2021 (3) TMI 456 - AT - Income Tax

Validity of ex-parte order passed by AO without serving the notice u/s. 148 of the Act on the assessee - HELD THAT - When the notice u/s. 148 of the Act was issued by the Assessing Officer at the address available with the Assessing Officer as well as the same address has given by the assessee in Form No. 36 and further when the assessee has made a statement before the Ld. CIT(A) not to press this issue of validity of notice, the assessee cannot be allowed to agitate this issue in the present appeal at this stage. Hence, the Ground Nos. 1 and 2 of the assessee appeal are dismissed. Addition on account of entire deposits made in the bank account of the assessee - HELD THAT - While passing the ex-parte reassessment order, made the addition of the entire deposits in the bank account of the assessee without even considering the corresponding withdrawal by the assessee. It is apparent from the bank statement of the assessee that there are frequent deposits and withdrawal by the assessee and therefore, even, if any, addition is made on account of deposits the corresponding withdrawal which can be a source of subsequent deposits is required to be considered. Further, the assessee has also required to explain the deposits in the bank account at different places apart from parent branch where the assessee is having the saving bank account. Therefore, matter is set aside to the record of the Assessing Officer to readjudicate the issue of assessment of income of assessee on account of deposit made in the bank account after considering the explanation of the assessee

Summary

Issues:
1. Validity of ex-parte order due to incorrect service of notice u/s. 148
2. Assessment of income based on deposits in bank account

Issue 1: Validity of ex-parte order due to incorrect service of notice u/s. 148:
The appellant challenged the ex-parte order passed by the Assessing Officer without proper service of notice u/s. 148. The appellant argued that the notice was issued at the wrong address, rendering it invalid. The appellant contended that the notice was not served within the period of limitation, which would vitiate the reassessment proceedings. However, the Department argued that the notice was issued based on the address available in the bank statement of the appellant and that the appellant did not file a return of income. The appellant had initially raised this issue but later withdrew it before the CIT(A). The CIT(A) dismissed the grounds related to notice service as the appellant did not press them. The Tribunal held that since the notice was issued to the address available with the AO and the appellant had withdrawn the challenge to the notice service, the issue could not be raised again in the appeal. Therefore, the grounds related to the validity of the notice were dismissed.

Issue 2: Assessment of income based on deposits in bank account:
The appellant contested the addition made by the Assessing Officer regarding deposits in the bank account, arguing that the deposits represented sale proceeds of cattle feed and fodder. The appellant claimed that as per Section 44AF, the presumptive income should be assessed at 5% of the turnover, resulting in an income of ?65,000. The Department, however, argued that the appellant failed to provide documentary evidence supporting the claim. The Tribunal noted that the Assessing Officer had made the addition without considering corresponding withdrawals by the appellant, and that the appellant's explanation regarding the deposits needed verification. The Tribunal set aside the matter for reassessment by the Assessing Officer to properly consider the deposits in relation to withdrawals and to verify the appellant's explanation with supporting evidence. Consequently, the appeal was allowed for statistical purposes.

In conclusion, the Tribunal addressed the issues of the validity of the notice service and the assessment of income based on bank deposits, providing detailed analysis and rulings on each point raised by the appellant.