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Income Tax Appellate Tribunal, SMC “C” BENCH : BANGALORE
Before: SMT. ASHA VIJAYARAGHAVAN
Date of hearing : 13.06.2016 Date of Pronouncement : 15.07.2016 O R D E R
This appeal by the assessee is directed against the order dated 17.09.2013 of the CIT(Appeals), Mysore for the assessment year 2006-07.
The assessee is carrying on the business in trading of spices/flowers etc. and filed his return of income for the AY 2006-07 declaring an income of Rs.1,72,450. The Assessing Officer in the scrutiny assessment order u/s. 143(3) of the Act assessed the total income of the assessee at Rs.10,27,750. Aggrieved by the order of the AO, the assessee filed an appeal before the CIT(Appeals) and also raised additional grounds of appeal.
3. The CIT(Appeals) called for a remand report from the AO on the assessee’s submissions made before him. The CIT(A) considered the remand report of the AO and the final written submissions of the assessee and dismissed the appeal of the assessee.
The CIT(Appeals) with respect to the issue of u/s. 143(2) of the Act held that the assessee substantially complied with all the proceedings subsequently and never objected to the notice, hence the same cannot be objected. Reliance was placed on the decision of the Hon’ble Madras High Court in the case of CIT v. C. Palaniappan, 241 CTR 207.
5. On merits, the CIT(Appeals) noted that the assessee produced certain books from which the AO noticed certain defects, which the assessee tried to correct and produced another set of books on the plea that the earlier set of books were rough ones and the second set were the final ones. The assessee contended before CIT(A) that the earlier set was not his version and was submitted by some unauthorized person, thereby taking a totally different version before the CIT(A). The CIT(A) was of the view that the AO clearly analysed and pointed out the deficit cash, which the assessee tried to match it with certain cash receipts prior to the dates of cash deficit which he failed to prove. The CIT(A) noted that even during the proceedings before him, the assessee could not establish anything credibly regarding the discrepancies noticed by the AO. The assessee failed to reconcile the differences in accounts and also the deficit cash pointed out by the AO.
The CIT(A) found no merit in the submissions of the assessee and concluded that the action of the AO was well justified and was elaborately explained in the remand reports as well. Thus, the order of the AO was confirmed.
Aggrieved, the assessee is in appeal before us. The ld. counsel for the assessee has filed the concise grounds of appeal as follows:-
“1. The learned Commissioner (Appeals) on facts, and in law erred in rectifying the contention of the appellant that the order of the assessment was illegal, and liable to be quashed for the reasons that the notice under section 143(2) of the Income Tax act, was not served on the appellant within the time prescribed.
2. The learned Commissioner (Appeals) erred in holding that after passing the order of assessment the legal issue of service of notice, raised by the appellant does not have much strength relaying on the decision of the Madras High Court in CIT v. C Pallaniyappan 241 CTR 207, which is distinguishable on facts and who's ratio is not applicable to the case of the appellant.
The learned Commissioner (Appeals) erred in not considering the contention made by the appellant to the effect that order of the assessment passed by the assessing officer, was illegal and liable to be quashed as the assessing officer selected the case of the appellant for scrutiny disregarding the instructions issued by the CBDT for selection of the case scrutiny assessments.
4. The learned Commissioner (Appeals) erred in not considering the contention of the appellant that the alleged rough cash book produced by the authorized representative of the appellant before the assessing officer on 7-10-2008 based on which the assessing officer worked out the alleged peak deficit of cash balance of Rs. 7,94,804/- did not contain all the 132 entries listed by the assessing officer at page No.2 of the order of assessment.
The learned Commissioner (Appeals) on facts and in law, erred in upholding the addition of Rs. 7,94,804/- made by the assessing officer under section 69c without considering the details return submissions made by the appellant before him.
6. The learned Commissioner (Appeals) ought to have consider the audited books of accounts which is otherwise, certified by the Chartered Accountant under section 44 AB of the Income Tax Act, produced before him and also before the assessing officer on 11-11-2008 and accordingly, ought to have given findings that there was no deficit cash in the said cash book and as a corollary , deleted the addition of Rs.7,94,804/- made by the assessing officer under section 69c.
7. The learned Commissioner (Appeals) erred in upholding the addition of Rs. 54,497/- made by the assessing officer towards bogus creditor in the case of Sagar Traders. Merely, for the reason that the appellant did not furnished confirmation letter from the creditor and the creditor did not respond to the letter sent by the assessing officer.
8. The learned Commissioner (Appeals) ought to have accepted the contention of the appellant the order the of assessment passed by the assessing officer without following principals of the natural justice was bad in law and accordingly, ought to have quashed the impugned order of the assessment in the best interest of justice and equity.
9. The learned Commissioner of (Appeals) erred for not considering the Reconciliation statements of debtors by name Taj Cormandel - Chennai, Taj Sats Air Catering Ltd.Mumbai.
Before me, the ld. counsel for the assessee submitted that the AO claimed that on receipt of notice u/s. 143(2) dated 25.06.2007, the assessee had sought for an adjournment by letter dated 5.7.2007. The assessee on verification of the said letter submitted that the signature found in the said adjournment letter is not that of his authorized CA. It was also stated that the said letter is not typed in the letterhead of the assessee nor from the office of his CA and hence it is a fabricated one. The ld. counsel for the assessee argued that the assessment is barred by time as the AO failed to issue notice well within one year from the date of filing the return for the AY 2006-07. He submitted that the AO issued notice u/s. 143(2) only on 29.7.2008 after a lapse of one year and therefore the entire assessment is barred by limitation and therefore illegal. It was also submitted that the reliance placed upon by the CIT(A) on the decision of the Hon’ble Madras High Court in the case of C. Palaniappan (supra) was distinguishable on facts and not applicable to the assessee’s case.
The ld. counsel for the assessee further submitted that the AO had passed the impugned order without giving reasonable opportunity of being heard to the assessee and the CIT(Appeals) merely followed the order of the AO. In these circumstances, it was prayed that an opportunity should be given to the assessee to present its case before the AO to establish that the issue of notice u/s. 143(2) was not served on the assessee within the time prescribed and also that the AO has not selected the case for scrutiny for the AY 2006-07 according to the Board instructions and not followed the due procedure of the Board guidelines. The AO before taking up the case for scrutiny had not taken prior permission from the CCIT/DGIT, hence the AO had exceeded his jurisdiction to pass the assessment u/s. 143(3) of the Act which is illegal and in violation of the provisions of the I.T. Act.
Apart from the jurisdictional aspect, the assessee reiterated the submissions made before the CIT(Appeals) on merits.
The ld. DR relied on the order of the lower authorities.
We have considered the rival submissions and perused the material on record. In the facts and circumstances of the case, we deem it fit to set aside the order of the CIT(Appeals) and restore the issue to the file of the Assessing Officer. The AO is accordingly directed to verify the issue of service of notice u/s. 143(2) of the Act on the assessee and also whether due procedure has been followed in obtaining prior permission from the CCIT for taking up the scrutiny assessment. The AO shall decide the issues afresh on the above issues and on merits in accordance with law, after affording opportunity of being heard to the assessee.
In the result, the appeal is allowed for statistical purposes.
Pronounced in the open court on this 15th day of July, 2016.