1995 (6) TMI 61 - AT - Income Tax

Tribunal overturns tax assessment due to insufficient examination, directs fresh assessment

The Tribunal allowed the assessee's appeal, setting aside the additions made under section 40A(3) and on account of alleged deposits in partners' accounts ... Assessing Officer, Best Judgment Assessment, In Part Issues:1. Dismissal of appeal against ex parte assessment by CIT (A) for the assessment year 1984-85.2. Additions made under section 40A(3) of the Income Tax Act.3. Alleged deposits in the accounts of partners.4. Low withdrawals of partners.Issue 1: The appeal was directed against the CIT (A)'s order dismissing the appeal against ex parte assessment. The assessee contended that reasonable opportunity was not provided, but the CIT (A) found that the assessee failed to comply with notices and deliberately avoided proceedings. The Appellate Tribunal upheld the CIT (A)'s decision, noting the lack of challenge to the assessment made under section 144 of the Income-tax Act.Issue 2: The additions under section 40A(3) were challenged by the assessee, arguing that most payments were below the prescribed limit of Rs. 2,500 individually. The assessee provided a list of payments and accounts of payees to support the claim. The Tribunal found that the Assessing Officer's conclusions were not based on proper examination of the accounts, and the additions were not sustainable.Issue 3: The alleged deposits in the accounts of partners were claimed to be mere transfer entries and not cash credits by the assessee. It was argued that no cash was introduced, and the entries were supported by original cash books and ledgers. The Tribunal agreed with the assessee, finding that the additions were not justified based on the evidence presented.Issue 4: The addition on account of low withdrawals of partners was challenged as lacking a basis in the assessment order. The Tribunal found that there was no justification for this addition and that it should be set aside along with the other additions. The Tribunal directed the matter to be restored back to the Assessing Officer for a fresh assessment based on the observations made.In conclusion, the Tribunal allowed the assessee's appeal for statistical purposes, setting aside the additions made by the Assessing Officer and CIT (A) and directing a fresh assessment based on proper examination of the books of account.