2023 (1) TMI 710 - AT - Income Tax

Tribunal grants relief to assessee, adjusts contractual receipts, recalculates interest charges

Ravindranath J. Mishra Versus Income Tax Officer, Ward-7 Vapi

The Tribunal condoned the delay in filing the appeal, restricted the addition of contractual receipts to 8% of the sum, directed re-computation of ... Reopening of assessment - contractual receipt treated as income of assessee - addition to a reasonable profit of 8% as laid down u/s 44AD - Case of assessee was reopened on the basis of ITS data information that assessee has receipt contractual payment - HELD THAT:- It is not disputed that in response notice under section 148, the assessee neither filed return nor responded to various notices. However, before NFAC/Ld. CIT(A) the assessee in his statement of fact and in written submission submitted that assessee received gross receipt of Rs.8,96,080/- from Paras Pumps Pvt. Ltd. The assessee also stated that entire contractual receipt was declared by assessee while filing his return of income for assessment year 2010-11 and such fact are duly recorded by NFAC/Ld. CIT(A). NFAC/Ld. CIT(A) despite that while recording such fact has not directed the Assessing Officer to find out the fact, whether the assessee has filed return of income or not. The NFAC/Ld. CIT(A) confirmed the addition of entire contractual receipt. It is settled law that entire receipt cannot be treated as income and find that in the case of Commissioner of Income-tax-XII vs. Subodh Gupta [2014 (12) TMI 479 - DELHI HIGH COURT] held that in absence of material to show net profit rate, presumptive net profit rate of 8% as stipulated in section 44AD could be taken for estimation of income. Hence, considering all direct the Assessing Officer to restrict the addition to the extent of 8% and re-compute the assessment in terms of above condition. In further direct the assessing officer that in case no set off of TDS is given in response to the original return of income the assessee be granted set off of TDS in the credit of assessee. Appeal of the assessee is partly allowed. Issues:1. Delay in filing appeal before Tribunal2. Addition of contractual receipts in assessment3. Validity of assessment order under section 1444. Application of best judgment principle5. Charging of interest under sections 234A, 234B, and 234C1. Delay in filing appeal before Tribunal:The appeal was filed with a delay of 42 days, which the assessee sought to condone. The assessee claimed they were unaware of the order due to non-receipt and only learned about it upon receiving a demand notice. The Tribunal, considering substantial justice, condoned the delay and proceeded to evaluate the merits of the case.2. Addition of contractual receipts in assessment:The Assessing Officer re-opened the case based on contractual receipts of Rs. 8,96,080, leading to an addition of the entire sum to the assessee's income. The assessee contended that only the income component should be considered, relying on legal precedents. The Tribunal directed the Assessing Officer to restrict the addition to 8% of the receipts, in line with section 44AD, and instructed the consideration of TDS set off.3. Validity of assessment order under section 144:The assessee challenged the order passed under section 144, alleging it was made without best judgment and ignoring submissions. The Tribunal found that the NFAC/Ld. CIT(A) confirmed the addition without verifying if the return was filed, leading to the direction to restrict the addition to 8% of the receipts.4. Application of best judgment principle:The assessee argued that the Assessing Officer did not apply best judgment and should have considered cash withdrawals and cheque payments. The Tribunal directed the AO to re-compute the assessment by restricting the addition to 8% of the receipts and granting set off of TDS.5. Charging of interest under sections 234A, 234B, and 234C:The assessee contested the charging of interest under these sections due to non-receipt of notice under section 148. The Tribunal partially allowed the appeal, directing the AO to correct the interest charges and granting relief to the assessee.This detailed analysis covers the core issues raised in the legal judgment, providing a comprehensive overview of the case and its outcomes.