TUFEL Vs ITO (ITAT Delhi)
ITAT Delhi partly allowed the assessee’s appeal for AY 2017-18 in TUFEL, a small goods carriage operator, granting substantial relief both on quantum and rate of tax, while sustaining the validity of best-judgment assessment u/s 144.
On jurisdiction, the Tribunal rejected the challenge to assessment u/s 144, holding that once the belated return filed in response to notice u/s 142(1) was treated as invalid, the AO was not required to issue notice u/s 143(2). Service of notice through ITBA could not be disproved by the assessee, and issuance of show-cause notices before completion of 144 assessment satisfied procedural requirements.
On merits, the assessee explained demonetisation-period cash deposits as arising from truck operations and cash withdrawals, having declared income on presumptive basis u/s 44AE. While the Tribunal found that the assessee had largely explained the source, some gaps remained. Balancing equities, it restricted the sustained addition to a lump-sum ₹2 lakh, expressly clarifying that this was fact-specific and not a precedent.
Crucially, on rate of tax, the Tribunal held that s.115BBE was wrongly applied. Following Madras HC in S.M.I.L.E. Microfinance, it directed that the sustained addition be taxed under normal provisions, not at the punitive rate u/s 115BBE.
Result:
– Assessment u/s 144 upheld
– Addition reduced from ₹22.88 lakh to ₹2 lakh
– s.115BBE rate set aside; normal tax directed
– Appeal partly allowed
Key takeaway: Even in best-judgment cases, quantum must be realistic and 115BBE cannot be applied mechanically, especially where business activity is evident
FULL TEXT OF THE ORDER OF ITAT DELHI
