Tribunal upholds assessment reopening & notice issuance for failure to file return timely

The Tribunal upheld the reopening of the assessment under section 147 and issuance of notice under section 148 due to the assessee's failure to file a return within the statutory period, thus losing the right to challenge jurisdiction. Additionally, the Tribunal directed the AO to estimate the net profit at 5% of the total turnover, allowing set-off for the disclosed income, following the Gujarat High Court's decision in a similar case.

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Issues Involved:
1. Reopening of assessment under section 147 and issuance of notice under section 148 of the Income Tax Act.
2. Addition of Rs. 15,11,906 as unexplained cash deposits in the bank account.

Issue-wise Detailed Analysis:

1. Reopening of Assessment under Section 147 and Issuance of Notice under Section 148:

The Assessee's appeal contested the reopening of the assessment under section 147 and the issuance of notice under section 148. The AO had reason to believe that cash deposits of Rs. 14,82,000 in the assessee's bank account were unexplained, leading to the issuance of notice under section 148. The assessee failed to file a return within the prescribed period, leading to the reopening of the assessment.

The CIT (A) observed that the appellant did not object to the reopening during the assessment proceedings and filed a return only after the statutory period had expired, making the return nonest. The CIT (A) cited various judicial precedents, including the ITAT decision in Mohd. Ayyub v. ITO, supporting the view that returns filed after the stipulated time are nonest, and objections to jurisdiction cannot be raised post-assessment.

The Tribunal upheld the CIT (A)'s decision, agreeing that the reopening was valid as the assessee did not file the return within the statutory period, thus losing the right to challenge the jurisdiction. The Tribunal distinguished the cases relied upon by the assessee, noting that in those cases, the facts were different, and the reasons for reopening were not recorded before issuing the notice.

2. Addition of Rs. 15,11,906 as Unexplained Cash Deposits:

The AO added Rs. 15,11,906, including cash deposits of Rs. 14,82,000, as unexplained income, rejecting the assessee's explanation of conducting a jari business without proper documentation. The CIT (A) upheld this addition, finding the assessee's evidence fabricated and unconvincing.

Before the Tribunal, the assessee reiterated the jari business explanation, claiming illiteracy and lack of formal business documentation. The Tribunal noted that while the assessee's explanation lacked supporting evidence, the bank statements showed regular cash deposits and withdrawals indicative of business activity.

The Tribunal, considering the holistic view and the absence of books of accounts, directed the AO to estimate the net profit at 5% of the total turnover of Rs. 15,11,906 under section 44AF, allowing set-off for the Rs. 75,000 disclosed in the return. This approach aligns with the Gujarat High Court's decision in CIT v. Pradeep Shantilal Patel, which mandates estimating net profit for unaccounted business transactions.

Conclusion:

The Tribunal partly allowed the assessee's appeal, upholding the reopening of the assessment while directing the AO to estimate the net profit at 5% of the total turnover, allowing set-off for the disclosed income. The order was pronounced in open court on 10.02.2020.

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