2018 (5) TMI 1385 - AT - Income Tax

Validity of assessment order - absence of notice under section 143 (2) as alleged to have been not issued by Ld.AO.- Held that - The notice issued by Ld.AO dated 08/10/10 amounts to be the notice issued under section 143 (2) of the Act. Assessee therefore cannot take the pretext of 143(2) notice being not issued by Ld.AO since the notice dated 08/10/10 makes it amply clear that the assessment proceedings have been initiated in the case of assessee for the relevant assessment year. We therefore do not find any infirmity in the observations of Ld. CIT (A) and the same is upheld. Addition u/s 69C - Held that - Information sought by Ld.AO from M/s Virat Exim under section 133 (6) was not provided to assessee, which is the basis of addition in the hands of assessee. It is observed that neither Ld.AO nor Ld.CIT(A) conducted any enquiries/verification regarding the same. Neither Ld. CIT (A) not Ld.AO has verified the genuineness of the amount received from M/s Virat Exim. Most importantly it is observed that Ld.AO has made the addition in the hands of assessee under section 69C which is unexplained expenditure, however, from the submissions made by assessee before Ld.CIT (A) as well as observations of Ld.CIT (A) himself, it appears that it is an amount received by assessee from M/s Virat Exim, and therefore cannot be considered to be an expenditure in the hands of assessee. Under such circumstances we deem it fit and proper to set aside this issue back to the file of Ld.AO for proper verification as per law.

Summary

Issues Involved:
1. Validity of the assessment order under section 143(3) of the Income Tax Act.
2. Addition of ?53,75,370 under section 69C of the Income Tax Act for unexplained expenditure.
3. Deletion of an addition of ?53,75,370 by the CIT(A) for alleged unaccounted cash receipt.

Issue-Wise Detailed Analysis:

1. Validity of the Assessment Order:
The assessee challenged the validity of the assessment order on the grounds that the mandatory notice under section 143(2) of the Income Tax Act was not issued by the Assessing Officer (AO). The Tribunal noted that the assessee did not file its return of income under sections 139(1) or 139(4) and only filed the return in response to a notice under section 142(1). The AO issued a notice dated 08/10/2010, calling for various details necessary for the assessment. The Tribunal held that this notice amounted to a notice under section 143(2), as it served the purpose of ensuring the assessee attended the office or produced evidence in support of the return. Therefore, the Tribunal upheld the validity of the assessment order, dismissing the assessee’s ground.

2. Addition of ?53,75,370 under Section 69C:
The AO made an addition of ?53,75,370 under section 69C, considering it unexplained expenditure related to land development and earth filling expenses, based on information from M/s Virat Exim Pvt. Ltd. The assessee contended that the amount was received back from M/s Virat Exim as part of an advance given for land purchase, and no expenses were incurred. The CIT(A) confirmed the addition, citing contradictions in the assessee’s statements and the lack of documentary evidence. However, the Tribunal observed that the amount received could not be considered as expenditure and set aside the issue to the AO for proper verification. The AO was directed to call upon both the assessee and M/s Virat Exim to ascertain the genuineness of the amount received, conduct necessary enquiries, and determine the correct income.

3. Deletion of Addition by CIT(A):
The CIT(A) deleted an addition of ?53,75,370 made by the AO, who alleged that the assessee received the amount in cash from farmers and did not record it in the books. The CIT(A) found no evidence of cash payment and inferred that the reduction in advances could be due to the return of advances or conversion into land purchase consideration. The Tribunal found the CIT(A)’s deletion based on presumptions without supporting evidence. It set aside the issue to the AO for proper investigation, directing the AO to call upon the assessee and M/s Virat Exim to verify the genuineness of the amount received and conduct necessary enquiries to determine the correct income.

Conclusion:
The Tribunal upheld the validity of the assessment order, dismissed the assessee’s appeal regarding the notice under section 143(2), and set aside the issues related to the addition and deletion of ?53,75,370 to the AO for further investigation. Both the assessee’s and the revenue’s appeals were partly allowed for statistical purposes. The Tribunal directed the AO to conduct thorough enquiries and provide the assessee an opportunity to present evidence and cross-examine any statements or documents submitted by M/s Virat Exim.