hereby made to the total income of the assessee which is taxed as per provisions of section 115BBE of the IT Act, 1961. In view of these facts, penalty proceedings u/s 271AAC of the Income-tax Act, 1961 is hereby initiated by issuing penalty notice u/s 274 read with section 271AAC of the Income-tax Act, 1961 separately. (Addition of Rs. 1,19,77,876/-)” Order of first-appeal passed by CIT(A):
“5. Adjudication: 5.1. From the grounds of appeal and written submission filed by the appellant the it appears that the appellant has mainly contended against i. Reopening of the case, and Page 5 of 23 ii. Addition made by the AO u/s 69A of the Act. 5.2. In ground no. 1 & 2 of the appeal, the appellant has challenged the legality of the impugned assessment order and strongly contended against reopening of the case u/s 147 and issuance of notice u/s 148. The appellant has claimed that no Income was escaped assessment, hence the reasons recorded by the AO and insufficient for reopening of the case. The appellant's submissions in this regard can be summarized as under: Assessment order was passed without issuance of notice u/s 143(2).
That the notice has been issued only on the basis of information. That the notice has been issued without any tangible material on record. Notice u/s 148 was issued without any independent enquiry.
Notice u/s 148 was issued without application of mind. The action was taken on the basis of information, That the notice has been issued without verification of facts.
That the reopening cannot done merely for cash deposit. Reopening is not permitted for enquires and verification. The AO merely had the reasons to suspect not reason to believe. Reopening of the case is based on change of opinion.
The AO acted mechanically on the information passed on to him by the Investigation Wing, Ahmedabad, he did not record his own satisfaction.
There is no live link between the information and formation of belief by the AO.
The specified authority granted approval mechanically without due application of mind. 5.3. The appellant placed his reliance upon a number of case laws which have been considered carefully. This is the matter of facts that the appellant had not filed his return of income u/s 139(1) of the Income Tax Act, 1961 within prescribed time limit. It is also evident that the appellant had deposited cash amounting to Rs. 1,19,77,876/- in his bank account during the financial year under reference. In such circumstances the AO had sufficient reason to form his belief that the appellant had got income escaped assessment for the assessment year under reference. Therefore, the contention of the appellant that deposit of cash cannot be ground for reopening of the case does not carry much force. In the instant case huge
Page 6 of 23 cash was deposited in the bank account of the appellant who had not filed his return of income. This very fact is sufficient reason for reopening of the case. 5.4. A perusal of assessment order shows that the AO analyzed the information about the huge cash deposit in the bank account of the appellant with reference to the data available on system and he came to know that despite having substantial financial transactions in his bank account the appellant did not file his return of Income. The AO recorded his satisfaction for issuance of notice us 148 of the Act, thereafter he put the proposal alongwith relevant records before the specified authority u/s 151 of the Act, who after applying his/her mind accorded the proposal for reopening of the case u/s 148 of the Act. Therefore, the appellant's contention, without any supporting documentary evidences, that the AO and the specified authority u/s 151 of the Act did not apply their mind and mechanically issued notice u/s 148, is not acceptable. 5.5. Similarly, the submission of the appellant that the AO had not tangible material on record for reopening of the case also does not carry any substance. The Information about huge transactions in the bank account of the appellant and not filing return of income by him is itself sufficient reason for reopening of the case us 148 of the Act. 5.6. With respect to the non-issuance of notice u/s 143(2), it is evident that the AO has clearly mentioned in the assessment order that the appellant, vide his reply dated 25.03.2022 had claimed that he had filed return of income in compliance to the notice u/s 148 dated 25.03.2021, but it was not visible on the e-filing portal. It is evident from the ITR filed by the appellant that it was uploaded on the system at 05:55 PM on 25.03:2022 and the AO has passed the impugned assessment order on 26:03:2022 when the ITR filed by the appellant was not visible to him on the system. It also transpires that the AO asked the appellant to file his return of income within 30 days from issuance of the notice u/s 148 dated 25.03.2021 but the appellant did not file his return of income despite lapse of one year. At the fag end when time-barring date was approaching, he just filed his ITR few hours before when AO passed he impugned assessment order. Therefore, the facts of the present case are clearly distinguishable from the facts of the case of Hotel Blue Moon referred by the appellant. Therefore, I am of the considered opinion that the judicial pronouncement of the Hon’ble Supreme Court in the case of Hotel Blue Moon is not applicable in the present case. Accordingly, the contention of the appellant is dismissed and not allowed. 5.6 In view of the above discussion in para 5.2 to 5.6, I am of the considered opinion that all technical issues raised by the appellant challenging the legality of the impugned assessment order do not carry substance, hence, not accepted. Accordingly, ground no. 1 & 2 of the appeal are dismissed and not allowed. [emphasis supplied]
We have heard learned Representatives of both sides at length and considered their rival submissions as also the material held on record including the orders of lower-authorities and the judicial rulings referred by Ld. Representatives of both sides during hearing.
Ld. AR assails the assessment-order made by AO by iterating following contentions as mentioned by him on Pages 1,2,5 of his Written-Synopsis:
That the notice has been issued only on the basis of information. That the notice has been issued without any tangible material on record. No notice/query/verification letter has been issued either to the Bank authorities or assessee to call the Bank Statement to verify the information of cash deposits. Notice u/s 148 was issued without any independent enquiry. Notice u/s 148 was issued without application of mind. Re-opening cannot be done merely because there are cash deposit in bank account. Mere cash deposit does not mean escapement of income. No tangible material in possession of the AO for reason to believe. That the assessment-order passed without issuance of notice under section 143(2) of the Act is illegal, wrong and bad-in-law.
The contentions raised by assessee/Ld. AR are similar/identical to various contentions raised in first-appeal as noted by CIT(A) in Para 5.2 of impugned order passed by CIT(A) [re-produced above]. The Ld. AR has also referred certain judicial rulings wherein the conclusions upholding these contentions have been taken.
On a bare reading of contentions raised by assessee/Ld. AR, one can easily observe that the assessee’s sole endeavour is to raise all premises, whether meritorious or not, to get out of the assessment framed by AO. This is ostensibly for the reason that the assessee was grossly non-compliant to various notices issued by AO during assessment-proceeding. In his assessment-order which is re-produced in earlier para, the AO has repeatedly and loudly noted adverse observations against assessee’s non- cooperative approach throughout and till the end of scrutiny-proceeding.
The Ld. AR could not demonstrate any justifiable reason behind such attitude of assessee. Be that as it may, we find that the CIT(A) has, in paras 5.3 to 5.6 of impugned order, dealt assessee’s contentions judiciously and rejected the same after due consideration of facts/documents. We do not find any error, adversity or perversity in the order of CIT(A).
Apart from this, Ld. DR for revenue carries us further to demonstrate serious aspects against assessee. He referred the reasons recorded by AO before issuing notice u/s 148 filed at Page 4 of Paper-Book; the same is scanned and re-produced below:
By reading above document line by line in open court, Ld. DR explained that the AO has recorded vehement reasons that the assessee did not file any return for AY 2017-18 (Point No. 1); that he had information from ITBA about cash deposit of Rs. 1,19,77,876/- made by assessee in bank a/c (Point No. 2 & 3); that he had a reason to believe that the assessee made cash deposit from unexplained sources (Point No. 4); that the assessee had not filed return of income although the total income of assessee exceeded the maximum amount not chargeable to tax and that the case of assessee was covered under deeming provision of escapement under clause (a) of Explanation 2 to section 147 (Point No. 5 to 7).
12. Ld. DR thereafter invited our attention to the return of income claimed to have been filed by assessee on 25.03.2022 at the feg end of assessment- proceeding, copy at Page No. 1 of Paper-Book; the same is also scanned and re-produced for an immediate reference:
Referring to same, Ld. DR successfully demonstrated that in the return of income, the assessee has himself disclosed total income at Rs. 6,82,080/- and paid tax of Rs. 63,258/- plus interest of Rs. 73,312/-. Ld. DR made a forceful contention that the return of income filed by assessee itself shows that the total income for the year was exceedingly higher than the maximum amount not chargeable to tax. When it is so, how the assessee is claiming that it was not a case fit for proceeding u/s 147? Ld. DR submitted that the case of assessee directly falls under the realm of clause (a) of Explanation to section 147. He submitted that the assessee’s all contentions to impress that the proceedings u/s 147 had been illegality initiated/completed by relying upon conclusions of certain judicial rulings which are not applicable at all to assessee’s facts, is a futile attempt and must be instantly rejected by this bench.
14. Ld. DR also referred an order of Hon’ble Bombay High Court in Hede Ferrominas (P) Ltd. Vs. Assistant Commissioner of Income-tax (2023)
147 taxmann.com 215 (Bombay), the portion referred by Ld. DR is re- produced below:
“11. The rival contentions now fall for our determination.
In this case, there are two significant circumstances based on which the Petitioner cannot expect this Court to exercise its extraordinary and discretionary jurisdiction in its favour. But, apart from these circumstances, other reasons disentitle the Petitioner from any relief in this Petition.
13. Firstly, the Petitioner did not bother to file any returns during Assessment Year 2015-16. Secondly, the Petitioner did not bother to file any response to the notice dated 27.03.2021 seeking to reopen the assessment within the time limit allowed to the Petitioner. The Petitioner
Page 13 of 23 filed returns only after eight months at the stage when the time limit for completing the reassessment proceedings was almost due to conclude. In these circumstances, the Assessing Officer rightly invoked the principle in Union of India V/s. Major General Madan Lal Yadav.
Discretion apart, we find that this is a matter where the explanation (2) to Section 147 of the IT Act would apply. This explanation inter alia provides that where no return of income has been furnished by the assessee although his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded with a maximum amount which is not chargeable to income-tax, the same shall also be deemed to be a case where income chargeable to tax has escaped assessment.
The Petitioner has not explained the amount of ₹2,15,107/-. The Petitioner may have its own version about the receipt of the amount of ₹6.74 crores. However, these are matters which can be looked into at the stage of reassessment. Based on the material available with the respondents, we cannot say that they either had no reason to believe or that their reasons to believe were based on some non-extent material or extraneous and irrelevant material.
16. Mr Panandiker's contentions are in a realm of merits which can always be gone into at the stage of actual reassessment. However, based on his contentions, no case is made out to interfere with the impugned orders or impugned notices seeking to reassess the Petitioner's income.
17. For the above reasons, we dismiss this Petition.”
[emphasis supplied]
15. Ld. DR compared the facts of above case before Hon’ble Bombay High Court with the facts of present assessee’s case and successfully demonstrated there are exactly same set of facts and, therefore, in the light of decision of Hon’ble High Court, the re-assessment proceeding set up by AO u/s 147 is very much valid. Accordingly, he requested to uphold the order passed by AO as also the adjudication made by CIT(A) in first-appeal.
On a careful consideration, we agree with the above submissions of Ld. DR which we do not want to repeat for the sake of brevity. Suffice it to say
Page 14 of 23 that in present case, the AO has recorded valid reasons to re-open assessee’s case, more specifically incorporating therein that the assessee was having total income exceeding the maximum amount not chargeable to tax which is an undisputable fact manifest from the return filed by assessee himself (scanned above) wherein the assessee has disclosed total income as high as Rs. 6,82,080/- and paid tax of Rs. 63,258/- plus interest of Rs.
73,312/-. Thus, the case of assessee is straightaway covered under the deeming provision of clause (a) of Explanation-2 to section 147 reading as under:
“Explanation 2 – For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely :- (a) where no return of income has been furnished by the assessee although his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income- tax; Therefore, various contentions raised by Ld. AR/assessee do not have any merit in the facts of assessee; those contentions are hereby rejected.
However, the assessee has raised one important contention in Ground No. 2 which requires a separate adjudication. The contention is such that the assessment-order passed by AO without serving notice u/s 143(2) is illegal. Ld. AR for assessee accepted that the AO issued notice u/s 148 dated 25.03.2021 requiring the assessee to file return within 30 days but the assessee filed return after a delay of 11 months on 25.03.2022 and hence there was a default on the part of assessee in not filing return within the Page 15 of 23 time allowed by AO in notice u/s 148. However, while admitting so, Ld. AR draws us to Page No. 2-3 of Paper-Book to show that simultaneously with filing of return, the assessee also filed a reply-letter dated 25.03.2022 to AO (which is acknowledged and re-produced by AO in Para No. 5.2 of assessment-order) intimating about the return so filed. The pages of Paper- Book referred by Ld. AR are scanned below for an immediate reference:
Thereafter, Ld. AR contended that even if the return was filed belatedly after 11 months, the AO was duty bound to issue notice u/s 143(2) to make assessment u/s 143(3) or 144 but the AO has failed to issue any notice u/s 143(2) and therefore the impugned assessment-order passed by AO on 26.03.2022 u/s 144 falls short of jurisdiction and invalid. To support his claim, Ld. AR relied upon the decision of ITAT, Indore in Income-tax Officer-1(2), Indore Vs. Divine Infracreation and Trading Private Ltd., ITA No. 272/Ind/2024.
Per contra, Ld. DR for revenue invited our attention to Para 6(i) of assessment-order wherein the AO has mentioned “However, the assessee has claimed that he filed his ITR in compliance to notice u/s 148 on 25.03.2019 but no copy of ITR has been filed by the assessee and no details of ITR is available on e-filing portal till date.” Thereafter, he analysed the very same reply-letter dated 25.03.2022 referred by Ld. AR as re-produced in preceding para and made a forceful contention that the assessee was throughout negligent in assessment-proceedings and it is only on 25.03.2022 that the assessee filed return to department. Further, the assessee filed reply-letter on 25.03.2022 at 17:55:16.0 which is evident from the e-filing acknowledgement reproduced above. Thereafter, the AO passed assessment-order on 26.03.2022 at 14:53:44. Thus, the AO was left with certain hours and not even one day. Ld. DR submitted that the CIT(A) has taken a judicious view of all these vital facts in his order and thereafter rejected assessee’s contention, hence the order passed by CIT(A) is proper
Page 18 of 23 and must be upheld. Ld. DR also emphasized that the assessment-order has been passed under the prescribed procedure of faceless scheme in terms of section 144B wherein multiple units of department work at pre-defined multi-stages. He submitted that the show-cause notice for making assessment u/s 144 accompanied by draft-assessment order was issued to assessee on 19.03.2022 and thereafter only the assessee filed return on 25.03.2022. He submitted that the return filed by assessee after having committed a series of failures to comply with all notices issued u/s 148/142(1) cannot help assessee. Therefore, the claim being insisted by assessee for requirement of issuance of notice u/s 143(2) is wrong and must be rejected.
We have considered rival contentions of both sides. At first, we extract below the relevant para of order passed by CIT(A) for this issue:
“5.6. With respect to the non-issuance of notice u/s 143(2), it is evident that the AO has clearly mentioned in the assessment order that the appellant, vide his reply dated 25.03.2022 had claimed that he had filed return of income in compliance to the notice u/s 148 dated 25.03.2021, but it was not visible on the e-filing portal. It is evident from the ITR filed by the appellant that it was uploaded on the system at 05:55 PM on 25.03:2022 and the AO has passed the impugned assessment order on 26:03:2022 when the ITR filed by the appellant was not visible to him on the system. It also transpires that the AO asked the appellant to file his return of income within 30 days from issuance of the notice u/s 148 dated 25.03.2021 but the appellant did not file his return of income despite lapse of one year. At the fag end when time-barring date was approaching, he just filed his ITR few hours before when AO passed he impugned assessment order. Therefore, the facts of the present case are clearly distinguishable from the facts of the case of Hotel Blue Moon referred by the appellant. Therefore, I am of the considered opinion that the judicial pronouncement of the Hon’ble Supreme Court in the case of Hotel Blue Moon is not applicable in the present case. Accordingly, the contention of the appellant is dismissed and not allowed.
Admittedly, the assessee filed return on 25.03.2022 after committing non-compliance of all notices issued by AO u/s 148/142(1). However, the assessee is claiming that even in such scenario, the AO must have issued notice u/s 143(2) before making assessment. The assessee is relying upon Divine Infracreation (supra) decided by ITAT, Indore. We have given a careful thought the order of ITAT, Indore in that case. From Para 13 of order of ITAT, it is discernible that the AO issued notice dated 08.08.2019 u/s 148, the assessee filed return on 05.10.2019 and the AO passed assessment- order on 09.01.2020. Thus, although there was a delay in filing return but the same was not so fatal for the reason that the AO framed assessment much after filing of return. In present case, however, the AO issued as many as four notices u/s 148 and 142(1) but there was non-compliance by assessee to all notices. Ultimately finding a total failure of assessee, the AO treated assessee’s case fit for best judgement and issued final show-cause notice alongwith draft assessment-order on 19.03.2022 in terms of statutory authority prescribed in section 144 of the Act. Thereafter only the assessee filed return and reply-letter on 25.03.2022. Therefore, the facts of present case of assessee do not have any parity with the facts of Divine Infracreation (supra). Needless to mention that section 144 prescribes thus:
“144. Best judgement assessment: (1) If any person – (a) XXX
(b) fails to comply with all the terms of a notice issued under sub-section (1) of section 142 or fails to comply with a direction issued under sub-section (2A) of that section, or (c) XXX the Assessing Officer, after taking into account all relevant material which the Assessing Officer has gathered, shall, after giving the assessee an opportunity of being heard, make the assessment of the total income or loss to the best of his judgement and determine the sum payable by the assessee on the basis of such assessment;” [emphasis supplied] Thus, the clause (b) of sub-section (1) of section 144 highlighted above, authorizes the AO to make best judgement assessment u/s 144 in a case where the assessee fails to comply with notices issued u/s 142(1). Therefore, in the present case, the AO is within authority to issue show-cause notice and draft assessment-order to assessee and thereafter make assessment u/s 144. The filing of return by assessee on 25.03.2022, subsequent to issuance of show-cause notice and draft assessment-order, cannot over-ride the specific provision of clause (b) of sub-section (1) of section 144 and cannot help assessee. In any case, the assessee’s gross negligent attitude is apparent. Had the assessee filed a return (or a belated return) leaving sufficient time for AO, the AO would have issued notice u/s 143(2) without resorting to best judgement assessment u/s 144 but this is not the facts of present case. Therefore, considering the entire conspectus of case in the light of legal provision of section 144, we are not persuaded to accept the contention raised by assessee. Accordingly, the assessee’s insistence for issuance of notice u/s 143(2) is not acceptable; the same is rejected.
The above discussion brings us to reject all contentions raised by assessee/Ld. AR and we do so. In the end, we conclude that the order passed by CIT(A) upholding the validity of assessment framed by AO is valid and does not require any interference from us. Accordingly, Ground No. 1 to 3 raised by assessee are dismissed.
Ground No. 4:
In this ground, the assessee claims that the addition of Rs. 1,19,77,876/- made by AO is bad. Basically, the assessee is challenging the merit of addition made by AO.
In so far this ground is concerned, we find that the CIT(A) has passed following order:
6. With respect to the ground no. 3 of the appeal which is against the addition made by the AO, it is clear that the impugned assessment order was passed by the AO ex-parte u/s 144 read with section 147 of the Income-tax Act. The appellant did not furnish army reply to the notices issued by the AO. However, during the appellate proceedings, he has furnished voluminous detail and documents with request to accept these additional evidences under Rule 46A. In the interest of natural justice, the details and documents furnished by the appellant require to the examined on merit. Since, these documentary evidences were not filed during the assessment proceedings, the AO has not examined them. Therefore, entire additional evidences furnished by the appellant require to be examined by the AO. In such circumstances and in view of the facts that the impugned assessment order was passed ex-parte by the AO. In my considered opinion, the interests of justice will be well-served, if the appellant is given an opportunity to present its case before the Assessing Officer. Accordingly, without any discussion on the merit of the additions made by the AO, the impugned assessment order is set aside and the matter is restored back to the file of the Assessing Officer for decision afresh. The Assessing Officer shall give proper opportunity to the appellant to present his case.
After a careful consideration, we do not find any error, adversity or perversity in the order of CIT(A). Hence, we are not inclined to interfere with Page 22 of 23 the same. The same is hereby upheld and the Ground No. 4 is also dismissed.
Resultantly, this appeal is dismissed.
Order pronounced in open court on 07/10/2025