TaxTMI 
TaxTMI 
2022 (5) TMI 731
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.... 68 - Unsecured loan 65,25,474/- (ii) Disallowance of depreciation 6,62,355/- (iii) Addition u/s. 69- Unexplained investment 58,64,847/- (iv)Addition u/s. 68- Unexplained credit 42,05,417/- (v) Out of expense 70,38,632/- (vi) Estimation of gross profit 2,58,88,202 Total 5,01,84,927/-. 3. The assessee carried the matter in appeal before the Ld. CIT(A), Challenging the validity of order passed on account of failure to issue the jurisdictional notice u/s. 143(2) of the Act within the prescribed time, as also the various additions made on merit. Evidences were filed before the Ld. CIT(A) in support of the grounds raised on merits ,which were sent to the Assessing Officer (A.O.) for his comments, after considering which the Ld. CIT(A) deleted all the additions made on merits while he dismissed the ground raised by the assessee regarding the validity of assessment framed. Against the aforesaid order both the Revenue and the Assessee have come up in appeal before us, with the Revenue challenging the deletion of addition made on merits by raising the following grounds: 1. The Ld.CIT(A) has erred in law and on facts in-admitting additional ....
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....x-parte order u/s.144 of the Act. 7. On the facts and in the circumstances of the case, the Ld. CIT(A) ought to have upheld the order of the Assessing Officer. 8. It is, therefore, prayed that the order of the Ld. CIT(A) may be set aside and that of the Assessing Officer may be restored to the above extent. 4. And the assessee agitating the dismissal of its legal ground raised before the Ld. CIT(A) is as under: 1. The Ld. CIT appeal has erred both in law and facts the rejecting the assessee claim that no notice u/s 143(2) was served upon the assessee as required under the relevant provision of the act. Since no notice u/s 143(2) for A.Y. 2009-10 was served the assessment framed as well as the appellate order passed not accepting the above facts are both bad in law and as such the assessment as well as the order of the CIT pertaining to this point be annulled. 2. The finding of the Ld. CIT (A) is absolutely wrong and illegal particularly when all the details were submitted before him pertaining to the invalidity of the notice served u/s 143(2) and hence the dismissal of the ground of the assessee on this point by the Ld. CIT(A) is void ab initi....
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....copy of the submissions filed before the Ld. CIT(A) was placed before us at paper book page no. 4 to 24 to bring out the reason for non-compliance during assessment proceedings, as the assessee harboring the bonafide belief that no proceedings for the impugned year, i.e A.Y 2009-10 ,had been initiated since no notice for assuming jurisdiction to frame assessment, u/s 143(2) of the Act, was received by it within the stipulated time and the only other such notice received mentioned A.Y 2008-09.The submissions of the assessee in this regard are as under: 2. The Appellant Company had filed it's return of income for the A.Yr. 2009-10 on 24-09- 2009, declaring total income at Rs. 20,94,480/- on the basis of Audited Accounts for the year ended 31-3-2009. Since the Appellant Company did not receive any notice under section 143(2) within the period of six months from the end of the financial year in which return of income was filed for this year, the appellant was under a bona fide belief that the return of income filed u/s 139(1) was accepted under section 143(1) of the Act. Therefore, the notices issued by the A.O. u/s 142(1) on 7-2-2011 & on subsequent dates were not complie....
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....ffice to say, we have perused the contents of the submissions made by the assessee before the ld. CIT(A) and we are in agreement with the Ld. CIT(A) that all the evidences filed were contemporary in nature and could not be treated as additional evidences. Moreover as stated above, the assessee bonafidely believed that no proceedings for the impugned year were initiated and therefore did not comply with the notices filed, though, at the same time, it was cooperating with the department in the assessment for assessment year 2008-09. 10. The Ld. D.R. has been unable to point out any infirmity in the observations and findings of the ld. CIT(A) while admitting the additional evidences as above. We therefore are not in agreement with the contention of the revenue that the additional evidences were wrongly admitted by the Ld. CIT(A) while adjudicating the issues on merit in favour of the assessee. 10.1 Having held so we shall now proceed to adjudicate on merits each addition/disallowance deleted by the Ld.CIT(A) as challenged by the Revenue before us. 11. In ground no. 1, the challenge is to the deletion of addition made on account of unsecured loans taken by the assessee amounti....
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....s. 62,25,474/- : This amount pertains to loan taken from the directors as evident from the Balance Sheet available with the A.O. from where he has taken this figure. Last year also loan is appearing in the name of Directors. All the directors are Income tax assesseees. A comparative chart is enclosed for ready reference. 13. It is evident that with respect to the issue of unsecured loans, the assessee had established from its financial results that they were majorly old loans. Further the enquiry conducted by the A.O. during remand proceedings also confirmed the genuineness of the unsecured loans. The A.O. having himself found the loan to be genuine after making due enquiry, we see no reason to interfere in the order of the Ld. CIT(A) deleting the addition made on account of unsecured loans u/s. 68 of the Act amounting to Rs. 65,25,474/-. 13.1 Ground of appeal No.1 is dismissed. 14. In ground no. 2, the revenue has challenged the deletion of disallowance of depreciation amounting to Rs. 6,62,355/-. With respect to the same, the assessee had submitted before the Ld. CIT(A) is as under: 2. Disallowance of Depreciation on newly acquired assets - The Company's ....
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....e of Rs. 58,64,847/- as unexplained investment u/s. 69 of the Act. 19. Before the Ld. CIT(A), the assessee submissions are as under: 7.2 Appellant's submission :- The relevant extracts from the submission of the appellant are reproduced here under:-- Addition u/s 69 unexplained investments of Rs. 5864847/-.: The above amount comprised of the following. A.Y. 2009-10 A.Y. 2008-09 Bank Balance Current A/c Rs. 1200/- Rs. 14050950/- F.D. [PNB] Rs. 572700/- Rs. 5727000/- Accrued Interest on F.D. Rs. 136647/- Rs. 61025/- Rs. 5864847/- Rs. 19838975/- Firstly there is no increase in the above investments in comparison to last year. Secondly all are old investments and carried forward from last year. Hence addition is illegal and application of section 69 is purely based on presumptions and under such circumstances no addition can be made and hence above addition deserves to be deleted." 20. Ld. CIT(A) deleted the addition holding as under: 7.3 Decision: I have carefully considered the facts of the case, the assessment order and the written submission of the appellant. T....
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....presents goods creditors from whom the Company had purchased goods / services etc and such creditors are not covered u/s 68. Further the total creditors are to the tune of Rs.24205417/- and out of that on estimate basis he has added Rs.4205417/- How the addition can be made u/s 68 and out of Sundry Creditors for goods etc on estimate basis unless it is proved that such creditors are bogus. Such creditors must first be proved as bogus and then the amount of such creditors can be added legally u/s 68. As such this addition is absolutely illegal and deserves to be deleted." 23. The Ld. CIT(A) deleted the addition holding as under: 8.3 Decision: I have carefully considered the facts of the case, the assessment order and the written submission of the appellant. It is noted that the AO has made the addition as he asked the appellant to furnish the details of sundry creditors of Rs. 2.42 crores appearing in the balance sheet. The appellant did not furnish the details and therefore, he estimated that the sundry creditors which were genuine should be at Rs. 2 crores and accordingly he made an addition of the balance sundry creditors shown in the balance sheet, i.e., Rs.....
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....ounting to Rs. 70,38,632/- which constituted 15% of the total expenditure incurred on Power and Fuel, Salary and Wages, Advertisement, Donation, Other expenses and Interest as summarized at page 28 of the CIT(A)'s order for want of evidence. 28. Before the Ld. CIT(A), the assessee submitted as under: 9.2 Appellant's submission :- The relevant extracts from the submission of the appellant are reproduced here under:- 2. Out of expenses : 15% on estimate basis of the following expenses. a) Power and Fuel Expenses: Firstly these expenses have gone down to Rs.2.42 crores in comparison to last year 3.49 crores. Secondly such expenses are covered in calculation of gross profit hence when addition in G.P. is made how disallowance can be made again out of such expenses. Further, no disallowance was ever made out of such expenses and also these expenses are paid to the State Government and also connected with WIND MILL installed by the Company which is connected with the power charges and controlled by the State Government which gives credit if the Company generates power to supply the same to state Government and such supply if made, attra....
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....round of appeal is accordingly allowed. 30. We have perused the order of the Ld. CIT(A) who we find has deleted the addition noting that there was no abnormal increase in these expenses as compared to the preceding years and further noting the fact that the A.O. had verified the expenses on sample basis and made no adverse comments. He also noted that in scrutiny assessment for earlier years no disallowance of such expenses was made except of a meagre amount of Rs. 20,000/- on lump sum basis in assessment year 2007-08. The Ld. CIT(A) noted that the expenditure in the impugned year was comparable with the turnover of the assessee and in the absence of any specific defect/ abnormality pointed out by the A.O. , he deleted the disallowance. 31. We see no reason to interfere in the well reasoned order of the Ld. CIT(A),particularly when the AO himself found the assesses claim to be correct in remand proceedings. 31. Ground of appeal No.5 is dismissed. 32. The revenue has lastly agitated against the deletion of addition made by the A.O. by estimating gross profit by Rs. 2,58,88,202/-. 33. . Before the Ld. CIT(A), the assessee submitted as under: 10.2 Appellant'....
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....h v CIT-2 ITR 129 (Allahabad] Held: It should be borne in mind that an assessment u/s 23(4} of the 1922 Act ( equivalent to section 144 of the 1961 Act) should not be influenced by a desire to punish the assessee for non-compliance with a notice u/s. 22 or section 23, however, culpable such non-compliance may be, Any deliberate concealment or misstatement of the particulars of his income by the assessee is made punishable by section 28;( new Section 271) and if his act amounts to an offence under that section, he should be tried and convicted if the offence is proved, in which case the law gives him a right to appeal, but to punish him indirectly by making a so-called best judgment assessment is wholly unwarranted. (2) State of Kerala vs. C.Velukuttv (1966) 60 ITR 239 (Supreme Court) Held: Though there is an element of guesswork in best judgment assessment, it should not be a wild one, but should have a reasonable nexus to the available material and the circumstances of the each case. Though the section provides for a summary method because of the default of the assessee, it does not enable the assessing authority to function capriciously without regard t....