HEMANT KUMAR PRADHAN,ANGUL vs. ITO, ANGUL WARD, ANGUL

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ITA 190/CTK/2017Status: DisposedITAT Cuttack29 November 2017AY 2009-105 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that once the books of accounts are rejected in the original assessment, they cannot be relied upon for making an addition under Section 69 in a reopened assessment. Therefore, the addition made by the AO was set aside.

What were the facts?

The Assessing Officer (AO) made an addition of Rs. 1,00,000 under Section 69 for a cash balance difference, after the original assessment under Section 143(3) had estimated the profit at 8% of gross receipts, rejecting the assessee's books of accounts. The CIT(A) upheld the AO's addition.

What were the issues?

Whether an addition under Section 69 can be made based on books of accounts that were previously rejected in the original assessment. The validity of reopening the assessment under Section 147 when the original assessment was based on estimation after rejecting books.

Which sections of the Income-tax Act were involved?

Section 69,Section 147,Section 144,Section 143(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “SMC” BENCH CUTTACK

Before: SHRI N.S.SAINI

Hearing: 28/11/2017Pronounced: 29/11/2017

This is an appeal filed by the assessee against the order of the CIT(A)-2,Bhubaneswar, dated 06.12.2016. 2. There is a delay of 27 days in filing the present appeal by the assessee. The assessee has filed an affidavit explaining the reason for delay of 27 days in filing the appeal. I find that the assessee had sufficient reason for delay in filing the appeal. Therefore, I condone the delay of 27 days in filing the appeal and admit the appeal for hearing.

3.

Ground of 1 of the appeal raised by the assessee reads as under :-

1.

Addition of Rs.1,00,000/- u/s.69 of the Income Tax Act by the learned AO in the assessment proceeding u/s.147 read with 144 of the I.T.Act on the premise of failure of the assessee to reconcile the difference of cash balance in the bank account as per books of account and as per the bank statement, is illegal and arbitrary since the original assessment of the appellant u/s.143(3) of the Act has been completed estimating the profit of the appellant @8% of the gross contract receipts.

2

4.

Brief facts of the case are that the Assessing Officer in the assessment order at page 2 has detailed out in the chart the various

dates on which notices were issued to the assessee and the same were not complied by the assessee which are as under :-

Date of Notice u/s. Date of fixation Fate of notice Remarks issue of of hearing notice 04/02/2014 148 To furnish Duly served by Request to treat return of hand the return income within original return one month u/s.148 03/06/2014 142(1) 16/06/2014 Notice returned back unserved 19/06/2014 142(1) 25/06/2014 Duly served by No compliance hand 13/08/2014 142(1) 25/08/2014 Duly served by No compliance Speed Post 22/09/2014 Show 29/09/2014 Duly served by No compliance cause with Speed Post 142(1) 09/10/2014 142(1) 28/10/2014 Duly served by No compliance 143(2) Speed Post 28/10/2014 142(1) 10/11/2014 Duly served by No compliance Speed Post 11/11/2014 142(1) 18/11/2014 Duly served by - Speed Post 08/01/2015 142(1) 27/01/2015 Duly served by No compliance Speed Post 28/01/2015 142(1) 05.02.2015 Duly served by No compliance Speed Post 28/01/2015 Show 05.02.2015 Duly served by No compliance cause for Speed Post the proposed addition

Therefore, the AO completed the assessment u/s.147/144 of the Act on 11.02.2015 assessing total income of the assessee at Rs.4,93,640/- by making an addition of Rs.1,00,000/- u/s.69 of the Act to the originally

assessed income of Rs.3,93,640/- u/s.143(3) of the Act vide order dated

23.12.

2011. 5. The assessee filed appeal before the CIT(A) and the CIT(A)

dismissed the appeal of the assessee on the ground that the assessee

3 was not able to reconcile the closing balance as per books of accounts and bank pass book during the course of appeal hearing.

6.

Ld. AR of the assessee submitted that the original assessment u/s.143(3) of the Act was made on 23.12.2011 by rejecting the books of accounts of the assessee and estimating the income by applying rate of 8% to the gross contract receipt of Rs.49,10,212/-, thereby arriving at an income of the assessee at Rs.3,92,816/-. He submitted that when the AO has rejected the books of accounts of the assessee and made an estimate of the income then on the basis of the very same books of account he cannot reopen the assessment u/s.147 of the Act and make addition of Rs.1 lakh u/s.69 of the Act on the ground of difference in the amount shown in the books of account as deposit with Allahabad Bank of Rs.1,077/- and as per the bank pass book Rs.1,01,077/-

7.

Ld. DR supported the orders of the lower authorities.

8.

I have heard rival submissions and perused the material available on record. In the instant case, the undisputed facts of the case are that the AO made assessment u/s.143(3) of the Act by passing the order on 23.12.2011 by rejecting the book results of the assessee and estimating the income by applying rate of 8% on the gross contract receipts of Rs.49,10,212/- and estimated the income at Rs.3,92,816/-.Thereafter the AO passed an order u/s.147/144 of the Act on 11.02.2015 making an addition of Rs.1,00,000/- u/s.69 of the Act on account of difference between the amount shown in the bank account maintained with 4 Allahabad Bank and the amount shown in the books of accounts of assessee. On appeal, the CIT(A) confirmed the action of AO.

9.

I find that the original assessment u/s.143(3) of the Act was made by the AO by rejecting the books of accounts of the assessee and estimating the income of the assessee at 8% of the gross contract receipt of Rs.49,10,212/-. It is trite law that once the books of accounts of the assessee are rejected, the same cannot be relied for making addition u/s.69 of the Act. My view finds support from the decision of Lucknow No.564/LKW/2011 (AY : 2008-09), order dated 26.05.2013. Therefore, I set aside the orders of lower authorities and delete the addition of Rs.1,00,000/- u/s.69 of the Act and allow this ground of appeal of assessee.

10.

As I have already deleted the addition of Rs.1,00,000/- made u/s.69 of the Act, other grounds of appeal taken by the assessee on reopening of assessment, have become academic in nature and, hence, become infructuous.

11.

In the result, the appeal of the assessee is allowed. Order pronounced in the open court on this 29/11/2017. (N. S. SAINI) ऱेखा सदस्य / ACCOUNTANT MEMBER कटक Cuttack; ददनांक Dated 29/11/2017 प्र.कु.मम/PKM, Senior Private Secretary

5 आदेश की प्रनिलऱपप अग्रेपषि/Copy of the Order forwarded to : 1. अपीलाथी / The Appellant- 2. प्रत्यथी / The Respondent- 3. आयकर आयुक्त(अपील) / The CIT(A), आयकर आयुक्त / CIT 4. निभागीय प्रनतनिनर्, आयकर अपीलीय अनर्करण, कटक / DR, ITAT, Cuttack 5. गार्ड फाईऱ / Guard file. 6. सत्यापपत प्रतत //// आदेशािुसार/ BY ORDER,

(Senior Private Secretary) आयकर अपीऱीय अधिकरण, कटक / ITAT, Cuttack

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