2024 (5) TMI 1356 - AT - Income Tax

Best Judgement Assessment - Validity of assessment completed without issuance of notice u/s. 143(2) - assessment was completed ex-parte u/s. 144 and AO treated the return filed by the assessee as invalid because the assessee has not filed return of income within the time allowed in the notice u/s. 142(1) - HELD THAT - The assessee has not filed any return of income u/s. 139(1) of the Act for the relevant assessment year 2017-18. Subsequently the AO noticed that the assessee has deposited demonetized cash in its bank account and hence to verify the genuineness of cash deposit notice u/s. 142(1) of the Act dated 05.01.2018 calling the assessee to file return of income was issued. The time allowed vide this notice u/s. 142 of the Act by the Department was up to 31.03.2018 but assessee furnished the return of income on 15.02.2019 i.e. almost 10 months after the expiry of time allowed by the Department. Hence the AO proceeded to frame the assessment u/s. 144 of the Act and finally assessment was framed as best judgment assessment u/s. 144 of the Act as the assessee neither filed any reply nor furnished any details. CPC Bangalore has issued this intimation u/s. 143(1) and regularized the return of income - Processing of return u/s. 143(1) of the Act is just a formality and not regularization of return of income because AO while framing assessment u/s. 144 of the Act dated 28.10.2019 has specifically treated the return as invalid return and framed assessment u/s. 144 of the Act. Hence non-issuance of notice u/s. 143(2) of the Act is not fatal to this assessment and assessment is valid as per law. Hence this issue of assessee s appeal is dismissed. Cash deposit made in Specified Bank Notes (SBNs) during demonetization period - Even now before us the assessee apart from making bald statement that the deposit in SBNs during demonetization period from 09.11.2016 to 30.12.2016 is out of the turnover of the assessee and assessee has already declared the turnover at Rs. 75, 52, 940/- no other source was explained. Even it was not explained that how this cash deposit in specified notes is included in the turnover by the assessee in its return of income. In the absence of any explanation or evidence have no alternative except to confirm the addition. Determination of profit rate at the rate of 8% on the total business turnover taking the figure of total cash deposits (excluding the bank deposit in specified notes deposited during demonetization period) - The assessee has declared total turnover at Rs. 75, 52, 940/- whereas as per bank statement and admitted position the total credit in assessee s bank account excluding the demonetized cash is Rs. 1, 36, 60, 970/-. In the absence of any evidence or any explanation have no alternative except to confirm the orders of the lower authorities. Therefore this issue of assessee s appeal is dismissed.

Summary

Issues:
1. Jurisdiction - Validity of assessment without notice u/s. 143(2) of the Income Tax Act.
2. Cash deposit during demonetization period - Treatment as unexplained money u/s. 69A of the Act.
3. Estimation of profit rate at 8% on total business turnover.

Jurisdiction Issue:
The appeal concerns the validity of an assessment made by the AO without issuing a notice u/s. 143(2) of the Income Tax Act. The AO conducted an ex-parte assessment under section 144 of the Act due to the assessee's failure to file a return within the specified time. The contention raised was that the absence of a notice u/s. 143(2) rendered the assessment invalid. However, the Tribunal upheld the assessment, stating that the failure to issue a notice u/s. 143(2) did not invalidate the assessment under section 144, as the return was considered invalid due to late filing after the specified deadline.

Cash Deposit Issue:
The AO noted cash deposits made during the demonetization period totaling Rs. 23,32,500, which the assessee failed to explain the source of. Consequently, the AO treated the amount as unexplained money under section 69A of the Act. The CIT(A) affirmed this decision, stating that the appellant did not provide a source for the cash deposits. The Tribunal upheld the decision, emphasizing the lack of explanation or evidence from the assessee, leading to the confirmation of the addition.

Profit Rate Estimation Issue:
Regarding the estimation of profit rate at 8% on total business turnover, the AO considered the total bank credits excluding demonetized cash and applied an 8% profit rate, resulting in an estimated income addition of Rs. 10,92,870. The CIT(A) upheld this action, citing the appellant's failure to provide details or sources for the cash deposit. The Tribunal confirmed the lower authorities' decisions due to the absence of evidence or explanation from the assessee, leading to the dismissal of the appeal.

In conclusion, the Tribunal dismissed the assessee's appeal concerning the jurisdiction issue, the treatment of cash deposits during demonetization, and the estimation of profit rate on total business turnover. The assessments were upheld based on the lack of timely filing, explanation, or evidence provided by the assessee throughout the proceedings.