Tribunal limits Revenue's addition, taxes as business income. Upholds CIT(A)'s order. Assessment upheld despite notice issue.

The Tribunal dismissed the Revenue's appeal and upheld the CIT(A)'s order, limiting the addition to Rs. 7,17,180/- and taxing it as business income. The assessment order under Section 144 was upheld despite the non-issuance of notice under Section 143(2). The Tribunal endorsed the CIT(A)'s reliance on judicial precedents and found no fault in the decision.

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Issues Involved:
1. Validity of the assessment order under Section 144 due to non-issuance of notice under Section 143(2).
2. Justification of the addition of Rs. 1,29,44,999/- as unexplained cash deposits under Section 69.
3. Correctness of estimating income at 8.85% of unexplained cash deposits.
4. Applicability of judicial precedents cited by CIT(A).
5. Tax treatment of the sustained addition of Rs. 7,17,180/-.

Issue-wise Detailed Analysis:

1. Validity of the assessment order under Section 144 due to non-issuance of notice under Section 143(2):
The assessee contended that the assessment order passed under Section 144 was not sustainable because the notice under Section 143(2) was not issued by the Assessing Officer (AO) who held jurisdiction over the appellant. However, this legal issue was not pressed by the assessee during the proceedings.

2. Justification of the addition of Rs. 1,29,44,999/- as unexplained cash deposits under Section 69:
The AO added the entire cash deposits of Rs. 1,29,44,999/- as unexplained investment under Section 69 due to the assessee's failure to explain the source and genuineness of these deposits. The CIT(A) observed that considering the entire amount as unexplained investment would be harsh and unreasonable. It was presumed that the deposits came from the assessee's contract business, as the assessee had disclosed gross receipts of Rs. 48,41,265/- from the contract business.

3. Correctness of estimating income at 8.85% of unexplained cash deposits:
The CIT(A) restricted the addition to Rs. 7,17,180/- by applying a profit rate of 8.85% on the unexplained cash deposits of Rs. 81,03,734/-. This rate was consistent with the profit rate disclosed by the assessee on the disclosed contract receipts. The CIT(A) relied on judicial precedents where only the profit embedded in undisclosed turnover was taxed, not the entire turnover.

4. Applicability of judicial precedents cited by CIT(A):
The CIT(A) relied on several judicial decisions, including those from the jurisdictional ITAT and High Courts, which held that taxing the entire turnover as income would be unreasonable. These precedents supported the view that only the profit embedded in the gross receipts should be taxed. The Tribunal found no infirmity in the CIT(A)'s application of these precedents.

5. Tax treatment of the sustained addition of Rs. 7,17,180/-:
The Tribunal accepted the assessee's submission that the sustained addition of Rs. 7,17,180/- should be taxed at the normal rate applicable to business income, as the receipts were considered business income. The Tribunal also noted that the appeal of the Revenue was not maintainable because the tax effect was below the limit prescribed by CBDT Circular No.17/2019.

Conclusion:
The Tribunal dismissed the Revenue's appeal and upheld the CIT(A)'s order, which restricted the addition to Rs. 7,17,180/- and taxed it at the normal rate applicable to business income. The cross-objection filed by the assessee was allowed, and the assessment order under Section 144 was upheld despite the non-issuance of notice under Section 143(2). The Tribunal endorsed the CIT(A)'s detailed analysis and reliance on judicial precedents, finding no infirmity in the order.

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