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TMI Blog2025 (4) TMI 534X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 03.12.2019 without affording adequate and reasonable opportunity and even without complying with the mandatory statutory requirement of law. The impugned order having been framed in gross breach of natural justice, kindly be quashed. 3. The Ld. AO/ NFAC seriously erred in law as well as on the facts of the case in not adhering to the mandatory procedure statutorily prescribed u/s 144B of the Act hence the impugned order so passed deserves to be quashed being in violation thereof. 4. Rs. 27,70,909/-: The ld. CIT(A) erred in law as well as on the facts of the case in confirming the addition made on account of the investment in/acquisition of the fixed assets of Rs. 27,70,909/ -. The addition so made and confirmed by the CIT(A) being contrary to provisions of law and facts may be kindly deleted in full. 5. Rs. 7,37,657/-: The ld. CIT(A) further erred in law as well as on the facts of the case in confirming the disallowance of interest paid on account of loan of Rs. 7,37,657/ -. The disallowance so made and confirmed by the CIT(A) being contrary to the provisions of law and the facts may kindly be deleted in full. 6. Rs. 27,39,791/-: The ld. CIT(A) further erred in law as we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e u/s 144 of the IT Act, 1961 was issued on 21.08.2019 fixing the case for hearing on 30.08.2019. In compliance to this notice Sh. Raman Kumar Saini, CA/AR of the assessee attended submitted power of attorney, copy of balance Sheet and Profit & loss account. Thereafter notice u/s 142(1) was issued on 04.09.2019 fixing the case for hearing on 12.09.2019. Despite various opportunities provided to it during assessment proceedings, assessee failed to furnish any details/documents/clarification as called for. The assessee has not complied with the statutory notices issued u/s 142(1) of the I.T. Act, 1961 hence ld. AO left with no other alternative but to complete the assessment to the best of his knowledge as per the provisions of section 144 of the Income Tax Act, 1961. Ld. AO noted that the assessee has not furnished return of income in compliance of notice issued u/s 148 of the I.T. Act, 1961. Ample opportunities were provided to the assessee, but no details/documents have been furnished till the date of completion of the assessment u/s. 144 of the Act. 3.1 As per the records, the assessee was engaged in the business of plying of trucks on hire during the relevant period of F.Y. 201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... long with enclosures. 4.3.1 With regard to the addition on account of fixed assets, the AO held that the assessee has not produced bills and vouchers of the fixed assets introduced during the year under consideration. The appellant argued that it is evident from the bank statements and the loan installment debited in the bank account details. The submissions of the appellant are not acceptable. It is the duty of the appellant to provide the information called for. The onus always lies on the assessee to prove the genuineness of the transaction. During the appellate proceedings also, the appellant had not filed the bills and vouchers in support of his claim of additions to fixed assets. In the remand report, it was submitted by the AO that the assessee has not submitted any documentary evidence to show that such investment was made during the year for business purpose. A copy of the said remand report was provided to the appellant for his comments. Till date no rejoinder is received from the appellant. In the absence of any details, I have no reason to interfere with the decision of the Assessing officer. Hence the addition is upheld. 4.3.2 With regard to disallowance of interes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law is not sufficient. The appellant has to prove by argument and demonstration as to how the order is unsubstantiated and opposed to facts and law. In the absence of details, I have no reason to hold that the AO was wrong in passing the order u/s. 144 of the Act. So it is held that in the fact of non compliance to the notices issued, AO was right in completing the assessment ex-parte and all the grounds raised in this appeal is dismissed. 5. Vide 4th ground of appeal the appellant craves her rights to add, amend or alter any of the grounds on or before the hearing. However, the appellant has not opted the option by her during appeal proceedings. Hence, this ground of appeal is dismissed 6. In the result, the appeal is dismissed." 5. As the assessee did not find any favour, from the appeal so filed before the ld. CIT(A)/NFAC, the assessee has preferred the present appeal before this Tribunal on the ground as reproduced hereinabove. To support the various grounds so raised by the ld. AR of the assessee, has filed the written submissions in respect of the various grounds raised by the assessee and the same is reproduced herein below: "Brief General Facts: The assessee Shri Kai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing income chargeable to tax. Accordingly, reasons for reopening of the case were recorded, and notice u/s 148 of the I.T. Act. 1961 was issued on 19.03.2019, which was duly served upon the assessee through registered post ... " The Id. AO's sole contention of reopening of the case of the assessee stands to be two-fold: firstly, cash deposit of Rs. 42.46 lakhs and secondly non filing of return of income which is completely biased and contrary to the facts of present case. Hence this ground. Submission: 1. No Reason to believe existed: 1.1 A bare perusal of reasons recorded appears more to be reasons to suspicion as against reason to believe for the simple reason that in the entire reasons alleged to be recorded, not at all disclosed what type of information or material came to his possession so as to give rise to a ground for the formation of the belief by the AO that some income really escaped assessment. Thus, what appears is firstly, there is no reason to believe as such. There is an attempt and more so endeavor of making roving enquiry in as much as some cash deposits not corroborative with the income in absence of ROI for the year under consideration and hence, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder the eyes of law in as much as the AO felt satisfied with other items of expense claimed by assessee without any corroborative evidences. Admittedly, the AO did not refer to any paper found during some Search or any statement recorded which might have indicated any possible disallowance revealing personal expense claimed by assessee. Thus, it is evidently a case of subjective satisfaction recorded and not an objective one which is the requirement u/s 147. Hence, the AO proceeded on mere reasons to suspicion as against reasons to believe. 1.5 Reliance is placed on CIT v. Kelvinator of India Ltd. [2010] 187 Taxman 312/320 ITR 561 (SC) where Hon'ble Apex court held as under: "However, one needs to give a schematic interpretation to the words "reason to believe" failing which, we are afraid, section 147 would give arbitrary powers to the Assessing Officer to reopen assessments on the basis of "mere change of opinion", which cannot be per se reason to reopen. We must also keep in mind the conceptual difference between power to review and power to reassess. The Assessing Officer has no power to review; he has the power to reassess. But reassessment has to be based on fulfil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ason to believe', had escaped assessment for any assessment year, did not escape assessment, then, the mere fact that the AO entertained a reason to believe, albeit even a genuine reason to believe, would not continue to vest him with the jurisdiction, to subject to tax, any other income, chargeable to tax which the AO may find to have escaped assessment, and which may come to his notice subsequently, in the course of proceedings under s. 147." 2.2.2 CIT vs Jet Airways (I) Ltd. (2011) 331 ITR 236 (Mum), wherein it was held as under: "Reassessment-Scope-Income in respect of which notice issued not found to be escaped income-Once the AO accepts that the income in respect of which he entertained reason to believe to have escaped assessment, was not in fact escaped income; he has no jurisdiction to reassess other items of income-In such a situation, Expln. 3 to s. 147 does not come to the reserve of AO" 2.2.3 This followed by Hon'ble Delhi High Court in the case of Ranbaxy Laboratories Ltd. v/s CIT (2011) 336 ITR 136 (Del HC) wherein, it was held that the AO had jurisdiction to reassess income other than the income in respect of which proceedings u/s 147 were initiated bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment after filing the return. This way, even though some opportunities might have been given but were illusory and not effective and adequate. Kindly refer Harendra Singh Dhillon, Naagaon v/s ITO (2012) 32 CCH 103 (Del). General Submissions on Merits: For all the grounds: 2. The impugned assessment is not a best judgment assessment as contemplated by law: 2.1 It is submitted that the AO also did not meet with the requirements of making a "best judgment assessment". It is submitted that while making an assessment u/s 144 the AO does not have blind and arbitrary powers to make the assessment, the way he wants. On the contrary, the law enjoins upon him a more onerous duty in such a circumstance in as much as he has to act in the capacity of quasi-judicial authority, who is supposed to take a best judgment, while making a fairest possible assessment of the income of an assessee. 2.2 Fair estimation required- Judicial Guideline: For a better appreciation, a reference may kindly be made to the commentary by the ld. Authors Chaturvedi Pethisaria Vol. 3 Edition V at page 4932, reproduced hereunder verbatim :- "Best Judgment assessment - how to be made? - In making a best judgmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dasari Sugar Mills v/s CIT (1992) 193 ITR 669 (Kar.): Best judgment assessment ought to be based on a fair and proper estimate of assessee's income and inferences to be drawn from available material should be properly inferable inferences. 2.3.4 The same principles were propounded by Hon'ble Rajasthan High Court in the case of CIT v/s Gotan Lime Khaniz Udyog (2002) 256 ITR 243 (Raj): 3. However, your honour shall find that the lower authorities in the present case have not conformed to these settled principles by the courts, while making the impugned assessment u/s 144 as elaborated hereunder: 3.1 The very first eye-opening example of complete non-application of mind and the highly arbitrary and capricious approach adopted by the authorities below is that the entire amount of the investment made in the purchase of a new truck (fixed assets) of Rs. 27,70,909/- has been added. The allegations is that the appellant failed to file bills / vouchers and other documentary evidence to show that such investment was made during the year (by the CIT(A)). However, it is not denied that such addition in the fixed asset is apparent and evident from the Audited Annual Statement of A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e appellant did not submit any documentary evidence and that depreciation schedule was not submitted. At the same time however, it is admitted that in the Audited P&L Account there is a truck operating expense of Rs. 2,41,98,338/- and other expenses. It can't be denied that it is only with the help of the truck and incurring various expenses for running and operating the truck for plying (direct or indirect), the assessee was able to declare huge gross receipts of Rs. 2.91 Cr. as per the Audited P&L Account. The ld. AO happily taxed the profit/income arising from the truck driving but is not agreeable to allow the expenses and the depreciation. Needless to say, that income tax is a tax on income and not on gross receipts. By making wholesale disallowances of the expenditure including depreciation, what the authorities below have taxed is the Gross Receipts but not the income which is against the very concept under the Income Tax Act. Kindly refer Sanath Kumar Murali v ITO & Ors) Karnataka HC Citation (2023) 333 CTR (Kar) 189. 3.4 Interestingly, the AO himself made ad hoc disallowance of 10% out of Rs. 2,41,98,338/- operating expenses meaning thereby the fact of incurring of 9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. Notably, there is no adverse remark made by the auditors. It is now well settled that the regularly maintained books of accounts, is an admissible evidence under Indian Evidence Act, 1872.The authorities below do not dispute this legal position and the facts narrated herein above. In the present case, the AO did not disbelieve or even did not reject the accounts. Once the accounts are not rejected, the same are binding upon the revenue authorities and all other concerned. Even the result declared therein are binding upon the AO authorities as held in the cases of: 4.1 R.B. Bansilal Abirchand Spinning & Weaving Mills vs. CIT (1970) 75 ITR 260 (Bombay) (DPB 17-18) "a. A finding has to be recorded as to the unacceptability of the method and irregularity of the method and irregularity of accounts kept. b. The mere fact that percentage of dead loss of cotton is high in a particular year cannot lead to the loan inference that thereby there has been a suppression of the production in a spinning mill. c. If it is not possible to keep such record (record of loss or wastage at subsequent stages) there was no other reason not to accept the book results of the records kept addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id evidence: The facts are admitted that the appellant filed audited Balance Sheet and P&L account before the AO which was not even doubted what to talk of rejection thereof and no enquiry was made further. The audited final accounts, based on which the return was filed is a good and valid evidence (in absence of any contrary evidence brought on record by the AO) and is binding upon all the concern. Reliance is placed on decision of Hon'ble Delhi High Court in the case of Addl. CIT vs. Jay Engineering Works Ltd. (1978) 113 ITR 389 (Del) (DC 16-18) wherein it was held that if the account books were destroyed in fire then the audited accounts examined by the external auditors can be accepted as evidence in support of the return of income. Therefore, the addition / disallowance made by the AO is arbitrary and unsupported by any credible evidence and deserves to be deleted in toto. 6. No addition permissible merely on suspicion: It is well settled that suspicion howsoever strong, cannot take place of reality. Thus, the impugned additions have been made merely on suspicion, impugned addition deserves to be deleted here itself. Kindly refer Dhakeshwari Cotton Mills v/s CIT (1954) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2011-31.03.2012 29 13. Copy of monthly summary ledger of Supervisor Exp & Mistry expenses for the period of 01.04.2011- 31.03.2012 30 14. Copy of monthly summary ledger of Tool Charges for the period of 01.04.2011-31.03.2012 31 15. Computation of Income for the A.Y. 2012-13 32 Case laws relied upon: S.No. Particulars Pg. No. 1. CIT vs. Shri Ram Singh (2008) 217 CTR (Raj) 345: (2008) 306 ITR 343 (Raj) 1-6 2. CIT vs Mohmed Juned Dadani (2013) 355 ITR 172 (Guj) 7-15 3. Addl. CIT vs. Jay Engineering Works Ltd. (1978) 113 ITR 389 (Del) 16-18 7. The ld. AR of the assessee in addition to the above written submission so filed vehemently argued that the as per the reason recorded the notice u/s. 148 was issued to verify the cash deposited by the assessee. Whereas the ld. AO has not made any addition on the issue of cash deposits and went on making the other addition based the books of the account so produced by the assessee. On this jurisdictional aspect of the matter he serviced the decision of our jurisdictional High Court in the case of CIT Vs. Shri Ram Singh [ 217 CTR 345 (Rajasthan) ] wherein Hon'ble high court held that once the assessing officer comes to c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ms. Rainee Singh v.Income-tax Officer 14. [1995] 83 TAXMAN 194 ( MAD.)111GI I COURT OF MADRAS Panchugurumurthy v Commissioner of Income-tax 15. [2016] 72 taxmann.com 302 (Gujarat) HIGH COURT OF GUJARAT Peass Industrial Engineers (P.) Ltd. v. Deputy Commissioner of Income-tax 16. [2020] 114 taxmann.com 718 (Gujarat) HIGH COURT OF GUJARAT Purnima Komalkant Sharma v. Deputy Commissioner of Income-tax, Circle 1 17. [2022] 139 taxmann.com 409 (Gujarat) HIGH COURT OF GUJARAT Pushpa Uttamchand Mehta v. Income-tax Officer 18. [2023] 153 taxmann.com 282 (Kolkata - Trib.) IN THE ITAT KOLKATA BENCH 'A' Tarasafe International (P.) Ltd. v.Deputy Commissioner of Income-tax 19. [2021] 128 taxmann.com -229 (Gujarat) HIGH COURT OF GUJARAT Bhanuben Mansukhlal Khimashia v.Income Tax Officer Ward 3(1) 20. [2021] 129 taxmann.com 48 (Gujarat) HIGH COURT OF GUJARAT Kaushaliya Sampatlal Dudani I/Income-tax Officer. Ward 1(3) 21. [2021] 129 taxmann.com 119 (Gujarat) HIGI I COURT OF GUJARAT Nishant Vilaskumar Parekh v.Income-tax Officer, Ward 1(3) 22. [2022] 138 taxmann.com 50 (Gujarat) HIGH COURT OF GUJARAT Nishant Vilaskumar Parekh vincorne-tax Officer 23. [2021] 131 taxmann.c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 1961. It was issued on the basis of deposit of Rs. 42,46,000/- in saving bank account of the assessee. The assessee filed return of income with total income of Rs 1,52,500/- Reasons were recording by the then ITO-Ward-Behror. After taking approval from the Pr. Commissioner of Income tax, Alwar, Notice u/s 148 was issued. The assessor failed to explain how the order is bad in law. Address of the assessee is Tehsil Kotputli which is within jurisdiction of the O/O ITO. Ward-Behror. The assessee failed to explain how the order is for want of jurisdiction. The assessee has not submitted that no such bank account is maintained by him during the year under consideration. Thus there was material available on record and notice u/s 148 was issued according to the provisions of Income Tax Act, 1961. 2. The assessee submitted that new items of income / expenses were raised while making addition to total income in assessment order. However the assessee failed to consider that additions made were directly related to reasons on the basis of which notice u/s 148 was issued. Notice u/s 148 was issued on the basis of cash deposit of Rs. 42 46 lakh in saving bank account maintained with ICICI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... merits of the case which was submitted vide letter dated 03.12.2024 which reads as under : No. ITO/W-BEHROR/2024-25/567 Dated: 03.12.2024 To The Additional Commissioner of Income Tax (Sr. DR)-II Income Tax Appellate Tribunal, Jaipur (Through Proper Channel) Sir, Sub: Appellate proceedings in the case of Kailash Chand. PAN-AHDPC7760R. ITA 565/JPR/2024) for the A.Y. 2012-13-reg .- Kindly refer to letter no. 767 dated 28.11.2024 on the above subject. In this regard, grounds wise comments are as below :- Grounds of Appeal 1. Notice u/s 148 was issued according to the provisions of Income tax Act, 1961. It was issued on the basis of information that deposit of Rs. 42,46,000/- was made in saving bank account of the assessee. The assessee filed return of income with total income of Rs. 1,52,500/ -. Reasons were recording by the ITO-Ward-Behror. After taking approval from the Pr. Commissioner of Income tax, Alwar, Notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . AR of the assessee also filed a detailed application under rule 29 prayer therein to admit the additional evidence on the merits of the dispute. The prayer of the assessee reads as follows: "PRAYER FOR ADMISSION OF ADDITIONAL EVIDENCES U/R 29 A. In the above case, the humble applicant-assessee humbly prays for admission of following Additional Evidences as under: 1. Copy of Purchase Invoices of the Trucks purchased during the AY 2012-13 2. Copy of Loan statements/ Interest certificate 3. Copy of Bank statement for the period of 01.04.2011 to 31.03.2012. 4. Copy of monthly summary ledger of Dala & Other Expenses for the period of 01.04.2011- 31.03.2012 5. Copy of monthly summary ledger of Diesel & Fuel Charges for the period of 01.04.2011- 31.03.2012 6. Copy of monthly summary ledger of Fooding Expenses for the period of 01.04.2011- 31.03.2012 7. Copy of monthly summary ledger of Jeep Rent for the period of 01.04.2011-31.03.2012 8. Copy of monthly summary ledger of Supervisor Exp & Mistry expenses for the period of 01.04.2011-31.03.2012 9. Copy of monthly summary ledger of Tool Charges for the period of 01.04.2011-31.03.2012 10. Copy of summary of Direct Exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpliance and submitted the copy of balance Sheet and Profit & loss account. Thereafter despite various opportunities provided assessee remained non-compliant and ld. AO went on making the addition which were based on the profit and loss account and Balance Sheet filed by the assessee and the has abstained from making any addition on account of cash deposited to the Saving Bank account as alleged in the reasons recorded for re-opening of the case. Thus, Once the Assessing Officer is satisfied with the reasons recorded for reopening the case, they no longer have the jurisdiction to tax any other income. We get strength of this view from a decision our own High Court serviced by the ld. AR of the assessee in the case of Commissioner of Income Tax V. Shri Ram Singh [ 217 CTR 345 (Rajasthan) ] wherein the Jurisdictional High Court held as under: 32. The result of the aforesaid discussion is, that the question framed, in the order dated. 23rd May, 2006, is required to be, and is, answered in the manner, that the Tribunal was not justified in holding, that the proceedings for reassessment under section 148/147 were initiated by the AO, on non-existing facts. because ultimately the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X
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