2016 (3) TMI 1189 - AT - Income Tax

Addition of expenditure as bogus - mandatory provisions of Section 44AD/44AF read with Rule 6DD (e)(i) ignored - Held that - The orders of the A.O and CIT(A) cannot be sustained as such. It is obvious that Assessee has used a wrong form and also reflected the income from business under the head other sources . It is the duty of the A.O to advice the Assessee when certain procedural / technical mistakes were committed by Assessee. The A.O should not take advantage of mistakes committed by the Assessee, while discharging statutory duties. Assessee s entire turnover, as accepted by the A.O, was only ₹ 16,58,500/- and provisions of 44AD of the IT Act would automatically apply. Since Assessee has declared more income than required under provisions, A.O should have accepted the same. The benefits provided to small time Assessees / small business persons cannot be denied by A.O. The order of the Ld. CIT(A) also was without considering the grounds raised before him. In view of that, in the interest of justice, I set aside the orders of the A.O and CIT(A) and restore the assessment to the file of A.O to be redone, after giving due opportunity to Assessee. A.O can advise Assessee to file a proper form of return if required, before completing the assessment. - Decided in favour of assessee for statistical purposes.

Summary

Issues involved:
1. Condonation of delay in filing the appeal.
2. Incorrect filing of return leading to disallowance of expenses by the Assessing Officer.
3. Dismissal of the appeal by the CIT(A) for non-prosecution and on merits.

Analysis:
1. Condonation of delay:
The Assessee filed an appeal with a delay of eleven days, seeking condonation citing reasons related to the petition filed before the CIT(A) and issues with notice service. The delay was condoned by the Tribunal considering the reasons provided and the appeal was admitted.

2. Incorrect filing of return and disallowance of expenses:
The Assessee, engaged in a small vegetable business, mistakenly filed the return in ITR-II instead of ITR-IV, leading to scrutiny by the Assessing Officer (A.O). The A.O disallowed the expenses claimed by the Assessee, stating no revised return was filed and no evidence was provided for the expenses claimed. The CIT(A) upheld the A.O's decision, emphasizing the lack of supporting evidence for the expenses. However, the Tribunal observed that the A.O should have guided the Assessee regarding the procedural mistake and not disallowed the expenses outright. The Tribunal set aside the orders of the A.O and CIT(A), directing a reassessment after giving the Assessee a proper opportunity.

3. Dismissal of the appeal by CIT(A):
The CIT(A) dismissed the appeal for non-prosecution and on merits, stating the Assessee failed to provide evidence for expenses and bills. The Tribunal found discrepancies in the notice service to the Assessee and noted that the CIT(A) did not consider the grounds raised by the Assessee. Consequently, the Tribunal allowed the Assessee's appeal for statistical purposes, setting aside the orders of the A.O and CIT(A) and directing a reassessment with proper consideration of the Assessee's contentions.

In conclusion, the Tribunal upheld the Assessee's appeal, highlighting the procedural errors in filing the return and the need for the A.O to guide the Assessee appropriately. The Tribunal emphasized the importance of providing small business persons with the benefits entitled under the law and directed a reassessment to be conducted with due opportunity given to the Assessee.