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2017 (8) TMI 177 - AT - Income TaxBest judgement assessment u/s 144 - Held that - The interference by the Ld. CIT(A) with the assessment order made by the AO on the basis of additional evidences admitted by the Ld. CIT(A) was not warranted in view of the facts and circumstances of this case. We have also already held in the foregoing paragraph (G) of this order that there was reasonable basis for the additions made by the AO. This is a best judgement assessment u/s 144 of the Act and the application of section 144 of the Act was not disputed by the assessee before the CIT(A). Even before us, the invocation of s.144 of the Act by the AO is not a matter in dispute. In any case, the protracted non-compliances by the assessee to various statutory notice u/s 142(1) and 143(2) of the Act and further non-compliance with the hearings fixed from time to time make this a fit case for best judgement assessment u/s 144 of the Act. On cumulative consideration of the facts and circumstances and the legal position and on further guidance from decided cases in CST vs H.M.Esufali H.M. Abdulali (1973 (4) TMI 49 - SUPREME Court) and CIT vs Rayala Corporation P.Ltd. (1995 (1) TMI 42 - MADRAS High Court), we are of the view that the CIT(A) wrongly substituted the best judgement of the AO with his own judgement contrary to the provisions of section 144 of the Act. Therefore, we set aside the order of the CIT(A) and restore the order of the AO. Appeal of the Revenue is allowed.
Issues Involved:
1. Condonation of delay in filing the appeal. 2. Admission of additional evidence by CIT(A) under Rule 46A. 3. Legitimacy of additions made by the AO under best judgment assessment u/s 144 of the Income Tax Act. 4. Specific additions made by the AO: a. Addition on account of share capital. b. Addition on account of unsecured loans. c. Disallowance of expenses. Detailed Analysis: 1. Condonation of Delay in Filing the Appeal: The appeal filed by the Revenue was delayed by three days. The AO requested condonation of the delay due to unavoidable circumstances such as the new incumbent in the Ward, changes in the procedure for submitting the Central Scrutiny Report, and bad weather. The Tribunal found the reasons satisfactory and condoned the delay, allowing the appeal to proceed on merits. 2. Admission of Additional Evidence by CIT(A) under Rule 46A: The CIT(A) admitted additional evidence under Rule 46A, citing that the assessee was prevented by sufficient cause from producing the details during the assessment proceedings. The Tribunal, however, found that the reasons provided by the assessee did not constitute "sufficient cause" within the meaning of Rule 46A. The Tribunal noted that the assessee had multiple opportunities to comply with the AO's requests but failed to do so. The Tribunal rejected the admission of additional evidence by the CIT(A) and held that the merits of the additions should be decided based on the materials available to the AO at the time of the assessment order. 3. Legitimacy of Additions Made by the AO under Best Judgment Assessment u/s 144: The Tribunal referred to the principles laid down by the Hon'ble Supreme Court in CST vs. H.M. Esufali H.M. Abdulali, which stated that in a best judgment assessment, the estimate made by the AO should be a bona fide estimate based on a rational basis. The Tribunal found that the AO had reasonable grounds for making the best judgment assessment due to the assessee's non-compliance and failure to provide necessary evidence. The Tribunal emphasized that appellate authorities cannot substitute their judgment for that of the AO if there is a reasonable nexus between the basis adopted by the AO and the estimate made. 4. Specific Additions Made by the AO: a. Addition on Account of Share Capital: The AO added ?1,10,75,000/- as cash credits u/s 68 of the Income Tax Act, citing the assessee's failure to provide evidence supporting the genuineness of the increase in share capital and share application money. The Tribunal upheld this addition, noting that the assessee did not discharge the onus of proving the identity, creditworthiness, and genuineness of the transactions. b. Addition on Account of Unsecured Loans: The AO added ?29,07,958/- as cash credits u/s 68, due to the assessee's failure to provide evidence supporting the genuineness of the unsecured loans. The Tribunal upheld this addition for the same reasons as the addition on account of share capital. c. Disallowance of Expenses: The AO disallowed 10% of the expenses claimed by the assessee, amounting to ?5,67,997/-, due to the inability to verify these expenses because of the assessee's non-compliance. The Tribunal found this disallowance justified, as the assessee failed to provide the necessary evidence to substantiate the claimed expenses. Conclusion: The Tribunal concluded that the CIT(A) erred in admitting additional evidence and substituting the best judgment of the AO. The Tribunal restored the AO's order, sustaining all the additions and disallowances made. The appeal of the Revenue was allowed.
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