2014 (1) TMI 1432 - AT - Income Tax

Sustainability of the assessment made by the Assessing Officer u/s 144 of the Income-tax Act instead of section 143(3) of the Act Held that - The assessee has failed to comply with all the terms of the notice issued u/s 143(1) and 143(2) of the Act - All the queries raised by the Assessing Officer were not duly complied with by the assessee till the last date of hearing - The order of the lower authorities for making the assessment u/s 144 of the Act sustained. Sustainability of Addition u/s 69 of the Act Addition made by AO u/s 68 of the Act Unexplained cash credits Held that - Once the credits appeared in the bank account of the assessee it was on the assessee to explain the source of these credits - The assessee cannot be granted relief only on the basis that these may be refund of the securities that were pledged with the Nagar Nigam, Meerut time to time at the time of contracts assigned to the assessee - Since the assessee has not given any reasonable explanation with regard to credit entries in its bank account thus, the order of the CIT (A) upheld with respect to these two credit entries treating as unexplained and sustain the addition. Disallowance made u/s 144 and 184(v) of the Act - Salary paid to partners Held that - The Assessing Officer made the addition by disallowing the amount of salary paid to the partners to cover up the possible leakages of revenue and for violation of provisions of section 44AA of the Act - The assessee s case was not covered by the provisions of section 44AD of the Act, hence Assessing Officer held that no deduction allowed to partner s salary from the estimated net profit @ 8% of the receipts - where the assessment has been made u/s 144 of the Act for the failure mentioned without section then no deduction by way of any payment of salary by the firm to any partner is allowable in computing the total income chargeable under the head Profits and gains of business and profession - The clause starts with the non-obstante clause notwithstanding anything contained in any other provision of the Act thus, there was no merits in the assessee s appeal Decided against Assessee. Interest u/s 234A, 234B,234C and 234D of the Act Held that - The decision in CIT vs. Anjum M.H. Ghaswala 2001 (10) TMI 4 - SUPREME Court followed - the charging of interest is mandatory thus, no relief can be granted on this ground also Decided against Assessee.

Summary

Issues involved:
1. Sustaining assessment under section 144 instead of section 143(3) of the Income-tax Act.
2. Sustaining addition of Rs.7,49,145.
3. Disallowance of Rs.3,07,811 as salary paid to partners.
4. Interest charged under sections 234A, 234B, 234C, and 234D.

Analysis:

Issue 1: Sustaining assessment under section 144 instead of section 143(3)
The appeal challenged the assessment made under section 144 instead of section 143(3) of the Income-tax Act. The court found that the assessee failed to comply with all terms of the notice issued under sections 143(1) and 143(2). As the queries raised were not duly complied with by the assessee, the court upheld the order of the lower authorities for making the assessment under section 144.

Issue 2: Sustaining addition of Rs.7,49,145
The issue revolved around sustaining the addition of Rs.7,49,145 in the bank account of the assessee firm. The court noted that the assessee failed to provide a reasonable explanation for the credit entries in the bank account. Despite the argument that these credits might be refunds of securities, the court upheld the addition as unexplained cash credits, emphasizing the need for the assessee to explain the sources of such credits.

Issue 3: Disallowance of Rs.3,07,811 as salary paid to partners
The dispute centered on disallowing Rs.3,07,811 as the salary paid to partners. The court considered the provisions of section 184(5) of the Act, which disallows deductions for payments like salary or remuneration to partners if there is a failure as mentioned in section 144. As the assessment was made under section 144 due to non-compliance, the court upheld the disallowance of the salary paid to partners, citing the specific provisions of the Act.

Issue 4: Interest charged under sections 234A, 234B, 234C, and 234D
The court addressed the issue of charging interest under sections 234A, 234B, 234C, and 234D of the Act. Referring to a Supreme Court case, it held that the charging of interest is mandatory. Consequently, no relief was granted on this ground, affirming the interest charged under the mentioned sections.

In conclusion, the appeal was dismissed, with the court upholding the lower authorities' decisions on the assessment, additions, disallowances, and interest charges based on the specific provisions of the Income-tax Act and the failure of the assessee to comply with the required notices and explanations.