2020 (12) TMI 83 - AT - Income Tax

Validity of Assessment order - void ab-initio or not - assessment u/s.144 - case was selected for scrutiny and notices u/s.143(2) and 142(1) - HELD THAT - AO had given reasonable opportunities to the assessee for explaining the return and substantiating his claim made in the return of income with respect to expenditure. However, the assessee did not attend and avail opportunities of explaining the return before the AO - despite many opportunities, the assessee did not respond to the AO. That even before making best judgment assessment, the AO had also communicated the said intention of framing assessment u/s.144 of the Act to the assessee. Then also the assessee did not avail this final opportunity. In such scenario, we are of the considered view that the Revenue Authorities have absolutely done correct thing as per process of law enshrined in the Act. Lack of opportunity in final notice served on wife - HELD THAT - Since even after providing several opportunities of hearing to the assessee, the assessee neither availed those opportunities and as evident from the order of the Ld. CIT(Appeal) before making the best judgment assessment, the said intention was conveyed to the assessee by the Assessing Officer still then the assessee has not bothered to appear before the Revenue Authorities. The assessee has not brought on record any evidence to show that notices have not reached at his registered address given to the Department. On the contrary, it is on record of the Department that the notices were duly served appropriately as per law and was received by the assessee. Therefore, observation of the Ld. CIT(Appeal) is upheld on this issue and Ground No.2 raised in appeal by the assessee is dismissed. Disallowance of cash deposit in IDBI Bank u/s.68 - HELD THAT - Revenue Authorities has not brought out any definite case in this regard against the assessee nor has brought out any evidence that such deposits were from some other source of income, not disclosed by the assessee. When the Revenue is admitting the earlier withdrawals of cash by the assessee, when the Revenue is also admitting the assessee having enough cash balance, in such scenario, there cannot be any addition on this ground. It is well explained that the amount of ₹ 2,00,000/- was deposited from earlier withdrawals of the assessee. We, accordingly, set aside the order of the Ld. CIT(Appeal) and allow this ground of appeal of the assessee Disallowance of u/s.69C of expenditure claimed by us @ 10% - HELD THAT - Assessee has failed to bring on record anything to support that the payments claimed to have actually incurred for the purpose of assessee‟s business. That there were no corroborating evidence or confirmations filed by the assessee to show that these were in relation to assessee‟s business purpose. There was also remand report called for by the Ld. CIT(Appeal) from concerned Assessing Officer and therein, it is stated that about 70% expenditures were made in cash and through self made vouchers. These were not refuted before the Ld. CIT(Appeal) by the assessee through proper evidences as evident from record. In such scenario, the disallowance being restricted to 10% of direct expenses as held by the Ld. Ld. CIT(Appeal) needs no further interference and is upheld. - Decided against assessee.

Issues Involved:
1. Whether the assessment order is void ab-initio.
2. Alleged lack of opportunity in the final notice served.
3. Disallowance of cash deposit in IDBI Bank ? 2,00,000/- under Section 68 of the Income Tax Act, 1961.
4. Disallowance of expenditure claimed under Section 69C of the Income Tax Act, 1961.

Issue-Wise Detailed Analysis:

1. Void Ab-initio Assessment Order:
The assessee contended that the assessment order was void ab-initio. The Ld. CIT(Appeal) held that the Assessing Officer (AO) had given reasonable opportunities to the assessee to explain the return and substantiate claims made in the return of income with respect to the expenditure. Despite multiple opportunities, the assessee did not respond or attend to explain the return. The AO, considering the time constraints and the need to complete assessments within the prescribed time limit, invoked the provisions of Section 144 of the Income Tax Act, 1961, for best judgment assessment. The AO had also communicated the intention to frame the assessment under Section 144 to the assessee, who still did not respond. The Tribunal upheld the Ld. CIT(Appeal)’s observation that the AO acted correctly as per the provisions of the Act, and the assessment order was not void ab-initio. Thus, Ground No.1 raised in appeal by the assessee was dismissed.

2. Lack of Opportunity in Final Notice:
The assessee argued that there was a lack of opportunity in the final notice served. The Ld. CIT(Appeal) noted that the assessee was given many opportunities to support his return of income but failed to respond. The AO had given a final call cum warning to present the case, which was ignored by the assessee and his Authorized Representative (AR). The Tribunal found that the AO acted appropriately by proceeding with the assessment under Section 144 of the Act after providing sufficient opportunities. The Tribunal upheld the Ld. CIT(Appeal)’s observation that there was no infirmity in the AO’s action. Thus, Ground No.2 raised in appeal by the assessee was dismissed.

3. Disallowance of Cash Deposit under Section 68:
The issue pertained to the disallowance of a cash deposit of ? 2,00,000/- in IDBI Bank under Section 68 of the Act. The Ld. CIT(Appeal) observed that the assessee had enough cash balance from earlier withdrawals and that the explanation provided by the assessee was not tenable. However, the Tribunal found that the Revenue had not disputed the earlier withdrawals or the cash balance. The Tribunal held that the amount of ? 2,00,000/- was well explained as being deposited from earlier withdrawals and set aside the order of the Ld. CIT(Appeal). Thus, Ground No.3 raised in appeal by the assessee was allowed.

4. Disallowance of Expenditure under Section 69C:
The issue involved the disallowance of 10% of the expenditure claimed, amounting to ? 19,52,270/-, under Section 69C of the Act. The Ld. CIT(Appeal) noted that the assessee failed to provide corroborating evidence or confirmations to support that the payments were incurred for business purposes. The remand report indicated that about 70% of expenditures were made in cash and through self-made vouchers. The Tribunal observed that the assessee did not refute these findings with proper evidence and upheld the Ld. CIT(Appeal)’s decision to restrict the disallowance to 10% of direct expenses. Thus, Ground No.4 raised in appeal by the assessee was dismissed.

Conclusion:
The appeal of the assessee was partly allowed, with Ground No.3 being allowed and the rest of the grounds (Ground Nos. 1, 2, and 4) being dismissed. The order was pronounced on 02nd December 2020.

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