2020 (8) TMI 588 - AT - Income Tax

Condonation of delay - delay of 245 days - order of the Pr. CIT passed u/s. 263 - HELD THAT - As submitted AO passed an order giving effect to the said order of the Pr. Commissioner of income Tax, on 08-04-2019 and the said consequential order was received by the assessee on 11-04 -2019 - as the ITP of the assessee was not in a condition to take necessary action in the matter, he approached another ITP, on whose advice he filed the appeal in time before the CIT(A) on 25-04-2019 against the order dated 08-04-2019 passed by the AO. This appeal and stay petition were last posted on 31-10-2019. Only then, the assessee came to know that the correct remedy for him was to challenge the order of the Pr. CIT passed u/sec.263 of the IT Act dt. 10-01- 2019. Then, he approached his Authorised Representative - there was no willful negligence or laches on the part of the assessee and in case if this delay of 245 days is not condoned, it would cause irreparable harm and injustice to the assessee. We find that there is good and sufficient reasons for filing the appeal belatedly. Accordingly, we condone the delay of 245 days in filing the appeal and admit the appeal for adjudication. Revision u/s 263 - excess cash deposits - AO declared it his deemed turnover and 2.5% of such deemed turnover, being rate of Gross Profit declared, was brought to tax - CIT observed that AO should have treated this as unexplained cash credits u/s 68 and charged to tax at a special rate of 30% as per Section 115BEE - HELD THAT - The additions made u/s. 68, 68, 69B, 69C and 69D of the I.T. Act cannot be set off with loss with effect from 01/04/2017. The direction of the Pr. CIT that addition u./s. 68 of the Act is to be made at special rate of 30% is proper if the addition made u/s. 68 of the Act is sustained by the Assessing Officer. Further, in this case, as rightly pointed out by the Ld. AR, the Pr. CIT had exercised his power u/s. 263 and he himself decided about the applicability of section 68 of the Act. Thereafter, he gave direction to the Assessing Officer to give opportunity of hearing to the assessee which is inappropriate. Pr. CIT pre-decided the issue and thereafter, directed the Assessing Officer to give opportunity of hearing to the assessee. We vacate this finding of the Pr. CIT and remit the issue in dispute to the file of the Assessing Officer to examine how the provisions of section 68 is not applicable to the assessee s case. The Assessing Officer has to examine whether the provisions of section 68 is applicable to the assessee s case or not. If the assessee is able to prove the identity and capacity of the parties concerned and the genuineness of the transactions to the satisfaction of the AO, he shall not make addition u/s. 68 of the Act. With this observation, we remit this issue to the file of the AO for fresh consideration - Appeal of the assessee is partly allowed for statistical purposes.

Summary

Issues:
1. Condonation of delay in filing appeal before the Tribunal.
2. Assessment of deemed turnover and tax implications under section 115BBE of the Income Tax Act.
3. Validity of the order passed under section 263 of the IT Act by the Principal CIT.

Condonation of Delay in Filing Appeal:
The appeal filed by the assessee was directed against the order of the Principal CIT passed under section 263 of the Income Tax Act for the assessment year 2014-15. The assessee faced a delay of 245 days in filing the appeal due to the illness and subsequent demise of the authorized representative. The Tribunal, after considering the reasons provided, condoned the delay and admitted the appeal for adjudication, noting that there were sufficient grounds for the delay.

Assessment of Deemed Turnover and Tax Implications:
The Principal CIT, upon subsequent verification, found discrepancies in the turnover declared by the assessee for the assessment year 2014-15. The Assessing Officer had added an amount to the returned income due to excess cash deposits over the turnover amount, treating it as deemed turnover. However, the Principal CIT deemed this treatment erroneous and prejudicial to the revenue's interests. The CIT directed the Assessing Officer to treat the excess cash deposits as unexplained cash credits under section 68 and apply a special tax rate of 30% as per section 115BBE of the Income Tax Act. The Tribunal observed that the CIT pre-decided the issue and remitted the matter back to the Assessing Officer for fresh consideration to determine the applicability of section 68 to the assessee's case based on proof of transactions' genuineness.

Validity of Order under Section 263 of the IT Act:
The assessee challenged the order passed under section 263 of the IT Act on various grounds, including lack of opportunity to produce confirmation letters and disagreement with the CIT's treatment of cash credits as undisclosed turnover. The Tribunal found that the CIT had prematurely decided the applicability of section 68 without proper assessment. The Tribunal vacated the CIT's finding and remitted the issue to the Assessing Officer for reevaluation, emphasizing the need for a fair opportunity for the assessee to present evidence. The appeal was partly allowed for statistical purposes based on these considerations.

In conclusion, the Tribunal addressed the issues of delay in filing the appeal, the assessment of deemed turnover, and the validity of the order under section 263 of the IT Act. The decision highlighted the importance of fair assessment procedures and the need for proper evaluation of evidence before making tax-related determinations.