2012 (11) TMI 940 - AT - Income Tax

Ex-parte assessment made u/s.144 of the Income Tax Act - notice under section 142(1) of the Act alleged that there was no compliance on behalf of the assessee to any of the notices issued by the AO Held that - Director of the Company was incharge of the company s day to day affairs at Mumbai. The other directors were residing at Calcutta he was diagnosed as suffering from cancer and, therefore, could not attend the proceedings before the AO. That is the reason why the final show cause notice dated 10/11/2008 was sent by the AO to the Kolkatta address of the other directors said director ultimately died on 19/4/2010 and that was the time when the proceedings before CIT(A) had come up for hearing - direct the assessee to make proper compliance before the AO to enable the AO to decide the issue afresh - appeals allowed for statistical purposes

Summary

Issues involved:
1. Ex-parte disposal of appeal by CIT(A)
2. Confirmation of ex-parte assessment under section 144 of the Income Tax Act, 1961
3. Confirmation of addition in respect of sundry creditors under section 154 of the Act

Issue 1: Ex-parte disposal of appeal by CIT(A):
The assessee, engaged in the business of hiring vehicles and office equipment, filed a return declaring total income as Nil for assessment year 2006-07. The AO issued notices under section 142(1) of the Act, requesting details including creditors exceeding Rs. 1 lakh. Despite the assessee providing some details, the AO issued a final show cause notice due to non-compliance. Subsequently, the AO proceeded to frame an assessment under section 144 of the Act, adding unexplained cash credit and disallowances. The CIT(A) dismissed the appeal ex-parte as the assessee failed to appear for hearings. The Tribunal set aside the CIT(A)'s order, considering the circumstances preventing compliance and directed the issue to be restored to the AO for fresh consideration.

Issue 2: Confirmation of ex-parte assessment under section 144 of the Income Tax Act, 1961:
The AO, after non-compliance by the assessee, completed the assessment under section 144 of the Act, adding unexplained cash credit and disallowances, resulting in the computation of the total income. The CIT(A) upheld the AO's order, leading to the assessee raising grounds before the Tribunal. The Tribunal, considering the circumstances preventing compliance, set aside the CIT(A)'s order and directed the issue to be restored to the AO for fresh consideration.

Issue 3: Confirmation of addition in respect of sundry creditors under section 154 of the Act:
Subsequent to the assessment under section 144, the AO initiated proceedings under section 154 and rectified a mistake in the calculation of sundry creditors, resulting in a revised total income. The CIT(A) dismissed the appeal, stating that the merits of the addition under section 68 of the Act could only be challenged in an appeal against the order under section 144. The assessee appealed to the Tribunal, which considered the submissions and directed the issue to be restored to the AO for proper compliance and fresh consideration.

This detailed analysis covers the issues involved in the legal judgment, highlighting the proceedings, decisions, and directions provided by the Appellate Tribunal ITAT MUMBAI in the cited case.