2018 (6) TMI 544 - AT - Income Tax

Reopening of assessment - no returns of income were filed by the appellant - appellant had complied with notices u/s 142 by filing information called for before the AO - best judgement assessment u/s 144 - unexplained cash deposits in bank accounts - Held that - Assessee had filed information before the AO in support of explaining sources for cash deposits in bank accounts - in the order of the ld.CIT(A) there is nothing indicating that these material was considered by the AO/ld.CIT(A) - hence the matter is remanded back to the file of the ld.CIT(A) for considering information/material filed by the appellant before the AO and pass the order after giving due opportunity of hearing to the appellant - thus allowed for statistical purposes.

Summary

Issues Involved:
1. Legality of the dismissal of grounds by the appellate authority.
2. Due service of notice by the Assessing Officer.
3. Consideration of the reply filed by the appellant during assessment proceedings.
4. Determination of taxable income and consideration of bank deposits.
5. Reopening of assessment under Section 148.
6. Provision of reasons for reopening the assessment.
7. Furnishing of books of accounts during appellate proceedings.
8. Violation of principles of natural justice.
9. Addition of undisclosed income.
10. Levy of interest under Section 234B and Section 234C.
11. Dispatch timing of the CIT(A)'s order.

Detailed Analysis:

1. Legality of the dismissal of grounds by the appellate authority:
The appellant argued that the order of the first appellate authority dismissing all grounds was "illegal, arbitrary, whimsical and without application of mind to the facts of the case."

2. Due service of notice by the Assessing Officer:
The appellant contended that there was no due service of notice by the Respondent Assessing Officer before concluding the best judgment assessment under Section 144 of the Income Tax Act. The notice issued under section 142(1) was returned by postal authorities with the comment "no such office."

3. Consideration of the reply filed by the appellant during assessment proceedings:
The appellant claimed that the authorities below erred in not considering the reply filed during the assessment proceedings. The appellant had filed a suitable reply after knowing about the assessment proceedings under section 144, but the reply was not considered judiciously by the assessing officer.

4. Determination of taxable income and consideration of bank deposits:
The authorities were criticized for not appreciating that there was no taxable income liable to be subjected to tax during the assessment years in question. The authorities failed to consider that the statutory notices were issued to a dormant company, which had returned/refunded huge monies to customers due to orders from the District Consumer Disputes Redressal Forums. The authorities erred in considering only bank deposits for determining taxable income, ignoring payouts made towards various expenditures.

5. Reopening of assessment under Section 148:
The appellant argued that the learned assessing authority refused to furnish the reasons for reopening the assessment under section 148, despite a specific request. This was claimed to be a violation of the judgment of the Hon'ble Supreme Court in the case of GKN Drive Shafts (India) Ltd. Vs Income Tax Officer.

6. Provision of reasons for reopening the assessment:
The appellant contended that the authorities failed to appreciate that there was no income that had escaped assessment for the assessment years 2010-11 and 2011-12, given that there were no sale deeds executed during those years.

7. Furnishing of books of accounts during appellate proceedings:
The appellant argued that the finding of the learned first appellate authority that the appellant failed to furnish books of accounts during appellate proceedings was arbitrary and whimsical.

8. Violation of principles of natural justice:
The appellant claimed that the assessment order was concluded without considering the reply filed and thus violated the principles of natural justice. The assessing authority's finding that the appellant was willfully not cooperating was termed arbitrary and whimsical.

9. Addition of undisclosed income:
The appellant argued that the addition of ?3,75,70,374/- as undisclosed income was unsustainable and arbitrary. The learned assessing officer did not specify under which provision the deposit amounts were added as alleged income, making the addition vague and based on mere suspicion.

10. Levy of interest under Section 234B and Section 234C:
The authorities were criticized for confirming the levy of interest under Section 234B and Section 234C, which the appellant termed arbitrary, illegal, and excessive.

11. Dispatch timing of the CIT(A)'s order:
The appellant expressed concerns that the impugned order was dispatched only in February 2018, though it was allegedly passed in August 2017, suggesting the order might be ante-dated.

Judgment:
The tribunal found that the appellant had filed information before the AO to explain the sources of cash deposits in bank accounts. However, there was no indication that this material was considered by the AO or the CIT(A). Therefore, the case was remanded back to the CIT(A) for de novo adjudication, considering the information/material filed by the appellant and to pass the order after giving due opportunity of hearing to the appellant. The appeals filed by the assessee were allowed for statistical purposes, and the stay petitions were disposed of as infructuous.