ITO, NEW DELHI vs. SHRI RAJEEV BOOBNA, NEW DELHI

The Grounds of appeal are as follows:-

The facts of the case are the assessee is engaged in the business of sale/purchase of mobile phones. The assessee filed his return of income for the assessment year 2005-06 on 31/10/2005 declaring income of Rs.93,749/-. The assessee in his return showed his address as 8/23, 3rd Floor, West Patel Nagar, New Delhi 110008. On the basis of information received from the office of Chief Commissioner of Income Tax, Delhi that the assessee deposited cash amounting to Rs.38,64,940/- into his saving bank account with UTI Bank Ltd. Assessing Officer i.e. ITO, Ward 41(4)/DAO/58, New Delhi issued notice u/s 142(1) dated 5/11/2007 to the assessee calling upon the assessee to file true and correct return of income for the Assessment Year 2005-06. The said notice was addressed at Shri Raj Kumar, G-7 Regent Mall, Hardhiyan Singh Road, Karol Bagh, New Delhi 11005. The assessee stated to have not received the notice u/s 142(1) dated 5/11/2007 and show cause notice dated 7/12/2007. The Assessing Officer assessed the income of the assessee u/s 144 of the Income Tax Act 1961 vide assessment order dated 31/12/2007 and added undisclosed investment/expenditure of the assessee at Rs.38,64,940/- being cash deposited with UTI Bank, Vasant Kunj, New Delhi. The assessee went in appeal before the Ld. CIT(A) on two grounds:-

Before the appellate proceedings, assessee made an application for admission of additional evidence under Rule 46A of the Income Tax Rule 1962. The Assessing Officer vide its letter dated 12/7/2010 submitted that the case of the abovementioned assessee has already been transferred to Ward 31(4), New Delhi vide office letter dated 23/8/2010 issued to A.O Ward 31(4), New Delhi. The Ld. CIT(A) asked Assessing Officer’s comments on the matter. The report of the Assessing Officer was received on 15/2/2011, the same was taken on record by the Ld. CIT(A). The assessee furnished its rejoinder vide his letter on 1/3/2011 placed on record. It was observed by the Ld. CIT(A) that in the report the Assessing Officer basically reiterated the observation made in the assessment order. The Ld. CIT(A) further observed that the documents filed by the assessee were relevant to the grounds of appeal and goes to the root of the matter. In view of the above, the Ld. CIT(A) admitted the additional evidence filed by the assessee under Rule 46A (1)(c) of the Income Tax Rules, 1962.

The Ld. CIT(A) further held that Assessing Officer failed to adduce any cogent evidence of service of notice issued u/s 142 of the Income Tax Act 1961 to the assessee before framing assessment u/s 142 of the Income Tax Act, 1961. Hence, the Ld. CIT(A) quashed assessment order u/s 144. As relates to treating aggregate sum of Rs.38,64,94/- deposited into the bank account as undisclosed income of the assessee from other sources. The Ld. CIT(A) held that the Assessing Officer has not made any adverse comments on the additional evidences filed by the assessee challenging the addition of Rs.38,64,940/- and only requested that specific direction to conduct proper enquiry and examine the books of accounts including inter alia cash book of the assessee and fresh opportunity there may kindly be given to the A.O before taking a view in the matter. As the assessee was granted relief of quashing of assessment order u/s 144 of the Income Tax Act, 1961, the additional evidence of the assessee was allowed by the Ld. CIT(A).

The DR submitted that as per the remand report which was annexed at Page No. 37 to 43 of the paper book, the notices were addressed to the assessee at Karol Bagh and assessee did not deny that the address was that of the assessee. The information received from the office of Chief Commissioner of Income Tax, Delhi to the Office of the Additional Commissioner of Income Tax (Co-ordination) that as per the information collected by the CIT (CIB), the assessee made cash deposit of Rs. 38,64,940/- in UTI Bank Ltd. While making the cash deposits, assessee had not furnished its PAN, therefore, it was not known as to whether the assessee furnished his return of income or not. Since the amount of deposits made during the financial year 2004-05 relevant to Assessment Year 2005-06 excess the maximum amount not chargeable to tax, therefore, notice u/s 142 (1) dated 5/11/2007 was issued to the assessee vide speed post to direct the assessee to furnish his return of income for A. Y 2005- 06. The same notice was neither received back undelivered nor complied with. Nobody attended nor any written submission was filed on that date. Another show cause notice u/s 142(1) dated 7/12/2007 was issued to the assessee expressly conveyed to him that he had made cash deposits amounting to Rs.38,64,940/-. The DR submitted that the notices were validly served and, therefore, the Assessing Officer’s order was proper as per Section 144 of the Income Tax Act, 1961. The DR further submitted that the Ld. CIT(A) proceeded solely on the basis that the Assessing Officer failed to advise any cogent evidence to challenge the validity of the affidavit of the assessee except simply stating that the assessee did not attend the proceedings even though he received all the statutory notices issued to him from time to time. The DR further submitted that no notice was return back undelivered.

The AR submitted that the Ld. CIT(A) has rightly quashed the assessment order u/s 144 and rightly allowed the appeal of the assessee before the CIT(A).

We have perused all the documents and heard both the parties. The notice u/s. 142(1) dated 05.11.2007 was issued by ITO ward 41(4), New Delhi to the assessee through speed post to direct the assessee to furnish his return of income for A.Y. 2005-06. The said notice was not received back undelivered. The second show cause notice under Section 142(1) dated 07.12.2007 was issued and the same was also not received back undelivered. Since the notices were not received back “unserved” within thirty days of its issuance, there would be presumption under the law that notice had been duly served upon the assessee. The assessee received the Show Cause Notice u/s. 271(1)(b) of the Income Tax Act, 1961 dated 18.06.2008 and the same is annexed at page 35 of the paper book filed by the assessee. Thus, the Assessment order under Section 144 of the Income Tax Act, 1961 is proper. As relates to addition made to the extent of 37,10,343/- on account of cash deposited in bank, additional evidence should have been allowed by the Ld. CIT(A) after giving opportunity to the Assessing Officer under Rule 46A(3) of the Income Tax Rules, 1962. Though the AR submitted that there was more than 8 months given to the Assessing Officer to send his remand report, in the interest of justice it will be proper to give time to look into the specific books of accounts including inter alia cash book of the assessee and fresh opportunity should have been given to the Assessing Officer while coming to the conclusion. In this respect the matter is remitted back to the Assessing Officer to look upon the additions made on account of cash deposits in bank.

In result, the appeal is partly allowed for statistical purpose.