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2017 (1) TMI 1728 - AT - Income TaxUnexplained cash credit - enhancement of the income at the rate of 1.50% on total cash credit in the banks by the ld. CIT(A) as against the 1.00% applied by the AO - HELD THAT - There are several cheque /RTGS entries of returned cheques/RTGS and interbank transfers in the assessee s bank accounts which were also included in the total credits which according to us is not correct and need to be excluded for the reasons that there can not be any income on unpaid or returned cheques/RTGS/inter bank transfers in assessee s banks. Income of the assessee has to be calculated on the basis of correct amount of credits appearing in the bank accounts which required to be verified and ascertained at the level of AO. All this has happened due non cooperation by the assessee during the assessment proceedings. - Restore the issue back to the file of the AO to make the assessment afresh as per law and facts after providing reasonable opportunity of hearing to the assessee to present his case. Assesssee is also to cooperate in the assessment proceedings and to file all the documents and information may be required by the AO to determine the income of the assessee. Appeal of the assessee is allowed for statistical purposes.
Issues:
1. Assessment based on cash credit entries in bank accounts. 2. Enhancement of income rate by CIT(A) from 1% to 1.5%. 3. Non-cooperation of the assessee during assessment proceedings. Analysis: Issue 1: Assessment based on cash credit entries in bank accounts The assessee's return of income declared total income of ?1,09,080 for the assessment year 2009-10. The AO received information regarding alleged bogus transactions, leading to the reopening of assessment under section 148. Despite notices, the assessee and representative did not appear before the AO, resulting in an ex-parte assessment assessing income at ?1,83,74,770, based on 1% of total cash credit in bank accounts. The CIT(A) further enhanced the assessment to 1.5% of total cash credit, amounting to ?2,73,98,537. The assessee objected, but the CIT(A) found the AO's estimate reasonable and in line with the Tribunal's decision in a similar case. Issue 2: Enhancement of income rate by CIT(A) from 1% to 1.5% The CIT(A) enhanced the income rate to 1.5% after considering the AO's reliance on a specific case law. The CIT(A) issued a show cause notice regarding the difference in income, which the appellant objected to without substantial evidence. The CIT(A) justified the enhancement by aligning it with the Tribunal's decision, emphasizing the lack of evidence from the appellant to support a lower commission rate. The CIT(A) dismissed the appeal, upholding the 1.5% income rate as reasonable. Issue 3: Non-cooperation of the assessee during assessment proceedings The assessee's non-cooperation throughout the assessment proceedings was noted, as they failed to attend hearings or provide necessary documentation. This lack of cooperation led to an ex-parte assessment by the AO and subsequent enhancement by the CIT(A). During the appeal, the assessee pointed out discrepancies in the bank statements, leading the Tribunal to conclude that the assessment should be revisited. The Tribunal decided to send the issue back to the AO for a fresh assessment, emphasizing the need for the assessee's cooperation and proper verification of bank credits. In conclusion, the Tribunal allowed the assessee's appeal for statistical purposes, directing a fresh assessment by the AO with the assessee's cooperation and verification of bank credits to determine the income accurately.
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