Appeal partly allowed due to unserved notice & undisclosed income treatment.

The appeal was partly allowed by the Appellate Tribunal ITAT DELHI on November 6, 2015. The assessment order u/s 144 was quashed in favor of the assessee due to the unserved notice u/s 142(1) for assessment. The treatment of cash deposits in the bank as undisclosed income was directed for proper examination by the Ld. CIT(A), who admitted additional evidence under Rule 46A. The matter was remitted back to the Assessing Officer for further review.

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Issues:
1. Validity of notice u/s 142(1) for assessment
2. Treatment of cash deposits in bank as undisclosed income
3. Admission of additional evidence under Rule 46A

Issue 1: Validity of notice u/s 142(1) for assessment
The Revenue filed an appeal against the order passed by CIT(A) for the Assessment Year 2005-06. The Revenue contended that the Ld. CIT(A) erred in deleting the addition made on account of cash deposited in the bank, as well as in ignoring the facts mentioned in the Remand Report submitted by the A.O. The Revenue also argued that the notice u/s 142(1) was unserved, rendering the assessment bad in law. However, the Ld. CIT(A) found that the Assessing Officer failed to provide any cogent evidence of serving the notice u/s 142(1) to the assessee before framing the assessment. Consequently, the Ld. CIT(A) quashed the assessment order u/s 144, ruling in favor of the assessee on this issue.

Issue 2: Treatment of cash deposits in bank as undisclosed income
The assessee, engaged in the sale/purchase of mobile phones, had deposited a significant amount of cash in a bank account, leading the Assessing Officer to treat it as undisclosed income. The Ld. CIT(A) allowed the appeal of the assessee, emphasizing that the Assessing Officer did not provide any adverse comments on the additional evidence challenging the cash deposit addition. The Ld. CIT(A) directed a proper enquiry and examination of the books of accounts, including the cash book, before taking a view on the matter. The Ld. CIT(A) held that since the assessment order u/s 144 was quashed, the additional evidence filed by the assessee was admitted.

Issue 3: Admission of additional evidence under Rule 46A
The assessee applied for admission of additional evidence under Rule 46A, which was allowed by the Ld. CIT(A) after considering the relevant documents filed by the assessee and the report of the Assessing Officer. The Ld. CIT(A) observed that the documents filed by the assessee were crucial to the grounds of appeal. The Ld. CIT(A) admitted the additional evidence under Rule 46A(1)(c) of the Income Tax Rules, 1962, as it was deemed relevant to the case. The Revenue argued that the additional evidence should have been allowed after giving an opportunity to the Assessing Officer under Rule 46A(3) for a proper examination. The matter was remitted back to the Assessing Officer for further review.

In conclusion, the appeal was partly allowed for statistical purposes, and the judgment was pronounced on November 6, 2015, by the Appellate Tribunal ITAT DELHI.

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