Case Law Details
Hemant Kumar Pradhan Vs ITO (ITAT Cuttack)
Original assessment u/s.143(3) of the Act was made by the AO by rejecting the books of accounts of the assessee and estimating the income of the assessee at 8% of the gross contract receipt of Rs. 49,10,212/-. It is trite law that once the books of accounts of the assessee are rejected, the same cannot be relied for making addition u/s.69 of the Act. This view finds support from the decision of Lucknow Bench of the Tribunal in the case of ITO Vs. M.S.Builders Pvt. Ltd. in ITA 564/LKW/2011 (AY : 2008-09), order dated 26.05.2013
FULL TEXT OF THE ITAT JUDGMENT
This is an appeal filed by the assessee against the order of the CIT(A)-2,Bhubaneswar, dated 06.12.2016.
2. There is a delay of 27 days in filing the present appeal by the assessee. The assessee has filed an affidavit explaining the reason for delay of 27 days in filing the appeal. I find that the assessee had sufficient reason for delay in filing the appeal. Therefore, I condone the delay of 27 days in filing the appeal and admit the appeal for hearing.
3. Ground of 1 of the appeal raised by the assessee reads as under :-
- Addition of Rs. 1,00,000/- u/s.69 of the Income Tax Act by the learned AO in the assessment proceeding u/s. 147 read with 144 of the I. T.Act on the premise of failure of the assessee to reconcile the difference of cash balance in the bank account as per books of account and as per the bank statement, is illegal and arbitrary since the original assessment of the appellant u/s. 143(3) of the Act has been completed estimating the profit of the appellant @8% of the gross contract receipts.
4. Brief facts of the case are that the Assessing Officer in the assessment order at page 2 has detailed out in the chart the various dates on which notices were issued to the assessee and the same were not complied by the assessee which are as under :-
| Date of issue of notice | Notice u/s. | Date of fixation of hearing |
Fate of notice | Remarks |
| 04/02/2014 | 148 | To furnish return of income within one month | Duly served by hand | Request to treat the return original return u/s.148 |
| 03/06/2014 | 142(1) | 16/06/2014 | Notice
returned back unserved |
|
| 19/06/2014 | 142(1) | 25/06/2014 | Duly served by hand | No compliance |
| 13/08/2014 | 142(1) | 25/08/2014 | Duly served by Speed Post | No compliance |
| 22/09/2014 | Show
cause with 142(1) |
29/09/2014 | Duly served by Speed Post | No compliance |
| 09/10/2014 | 142(1) 143(2) | 28/10/2014 | Duly served by Speed Post | No compliance |
| 28/10/2014 | 142(1) | 10/11/2014 | Duly served by Speed Post | No compliance |
| 11/11/2014 | 142(1) | 18/11/2014 | Duly served by Speed Post | – |
| 08/01/2015 | 142(1) | 27/01/2015 | Duly served by Speed Post | No compliance |
| 28/01/2015 | 142(1) | 05.02.2015 | Duly served by Speed Post | No compliance |
| 28/01/2015 | Show cause for the proposed addition | 05.02.2015 | Duly served by Speed Post | No compliance |
Therefore, the AO completed the assessment u/s.147/144 of the Act on 11.02.2015 assessing total income of the assessee at Rs.4,93,640/- by making an addition of Rs.1,00,000/- u/s.69 of the Act to the originally assessed income of Rs.3,93,640/- u/s.143(3) of the Act vide order dated 23.12.2011.
5. The assessee filed appeal before the CIT(A) and the CIT(A) dismissed the appeal of the assessee on the ground that the assessee was not able to reconcile the closing balance as per books of accounts and bank pass book during the course of appeal hearing.
6. Ld. AR of the assessee submitted that the original assessment u/s.143(3) of the Act was made on 23.12.2011 by rejecting the books of accounts of the assessee and estimating the income by applying rate of 8% to the gross contract receipt of Rs.49,10,212/-, thereby arriving at an income of the assessee at Rs.3,92,816/-. He submitted that when the AO has rejected the books of accounts of the assessee and made an estimate of the income then on the basis of the very same books of account he cannot reopen the assessment u/s.147 of the Act and make addition of Rs.1 lakh u/s.69 of the Act on the ground of difference in the amount shown in the books of account as deposit with Allahabad Bank of Rs.1 ,077/- and as per the bank pass book Rs.1 ,01 ,077/-
7. Ld. DR supported the orders of the lower authorities.
8. I have heard rival submissions and perused the material available on record. In the instant case, the undisputed facts of the case are that the AO made assessment u/s.143(3) of the Act by passing the order on 23.12.2011 by rejecting the book results of the assessee and estimating the income by applying rate of 8% on the gross contract receipts of Rs.49,10,212/- and estimated the income at Rs.3,92,816/-.Thereafter the AO passed an order u/s.147/144 of the Act on 11.02.2015 making an addition of Rs.1,00,000/- u/s.69 of the Act on account of difference between the amount shown in the bank account maintained with Allahabad Bank and the amount shown in the books of accounts of assessee. On appeal, the CIT(A) confirmed the action of AO.
9. I find that the original assessment u/s.143(3) of the Act was made by the AO by rejecting the books of accounts of the assessee and estimating the income of the assessee at 8% of the gross contract receipt of Rs. 49,10,212/-. It is trite law that once the books of accounts of the assessee are rejected, the same cannot be relied for making addition u/s.69 of the Act. My view finds support from the decision of Lucknow Bench of the Tribunal in the case of ITO Vs. M.S.Builders Pvt. Ltd. in ITA 564/LKW/2011 (AY : 2008-09), order dated 26.05.2013. Therefore, I set aside the orders of lower authorities and delete the addition of Rs.1,00,000/- u/s.69 of the Act and allow this ground of appeal of assessee.
10. As I have already deleted the addition of Rs.1,00,000/- made u/s.69 of the Act, other grounds of appeal taken by the assessee on reopening of assessment, have become academic in nature and, hence, become infructuous.
11. In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on this 29/11/2017.
