2012 (7) TMI 360 - AT - Income Tax

Challenge the assessment ex parte u/s 144 - the notice was served after the due date - Held that - Valid notice containing the address of the assessee, was issued by speed post to it on 16.8.2008 and the normal presumption is that this notice would have been received by the assessee - company within a period of one or two days. The notice has not been received back. Therefore, it is held that in absence of any valid rebuttal of service, the same deemed to have been made on the assessee - against assessee. Deletion of addition made by the AO u/s 40(a)(ia)for non-deduction of tax at source - Held that - Only one notice has been issued in this case for making the assessment u/s 144 adequate opportunity of being heard was not granted to the assessee. Therefore, it is justified in admitting additional evidence under Rule 46(A)(3). The evidence showed that tax has been deducted and paid to the Central Government. Consequently there is no reason to disallow the expenditure Disallowance from laundry expenses, house keeping and service expenses have been deleted by mentioning that the AO has not brought any evidence on record that the expenses were not incurred in the course of business - in favour of assessee

Summary

Issues:
1. Assessment made ex-parte due to late notice service
2. Deletion of additions made by AO under various sections
3. Validity of notice served to the assessee company and its Directors
4. Disallowance of expenses and donations

Analysis:

Issue 1: Assessment made ex-parte due to late notice service
The assessee contended that the assessment was made ex-parte under section 144 of the Income Tax Act, 1961, as the notice was served after the due date. The AO proceeded with best judgment assessment due to non-compliance with notices. The CIT(A) considered the case facts and issued notices, concluding that the notice was validly served on the assessee. The Tribunal emphasized the importance of valid notice service and compared the case to precedents where lack of notice receipt led to assessment annulment. The Tribunal found that the notice was correctly addressed and served, leading to the dismissal of the appeal.

Issue 2: Deletion of additions made by AO under various sections
The primary contention was the deletion of Rs. 16.38 lacs addition under section 40(a)(ia) for non-deduction of tax at source. The AO made the addition based on lack of evidence of tax deduction. The assessee provided evidence of tax deduction and payment to the Central Government before the deadline. The CIT(A) admitted additional evidence, concluding no violation of statutory provisions and deleting the addition. The Tribunal upheld this decision based on the evidence presented. Similar deletions were made for other expenses and taxes, with the Tribunal supporting the CIT(A)'s findings.

Issue 3: Validity of notice served to the assessee company and its Directors
The dispute revolved around the validity of notices served to the assessee company and its Directors. The assessee argued that the notices to Directors were invalid as they were not issued in their capacity as Directors. The Tribunal analyzed the notice issuance and receipt, emphasizing the importance of correct address and service. Comparisons were drawn with previous cases where notice service discrepancies led to annulment. The Tribunal concluded that the notice was validly served based on the evidence presented.

Issue 4: Disallowance of expenses and donations
The Tribunal addressed adhoc disallowances from laundry, housekeeping, service expenses, and donations. The AO's disallowances were challenged based on lack of evidence or comparison with previous years. The CIT(A) deleted the disallowances citing lack of substantial evidence for disallowance. The Tribunal upheld the CIT(A)'s decision, emphasizing the need for a compelling case for disallowance. Consequently, the appeals were dismissed based on the findings and evidence presented.