2021 (7) TMI 503 - AT - Income Tax

Assessment of income - Income assessed at 8% on the turnover - AO treated the entire cash deposits in the assessee's bank account as turnover and assessed 8% of it as an income - As argued since the assessee earned commission from the gross receipts, invoking section 44AD is not correct - HELD THAT - It is clear from the assessment order that on due consideration of material, assessee's submission etc that the AO originally proposed the cash withdrawals from the assessee's bank account as assessee's income which the assessee also admitted as commission and interest by his letter to accept receipts as his receipts and required the assessee to produce the proof towards the expenditure claimed by the assessee as against such receipts As seen from the assessment order that the AO required the assessee to explain within one day from the receipt of his letter and thereafter he concluded that the assessee did not explain and completed the assessment on 29.12.2017 taking a different turn. The assessee had placed whatever material available with him and made an attempt to substantiate his claim. It appears that the AO was inconsistent in his approach and completed the assessment without appreciating the material placed before the AO. Therefore, the order of the Ld. CIT(A) is set aside and the issues are remitted back to the AO for a fresh examination and due assessment. Assessee's appeal is allowed for statistical purposes.

Summary

Issues:
Assessment of income based on cash deposits in bank account; Application of section 44AD; Adequacy of material considered by Assessing Officer; Dismissal of appeal by CIT(A); Inconsistency in AO's approach.

Analysis:
The appeal was filed against the Commissioner of Income Tax (Appeals)- Salem's order for the assessment year 2010-11. The Assessing Officer treated 8% of the total turnover from cash deposits in the bank account as the assessee's income, resulting in an addition to the returned income. The assessee participated in a scheme involving Fine India Sales Private Limited and Ultra Holidays, earning commission through Multilevel Marketing. The AO proposed to treat a specific amount as the assessee's income, disregarding the expenses claimed. The CIT(A) dismissed the appeal, leading to the current appeal.

During the hearing, the AR argued that the AO did not consider the material properly and made an incorrect assessment. The AR highlighted that the assessee earned commission and had expenses that should have been deducted. The AO's failure to consider all relevant facts led to an erroneous assessment. The AR emphasized that the assessee provided available material and should not be penalized for lack of contemporaneous records.

Upon review, the Tribunal found the AO's approach inconsistent and lacking proper consideration of the material presented. The AO's failure to appreciate the assessee's submissions and evidence necessitated setting aside the CIT(A)'s order. The Tribunal remitted the issues back to the AO for a fresh examination, directing a thorough assessment considering comparable cases in the same business line. The Tribunal allowed the assessee's appeal for statistical purposes, emphasizing the need for a fair assessment based on all available evidence.

In conclusion, the Tribunal's judgment highlighted the importance of a comprehensive assessment based on all relevant material and directed the AO to conduct a fair evaluation, taking into account comparable cases and affording the assessee due opportunity to present evidence.