2021 (7) TMI 271 - AT - Income Tax

Addition of income - Difference in receipts as business turnover - HELD THAT - Prima facie it appears that there is a difference of service tax returns which was not properly verified by the Assessing Officer. Therefore, we are remanding back the issue to the file of the Assessing Officer for proper adjudication after taking cognizance of the evidence produced by the assessee. Needless to say, the assessee be given opportunity of hearing by following principles of natural justice. The appeal of the assessee is partly allowed for statistical purpose.

Issues:
Assessment of undisclosed receipts and application of net profit rate, failure to consider revised return, lack of proper enquiry by Assessing Officer, dismissal of appeal by CIT(A).

Assessment of Undisclosed Receipts and Application of Net Profit Rate:
The appeal was filed against the order passed by the CIT(A) confirming the addition of ?8,98,110 to the income returned by the assessee for the assessment year 2015-16. The Assessing Officer made this addition based on undeclared receipts of ?1,01,59,619 under the head income from business or profession, applying a net profit rate of 8.84%. The assessee, engaged in money lending and financial services, challenged this addition, claiming that the Assessing Officer did not consider the revised return filed by the appellant, which stated that the turnover in service tax returns was inadvertently declared incorrectly. The Tribunal noted a discrepancy in the service tax returns that was not adequately verified by the Assessing Officer. Consequently, the issue was remanded back to the Assessing Officer for proper adjudication, emphasizing the importance of considering the evidence presented by the assessee and granting the assessee a fair hearing.

Failure to Consider Revised Return:
The assessee argued that due to the restriction in tax law preventing the revision of service tax returns after 60 days, the incorrect turnover figure could not be rectified in subsequent filings, including the income tax return. The Assessing Officer's failure to investigate this discrepancy and reliance on the higher turnover figure led to the addition in question. The Tribunal acknowledged this argument and directed the Assessing Officer to reexamine the issue considering the factual submissions and evidence provided by the assessee, ensuring that principles of natural justice are followed.

Lack of Proper Enquiry by Assessing Officer:
The appellant contended that the Assessing Officer did not conduct a thorough enquiry into the matter, as evidenced by the failure to review account books and bank statements supporting the correct turnover figure. The Tribunal observed that the Assessing Officer's oversight in verifying the discrepancy in service tax returns highlighted the need for a more diligent investigation. By remanding the issue back to the Assessing Officer, the Tribunal aimed to rectify this oversight and ensure a comprehensive review of the relevant evidence.

Dismissal of Appeal by CIT(A):
Despite the appellant's submissions and challenges regarding the Assessing Officer's approach, the CIT(A) upheld the addition to the income returned by the assessee. The Tribunal, upon reviewing the arguments and evidence presented by both parties, found merit in the appellant's contentions regarding the incorrect turnover figure and the lack of proper enquiry. Consequently, the appeal was partly allowed for statistical purposes, emphasizing the need for a fair and thorough assessment process to determine the correct income tax liability.

In conclusion, the Tribunal's decision highlighted the importance of conducting a detailed enquiry, considering all relevant evidence, and ensuring procedural fairness in assessing tax liabilities to uphold the principles of natural justice and fairness in tax proceedings.

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