Loading judgment…
Facts
The assessee's appeal is against the CIT(A)'s order sustaining proceedings under Section 147/148 and additions made by the AO. The AO made additions ex-parte, estimating income at 30% of total receipts and interest income, stating that the assessee did not respond to notices. The total cash credits in the assessee's bank account were substantial, and the assessee had not filed a return of income.
Held
The Tribunal held that the CIT(A) did not appreciate the facts and arbitrarily confirmed the assessment order. The authorities below acted in violation of the principles of natural justice by not giving the assessee a reasonable opportunity to be heard and present their case. The matter was restored to the AO for a de novo assessment.
Key Issues
Whether the assessment order and the additions sustained by CIT(A) are bad in law and facts due to violation of natural justice principles and lack of proper appreciation of evidence.
Sections Cited
147, 148, 144
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, JODHPUR BENCH (Virtual
Before: SHRI RAJPAL YADAV, HONBLE & DR. MITHA LAL MEENA, HONBLE
PER DR. MITHA LAL MEENA, Α.Μ.: The captioned appeal has been filed by the assessee against the order of the Id. National Faceless Appeal Centre [NFAC/CIT(A)], Delhi dated 13.05.2024 in respect of Assessment Year: 2018-19 where the assessee has raised following grounds:
The Id. CIT(A) has erred in sustaining the proceedings under Section 147/148. The order so sustained u/s 147/148 r.w.s 144 is bad in law and bad on facts and contrary to the principles of natural Justice.
The Id. CIT (A) has erred in sustaining an addition of Rs 1,09,47,423/- by estimating income at 30% of the total receipts. The estimation so sustained is bad in law and bad on facts.
The Id. CIT(A) has erred in sustaining an addition of Rs 1,83,053/- on account of Interest Income which is bad in law and bad on facts.
The appellant craves liberty to add, alter, amend or vary from the above the above grounds of appeal at or before the time of hearing. The assessee challenged that the Id. CIT(A)'s order sustaining the additions made by the AO by estimating income at 30% of the total receipts and interest income in the assessment order u/s 147/148 r.w.s 144 is bad in law and bad on facts and contrary to the principles of natural Justice. Heard both the sides, perused the material on record and the impugned order. Admittedly, the AO had made addition in the assessment order passed u/s 147/148 r.w.s 144 of the Act, ex parte qua the assessee. The NFAC has endorsed the finding of the AO by observing that the Verification Unit has stated that Summons u/s.131 was issued to the assessee and was delivered on the assessee through speed post on 07-02-2023 but, there was no response from the assessee till date; that the assessee has not responded to any of the notices issued in this case except for the show cause notice issued u/s.144 for which, the assessee filed a copy of the partnership deed and Certificate for Registration of the firm through the DCIT, NFAC, Delhi. The Ld. NFAC has stated that the total cash credits in the assessee's Axis Bank Account during the financial year 2017- 18 stood at Rs.3,64,91,412/-. Since the assessee has not filed its return of income, the sources for the same remain unexplained. However, keeping in view, the fact that the assessee is into diagnostic business, the cash deposits in its current account can reasonably be treated as its receipts and the income therefrom can be reasonably be estimated @ 30% which is the normal rate of profit in this line of business. The Ld. NFAC has discussed the facts on pg 4,13 and 15 of the impugned order while endorsing the finding of the AO that assessee's total receipts/turnover was more then one crore but books of account were not audited, so the AO estimated the NP @ 30% on these receipts deposited in bank account as against the assessee's claim of loss as trending in this line of diagnostic centres. The Ld. Counsel of the assessee argued that the assessment order so sustained u/s 147/148 r.w.s 144 is bad on facts and contrary to the principles of natural Justice as the Id. CIT (A) has sustained an addition of Rs 1,09,47,423/- made by the AO by way of estimating income at 30% of the total receipts, being made without any basis and appreciating the merits. He argued that the authorities below have not substantiated the applicability of NP rate either with reference to its past history or comparable case on parity and even without taking rebuttal of the assessee on record in view of natural justice. It is noted that while deciding the case ex-parte, the Ld. CIT(A) has not appreciated the facts of the case and arbitrary confirmed the assessment order passed exparte adopting NP rate @ 30% in arbitrary manner without addressing the relevant matter regarding appellants claim that the amount disputed may be treated turnover but the NP Rate ought to be applied in parity to a comparable case dealing in same activities in the neighbourhood or vicinity or juri iction. In our view, the authorities below have acted in violation of principles of natural justice. The Hon'ble Supreme Court of India in the case of Tin Box Company vs. CIT reported in 249 ITR 216 in which their Lordships of Supreme Court of India observed as under: "Assessment - Opportunity of being heard - Setting aside of assessment - Assessment order must be made after the assessee has been given reasonable opportunity of setting out his case - Same not done - Fact that the assessee could have placed evidence before the first appellate authority or before the Tribunal is really of no consequence for it is assessment order that counts Assessment order set aside and matter remanded to assessing authority for fresh consideration." Accordingly, we consider it deem fit to restore back the matter to the file of the Ld. AO to pass de novo assessment after considering the written submission and evidence filed by the assessee during the fresh proceedings after granting sufficient opportunity of being heard to the assessee. Needless, to mention that assessee shall co-operate in de novo assessment proceedings. In the result, the appeal of the assessee is allowed for statistical purpose. Order pronounced on 01/07/2025 in the open Court. (RAJPAL YADAV) VICE PRESIDENT A (DR. MITHA LAL MEENA) ACCOUNTANT MEMBER DATED :01/07/2025 Copies to: (1) The appellant. (2) The respondent. (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By Oder