2023 (6) TMI 109 - AT - Income Tax

Assessment u/s 144 - addition applying net rate of 8% on total deposit in bank - cash deposited during demonetization - onus to prove - HELD THAT - Finding of the AO that deposits in this bank account in the name of Yogi Enterprises are business receipts is without any basis and evidence on record. The onus is entirely on the assessee to file return of income as also to explain nature and source of each of the deposits in this account, and also to comply with the requirements of various provisions of statute as are concerning with the allowability of deductions towards business expenses while computing business income, such as provisions of Section 37(1), 40A(2) , 40A(3), 40(a)(ia), 36(1)(va) etc etc. The onus is squarely on the assessee to prove that he is carrying on business and compliance with provisions of statute before any business deduction is allowed to the assessee. Similarly, the onus is on the assessee to explain every source of deposits in his bank account . Similarly, for other addition being made by the AO which were the cash deposits in the bank accounts of the assessee during demonetization period (account no.13920100031032 and 501000186411596), for which no explanation was furnished by the assessee before the AO as well before ld. CIT(A). CIT(A) on its part has simply confirmed the assessment order, while he was required to give his independent reasoning by way of speaking order. Reference is drawn to provisions of Section 250(6) of the 1961 Act. Thus, restoring the entire matter back to the file of the AO for denovo assessment and orders of both the authorities are set aside and the matter is restored to its original status for framing denovo assessment by the AO - Assessee appeal allowed for statistical purposes.

Summary

Issues involved:
The issues involved in the judgment are related to an appeal filed by the assessee against the appellate order dated 25.08.2022 for assessment year 2017-18. The grounds of appeal raised by the assessee include challenges to the assessment framed under section 144, addition of amounts based on cash deposits during demonetization, and the conduct of the assessing officer and CIT(A) in the proceedings.

Assessment under Section 144:
The assessee challenged the assessment framed under section 144, claiming it to be bad on both factual and legal grounds. The AO observed that the assessee did not file a return of income for the relevant year and had deposited a significant amount in cash during the demonetization period. Despite statutory notices and opportunities provided, the assessee failed to comply, leading to an ex-parte assessment. The AO brought to tax income based on deposits in a specific bank account, treating them as business transactions and applying a net profit rate of 8%. The CIT(A) upheld this action, and the assessee did not respond at any stage of the proceedings. However, the tribunal found the AO's conclusions regarding the nature of deposits lacking in basis and evidence. The matter was remanded to the AO for a denovo assessment, emphasizing the assessee's obligation to explain the nature and source of deposits and comply with statutory provisions.

Addition of Cash Deposits:
The AO made additions totaling Rs. 13,59,680/- based on cash deposits during demonetization, treating them as unexplained money under section 69A. The assessee contested these additions, arguing that the amounts were from disclosed sources. However, the lower authorities confirmed the additions without sufficient reasoning or independent analysis. The tribunal noted the lack of explanation provided by the assessee and the failure of the CIT(A) to provide a speaking order. Consequently, the entire matter was remanded to the AO for denovo assessment, with directions for the assessee to cooperate and provide necessary details.

Conclusion:
The tribunal allowed the appeal filed by the assessee for statistical purposes, setting aside the orders of the lower authorities and remanding the matter to the AO for denovo assessment. The tribunal clarified that it had not commented on the merits of the issues raised in the appeal, emphasizing the need for the assessee to fulfill obligations and provide explanations during the reassessment process.