Assessment under Section 144 invalid without Section 143(2) notice when assessee filed return and responded

ITAT Ahmedabad held that assessment under Section 144 without issuing notice under Section 143(2) was invalid when assessee filed return and responded to AO notices. Best judgment assessment conditions were not met. Addition under Section 69A for unexplained money was deleted as assessee provided credible affidavits from relatives confirming cash deposits belonged to them, supported by their income returns and evidence showing deposits were from fixed deposit maturity proceeds. CIT(A) incorrectly upheld partial assessment. Penalty proceedings under Sections 271AAC(1) and 271F were dropped. Assessee's appeal allowed.

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Issues Involved:
1. Deletion of half of the addition made for cash deposits and other credits under Section 69A of the Income Tax Act.
2. Justification of total cash deposits as unexplained investment belonging solely to the appellant.
3. Consideration of the nature of other credits in the bank account.
4. Double addition of the same cash deposit in the total income of a joint account holder.
5. Validity of assessment order passed under Section 144 without issuing a statutory notice under Section 143(2).
6. Compliance with the due process of assessment prescribed by CBDT for ex-parte assessment orders under Section 144.
7. Consideration of the appellant's explanations and evidence about the source of deposits.
8. Applicability of the E-assessment Scheme 2019 to assessments made under Section 144.
9. Support of the Show Cause Notice (SCN) by reasons/evidence.
10. Opportunity of oral/personal hearing before disregarding the appellant's explanations.
11. Initiation of penalty proceedings under Sections 271AAC(1) and 271F.

Detailed Analysis:

1. Deletion of Half of the Addition Made for Cash Deposits and Other Credits under Section 69A:
The CIT(A) deleted half of the addition made by the AO for cash deposits and other credits, holding that the entire cash deposits/credits did not belong solely to the appellant. The CIT(A) observed that the cash deposits were held in joint accounts with other family members and were accumulated over more than 40 years for medical emergencies. However, the CIT(A) did not find sufficient documentary evidence to support the appellant's claims.

2. Justification of Total Cash Deposits as Unexplained Investment Belonging Solely to the Appellant:
The AO treated the total cash deposits of Rs. 14,10,000 in joint bank accounts as unexplained investment belonging solely to the appellant, disregarding the appellant's explanation that the deposits included savings from family members. The CIT(A) sustained half of the addition, but the Tribunal found that the AO and CIT(A) did not provide concrete reasons or evidence to reject the appellant's affidavits and explanations.

3. Consideration of the Nature of Other Credits in the Bank Account:
The appellant argued that the other credits of Rs. 5,91,006 in the bank account were maturity proceeds of old FDRs and not cash deposits. The Tribunal noted that the deposits totaling Rs. 5,91,006 were indeed related to the maturity proceeds of fixed deposits and not cash deposits.

4. Double Addition of the Same Cash Deposit in the Total Income of a Joint Account Holder:
The appellant pointed out that the AO made the same addition of Rs. 10,00,000 for cash deposits in the joint account in the total income of another joint holder, Mr. Shabbir Kantawala. The Tribunal observed that there was indeed an addition of Rs. 10,00,000 on a substantive basis in the hands of Shabbir Kantawala, which was the same amount deposited in the joint bank account held by the appellant.

5. Validity of Assessment Order Passed under Section 144 without Issuing a Statutory Notice under Section 143(2):
The appellant argued that the assessment order passed under Section 144 was invalid as the AO did not issue a statutory notice under Section 143(2). The Tribunal found that the AO did not issue the notice under Section 143(2) within the stipulated time period, making the assessment order null and void.

6. Compliance with the Due Process of Assessment Prescribed by CBDT for Ex-parte Assessment Orders under Section 144:
The appellant contended that the AO did not follow the due process of assessment prescribed by CBDT for ex-parte assessment orders under Section 144. The Tribunal noted that the AO did not comply with the SOP/instructions under Section 144A of the Act.

7. Consideration of the Appellant's Explanations and Evidence about the Source of Deposits:
The appellant provided affidavits and confirmation letters from relatives explaining the source of cash deposits. The Tribunal found that the AO and CIT(A) did not provide concrete reasons or evidence to reject these affidavits and explanations. The Tribunal emphasized that mere suspicion or conjecture is not sufficient to sustain an addition under Section 69A.

8. Applicability of the E-assessment Scheme 2019 to Assessments Made under Section 144:
The appellant argued that the E-assessment Scheme 2019 was not applicable to assessments made under Section 144 at the time of the impugned assessment order. The Tribunal did not specifically address this issue in the judgment.

9. Support of the Show Cause Notice (SCN) by Reasons/Evidence:
The appellant contended that the SCN issued by the AO was not supported by reasons or evidence, as required by CBDT instructions. The Tribunal did not specifically address this issue in the judgment.

10. Opportunity of Oral/Personal Hearing before Disregarding the Appellant's Explanations:
The appellant argued that the AO and CIT(A) did not afford an opportunity for oral/personal hearing before disregarding the appellant's explanations. The Tribunal did not specifically address this issue in the judgment.

11. Initiation of Penalty Proceedings under Sections 271AAC(1) and 271F:
The Tribunal set aside the order of the CIT(A) and deleted the entire addition made under Section 69A r.w.s 115BBE of the Act. Consequently, the Tribunal directed that the penalty proceedings under Sections 271AAC(1) and 271F be dropped.

Conclusion:
The Tribunal allowed the appeal of the assessee, setting aside the order of the CIT(A) and deleting the entire addition made under Section 69A r.w.s 115BBE of the Act. The Tribunal emphasized that the affidavits and explanations provided by the appellant were not properly considered, and the conditions for invoking Section 144 were not met. The penalty proceedings under Sections 271AAC(1) and 271F were also directed to be dropped.

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