2019 (7) TMI 794 - AT - Income Tax

Best Judgement assessment u/s 144 - Non-issue of notice u/s. 143(2) - unexplained bank deposit/s - assessment completed u/s 144 without notice - return filed on fag end of proceedings on the date order was also filed - HELD THAT - The filing of the return by the assessee on 20.3.2013 is mischievous; in fact an abuse of the process of law. It is as observed after the close of the hearing in the assessment proceedings. Sh. Kalia could not on being asked during hearing about the provision of law under which the said return was filed on 20.3.2013 state any. No cognizance in law could be placed on such a return of income . The income voluntarily returned is in any case a source of information with the AO which could without doubt be taken into account by him in framing the assessment. Further still the obligation on the AO to issue a notice u/s. 143(2) is only if he intends to verify the return. Being not in a position to verify the return; a notice u/s. 143(2) cannot be regarded as an empty formality he may in an appropriate case as indeed the instant case choose not verify the same and consequentially not issue notice u/s. 143(2). The ensuing assessment as also observed in Hotel Blue Moon 2010 (2) TMI 1 - SUPREME COURT is an assessment u/s. 144. The instant assessment is an assessment u/s. 144 and not as stated u/s. 143(3). Rather a return is not filed has to be supplemented by physical return of which there is no mention or contention in the absence of which the same cannot be said to have been filed. In fact the completion of the said procedure after 20.03.2013 the date of assessment even if so is to moment as the assessment stand already completed on that date. The assessment in the instant case is accordingly to be regarded as u/s. 144 r/w s. 147 and the AO is incorrect stating it to be u/s. 143(2) r/w s. 147. Considered whichever way the assessee s legal challenge is without merit both on facts as well as and for that reason as well in law. In fact the assessment as framed is in u/s. 144 and the Revenue authorities were in law under no obligation to accept the additional evidences sought to be furnished by the assessee in the appellate proceedings. An appellate authority when he so does converts a s. 144 assessment into a s. 143(3) assessment which is impermissible as explained in CIT v. Rayala Corporation (P.) Ltd . 1995 (1) TMI 42 - MADRAS HIGH COURT Taxability of lease rent for the agricultural land - HELD THAT - For merits of addition assessee s explanation with regard to lease rental of agricultural land has been accepted by the ld. CIT(A) implying acceptance of the assessee s claim of agricultural income to that extent. The same has accordingly been incorporated in the cash flow statement at Rs. 4 lacs (on 15.02.2005) as agricultural income. Taxability of cash gift - received from S. Jagjit Singh the assessee s father-in-law on the occasion of the golden jubilee of the assessee s marriage - HELD THAT - There is also no evidence of the stated donor S. Jagjit Singh owning 21.82 acres of agricultural land or his income on record. Why nobody keeps cash in such a high amount at home and there is nothing to show of cash being withdrawn from bank on or before 03.04.2004. Rather why should the gift which could easily be so from his bank account be in cash i.e. if it was from accounted income i.e. assuming the source to be the said gift. In the absence of any corroborative material; rather even as to the assessee s marriage date being unstated the 50th anniversary of which forms the occasion for the gift is not stated the explanation of cash gift has in my view been rightly not accepted by the Revenue. Unexplained income - cash deposit in account - as per cash flow statement it was deposited out of withdrawal from assessee as well as from that of his wife and son account - HELD THAT - Surely the cash withdrawals and deposits in all the bank accounts (of all these three persons) is to be taken into account to arrive at the availability of cash at any particular date during the year. Again assuming no adverse circumstance/s the said cash flow statement being prepared toward explanation of cash deposit of Rs. 20.61 lacs in the assessee s bank account during the year cannot be regarded as an evidence of Rs. 16 plus lacs cash with the family on 31.3.2005. The same in fact is without deducting Rs. 3 lac toward household expenses. Any adverse finding by the AO needless to add shall be preceded by due opportunity of hearing to the assessee and further per definite findings of fact (by the AO). The assessee shall cooperate in the matter lest the AO draw adverse inference as admissible under the circumstances. The AO shall complete the said verification in a time bound manner being also required to observe the time limit u/s. 153 of the Act as specified after 01.06.2016. - assessee s appeal is partly allowed on the afore-said terms

Summary

Issues Involved:
1. Jurisdictional validity of assessment under sections 148 and 143(3) without issuing notice under section 143(2).
2. Merits of the quantum addition made during the assessment.

Issue-wise Detailed Analysis:

1. Jurisdictional Validity of Assessment:

The primary legal issue raised by the assessee was the validity of the assessment under sections 148 and 143(3) without the issuance of a notice under section 143(2). The assessee argued that the assessment was bad in law as the mandatory notice under section 143(2) was not issued, citing the case of Hotel Blue Moon (2010) 321 ITR 362 (SC). The Tribunal examined the facts, noting that the assessee did not file a return in response to the notice under section 148 within the prescribed period or even thereafter. The Tribunal referred to the decision in Ram Narain Bansal [2011] 202 Taxman 213 (P&H), where the Hon’ble Court upheld the assessment despite the non-issuance of notice under section 143(2) because the assessee participated in the proceedings without objection.

The Tribunal concluded that the jurisdiction for an assessment under section 147 is assumed upon the issuance of a valid notice under section 148, and section 143(2) notice is only required if the return is filed and needs verification. Since the assessee did not file a return within the stipulated time, the AO was not obliged to issue a notice under section 143(2). Therefore, the assessment was valid under section 144 read with section 147, not under section 143(3).

2. Merits of the Quantum Addition:

On the merits of the quantum addition, the assessee contested the addition of Rs. 20,60,917 as unexplained bank deposits. The assessee explained the deposits as a cash gift of Rs. 15 lacs from his father-in-law and Rs. 4 lacs from the sale proceeds of crops, later modified to Rs. 4 lacs received from S. Dilbagh Singh as lease rent for agricultural land. The CIT(A) accepted the explanation for Rs. 4 lacs but not for the Rs. 15 lacs cash gift due to lack of corroborative evidence.

The Tribunal reviewed the cash flow statement and found discrepancies, particularly the absence of evidence for the cash gift and the date of the assessee’s marriage, which was claimed to be the occasion for the gift. The Tribunal agreed with the CIT(A) that the cash gift explanation was not credible. However, it noted that the addition should be restricted to Rs. 9 lacs instead of Rs. 15 lacs, as the cash flow statement indicated sufficient cash-in-hand on any date during the year.

The Tribunal directed the AO to verify the revised cash flow statement and make necessary adjustments, ensuring the assessment is consistent with the available evidence and legal provisions.

Conclusion:

The Tribunal upheld the jurisdictional validity of the assessment under section 144 read with section 147, as the issuance of notice under section 143(2) was not mandatory in the absence of a timely filed return. On the quantum addition, the Tribunal partially allowed the assessee’s appeal, reducing the addition to Rs. 9 lacs and directing the AO to verify the revised cash flow statement. The assessee’s appeal was thus partly allowed on these terms.