2024 (6) TMI 410 - AT - Income Tax

Reopening of assessment u/s 147 - Estimation of income from cash deposits - unexplained money u/s 69A on the ground that assessee failed to comply with all the notices / letters issued to her explaining the source of deposits - HELD THAT - Even though the CIT(A) has mentioned that these returns were filed after receiving notice u/s 148 and that to before a different AO, however, there is nothing on record to suggest that those returns were treated as non-est by the AO and that any proceedings u/s 147 of the Act has been initiated by treating the returns as non-est and brining the income to tax. Although, the assessee in the instant case, did not appear before the AO by producing requisite details and that the Assessing Officer has passed order u/s 144 of the Act, however, it was explained before us that assessee has stopped her business and has joined government service and therefore, all the past records are not available at present. Considering the totality of the facts and considering the fact that assessee has filed the returns of income for A.Ys. 2012-13 to 2014-15 by offering income from proprietary concern namely, M/s. Sri Sai Consultancy and that returns for A.Y. 2012-13 to 2014-15 were also filed before the completion of assessment for the impugned year, we are of the considered opinion that adoption of net profit rate of 15% on the total deposits will meet the ends of justice. We therefore direct the AO to restrict the disallowance to 15% of the total cash deposits in the bank accounts of assessee as her business income, to be taxed at normal rate - The balance addition is directed to be deleted. Accordingly, the appeal of the assessee is partly allowed.

Summary

Issues Involved:
1. Validity of proceedings u/s 144 r.w.s 147 of the Income Tax Act.
2. Jurisdiction of the Assessing Officer.
3. Validity of notice issued u/s 148 of the Income Tax Act.
4. Estimation of income from business receipts.

Summary:

1. Validity of proceedings u/s 144 r.w.s 147 of the Income Tax Act:
The assessee challenged the proceedings initiated u/s 144 r.w.s 147 for the A.Y 2013-14, arguing that the addition of Rs. 1,22,19,500/- made u/s 69A was improper. The assessee contended that the entire amount deposited in the bank was considered as income without proper evidence of consultancy business being taken into account.

2. Jurisdiction of the Assessing Officer:
The assessee argued that the ITO Ward-12(2), Hyderabad had no jurisdiction over her as she had no income from salary for the relevant year. The case was transferred to ITO Ward-4(3) due to the business income. However, the AO reverted the jurisdiction back to ITO Ward-12(2) based on the income from salary for the A.Y 2017-18. The Tribunal noted that the jurisdiction was assumed based on the PAN and the nature of income at the time of issuing the notice.

3. Validity of notice issued u/s 148 of the Income Tax Act:
The assessee claimed that the notice u/s 148 dated 21.06.2016 was invalid as it was served by affixture at an old address despite having her email ID in the PAN data. The Tribunal found that the notice was correctly served as per the available addresses and the subsequent notice dated 21.12.2017 did not invalidate the earlier notice.

4. Estimation of income from business receipts:
The assessee contended that the entire deposits could not be added u/s 69A and requested for a reasonable estimation of profit. The Tribunal noted that the returns for A.Ys. 2012-13 to 2014-15 were filed showing income from M/s. Sri Sai Consultancy, and directed the AO to adopt a net profit rate of 15% on the total deposits of Rs. 1,22,19,500/-, resulting in a taxable income of Rs. 18,32,925/-. The balance addition of Rs. 1,03,86,575/- was directed to be deleted.

Conclusion:
The appeal of the assessee was partly allowed, with the Tribunal directing a net profit estimation of 15% on the total deposits, thereby reducing the taxable amount significantly. The Tribunal upheld the validity of the proceedings and notices, and addressed the jurisdictional challenges raised by the assessee.