2019 (12) TMI 82 - HC - Income Tax

Assessment u/s 144 - Addition under Section 69A - Addition on Account of Business Income - HELD THAT - Perusal of the show cause notice clearly indicates that the only issue chosen by the AO to call upon the petitioner to show cause, was with regard to cash deposits made during the demonetization period. No doubt, it is admitted by the learned counsel for the petitioner that the petitioner did not file any reply to the show cause notice.It is seen that the petitioner has filed a belated return where, it is stated that the petitioner has given details as to how such cash deposits were made in the Current Account. In any event insofar as the second issue, namely an addition on account of business income, is concerned, admittedly, the assessment made on such issue was not preceded by any show cause notice. Therefore, this Court is of the view that it is better the matter is remitted back to the Assessing Officer for redoing the assessment once again, after getting a reply from the petitioner in respect of both the issues, apart from the belated return filed already. Since this Court has remitted the matter back to the AO for redoing the assessment once again on both the issues also by directing the petitioner to file the reply to both the issues, a fresh show cause notice need not be issued to the petitioner in respect of the second issue viz., an addition on account of business income. Accordingly, this writ petition is allowed and the impugned assessment order is set aside. Consequently, the matter is remitted back to the Assessing Officer to redo the assessment on the following terms - (a) The petitioner shall file their reply within a period of two weeks from the date of receipt of a copy of this order in respect of both issues. (b) On receipt of such reply, the Assessing Officer shall pass fresh order of assessment on merits and in accordance with law, as this Court is not expressing any view on the merits of the assessment in respect of both the issues, since it is for the Assessing Officer to consider and decide. (c) The whole exercise shall be done by the Assessing Officer within a period of eight weeks from the date of receipt of the reply. (d) The Assessing Officer shall afford an opportunity of personal hearing to the petitioner before concluding the assessment.

Summary

Issues:
1. Assessment Order passed under Section 144 of the Income Tax Act, 1961 challenged by the petitioner.
2. Violation of principles of natural justice by the Assessing Officer in passing the impugned order without issuing a show cause notice on the issue of addition on account of business income.

Analysis:
1. Assessment Order Challenge:
The petitioner, engaged in the wholesale and retail sale of veterinary medicines, challenged the Assessment Order dated 26.09.2019 under Section 144 of the Income Tax Act, 1961. The order was based on two issues: first, the cash deposits of ?15,69,000/- during demonetization treated as unexplained money under Section 69A, and second, the estimation of business income at 8% of Turn Over due to a declared net profit considered very low. The petitioner contended that the Assessing Officer violated natural justice principles by not issuing a show cause notice on the business income addition issue, which was not part of the initial show cause notice.

2. Violation of Natural Justice:
The petitioner's counsel argued that the Assessing Officer failed to provide notice or an opportunity to be heard on the issue of adding business income, which was not mentioned in the initial show cause notice. The Revenue did not dispute this fact but emphasized the delay in filing the return for the Assessment Year 2017-18. The High Court found merit in the petitioner's contention, noting that the show cause notice only addressed the cash deposits during demonetization. Despite the petitioner's belated return explaining the deposits, no notice was issued regarding the business income addition.

3. Remittance for Redoing Assessment:
Given the violation of natural justice, the High Court remitted the matter back to the Assessing Officer for a fresh assessment. The court directed the petitioner to file replies within two weeks on both issues, including the business income addition. The Assessing Officer was instructed to pass a new assessment order within eight weeks, affording a personal hearing to the petitioner. The court did not express any view on the merits of the assessment, leaving it to the Assessing Officer's discretion.

In conclusion, the High Court allowed the writ petition, setting aside the impugned assessment order and remitting the matter back for a fresh assessment in compliance with natural justice principles.