Best judgment assessment under section 144 upheld for invalid belated return and unexplained demonetized cash deposits

ITAT Chennai upheld a best judgment assessment under section 144 for assessment year 2017-18. The assessee failed to file return under section 139(1) and subsequently filed return 10 months after the deadline specified in section 142(1) notice. The AO treated the belated return as invalid and completed ex-parte assessment. ITAT held that non-issuance of notice under section 143(2) was not fatal as the return was validly treated as invalid. The tribunal confirmed additions relating to unexplained cash deposits of demonetized notes during the demonetization period and profit determination at 8% on total business turnover due to lack of explanation or evidence from the assessee.

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Issues:
1. Jurisdiction - Validity of assessment without notice u/s. 143(2) of the Income Tax Act.
2. Cash deposit during demonetization period - Treatment as unexplained money u/s. 69A of the Act.
3. Estimation of profit rate at 8% on total business turnover.

Jurisdiction Issue:
The appeal concerns the validity of an assessment made by the AO without issuing a notice u/s. 143(2) of the Income Tax Act. The AO conducted an ex-parte assessment under section 144 of the Act due to the assessee's failure to file a return within the specified time. The contention raised was that the absence of a notice u/s. 143(2) rendered the assessment invalid. However, the Tribunal upheld the assessment, stating that the failure to issue a notice u/s. 143(2) did not invalidate the assessment under section 144, as the return was considered invalid due to late filing after the specified deadline.

Cash Deposit Issue:
The AO noted cash deposits made during the demonetization period totaling Rs. 23,32,500, which the assessee failed to explain the source of. Consequently, the AO treated the amount as unexplained money under section 69A of the Act. The CIT(A) affirmed this decision, stating that the appellant did not provide a source for the cash deposits. The Tribunal upheld the decision, emphasizing the lack of explanation or evidence from the assessee, leading to the confirmation of the addition.

Profit Rate Estimation Issue:
Regarding the estimation of profit rate at 8% on total business turnover, the AO considered the total bank credits excluding demonetized cash and applied an 8% profit rate, resulting in an estimated income addition of Rs. 10,92,870. The CIT(A) upheld this action, citing the appellant's failure to provide details or sources for the cash deposit. The Tribunal confirmed the lower authorities' decisions due to the absence of evidence or explanation from the assessee, leading to the dismissal of the appeal.

In conclusion, the Tribunal dismissed the assessee's appeal concerning the jurisdiction issue, the treatment of cash deposits during demonetization, and the estimation of profit rate on total business turnover. The assessments were upheld based on the lack of timely filing, explanation, or evidence provided by the assessee throughout the proceedings.

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