2021 (1) TMI 1064 - AT - Income Tax

Addition u/s 68 / 69A - While deleting the addition u/s 68 CIT(A) enhanced the resultant assessment by retaining the addition made by the assessing officer u/s 69A - HELD THAT - CIT(A) has erred in deleting the addition of section 68 of the Act but enhancing the resultant assessment by retaining the addition made by the assessing officer under section 69A of the Act and that also without any notice to the assessee in clear contravention of provisions of section 251(2) of the Act. Assessee having filed the return of income pursuant to the notice issued to the assessee has discharged the onus. The assessment made by the assessing officer by not commenting anything of the return of income filed but adding the random figure out of the bank deposit under section 68 is not sustainable. It is settled law that when assessing officer is rejecting the books of account and return of income filed by the assessee the best judgement assessment has to be based upon some reasonable criteria. The same has to be on the basis of rates applicable for earlier income shown by the assessee in the past or that operating in the concerned business. By not adopting any fair rate or estimate of income and adding the bank deposits partly only as undisclosed income or investment is not at all sustainable. CIT(A) has further erred in making the addition u/s 69A of the Act without giving the assessee any opportunity being heard. CIT(A) has also quoted a random figure of ₹ 24,38,819/- and held that the same should be treated as undisclosed investment. From the figures of deposits noted by the assessing officer hereinabove it is not discernible as to how this figure has arisen. This shows that authorities below have not applied their mind and considered random figures for addition. CIT(A) has erred in considering the entire submissions of the assessee as an afterthought and summarily rejecting the same. Thus we set aside the orders of authorities below and delete the addition. - Decided in favour of assessee.

Summary

Issues:
1. Confirmation of action of Assessing Officer taxing deposit as unexplained cash credit under section 68 of the Income Tax Act, 1961.
2. Failure to appreciate that the source of deposit in the bank account was related to business transactions.

Analysis:
1. The appeal challenged the order of the Commissioner of Income Tax (Appeals) regarding the assessment year 2009-10. The assessing officer had reopened the assessment due to the non-filing of a regular return of income. The assessing officer made a best judgment assessment due to the absence of the assessee and lack of compliance with notices. The deposits in the bank account totaling ?27,10,812 were treated as unexplained credit under section 68 of the Act. The assessing officer did not consider the sale proceeds of the business as a source of the deposits and made the assessment without applying any estimated rate of profit.

2. The learned CIT(A) found that since no books of accounts were maintained, the addition under section 68 of the Act was not sustainable. However, he added the amount under section 69A of the Act as unexplained investment without specifying the basis for the figure. The assessee argued that the deposits were from sale proceeds and had provided details, including bank statements, which were not considered by the assessing officer. The CIT(A) deleted the addition under section 68 but enhanced it under section 69A without giving the assessee an opportunity to be heard, contrary to the provisions of the Act.

3. The ITAT observed that the assessing officer did not comment on the return of income filed by the assessee, which showed sale proceeds and income. The ITAT found that the addition of deposits as unexplained credit without considering the turnover of the assessee was not sustainable. The ITAT highlighted that the assessing officer accepted deposits in one bank account as part of the business turnover but did not provide a reason for treating deposits in another bank account as unexplained. The ITAT set aside the orders of the authorities below and deleted the addition, emphasizing that the assessing officer's approach lacked a reasonable basis and the CIT(A) erred in enhancing the assessment without proper examination or notice to the assessee.