2021 (3) TMI 1103 - AT - Income Tax

Reopening of assessment u/s 147 - Notice to be served within the limitation period or specified period - addition u/s 68 - HELD THAT - The notice u/s. 148 of the I.T. Act was dispatched on 31.03.2018 in the address given by the assessee in the PAN portal. Since the notice was returned unserved, the same was served through affixture. The learned Standing Counsel has produced the assessment records to prove that the notice u/s. 148 of the I.T. Act was dispatched on 31.03.2018 itself. In this context, the judicial pronouncement relied on by the CIT(A) clearly states that it is not necessary that notice needs to be served within the limitation period, but only need to be dispatched within the specified period. Therefore, the technical grounds raised by the assessee are dismissed. Addition u/s 68 - Assessee was not given any benefit of telescoping with regard to the withdrawals made by him. The assessee has also contended that he is deriving income from screen printing activities and the same were deposited in Kotak Mahindra Bank. It was stated by the assessee that the notice u/s. 142(1) was served on the assessee in the fag end of limitation period for completion of assessment, hence, was not in a position to furnish the necessary proof/evidences. Admittedly, in this case, the assessment has been completed on a best judgment basis. Therefore, assessee should be provided with one more opportunity to explain the source of cash deposit. The assessee shall produce the necessary evidences/documents to prove the source of cash deposits. The assessee shall co-operate with the department and shall not seek unnecessary adjournment. The A.O. is directed to afford a reasonable opportunity of hearing to the assessee and pass an order in accordance with law. It is ordered accordingly. Appeal filed by the assessee is allowed.

Summary

Issues involved:
1. Validity of notice issued under section 148 of the Income Tax Act.
2. Adequacy of opportunity provided to the assessee during the assessment proceedings.
3. Applicability of section 68 of the Income Tax Act regarding unexplained cash credit.
4. Treatment of cash withdrawals for re-deposit.
5. Justification of levy of interests under sections 234A, 234B, and 234C of the Income Tax Act.

Issue 1: Validity of notice under section 148:
The appeal questioned the validity of the notice issued under section 148 of the Income Tax Act, claiming it was not served within the limitation period. The Appellate Tribunal noted that the notice was dispatched on time, and dispatch within the specified period is sufficient, even if served subsequently. The technical objection raised by the assessee was dismissed based on legal precedents.

Issue 2: Adequacy of opportunity during assessment:
The assessee contended inadequate opportunity for hearing during the assessment proceedings. The CIT(A) found no violation of natural justice principles, stating that the assessee was given a fair hearing. The Tribunal upheld this finding, emphasizing the importance of providing reasonable opportunity to be heard before making assessments.

Issue 3: Applicability of section 68 for unexplained cash credit:
The assessee argued that section 68 of the Income Tax Act, regarding unexplained cash credit, was not applicable as no books of account were maintained. The Tribunal referred to a relevant case and held that the correct section to be invoked in such cases is section 69A, not section 68. This clarified the applicability of the correct legal provision to determine unexplained income.

Issue 4: Treatment of cash withdrawals for re-deposit:
The appeal raised concerns about the treatment of cash withdrawals for re-deposit, claiming that credit should have been given for such transactions. The Tribunal acknowledged the lack of benefit of telescoping for withdrawals and directed the assessee to provide necessary evidence to explain the source of cash deposits. The Tribunal emphasized the need for cooperation and directed the Assessing Officer to afford a reasonable opportunity for the assessee to present their case.

Issue 5: Justification of levy of interests under sections 234A, 234B, 234C:
The appeal contested the levy of interests under sections 234A, 234B, and 234C of the Income Tax Act. However, the Tribunal did not specifically address this issue in the judgment, focusing instead on the validity of the notice, applicability of relevant sections, and the need for a fair opportunity for the assessee to present their case.

In conclusion, the Appellate Tribunal allowed the appeal, emphasizing the importance of providing a fair opportunity for the assessee to explain the source of cash deposits and directing the Assessing Officer to conduct the assessment accordingly.