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2020 (11) TMI 866 - AT - Income TaxNo notice u/s 143(2) issued - Assessment in the remand proceedings - Tribunal has remanded the matter back (the same issues which were there during the original assessment proceedings before the assessing officer) to the file of Assessing Officer, with direction to the Assessing Officer and Assessee - whether notice under section 143(2) of the Act is required be issued to the assessee? - HELD THAT - Tribunal had given specific direction while setting aside and restoring the matter back to the file of the Assessing Officer and the assessee was also asked to furnish documents and explanation on those issues in view of the directions of the Tribunal. The assessment order is to be passed after discussing the details/documents furnished by the assessee therefore, the assessing officer and assessee both were aware about the details/documents and directions of the Tribunal. Hence, there is no need to issue notice under section 143(2) of the Act, as the necessary instructions were given by the Tribunal in its order. Therefore, the requirement to issue the notice under section 143(2) of the Act does not arise. We note that notice under section 143(2) is required when assessee has furnished his return of income under section 139 or in response to a notice under section 142(1) of the Act. Therefore, notice under section 143(2) is not required when the Tribunal has remanded the matter back to the file of Assessing Officer, with certain direction to assessee and Assessing Officer. It is abundantly clear that assessee had himself taken the responsibility to produce creditors to establish identity and creditworthiness, hence the question to issue notice under section 143(2) does not arise. During the assessment proceedings (second round) under section 143(3) r.w.s. 254 of the Act, the Assessing Officer has issued letter on 13.02.2012 to the assessee to furnish books of accounts, bank statements etc. In response to the said letter the assessee has filed documents and submissions, therefore, the principle of natural justice has been observed during the assessment stage. Therefore, the requirement to issue notice under section 143(2) does not arise. Hence, we dismiss the ground no.1 raised by the assessee. Rejection of books of accounts - CIT(A) deleted gross profit addition and upheld the rejection of books of accounts - HELD THAT - When the books of accounts are rejected then only option available before the Income Tax Officer is to make addition based on estimation, that is, gross profit addition/net profit addition etc, and item-wise addition are not made. We note that ld CIT(A) deleted the addition based on gross profit (GP). Thus, we note that ld CIT(A) has not rejected the books of accounts. We note that it is only a passing reference and contradictory statement made by ld. CIT(A) in his order, as the item-wise additions were upheld by the ld. CIT(A), therefore, books of accounts were not rejected. Based on this factual position, ground no.2 raised by the assessee is dismissed. Addition u/s 68 - HELD THAT - Assessee has discharged his burden by establishing identity, genuineness as well a creditworthiness. In fact, it was up to the department to make further inquiries in the matter based on the documents and evidences submitted by the assessee, as noted above, but no such exercise has been done by the department. Hence, we delete the addition. Undervaluation of the stock of Cement sheets and Angles - HELD THAT - The assessee has maintained quantity wise and quality wise day-to-day register which is not disputed by the assessing officer. The assessee has adopted LIFO mode of valuation because these sheets when typically are piled over each other say 50-60 sheets, it results in only the last sheet inwarded as first to be taken out. These sheets were valued at ₹ 180 per sheet considering the fact that they result in unavoidable damage due to fragile nature of the sheets, sheets damaged in transit and it loses some merchandise value. Undervaluation of M.S. angle channels - The valuation adopted by the assessing officer has been based on the last bill of purchases without specifying to which quality it applied. Hence there is no any undervaluation of the stock therefore we delete both the addition in respect of Cement sheets and Angles The instant adjudication shall not be treated as a precedent in any preceding or succeeding assessment year.
Issues Involved:
1. Validity of addition without issuing show cause notice and notice under section 143(2). 2. Rejection of book results. 3. Gross profit addition. 4. Addition under section 68. 5. Undervaluation of stock. 6. Miscellaneous grounds. Issue-Wise Detailed Analysis: 1. Validity of Addition: The assessee contended that no notice under section 143(2) was issued by the Assessing Officer (AO) after the Tribunal remanded the matter back for fresh adjudication. The Tribunal noted that the AO had issued a letter on 13.02.2012 requesting the assessee to furnish books of accounts and other documents, and the assessee complied. Therefore, the principle of natural justice was observed, and the requirement to issue a notice under section 143(2) did not arise. The Tribunal dismissed this ground, agreeing with the CIT(A) that the specific directions given by the Tribunal and the subsequent compliance by the assessee negated the need for a new notice under section 143(2). 2. Rejection of Book Results: The assessee argued that the CIT(A) erred in rejecting the book results. The Tribunal noted that the CIT(A) had deleted the gross profit addition but upheld the rejection of books of accounts. However, the Tribunal observed that the CIT(A) had not actually rejected the books of accounts, as item-wise additions were upheld. Thus, the Tribunal found no merit in the assessee’s contention and dismissed this ground. 3. Gross Profit Addition: The assessee did not press this ground, and it was dismissed without objection from the Departmental Representative. 4. Addition under Section 68: The assessee challenged the addition of ?7,95,000 under section 68, arguing that sufficient evidence was provided to establish the identity, genuineness, and creditworthiness of the creditors. The Tribunal noted that the assessee had submitted various documents, including gift declarations, copies of returns, bank statements, and PAN details. The Tribunal found that the assessee had discharged his burden of proof, and the department had not conducted further inquiries. Consequently, the Tribunal deleted the addition of ?7,95,000. 5. Undervaluation of Stock: The assessee contested the addition for undervaluation of stock, specifically ?40,896 for cement sheets and ?1,23,341 for angles. The Tribunal noted that the assessee maintained a day-to-day stock register and valued the inventories on a Last-In-First-Out (LIFO) basis, which was not disputed by the AO. The Tribunal found the assessee's method of valuation reasonable, considering the nature of the materials and potential damage. Thus, the Tribunal deleted the additions for undervaluation of stock. 6. Miscellaneous Grounds: The assessee did not press this ground, and it was dismissed as general in nature and not requiring adjudication. Conclusion: The appeal filed by the assessee was partly allowed. The Tribunal upheld the CIT(A)'s decision on the validity of the addition without notice under section 143(2) and the rejection of book results. However, it deleted the additions under section 68 and for undervaluation of stock. The gross profit addition and miscellaneous grounds were dismissed as not pressed or general in nature.
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