TaxTMI 
TaxTMI 
2026 (1) TMI 1586
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....e extent the order is prejudicial to the interests of the appellant. 2. The Ld. CIT (A) erred in dismissing the appeal without considering the facts and circumstances of the case as also the settled position of law. 3. The Ld. CIT(A) erred in upholding the order of assessment as passed by the Ld. AO u/s 147 r.w.s 144 of the Act without issuing a notice under section 143(2) of the Act, which is mandatory for initiating scrutiny proceedings. 4. The LD. CIT(A) ought to have considered that the Ld. AO erred in rejecting the books of accounts of the appellant under section 145 of the Act, and thereafter making separate additions on specific items, which is untenable once the books have been rejected and income is estimated. 5. The Ld. CIT (A) failed to consider the factual and legal position that the Ld. AO erred in making an addition of Rs. 25,63,372/- at 8 percent on gross receipts of Rs. 3,20,42,152/- that the same has been considered into accounts and that making addition without appreciating the facts of the case, which is incorrect. 6. The Id. CIT(A) ought to have fairly considered that the Ld. AO has rejected the books of accounts and ....
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....nsidering the loss made in the AY 2014-15 and brought forward losses. 15. Appellant may, add or alter or amend or modify or substitute or delete and/or rescind all or any of the grounds of appeal at any time before or at the time of hearing of the appeal." 2. Succinctly stated, the AO based on information that the assessee company during the subject year had carried out substantial financial transactions/receipt of income, viz. (i) receipt of payments towards contracts: Rs. 3,20,42,152/-; (ii) interest income: Rs. 92,069/-; and (iii) time deposits with bank: Rs. 19,54,348/-, but had not filed its return of income for the subject year, i.e., AY 2014-15, initiated proceedings under section 147 of the Act. Notice under section 148 of the Act, dated 27/03/2021, was issued to the assessee company. In compliance, the assessee company filed its return of income on 21/10/2021, declaring its income at Rs. NIL. 3. During the course of the assessment proceedings, the AO issued notice under section 142(1) of the Act, dated 22/11/2021, calling upon the assessee company to comply with the same on 06/12/2021, but the same was not acted upon by the latter.....
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....Act. As the assessee company had not filed its return of income for the subject year under section 139(1) of the Act, i.e., within the "due date" of 31/10/2013, the AO made an addition of the subject interest income in its hands. 7. The AO further observed that the assessee company, during the year under consideration, had invested in time deposits of Rs. 19,54,348/-. As the assessee company had failed to come forth with any explanation regarding the source of the subject investment, therefore, the AO added the same by treating it as its unexplained investment under section 69B of the Act. 8. Further, the AO observed that as the assessee company had failed to furnish the requisite details in respect of various expenses that it had claimed to have incurred during the subject year, therefore, its book results were not subject to verification and thus, not reliable. Accordingly, the AO, after rejecting the books of account of the assessee company under section 145A of the Act, disallowed on an ad hoc basis 20% of its claim of expenses of Rs. 4,72,79,447/- and worked out a disallowance of Rs. 94,55,889/- which was added to the returned income of the assessee company. 9. Therea....
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....sons for reopening were recorded, as confirmed in the assessment order. The reassessment was within the prescribed time and squarely falls within the framework of section 147, Therefore, the action of the AO in reopening the assessment is held to be valid and in accordance with law. Accordingly, grounds of appeal pertaining to this issue are dismissed and not allowed. 5.2. The appellant has challenged against the addition of Rs. 25,63,372/- on account of estimation of Income on Contractual Receipts. The AO made an addition of RS. 25,63,372/- by applying an 8% net profit rate on gross receipts of Rs.3,20,42,152/- reported in Form 26AS. The appellant argues that the receipts were already reflected in the books and audited financials, and the addition amounts to double taxation. However, during the assessment proceedings, the appellant failed to furnish verifiable evidence regarding the specific receipts or correlate Form 26AS figures with its books. The appellant did not produce any party-wise ledger, invoices. or confirmations to substantiate the nature and source of receipts. The AO, in absence of books being accepted, was justified in applying a reasonable rate of profit ....
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....s. 94,55,889/-. The AO disallowed 20% of total expenses Rs. 4.72 crores due to non-furnishing of supporting details during assessment. The appellant argues that once income is estimated, no separate disallowance is permissible. However, the contention of the appellant is incorrect as only income from contract receipts was estimated; remaining business income and expenses remained unevaluated. The appellant also failed to respond to repeated notices u/s 142(1) seeking supporting documents for claimed expenses. Therefore books of account were rightly rejected under section 145(3) of the Act by the AO for the reason of non-verifiability. The disallowance is not arbitrary but a reasonable estimate in absence of records. The AO rightly exercised judgment based on the facts. The Hon'ble Supreme Court in CIT v. Calcutta Agency Ltd. [(1951) 19 ITR 191 (SC)] has held that the onus to prove expenditure lies with the assessee. Where no evidence is furnished, disallowance is permissible. Similarly, in CIT v. McMillan & Co. [(1958) 33 ITR 182 (SC)], it was held that estimation of disallowance is valid where accounts are not reliable. Hence, the rejection of books of account and the disallow....
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....ed the said factual position. However, the Ld. CIT-DR submitted that no statutory obligation was cast upon the AO to issue notice under section 143(2) of the Act for framing the assessment pursuant to the notice issued under section 148 of the Act, dated 27/03/2021. The Ld. CIT-DR had come forth with two fold contentions in support of his aforesaid claim, viz. (i) that the assessee company had failed to file the return of income in compliance to notice under section 148 of the Act, dated 27/03/2021 within the prescribed time period as was allowed by the said notice; and (ii) pursuant to the notice issued under section 148 of he Act, dated 27/03/2021, no obligation was cast upon the AO to issue notice under section 143(2) of the Act for framing the assessment vide order passed by him under section 147 r.w.s 144B of the Act, dated 30/03/2022. Elaborating on his contention, the Ld. DR submitted that as per section 143(2) of the Act (as was available on the statute at the relevant point of time), the AO was obligated to issue notice under section 143(2) of the Act, in a case where the return of income had been furnished by the assessee under section 139 of the Act, or in response to a ....
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....rn of income filed under section 139 of the Act. To sum up, the Ld. CIT-DR submitted that as no obligation was cast upon the AO to issue a notice under section 143(2) of the Act in response to the return of income filed by an assessee under section 153A of the Act, therefore, based on the pari materia language used in section 148 of the Act, i.e. to the extent the return of income filed in response to the notice issued under the said section was to be considered as return of income under section 139 of the Act, no obligation was cast upon the AO to issue notice under section 143(2) of the Act for framing the assessment in response to the return of income filed in response to the notice issued under section 148 of the Act, dated 27/03/2021. Apart from that, the Ld. CIT-DR also pressed into service the judgment of the Hon'ble High Court of Delhi in the case of Ashok Chadda vs. ITO (2011) 37 ITR 399 (Delhi), wherein it was held that the issue of notice under section 143(2) is not mandatory for finalisation of an assessment under section 153A of the Act. The Ld. CIT-DR based on his aforesaid contentions submitted that based on the aforesaid judicial pronouncements the AO in the pre....
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....ssue, i.e., as to whether or not the return of income filed by an assessee beyond the prescribed time period allowed vide the notice under section 148 of the Act is to be construed as a return of income, we find that the said issue had been answered by the Hon'ble High Court of Kerala in the case of Chirakkal Service Co- operative Bank Ltd. v. CIT (2016) 384 ITR 490 (Kerala). The indulgence of the Hon'ble High Court was, inter alia, sought for adjudicating the following substantial question of law. "Whether the return filed by the assessee beyond the period stipulated u/s 139(1)/139(4) or Section 142(1)/148 can be held as non-est in the eyes of law and has invalidated for the purpose of deciding exemption u/s 80P of the Income Tax Act, 1961 ?" The Hon'ble High Court answered the aforesaid issue, and, held, that the "return of income" filed by the assessee beyond the period stipulated under Section 139(1) or Section 139(4) or Section 142(1) or Section 148 can also be accepted and acted upon provided further proceedings in relation to such assessment are pending in the statutory hierarchy of adjudication in terms of the provisions of the Income-tax Act. As in ....
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....fficer or to produce, or cause to be produced before the Assessing Officer any evidence, which the assessee may rely in support of the return of income. Although, at the first blush it appeared that issuance of the notice under section 143(2) of the Act is restricted only in a case where the return of income is filed by the assessee under section 139 of the Act, or in response to a notice under subsection (1) of section 142, and, thus, cannot be stretched to a case where the return of income is filed in response to a notice under section 148 of the Act, but we stand corrected on our aforesaid view. We say so, for the reason that section 148 of the Act (as was available on the statute at the relevant point of time) contemplated that the provisions of the Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139 of the Act. Accordingly, a return of income filed in response to notice under section 148 of the Act is to be treated as a return of income required to be furnished under section 139 of the Act. We thus, are of the view that as the return of income filed in response to the notice under section 148 of the Act is t....
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....tly emphasized that section 153A(1)(a) of the Act contemplates that the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139. The Ld. AR submitted that the same language has been employed by the legislature in section 148 of the Act. Elaborating further on his contention, the Ld. AR had tried to impress upon us that the view taken by the Hon'ble High Court of Madras in the case of B. Kubendran vs. DCIT (supra), wherein it was held that for framing an assessment under section 153A, the issuance of notice under section 143(2) of the Act is not mandatory will equally apply with the same force for framing of an assessment on a return of income filed by an assessee in response to notice issued under section 148 of the Act. 23. We have given thoughtful consideration to the aforesaid contentions of the Ld. CIT-DR, which at the threshold of hearing appeared to be very appealing, but, are unable to persuade ourselves to subscribe to the same. We say so, for the reason that as observed by us at length herein above, section 148 of the Act can though facilitate calling upon the assessee to file his r....
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....ting the assessee's objection against assumption of jurisdiction for reopening and also reference to the Transfer Pricing Officer (TPO) were to be quashed. We further find that the Hon'ble High Court of Punjab & Haryana in the case of CIT vs. Nagendra Prasad (2013) 156 Taxmann.com 19 (Punjab & Haryana) had observed that where the notice was issued by AO under section 148 of the Act requiring the assessee to file a return within 30 days, but the said return was filed after 81/2 months, since return of income was filed by the assessee in response to the notice under section 148 of the Act, though delayed, there should have been a notice issued under section 143(2) as the requirement to issue notice cannot be dispensed with. Further, the Hon'ble High Court of Delhi in the case of PCIT v. S.G. Portfolio Pvt. Ltd. (2023) 454 ITR 761 (Delhi) had, inter alia, held that where the assessee company had filed the return income in response to notice under section 148 of the Act, the AO was required to issue notice under section 143(2) of the Act for framing the assessment. Also, the Hon'ble High Court of Madras in the case of Sapthagiri Finance & Investments vs. ITO (2012) 25 t....