2014 (11) TMI 2 - AT - Income Tax

Unexplained credit u/s 68 - Facts remained unrebutted on record - Service of notice Held that - The assessee was the sole proprietor of M/s New Age Overseas and filed the return for the year under consideration on 05.07.2001 declaring an income of Rs,2,78,410/- has not been disputed by the Revenue the income included the income of ₹ 2,31,187/- from the proprietary firm M/s New Age Overseas has also not been rebutted - against this return filed on 05.07.2001, no notice u/s 143(2) has been issued to the assessee - The evidence in regard to the shifting of the firm M/s New Age Overseas 130-131-D, Kamla Nagar, Delhi to 96-D, Kamla Nagar, Delhi w.e.f 07.07.2004 and ultimately the proprietorship was closed on 31.03.2007 by surrendering the sales tax number also has been confronted by the AO by way of a Remand Report and has not been rebutted as per the finding on fact available on record and has also not been rebutted before us in the present proceedings. The fact that the assessee specifically shifted to B-7, Green park Extension, New Delhi and submitted his return in Ward-24(1), New Delhi is the finding of the fact recorded in the order which also has been confronted to the AO and not denied by him and also not rebutted before us by the Revenue in the present proceedings - the service of notice by way of affixtures from 31.03.2008 to 28.11.2008 on the premises i.e. 130D, Kamla Nagar has been taken cognizance by the CIT(A) to hold that the notices were not served at the correct address - the CIT(A) also proceeds to consider the fact that the AO could have obtained the correct address from the bank account of Vijaya Bank as the complete address was available there - This fact also stands unrebutted on record - the CIT(A) ought to have quashed the proceedings and there was no need to proceed to adjudicate upon the additions on merit - the reasoning taken by the CIT(A) on merits also has not been assailed by the Revenue either by referring to any fact or evidence Decided against revenue.

Summary

Issues Involved:
1. Deletion of addition of Rs. 1,08,000/- under Section 68 of the Income Tax Act.
2. Deletion of addition of Rs. 6,65,815/- as unexplained investment.
3. Deletion of addition of Rs. 10,89,423/- on profit estimate basis.
4. Validity of reassessment proceedings and service of notice.
5. Legality of assessment in the name of M/s New Age Overseas.

Issue-wise Detailed Analysis:

1. Deletion of Addition of Rs. 1,08,000/- under Section 68 of the Income Tax Act:
The Assessing Officer (AO) added Rs. 1,08,000/- to the assessee's income based on information from the Investigation Wing, concluding it was an unexplained credit. However, the assessee argued that this amount was received from the sale of furniture, which was already included in the total sales disclosed in the audited accounts. The CIT(A) accepted the assessee's explanation, noting that the sales bill and confirmation from the buyer were provided. The AO's failure to bring contrary evidence led to the deletion of this addition by the CIT(A), which was upheld by the Tribunal.

2. Deletion of Addition of Rs. 6,65,815/- as Unexplained Investment:
The AO treated Rs. 6,65,815/- as an unexplained investment. The assessee clarified that this amount was the closing balance in the bank account as of 14.11.2000, duly reflected in the audited accounts. The CIT(A) found that this balance resulted from trading transactions over time and did not represent a specific unexplained deposit. Consequently, the addition was deleted, and the Tribunal upheld this decision.

3. Deletion of Addition of Rs. 10,89,423/- on Profit Estimate Basis:
The AO estimated a profit of Rs. 10,89,423/- by applying a 5% profit rate on the total credits in the bank account. The assessee contended that the credits were already accounted for in the audited books, and the AO's estimation was based on mere suspicion without examining the detailed bank account reconciliation. The CIT(A) agreed with the assessee, noting that the AO failed to provide cogent findings and deleted the addition. The Tribunal upheld this deletion, emphasizing that additions cannot be based on suspicion alone.

4. Validity of Reassessment Proceedings and Service of Notice:
The reassessment was challenged on the grounds that notices were not served at the correct address. The CIT(A) found that the notices were served by affixture at an old address, despite the AO having access to the correct address from the bank records. The Tribunal noted that the CIT(A) should have quashed the reassessment proceedings due to improper service of notice and the existence of two assessments for the same year. The Tribunal concluded that the reassessment was invalid and quashed the proceedings.

5. Legality of Assessment in the Name of M/s New Age Overseas:
The CIT(A) found that the assessment was incorrectly made in the name of M/s New Age Overseas, a proprietary concern, instead of the individual proprietor. The Tribunal upheld this finding, noting that the assessment should have been made in the name of the individual, and the existence of two assessments for the same year rendered the proceedings invalid.

Conclusion:
The Tribunal dismissed the Revenue's appeal and allowed the assessee's cross-objection, quashing the reassessment proceedings and upholding the deletions of the additions made by the AO. The Tribunal emphasized the importance of proper service of notice and the invalidity of multiple assessments for the same year. The judgment highlighted the need for assessments to be based on concrete evidence rather than suspicion.