2024 (5) TMI 1397 - AT - Income Tax

Best judgment assessment - Validity of assessment order u/s 144 without issuing notice u/s 143(2) - HELD THAT - When assessee has filed the return of income and responded to the notice of the AO, the conditions for invoking Section 144 are not met. Therefore, the assessment made by the AO u/s. 144, would not sustain. Various judicial decisions have held that invoking Section 144 is improper, if the assessee has filed a return of income and complied with the notices. The courts have quashed such assessments, emphasizing that best judgment assessments are intended only for cases where the assessee fails to file returns or comply with statutory notices. Addition u/s 69A as unexplained Money - In the present case, the assessee has furnished the details of cash deposits, during the course of the appellate proceedings. The Affidavits of relatives confirming that the cash deposited in the bank account of the assessee belongs to them were also produced before the CIT(A). Assessee also produced the return of income of the relatives. As observed that the deposits is not relating to cash deposit and it is related to the maturity proceeds of the fixed deposits. As noted that there is an addition on substantive basis in the hands of Shabbir Kantawala, brother of the assessee and the said Rs. 10,00,000/- is the same amount deposited in the joint bank account held by the assessee. CIT(A) was not correct in upholding the half of the assessment in the hands of assessee u/s. 69A Affidavits, if credible and corroborated by other evidences, can be sufficient to explain the source of cash deposits. Neither the AO nor the CIT(A) has provided concrete reasons or evidences to reject the Affidavits and the explanation provided by the assessee. Mere suspicion or conjecture is not sufficient to sustain an addition u/s 69A - We, therefore, set aside the order of CIT(A) and delete the entire addition made u/s. 69A r.w.s 115BBE in the hands of the assessee by the AO. Initiation of penalty proceedings u/s 271AAC(1) 271F - Proceedings for initiation of penalty proceedings u/s. 271AAC(1) 271F of the Act be dropped. Appeal of assessee is allowed.

Issues Involved:
1. Deletion of half of the addition made for cash deposits and other credits under Section 69A of the Income Tax Act.
2. Justification of total cash deposits as unexplained investment belonging solely to the appellant.
3. Consideration of the nature of other credits in the bank account.
4. Double addition of the same cash deposit in the total income of a joint account holder.
5. Validity of assessment order passed under Section 144 without issuing a statutory notice under Section 143(2).
6. Compliance with the due process of assessment prescribed by CBDT for ex-parte assessment orders under Section 144.
7. Consideration of the appellant's explanations and evidence about the source of deposits.
8. Applicability of the E-assessment Scheme 2019 to assessments made under Section 144.
9. Support of the Show Cause Notice (SCN) by reasons/evidence.
10. Opportunity of oral/personal hearing before disregarding the appellant's explanations.
11. Initiation of penalty proceedings under Sections 271AAC(1) and 271F.

Detailed Analysis:

1. Deletion of Half of the Addition Made for Cash Deposits and Other Credits under Section 69A:
The CIT(A) deleted half of the addition made by the AO for cash deposits and other credits, holding that the entire cash deposits/credits did not belong solely to the appellant. The CIT(A) observed that the cash deposits were held in joint accounts with other family members and were accumulated over more than 40 years for medical emergencies. However, the CIT(A) did not find sufficient documentary evidence to support the appellant's claims.

2. Justification of Total Cash Deposits as Unexplained Investment Belonging Solely to the Appellant:
The AO treated the total cash deposits of Rs. 14,10,000 in joint bank accounts as unexplained investment belonging solely to the appellant, disregarding the appellant's explanation that the deposits included savings from family members. The CIT(A) sustained half of the addition, but the Tribunal found that the AO and CIT(A) did not provide concrete reasons or evidence to reject the appellant's affidavits and explanations.

3. Consideration of the Nature of Other Credits in the Bank Account:
The appellant argued that the other credits of Rs. 5,91,006 in the bank account were maturity proceeds of old FDRs and not cash deposits. The Tribunal noted that the deposits totaling Rs. 5,91,006 were indeed related to the maturity proceeds of fixed deposits and not cash deposits.

4. Double Addition of the Same Cash Deposit in the Total Income of a Joint Account Holder:
The appellant pointed out that the AO made the same addition of Rs. 10,00,000 for cash deposits in the joint account in the total income of another joint holder, Mr. Shabbir Kantawala. The Tribunal observed that there was indeed an addition of Rs. 10,00,000 on a substantive basis in the hands of Shabbir Kantawala, which was the same amount deposited in the joint bank account held by the appellant.

5. Validity of Assessment Order Passed under Section 144 without Issuing a Statutory Notice under Section 143(2):
The appellant argued that the assessment order passed under Section 144 was invalid as the AO did not issue a statutory notice under Section 143(2). The Tribunal found that the AO did not issue the notice under Section 143(2) within the stipulated time period, making the assessment order null and void.

6. Compliance with the Due Process of Assessment Prescribed by CBDT for Ex-parte Assessment Orders under Section 144:
The appellant contended that the AO did not follow the due process of assessment prescribed by CBDT for ex-parte assessment orders under Section 144. The Tribunal noted that the AO did not comply with the SOP/instructions under Section 144A of the Act.

7. Consideration of the Appellant's Explanations and Evidence about the Source of Deposits:
The appellant provided affidavits and confirmation letters from relatives explaining the source of cash deposits. The Tribunal found that the AO and CIT(A) did not provide concrete reasons or evidence to reject these affidavits and explanations. The Tribunal emphasized that mere suspicion or conjecture is not sufficient to sustain an addition under Section 69A.

8. Applicability of the E-assessment Scheme 2019 to Assessments Made under Section 144:
The appellant argued that the E-assessment Scheme 2019 was not applicable to assessments made under Section 144 at the time of the impugned assessment order. The Tribunal did not specifically address this issue in the judgment.

9. Support of the Show Cause Notice (SCN) by Reasons/Evidence:
The appellant contended that the SCN issued by the AO was not supported by reasons or evidence, as required by CBDT instructions. The Tribunal did not specifically address this issue in the judgment.

10. Opportunity of Oral/Personal Hearing before Disregarding the Appellant's Explanations:
The appellant argued that the AO and CIT(A) did not afford an opportunity for oral/personal hearing before disregarding the appellant's explanations. The Tribunal did not specifically address this issue in the judgment.

11. Initiation of Penalty Proceedings under Sections 271AAC(1) and 271F:
The Tribunal set aside the order of the CIT(A) and deleted the entire addition made under Section 69A r.w.s 115BBE of the Act. Consequently, the Tribunal directed that the penalty proceedings under Sections 271AAC(1) and 271F be dropped.

Conclusion:
The Tribunal allowed the appeal of the assessee, setting aside the order of the CIT(A) and deleting the entire addition made under Section 69A r.w.s 115BBE of the Act. The Tribunal emphasized that the affidavits and explanations provided by the appellant were not properly considered, and the conditions for invoking Section 144 were not met. The penalty proceedings under Sections 271AAC(1) and 271F were also directed to be dropped.

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