2022 (10) TMI 402 - AT - Income Tax

Cash deposited post demonetization period - AO making the addition of 30% of the cash deposited in the bank during post demonetization period - addition made by the AO as the appellant assessee had failed to prove the source of cash deposit in the bank account during the post-demonetization period during the course of assessment as well as first appellate proceedings with any cogent and sustainable evidence - HELD THAT - Logical conclusion that the AO was right in making the addition in the hands of the assessee and the CIT(A) was also correct and justified in confirming the same. There is no ambiguity, perversity or any other valid reason to interfere with the findings arrived at by the authorities below, therefore, uphold the same. Resultantly, the grounds of the assessee being devoid of merits are dismissed.

Issues Involved:
1. Non-issuance and service of notice under section 143(2).
2. Lack of reasonable opportunity to respond to the show cause notice.
3. Failure to adjudicate the reply filed by the appellant.
4. Incorrectness of the assessment order regarding the declared profit under section 44AD.
5. Unsupported additions of Rs. 10,20,000.
6. Lack of material evidence for the additions.
7. Erroneous invocation of section 145(3) to reject books of accounts.
8. Incorrect lump sum additions based on cash deposits.
9. Enhancement of sales without supporting material.
10. Jurisdictional error in assessing the appellant's income.
11. Dismissal of appeal by CIT(A) without proper consideration.
12. Illegality of interest charged under section 234B and penalty proceedings under section 270A.

Detailed Analysis:

1. Non-issuance and Service of Notice under Section 143(2):
The appellant argued that the assessment order was untenable due to the non-issuance and service of notice under section 143(2). However, the tribunal did not find merit in this argument as the assessment proceedings were conducted with due notice and opportunity for the appellant to present their case.

2. Lack of Reasonable Opportunity:
The appellant claimed that they were not given a reasonable opportunity to respond to the show cause notice issued on 03.12.2019, requiring a reply by 06.12.2019. The tribunal noted that the Assessing Officer (AO) provided due opportunity and the appellant failed to utilize the same effectively.

3. Failure to Adjudicate the Reply:
The appellant contended that the AO and CIT(A) failed to consider the reply filed on 06.12.2019. The tribunal observed that the AO considered the appellant's submissions but found them unsatisfactory, leading to the rejection of the books of accounts under section 145(3).

4. Incorrectness of Assessment Order under Section 44AD:
The appellant argued that they declared a higher profit percentage of 22% under section 44AD, which should have been accepted. The tribunal noted that the AO found discrepancies in the cash sales during the demonetization period, leading to the rejection of the books of accounts and subsequent additions.

5. Unsupported Additions of Rs. 10,20,000:
The appellant claimed that the additions were based on whimsical assumptions. The tribunal upheld the AO's findings that the cash sales booked during the demonetization period were abnormal and appeared to be an attempt to adjust undisclosed income.

6. Lack of Material Evidence for Additions:
The tribunal agreed with the AO that the appellant failed to provide cogent evidence to substantiate the source of cash deposits during the demonetization period, justifying the additions made.

7. Erroneous Invocation of Section 145(3):
The appellant argued that the invocation of section 145(3) was incorrect as they declared income under section 44AD, which does not require maintaining books of accounts. The tribunal found that the AO rightly invoked section 145(3) due to the abnormal cash sales pattern during the demonetization period.

8. Incorrect Lump Sum Additions Based on Cash Deposits:
The appellant contended that the lump sum additions of 30% on cash deposits were incorrect. The tribunal upheld the AO's decision, noting that the pattern of cash sales during the demonetization period was inconsistent with previous years, justifying the additions.

9. Enhancement of Sales without Supporting Material:
The appellant argued that the enhancement of sales to Rs. 1,29,79,543 was unsupported. The tribunal found that the AO's analysis of cash sales and deposits during the demonetization period justified the enhancement.

10. Jurisdictional Error in Assessing Income:
The appellant claimed that the AO wrongly assumed jurisdiction in assessing their income. The tribunal found no merit in this argument, noting that the AO acted within their jurisdiction.

11. Dismissal of Appeal by CIT(A) without Proper Consideration:
The appellant argued that CIT(A) dismissed their appeal casually. The tribunal found that CIT(A) properly considered the facts and upheld the AO's findings.

12. Illegality of Interest Charged under Section 234B and Penalty Proceedings under Section 270A:
The appellant contended that the interest charged and penalty proceedings were illegal. The tribunal upheld the AO's decision, noting that these were consequential to the justified additions made.

Conclusion:
The tribunal dismissed the appeal, upholding the AO's and CIT(A)'s decisions. The tribunal found no ambiguity or perversity in the findings and confirmed the additions made due to the appellant's failure to substantiate the source of cash deposits during the demonetization period. The grounds of appeal were deemed devoid of merit.

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