1987 (5) TMI 56 - AT - Income Tax

Summary

Issues:
1. Addition under section 40A(3)
2. Addition related to High Denomination Notes
3. Assessment of the firm as Unregistered Firm

Analysis:
1. The appeal before the Appellate Tribunal ITAT BOMBAY-D was against the order of the CIT(A) for the assessment year 1979-80. The main disputes raised in the appeal were regarding the addition under section 40A(3), addition related to High Denomination Notes, and the assessment of the firm as an Unregistered Firm. The initial addition made by the ITO was challenged by the assessee, and the CIT(A) upheld the addition under section 40A(3) while deleting the addition made for bogus purchases. The assessee objected to the disallowance under section 40A(3) after the deletion of the bogus purchases addition, citing lack of opportunity to respond to the evidence collected by the CIT(A) without confrontation.

2. Concerning the addition related to High Denomination Notes, the assessee presented 30 notes of Rs. 1,000 to the Reserve Bank of India for encashment, which were found in consecutive numbers. The ITO made an addition of Rs. 18,000 as unexplained income, confirmed by the CIT(A). The assessee contended that they were not given a proper opportunity to respond to the material relied upon by the CIT(A) from the ITO's report. The lack of record-keeping by the assessee led to this addition, and the CIT(A) upheld it without adequate hearing for the assessee.

3. Regarding the assessment of the firm as an Unregistered Firm due to the alleged non-filing of Form 12, the assessee submitted a copy of Form No. 12 filed on a specific date. However, verification of this filing was deemed necessary. The Tribunal found that the assessee was not afforded a fair opportunity to be heard during the proceedings before the CIT(A), as crucial materials were used without confrontation. Therefore, the Tribunal set aside the CIT(A)'s order and remanded the appeal for fresh disposal, emphasizing the need for a reasonable opportunity for the assessee to respond to the materials collected by the Department and to verify the filing of Form No. 12.

4. The Tribunal, while acknowledging the reliance placed on various decisions by the assessee, decided not to discuss them further due to setting aside the CIT(A)'s order for fresh proceedings. Ultimately, the appeal was treated as allowed for statistical purposes, indicating a decision in favor of the assessee based on the procedural irregularities and lack of opportunity for a fair hearing during the assessment process.