Written Submission before the Hon’ble CIT(A), Faceless in respect of Sh. XxxxxxxxxxXXXXXXXfor the A.Y. 2012-13 [ANXXX35XXT]
Appeal filed against the order of assessment u/s 147/144 of the Income Tax Act, 1961 made by ITO, Ward No. 2(5), Xxxxxxxxxx dated 10.12.2019
Most respectfully submitted before the Hon’ble CIT(A), Faceless. my written submissions
My case on Merit
Statement of Facts are narrated as under:
The assessment of the assessee was decided by the ITO, Ward No. 2(5), Xxxxxxxxxx u/s 147/144 of the Act Dt. 10.12.2019 and order was received by the assessee Dt. 17.02.2020 by hand going to the department. The assessee is regularly filing his ITR since long with PAN ACXXX43XXH.The return for the A.Yr. 2012-13 was filed with PAN ACXXX43XXH as usual. The nature of business of the assessee is Truck Plying. He is having ownership of 10 Trucks during the F.Yr. 2011-12 and filed his return declaring income u/s 44AE of the Act. The entire receipts received in cash or banks whether with old PAN or with New PAN belongs to the business which is truck plying from 10 trucks only. No other Income is there with the assessee.
Taking into consideration the entire receipts of the assessee the return of the assessee has been filed u/s 44AE of the act as no books were required to be maintained by the assessee as per language of section 44AE of the Act. He has calculated his income according to the months of ownership of the trucks and applied presumptive taxation. Assessee used his one new PAN for opening bank account but the deposits in the bank account belongs to the business of truck plying from 10 trucks and filed one return of income with PAN ACXXX43XXH which one is old PAN of the assessee and till date assessee is using this PAN everywhere. The entire cash deposited with the Banks is out of gross receipts in cash from Truck Plying of 10 trucks. There is no other source of cash with the assessee. The total income earned is from Truck Plying and gross receipts are u/s 194C of the Act as shown in Form 26AS form with both PAN (page no. 1-9 of the Paperbook) but entire receipts are from truck plying and taking into consideration on the entire receipts the assessee filed his return as per section 44AE of the act as assessee can file the return u/s 44AE till he has ownership of 10 trucks. The gross receipts u/s 194C being transportation charges in the case of the assessee includes receipts in cash as well as banking channel.
Basically assessee is XXXXXXXby cast & creed. He desired to obtain PAN as XxxxxxxxxxXXXXXXXand applied for PAN in the name of XxxxxxxxxxChaprana . Mainly the reason for change of PAN was astrological reason. At that time Aadhar cards were not in use when assessee obtained PAN ANXXX35XXT in the name of XxxxxxxxxxChaprana . The return filed with PAN ACXXX43XXH in the name of Xxxxxxxxxx Chaprana is the one and only one and correct return filed by the assessee taking into consideration the entire receipts from truck plying in all the banks of the assessee with Bank No. 4943002100000548 with Punjab National Bank, Sola Village Xxxxxxxxxx with New PAN ANXXX35XXT and other old bank Account No. 3078000100258390 with Punjab National Bank, Sola village, Xxxxxxxxxx with old PAN ACXXX43XXH and also other banks with new PAN and old PAN and also receipts from truck plying in cash as well. The receipts of the assessee included truck plying receipts in cash as well as through banking channel.
The source of cash deposited with the Bank A/c customer Account or saving account is enumerated as under:
a) Opening cash in hand as the assessee is in business with the last so many years and filing his return since A.Yr. 2003-04.
b) Gross receipts from the Truck Plying of 10 Trucks. Assessee is having ownership of 10 trucks. Cash deposited with all the banks whether with New PAN or old PAN is out of the business receipts. Debit entries reveal that the assessee has deposited cash for the purpose of making payment for running the business. AO has never checked debit entries with the banks,
c) Cash withdrawals from the same Bank A/c.
d) Parties for whom we were doing truck plying paid expenses for diesel, toll tax & other expenses in cash. This way the cash which we deposited with the bank and made payment for installments, diesel and so many expenses related to the business. More that 70% payment from the parties were received in cash which we deposited with different banks.
The provision of Sec. 44AE(5) is applicable in the case of the assessee which reads as under:
“The provision of section 44AA and 44AB shall not apply in so far as they relate to the business referred to in sub-section 44AE (1) and in computing the monetary limits under those sections, the gross receipts or, as the case may be, the income from the said business shall be excluded”.
The cash which has been deposited with the bank is out of the gross receipts but as per section 44AE (5), assessee is not liable to explain the gross receipts. The assessee is having 10 trucks and he has filed his ROI declaring income u/s 44AE (2) of the Act. The assessment framed is illegal, void and bad in law. As the assessee has already filed his return using his old PAN and the entire business receipts of the assessee with all the Bank A/cs and in cash from 10 trucks only and Income from 10 Trucks has been shown as usual u/s 44AE of the Act.
The notice u/s 133(6) Dt. 22.02.2019 sent to the assessee contains the cash deposit figure as Rs. 2259100.00 during the F.Yr. 2011-12 whereas the assessment has been framed at a figure of Rs. 4094100.00 which is not justified and seems to be unmindful exercise of the Assessing Officer. The assessee has mailed the complete reply Dt. 10.12.2019 but AO has not considered the reply filed by the assessee and passed the order without looking and checking the mail (Page 13-15 of the paperbook). On 3.12.2009 a mail was sent by assessee for the adjournment till 10.12.2019 and on 10.12.2019, complete reply was mailed to the ITO but AO has not considered the same mail before passing the order.
Notice u/s 133(6) dated 22.02.2019 contains two cuttings / overwriting, one for name written as XxxxxxxxxxXXXXXXX instead of Devender. One for PAN as ANXXX35XXT instead of ACXXX43XXH. The notice is highly illegal in the eyes of law as it contains two overwriting and it seems that notice has been prepared for XxxxxxxxxxXXXXXXX instead of Xxxxxxxxxxby the ITO himself without any permission from higher authorities. Hence, the entire assessment is to be made null and void in the absence of proper notice.
On 06.12.2019 one show cause notice was given to the assessee for 23.12.2019. Assessee was sure that his case will not be decided before 23.12.2019 at least. Other show cause notice was issued to the assessee in which date of hearing was 28.11.2019 which shows AO was in hurry to decide the case this way or that way. He was always confused while issuing the notices. Assessee mailed his reply to the AO on 10.12.2019 and AO decided the case of the assessee u/s 144 of the Act on 10.12.2019 without considering the reply of the assessee and created huge demand of Rs. 3126440.00 as per assessment order passed illegally. AO formed a false opinion regarding cash deposited by the assessee with his SB A/C as income of the assessee from undisclosed sources. There seems to be no reason to believe that the cash deposited by the assessee to his SB A/C is income of the assessee from some sources not disclosed to the department in the absence of ROI with PAN ANXXX35XXT. The best judgment assessment u/s 144 has been done by the officer without application of mind. Every cash deposited by the assessee cannot be treated as income of the assessee. No notice u/s 148 was received by the assessee in person. Assessee is not well versed with the computer operation, He is unable to check his mails as well as his portal on the ITD website. The information received from the department without independent inquiries is not sufficient for framing the assessment u/s 144 of the Act. The ITO , ward No. 2(5) treated the entire cash of Rs.4094100.00 deposited with the bank account of the assessee as income of the assessee which cannot be possible and it is a mere presumption of the AO which is explained here at CIT (A) level. The order u/s 144/147 was not received by the assessee who collected it on 17.02.2020. In the same way Notices were also not received by the assessee, otherwise he would have appeared before AO somehow earlier. The addition of Rs. 4094100.00 is being challenged before you as the base of this figure has not been told to the assessee before framing the assessment which is quite bad. Before making assessment AO is duty bound to gather all material including history and past records of the assessee to come out at a genuine conclusion. He cannot pass the assessment order with blind eyes which he has done in the case of the assessee. The entire assessment made u/s 144 of the Act is quite baseless and beyond the legal framework of the law.
In the facts and circumstances of the case, the AO is not justified in initiation of assessment proceedings u/s 148 which was without jurisdiction since the notice was never served on the assessee personally.
In the facts and circumstances of the case the AO is not justified in the initiation of re-assessment proceedings u/s 148 is also without jurisdiction since approval u/s 151 by the PCIT, Xxxxxxxxxx was never supplied to the assessee which is contrary to the legal position as declared by SC. It is not known to the assessee whether approval obtained from PCIT before issue of notice u/s 148. The assessment order has been passed without mentioning the reasons recorded u/s 148(2) and also without mentioning the approval obtained from PCIT, Xxxxxxxxxx u/s 151 of the Act.
In the facts and circumstances of the case, the AO is not justified as copy of reasons recorded u/s 148(2) for issuing notice u/s 148 were never supplied to the assessee.
In the facts and circumstances of the case the AO is not justified in making the addition of Rs. 4094100.00 in the hands of the appellant which is unwarranted in law since the entire cash deposited with the bank cannot be treated as income of the assessee. If all the requisite notices had been received by the assessee personally or if some more opportunity had been given to the assessee then he would have been able to produce the plausible explanation regarding cash deposited with the bank as every evidence are in the possession with the assessee which can be produced before the Hon’ble CIT(A), Faceless.
In the facts and circumstances of the case the AO is not justified in not following the principal of best judgment. He was in hurry in deciding the case u/s 144 of the Act. Out of fear the AO decided the case on 10.12.2019. The time barring of the case is on 31.12.2019 and he did not check the mail where assessee has replied fully dated 10.12.2019.
In the facts and circumstances of the case the AO is not justified in relying only on the information of the department. Not making independent enquiries. He has not gathered any material before framing the best judgment assessment u/s 144 of the Act. He has not checked the complete bank account before framing the best judgment assessment and decided the case abruptly at a figure of Rs. 4094100.00.
In the facts and circumstances of the case the Ld. AO is not justified in treating the entire cash deposited with the SB A/C as income of the assessee as it is a cardinal principal that the entire cash deposited with the bank, cash recovered from the assessee, cash found during search operation cannot be income of the assessee and every income cannot be taxable income of the assessee.
In the facts and circumstances of the case the ld. AO is not justified without knowing the fact that assessee is having ownership of 10 trucks and truck plying income comes to the assessee which is in cash as well as in bank. Copy of proof of ownership of truck is enclosed with the paperbook (page 37-42 of the paperbook). There is no other source of income with the assessee and he has not checked 26AS form before deciding the case u/s 144 of the Act. Debit entries with the bank reveals that the assessee has deposited the cash for the purpose of business not for personal use.
In the facts and circumstances of the case the Ld. AO is not justified in framing the assessment which is bad in law and spirits as notice u/s 133(6) was issued to the assessee with a figure of cash deposited which is quite different with the figure of cash deposited in the assessment order. Moreover, notice u/s 133(6) was never received by the assessee on ITD Portal, mail, speed post and served through a person to the assessee.
In the facts and circumstances of the case, the Ld. AO is not justified as the AIR information (ITD System through non-filers monitoring system) is not sufficient for framing reason to believe by the AO regarding reopening of the assessment u/s 147 and issue of notice u/s 148 of the Act. There is no material with AO at the time of framing reasons to believe except the AIR information (ITD System through non-filers monitoring system). The reopening is bad in law and spirits.
As per assessment order para no. 5, the assessee sought an adjournment dated 03.12.2019 for 10.12.2019 and the counsel of the assessee said that I shall not be able to submit my reply on or before 10.12.2019 but AO issued show cause notice dated 06.12.2019 and adjourned the case to 09.12.2019 instead of 10.12.2019. Assessee fulfilled his promise and submitted his reply dated 10.12.2019.
In the facts and circumstances of the case the Ld. AO is not justified as the reply of the assessee has not been considered by the assessing officer before framing the best judgment assessment on 10.12.2019 when the full reply was mailed to the AO on 10.12.2019. Proof of mail is enclosed with the paperbook (page no. 43 of the paperbook). The assessment framed is bad. In the two show cause notices dt. 6.12.2019 AO has asked to furnish the reply on line through ITBA or through mail. He has to consider the mail before passing the assessment order with such a high figure. To earn this much income from 10 trucks is an impossible task. He has to apply his own mind before passing assessment order at such a vague and non justified figure.
As per Assessment order, the gender of the assessee has been treated as female as the word “her” has been used instead of “his” in so many times (9 times).
The AO has passed the order and added INR 4094100 but he has not mentioned specifically under which section he is making addition if under section 68 or 69A of the Act.
In the facts and circumstances of the case the Ld CIT (A), Faceless is prayed to delete the entire addition made by the AO as the assessee has filed his ROI for the relevant assessment year with PAN which is old PAN and is used by the assessee everywhere but full income was shown with the ROI as per section 44AE of the Act.
In the facts and circumstances of the case the Ld CIT (A), Faceless is prayed to delete the entire addition made by the AO as the entire cash deposited with the bank is out of the gross receipts of truck plying and he is not required to maintain the books of accounts when he has filed his ROI as per section 44AE of the Act. The cash deposited is part of the gross receipts of the assessee as per section 44AE(5) of the act. The return filed with one and old PAN is the correct return and reflects the income from 10 trucks. Assessee is unable to file his ROI with two PANs. He may have two PAN by mistake but he has to file his ROI with one PAN where he has show his complete income not partly. Having two Banks with different PAN and filing of return with one PAN shall not make the assessee liable for concealment of Income if return with one PAN has been filed truly.
The assessee holds sufficient proof for ownership of 10 trucks during the F.Yr. 2011-12 and sufficient proof for filing the ROI for the A.Yr. 2012-13 with PAN ACXXX43XXH. The assessee is having no other income except the truck plying income. The order seems to be bad in law and spirits and is prayed to be made null and void.
On verification of Form 26AS with both the PANs, it is noticed that for the first half of the year transactions are with old PAN of the assessee and during the second half, transactions are with New PAN particularly in the months of January, February and March 2012. Hence the entire receipts as reflected in both 26AS forms are from the 10 trucks only.
Introduction of the Assessee
The nature of business of the assessee is Truck Plying. He is having ownership of 10 Trucks during the F.Yr. 2011-12 and filed his return declaring income u/s 44AE of the Act. No other Income is there with the assessee.
About return of the assessee for the AY 2012-13
The assessee is regularly filing his ITR since long with PAN ACXXX43XXH. The return filed with PAN ACXXX43XXH is the one and only one and correct return filed by the assessee taking into consideration the entire receipts from truck plying in all the banks as well as cash. The receipts of the assessee included truck plying receipts in cash as well as through banking channel.
All transactions with the bank have been declared with the ITR filed with old PAN. All notices were bearing the new PAN. Every transaction has been declared with the ITR filed with Old PAN . Banks were opened with New PAN but ultimately assessee decided to file the return with Old PAN and made his continuity with old PAN though all banks with old PAN and New PAN were operated for the purpose of business. As usual he had not changed his PAN with the bank with New PAN.
The Assessing Officer has initiated proceedings u/s 144 by issue of notice u/s 142(1) against wrong PAN (Not in use) of the assessee. The Wrong PAN is ANXXX35XXT. The Assessee has filed Income Tax Return with a correct PAN which is ACXXX43XXH. The Income Tax Returns for the Assessment year 2012-13 were submitted with ITO, Ward No. 2(5), Xxxxxxxxxx Dt. 10.12.2019 but ITO failed to detect wrong PAN (Not in use) & correct PAN (Always in use) of the assessee. The assessment framed is bad in law and spirit as the assessee has already filed his ROI for the assessment year 2012-13 vide e-filing acknowledgement no. 167689140310314 Dated 31/03/2014 with correct PAN ACXXX43XXH and copy of the same has been furnished with AO Dt. 10.12.2019. The A.O has not recognized the return filed by the assessee.
Assessee has already filed his ROI before issue of notice u/s 148 Dt. 29/03/2019 with PAN ACXXX43XXH in which nature of business and ownership of trucks is already incorporated. Assessee statutorily cannot file 2 returns with 2 PANs.
Reasons recorded u/s 148(2) and approval obtained u/s 151
Copy of reasons recorded u/s 148(2) of the Act and also copy of approval obtained from PCIT, Xxxxxxxxxx u/s 151 of the Act were never supplied to the assessee along with the notice u/s 148 although he has asked for the same in his reply mailed to the concerned ITO dated 10.12.2019.
The notice u/s 133(6) sent to the assessee contains the cash deposit figure as Rs. 2259100.00 whereas the assessment has been framed at a figure of Rs. 4094100.00 which is not justified and seems to be unmindful exercise of the Assessing Officer. (Page no. 18 of the paperbook)
Reply filed by the assessee ignored by the AO
The assessee has mailed the complete reply Dt. 10.12.2019 but AO has not considered the reply filed by the assessee. On 03.12.2019, a mail was sent by assessee for adjournment for 10.12.2019 and on 10.12.2019 complete reply was mailed to the ITO but AO has not considered the same mail before passing the order.
Demand raised by the AO
The Assessing Officer has erred on facts and in law in not accepting faultless explanation of the assessee regarding cash deposits and thereby erroneously making wrongful addition of Rs. 40,94,100/- on the basis of conjectures and surmises as such is bad in law and treating the same as income from undisclosed sources.
The case of the assessee was decided u/s 147/144 of the Income Tax Act, 1961 in which a demand of Rs. 31,26,440/- has been created which is quite illegal, baseless and not justified.
Assessment with blind eyes
The Assessing Officer has erred on facts and in law in not following the judicial precedents available in this regard as he failed to appreciate that the entire amount of Rs. 40,94,100/- deposited with the banks is business receipts of the Appellant and out of gross receipts of Truck Plying services.
The Assessing Officer has erred on facts and in law in making the addition of Rs. 40,94,100/- treating it as income from undisclosed sources merely on the basis of information available on record as Assessing Officer failed to examine as to whether amount in question was not from regular course of business and it has come from undisclosed sources as alleged by the Assessing Officer.
The Ld. AO indulged in speculation, surmises and conjecture in treating the cash deposit as complete income of the assessee. Before making assessment the AO is duty bound to gather all material including history and past records of the assessee to come at a genuine conclusion. He cannot pass the assessment order with blind eyes which he has done in the case of the assessee.
Assessment without application of mind
The Assessing Officer has erred on facts and in law in making addition of Rs. 40,94,100/- as the requirement of application of mind is missing in the present case as it is a cardinal principle of taxation that “all receipts are not income and all income are not taxable income” applies squarely to the present facts as held in the case of Mahavir Parsad v. ITO – Date of Judgment : 09.10.2017 – (ITAT Delhi).
Addition made only on the basis of Presumption
AO formed a false opinion regarding cash deposited by the assessee with his SB A/C that income of the assessee is from undisclosed sources. There seems to be no reason to believe that the cash deposited by the assessee to his SB A/c is income of the assessee from some sources not disclosed to the department in the absence of ROI with PAN ANXXX35XXT.
The best judgment assessment u/s 144 has been done by the officer without application of mind. Every cash deposited by the assessee cannot be treated as income of the assessee. No notice u/s 148 was received by the assessee in person. Assessee is not well versed with the computer operation. He is unable to check his mails as well as his portal on the ITD website. No mail regarding the notices has been received by the assessee.
“No doubt it is true that when the returns and the books of account are rejected, the assessing officer must make an estimate, and to that extent he must make a guess: but the estimate must be related to some evidence or material and it must be something more than mere suspicion.”
Bank Statement of the assessee
The assessing officer has no bank statement during the course of assessment proceedings. No material was with AO at the time of opening of the assessment and hence the opening is bad in law and spirits. In this regard assessee relies on the judgment of ITAT, Delhi in the case of Mahavir Parsad v. ITO – Date of Judgment : 09.10.2017 – (ITAT Delhi).
Assessment made at Wrong PAN
The assessment made at the wrong PAN of the assessee is prayed to be made null and void in the presence of returns filed by the assessee for the assessment year 2012-13 with correct PAN.
No return has been filed by the assessee with the new PAN (Not in use). Only one and one return has been filed with correct PAN of the assessee which is always ACXXX43XXH. The ITO was having with him the correct PAN of the assessee as assessee provided information on mail. At the time of finalization of the assessment, ITO failed to examine the reply filed by the assessee on mail as he was not in mood to impart justice to the assessee.
ITO failed to examine the PAN mentioned on the returns. The assessee has clearly stated in his reply Dt. 04.12.2019 that the assessee has filed his ITR for the A.Yr. 2012-13 vide e-filing acknowledgement No. 167689140310314 Dt. 31-03-2014 and also submitted his copy of ROI.
The PAN was not changed with the bank and bank was kept on running with wrong PAN. Copy of statement is enclosed. Without acknowledging the intent of the assessee the Ld. AO kept on issuing notices with the incorrect PAN. He has not acknowledged the PAN mentioned on the return. He issued the following notices with the wrong PAN.
Notice u/s 133(6) dated 22/02/2019
Notice u/s 142(1) dated 28/11/2019
Notice u/s 142(1) dated 04/12/2019 (page no. 44-46 of the paperbook)
Show Cause notice dated 06/12/2019 (page no. 52 of the paperbook)
Show Cause notice dated 06/12/2019 (page no. 53 of the paperbook)
Principal of natural justice must be on rational and scientific basis and the same must be specified in the order.
That in this case Ld. AO before passing an order does not comply with basic condition i.e. opportunity of being heard. That must be guided by rules of justice, equity and Good conscience. We place our reliance on number of land mark judgments on the same ground of appeal. Some are reproduced as under.
1. Dhanalakshmi Pictures Vs. ITO reported as (1983) 144-ITR-452 (Mad) Hon’ble Madras High court.
2. C.N. Menon Vs. ITO reported as (1974) 96 ITR 148 (Ker) Hon’ble Kerala High court.
Held the Income Tax Officer was, therefore, bound to give an opportunity to the petitioner to explain about the nature and source.
The entire order is non-speaking, without application of mind, unjustified. Before taking this drastic step, he is bound to apply his own mind and he is not supposed to add the entire cash deposited with the bank as income of the assessee. The entire addition is based on conjectures and surmises. He was not confirmed about the income of the assessee and he passed order just to name it in the list of cases decided. How vague the assessment order is which is without emotions, without application of mind and without due care and without following the principle of natural justice. There is no scope in the entire Act for a vague assessment; hence the Hon’ble CIT (A), Faceless is prayed to quash the order passed by the AO illegally.
For any best judgment order, computation of income must be on rational and scientific basis, and the same must be specified in the order. The Ld. AO fails to do so. No proposal notice for the addition of Rs. 40,94,100/- was sent to the assessee.
In this regard the assessee relies on the following judgment:
Prabhakar Mallappa Panadare Vs. Agriculture Income Tax Officer, Hon’ble High court of Karnataka, reported as (1970) 77-ITR-349 (Kar)
Held: – where the assessing authority proposes to proceed under section 19(4) and makes an order of assessment to the best of judgment, the basis for the proposed assessment should have been put to the assessee and an opportunity should have been given to the assessee to show cause as to why assessment should not be made on the basis of proposal sent to the assessee. It is clear, on a perusal of the record that no reasonable opportunity of being heard as contemplated under second proviso to sub section (4) of section 19 has been given to the petitioner’s father who was the assessee. Therefore, the impugned order and notice of demand made pursuant thereto cannot be supported. They are accordingly quashed.
However, the principles to be followed by the income tax officer while making a best judgment assessment have been clearly laid down by the Privy Council as also by this Court in a number of decisions. In commissioner of Income Tax v. Laxminarain Badri das (1), their Lordships of the Privy Council observed as follows:
“The officer is to make an assessment to the best of his judgment against a person who is in default as regards supplying information. He must not act dishonestly or vindictively or capriciously because he must exercise judgment in the matter. He must make what he honestly believes to be a fair estimate of the proper figure of assessment, and for this purpose he must, their Lordships think, be able to take into consideration local knowledge and repute in regard to the assessee’s circumstances, and his own knowledge of previous returns by and assessments of the assessee and all other matters which he thinks will assist him in arriving at a fair and proper estimate; and though there must necessarily be guesswork in the matter, it must be honest guesswork. In that sense, too, the assessment must be to some extent arbitrary”.
Since the law relating to “best judgment assessment” is the same both in the case of income-tax assessment and the sales-tax assessment and the following observations of this Court in Raghubar Mandal Harinder Mandal v. State of Bihar,(2) a case under the Bihar Sales Tax Act, would be material:
(1) (1937) S I.T.R. 170 (PC).
(2) (1957) 7 STC 770 at p. 778.
“No doubt it is true that when the returns and the books of account are rejected, the assessing officer must make an estimate, and to that extent he must make a guess: but the estimate must be related to some evidence or material and it must be something more than mere suspicion.”
The Ld. AO has written in the Assessment order that assessee has failed to reply to the notices u/s 142(1) but he himself failed to acknowledge and examine the reply filed on mail by the assessee. He not discussed at all what information assessee has given which clearly depicts assessment framed without application of mind.
Again in State of Kerala v. C. Velukutty,(l) which was a case under the Travancore-Cochin General Sales Tax Act, Subba Rao, J. (as he then was), speaking for this Court observed at page 244 of the report this:
“The limits of the power are implicit in the expression ‘best of his judgment’. Judgment is a faculty to decide matters with wisdom truly and legally. Judgment does not depend upon the arbitrary caprice of a judge, but on settled and invariable principle, of justice. Though there is an element of guesswork in a ‘best judgment assessment’ it shall not be a wild one, but shall have a reasonable nexus to the available material and the circumstances of each case.”
Brij Bhushan Lal Praduman Kumar Vs. CIT (1978) 115 ITR 524 (SC)
Held :- “The authority making a best judgment assessment must make an honest and fair estimate of the Income of the assessee and though arbitrariness cannot be avoided in such an estimate, the same must not be capricious but should have a reasonable nexus to the available material and the circumstances of the case.“
The assessee prays to produce and accept additional evidence before the Hon’ble CIT (A), Faceless and makes an application under rule 46A of the IT Rules, 1962 because the appellant was prevented by sufficient cause from producing the evidence when he was called upon to produce by the AO. Also the appellant was prevented by sufficient cause from producing before the AO any evidence which is relevant to any ground of appeal. The counsel of the assessee met the ITO on 10.12.2019 but he refused to entertain him and told him that he had already passed the order.
Where the AO has made the order appealed against without giving sufficient opportunity to the appellant to adduce relevant to any ground of appeal.
The entire addition made by the AO is based on doubt or suspicion. Suspicion however strong cannot take the place of evidence as laid down by the Hon’ble Apex Court in the case of Dhakeshwari Cotton Mills Ltd .Vs CIT (1955) AIR 65 (1955 SCR 011941).
Here is summary of the judgments relied upon by the assessee:
| Sr. No. | Judgments relied upon by the assessee | Decision of the court |
| 1 | Parimisetti SeethramammaVs CIT reported in 57 ITR 532 | The Court held that the Act does not make a blanket provision whereby any and every receipt is to be treated as income and thereby made eligible to tax. In all cases, the burden lies on the Revenue to prove that the receipt is income within a taxing provision. |
The order passed by the AO u/s 144 Dt. 10.12.2019 (Page no. 47-51 of the paperbook). The point wise explanation of every para is given by the assessee as under:
Point no. 1 of the assessment order dt. 10.12.2019
Point no. 1 of the assessment order Dt. 10.12.2019 varies from the truth and substance as under:
The assessee filed return u/s 139(4) vide e filing ackd no. 167689140310314 dt. 31.3.2014 with PAN ACXXX43XXH which is old PAN of the assessee and its always in use and assessee duly informed ITO through mail Dt. 10.12.2019, the day he passed the order u/s 144 of the act.
Point no. 2 of the assessment order dt . 10.12.2019
Point no. 2 of the assessment order Dt. 10.12.2019 varies from the truth and substance as under:
The ITD system ‘Non filers monitoring system“ revealed that assessee has deposited a sum of Rs. 4094100.00 in the saving bank A/C. Bank A/C No. and name of the bank has not been mentioned in the assessment order. Rs 4094100.00 has been deposited by the assessee in his saving bank account but order is silent to which account it has been deposited. No information was called from the banks regarding nature of business of the assessee and even bank statement. Even before assessment order u/s 144 no bank statement was called from bank by the AO and if called no debit entries were checked.
Whatever cash which has been deposited in the bank with PAN ANXXX35XXT is nothing but part of the gross receipts from truck plying received in cash. Return was filed u/s 139(4) and income has been shown as per presumptive taxation u/s 44AE of the Act. . The cash has been deposited out of the gross receipts from truck plying. The debit entries reveal expenses for the purpose of the business.
Point No. 3 of the Assessment Order Dt. 10.12.2021
Point no. 3 of the assessment order Dt. 10.12.2019 varies from the truth and substance as under:
The notice u/s 148 Dt. 29.03.2019 was never received by the assessee in person (Page no. 36 of the Paperbook). If reasons were recorded or not. It is not mentioned in the order. For provision of sub section (a) to explanation 2 of section 147; the AO in charge has to follow the complete provision u/s 147 and 148 of the Act not partly. AO has to follow the complete provision laid down in section 147 and 148, 151 of the Act, 1961. There seems no reasons were recorded and if recorded not supplied to the assessee and approval u/s 151 obtained or not from PCIT, Xxxxxxxxxx and if obtained not supplied to the assessee.
Point No. 4 of the Assessment order Dt. 10.12.2019
Point no. 4 of the assessment order Dt. 10.12.2019 varies from the truth and substance as under:
Assessee has duly informed ITO that the return filed already with PAN ACXXX43XXH may be considered in response to the notice u/s 148 Dt. 29.03.2019. As the assessee has already filed his return with a different PAN, The penalty proceedings initiated u/s 271F is requested to be dropped.
Point No. 5 of the Assessment order Dt. 10.12.2019
Point no. 5 of the assessment order Dt. 10.12.2019 varies from the truth and substance as under:
The notice u/s 142(1) Dt. 28.11.2019 was not received by assessee in person, speed post, affixture as narrated by AO (Page no. 10-12 of the Paperbook). In response to this notice assessee sought adjournment till 10.12.2019 but AO granted adjournment for 9.12.2019 and it was not clear from two show cause notices that which date has been given to the assessee if 9.12.2019, 23.12.2019 or 28.11.2019 but case was not adjourned by the assessee for 10.12.2019 as requested by the assessee on 3.12.2019 vide adjournment letter through portal.
Point No. 6 of the Assessment order Dt. 10.12.2021
Point no. 6 of the assessment order Dt. 10.12.2019 varies from the truth and substance as under:
The notice u/s 142(1) Dt. 4.12.2019 was sent on Portal but never received by the assessee in person and by post. Two show cause notices Dt. 6.12.2019 were issued by AO fixing the dates which was not clear from the notices and assessee expected case to be decided till 23.12.2019 but clearly assessee mailed his full reply Dt. 10.12.2019 but AO did not check the mail and passed the order abruptly. In the absence of notices duly served upon the assessee the AO initiated proceedings u/s 271(1)(b) . The assessee being not aware of the computer work never opened portal. Even counsel of the assessee never opened portal with PAN ANXXX35XXT because no ITR was ever filed with this PAN. When AO called on assessee on phone two or three times then assessee asked his counsel to check the same then and only then e proceedings were checked and printout of the notices were taken and the counsel of the assessee prepared the reply and sent on mail Dt. 10.12.2021. But making assessment u/s 144 with a figure of Rs. 4094100 is harsh on the part of the AO with no thought and substance in the mind.
Point No. 7 of the Assessment order Dt. 10.12.2019
Point no. 7 of the assessment order Dt. 10.12.2019 varies from the truth and substance as under:
The entire cash deposited can never be income of the assessee, very well explained in judgment of ITAT, Delhi in the case of Shri Mahavir Prasad Vs ITO Dt. 9.10.2017.
The action of the AO is wrong, fully unjustified as entire cash can never be income of the assessee. Before passing the assessment order has never gathered any information from bank, bank statement, nature of the business of the assessee and debit entries too. There was no material available with the AO at the time of passing the order u/s 144 of the Act.
Point no. 8 of the assessment order Dt. 10.12.2019
Point no. 8 of the assessment order Dt. 10.12.2019 varies from the truth and substance as under:
The action of the AO is unwarranted in law as he has not checked the mail of the assessee and made assessment at such a high figure without gathering any material. The assessment is completely unmindful job on the part of the AO. He decided the cases in hurry which has put burdened on the assessee. The return has already been submitted with PAN ACAPJ4347H and the Hon’ble CIT (A), Faceless is requested to consider the same return filed in response to the notice u/s 148 Dt. 29.03.2019 as well as entire receipts are nothing but business receipts from truck plying. The assessee has filed his return on presumptive taxation. There is no concealment of income in the case of the assessee. In these circumstances penal provisions shall not be attracted. The Ld. CIT(A), Faceless is requested to drop the proceedings initiated by AO u/s 271(1)(c) of the Act. The assessment made at a figure of Rs. 4094100.00 is gross violation of natural justice. In this regard the case of the assessee is fully explained in the written submissions enclosed.
Application under rule 46A of the Income Tax Rules, 1962 is separately enclosed for your kind consisola tion in the matter.
Beside merits of the case, the assessee desire to plead his case on the basis of technical ground simultaneously.
Core issues:
A.Yr. 2012-13, Reopening u/s 147, Issue of notice u/s 148 not received by assessee at his address, best judgment assessment u/s 144, cash deposit by assessee in his SB A/c in the name of XxxxxxxxxxXXXXXXX(ANXXX35XXT). Operated bank A/C with a PAN which is new but return filed with the old PAN. Assessee forgot to get changed the PAN with the bank and continued operating for his business with the same new PAN taken. Source of the cash deposited is from gross receipts from business of Truck Plying. Without looking at the entire bank A/c of the assessee, without gathering any material, without studying the replies submitted by the assessee on 10.12.2019, the assessment framed is bad enough. Reasons recorded are vague, without material, copy not given to assessee. The entire assessment is prayed to be made null & void.
Limitation period for deciding the case of the assessee for the A.Yr. 2012-13
That the Ld. AO decided the case of the assessee too earlier on 10.12.2019 though the time barring was on 31.12.2019.
AO is not justified in making the addition of Rs. 40,94,100/- in the hands of the appellant which is unwarranted in law since the entire cash deposited with the bank cannot be treated as income of the assessee. If all the requisite notices had been received by the assessee personally or if some more opportunity had been given to the assessee then he would have been able to produce the plausible explanation regarding cash deposited with the bank as every evidence are in the possession with the assessee which can be produced before the Hon’ble CIT(A), Faceless.
Copy of reasons recorded not supplied to the assessee
AO formed a false opinion regarding cash deposited by the assessee with his SB A/c as income of the assessee from undisclosed sources. There seems to be no reason to believe that the cash deposited by the assessee to his SB A/C is income of the assessee from some sources not disclosed to the department in the presence of ROI for the A.Yr. 2012-13. Copy of reasons to believe could not be provided to the assessee. In the facts and circumstances of the case the AO is not justified as AIR information (ITD System through Non Filers Monitoring System) is not sufficient for forming reason to believe by the AO regarding reopening of the assessment u/s 147 and issue of notice u/s 148 of the Act. There was no material with AO at the time of framing of reasons to believe. There existed no live link between the material and escaped income as there was no material with AO, even no bank statement. Copy of reasons recorded were never supplied to the assessee and approval obtained from worthy PCIT, Xxxxxxxxxx never supplied to the assessee.
How it will be known to the assessee if approval obtained or not. In this absence of these copies not supplied to the assessee, the assessment framed is quite bad in law and spirits. Assessee has written to the A.O. dated 10.12.2019 on mail id “delhi.ito29.6@incometax.gov.in” regarding copies of the same but AO never bothered to give copies.
Reasons recorded are far-fetched, not based on any cogent material. In the same way PCIT gave approval without material. The approval given is bad in law and spirits.In the opinion of the assessee if reasons were recorded and approval obtained .
Reason to believe is nothing but reason to suspect. The income of the assessee being a small truck owner is never chargeable to tax. Clause (a) of Explanation 2 of section 147 is applicable when income of the assessee is chargeable to tax and even then he has filed no return of Income. The reopening is bad. The initiation of proceedings u/s 147 of the Act is based on no material, No formation of belief of escapement of Income is there. This is only unmindful act of the AO. The assessment framed is bad in law and spirits.
Thus it was a mere suspicion of the AO that prompted him to initiate assessment proceedings under section 147, which is neither countenanced, nor sustainable in law.
In the case of ITAT, Delhi Bench decision in the case of Parveen Kumar Jain Vs ITO No. 133/D/2015 for the A.Yr. 2006-07 Dt. 22.01.2015 wherein it has been held as under:
Thus it is clear that the basic requirement for reopening of assessment that the AO must apply his mind to the materials in order to have reasons to believe that the income of the assessee escaped assessment was found to be missing when the AO proceeded to reopen the assessment.
At the time of formation of belief by the ITO that the income has escaped assessment, the material must indicate income escaping assessment rather than desirability of further probe in the matter which may or may not lead to income escaping the assessment.
The observations of the Hon’ble Supreme Court in the case of ‘ITO vs. Lakhmani Mewal Das’103 ITR 437(SC), were reproduced as under:
It may be desirable, from the point of view of revenue authorities, to examine the matter in detail, but then reassessment proceedings cannot be resorted to only to examine the facts of a case, no matter how desirable that be, unless there is a reason to believe, rather than suspect, that an income has escapement assessment.”
The reasons recorded are totally silent
Merely stating the reasons in a letter addressed by the AO, is not enough. Then, the reasons to believe escapement of income need to spell out all the reasons and grounds available with the AO for reopening the assessment. The reasons must also paraphrase any investigation report, which may form the basis of the reasons and any enquiry conducted by the AO thereon, as also the conclusions thereof.
In the case of CIT vs. Videsh Sanchar Nigam Ltd. (2012) 340 ITR 66 (Bom.) has held that though the reopening of assessment was within time, since the reasons recorded for reopening of the assessment were not furnished to the assesses till date the completion of assessment, the reassessment order cannot be upheld.
After 1.4.1989, the Assessing Officer has power to re-open, provided there is “tangible material” to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief. This is supported by Circular No. 549 dated 31.10.1989 which clarified that the words “reason to believe” did not mean a change of opinion – CIT vs. Kelvinator of India (320 ITR 546 / 228 CTR 488 / 187 Taxman 312)
The assessee has relied on the judgment of High court of Delhi in the case of “Signature Hotels (P) Ltd. 338ITR 51 (Delhi)” where in it was held that:
“The reasons and the information referred to were extremely scanty and vague. There was no reference to any document or statement except AIR information (ITD System through non filers monitoring system). The AIR ITD System through non filers monitoring system) could not be regarded as a material or evidence that prima facie showed or established nexus or link which disclosed escapement of income. The AIR information was not a pointer and did not indicate escapement of income. Further it was apparent that the assessing officer did not apply his own mind to the information and examine the basis and material of the information. The assessing officer accepted the plea on the basis of vague information in a mechanical manner. The commissioner also acted on the same basis by mechanically giving his approval; therefore proceedings under section 148 were to be quashed.
Reasons to believe
No bank statement was with the Assessing officer at the time of formation of belief and reasons recorded even it was not obtained at the time of making assessment u/s 144 of the Act. He formed the opinion for escapement of income without bank statement. PCIT gave approval without this very important document u/s 151 Hence the opinion framed, approval given and assessment framed all is bad, illegal to be made null and void.
Approval u/s 151 of the Income tax Act
The approval from the Principal Commissioner of Income tax, Xxxxxxxxxx has been obtained in a mechanical manner without any concrete finding, without looking at the bank account of the assessee. Without preparing separate notes, mere writing “I am satisfied“ is an abuse and misuse of powers enshrined in the Act. Regarding this issue assessee has relied on the Judgment of ITAT, Delhi Bench, ITA No. 988/Del/2018 in the case of Sunil Aggarwal Vs. ITO, Ward No. 1(3) (3), Haridwar.
The Hon’ble Supreme Court of India in the case of CIT Vs. S. Gayanka Lime and Chemical Ltd. Reported in (2015) 64 taxmann.com 313(SC) in the Head notes has held that (Section 151, read with section 148 of the Income tax Act,1961 – Income escaping assessment –Sanction for issue of notice (Recording of Satisfaction) – High court by impugned order held that where joint commissioner recorded satisfaction in mechanical manner and without application of mind to accord sanction for issuing notice u/s 148 , reopening of assessment was invalid – Whether special leave petition filed against impugned order was to be dismissed – Held ,yes ( in favor of the assessee)
The approval obtained from Pr. CIT, Xxxxxxxxxx was never supplied to the assessee neither on mail, nor on income tax portal and not in person and not by speed post which is mandatory requirement hence the entire assessment is prayed to be quashed.
Reasons to believe has to be supplied within a period of six years
The above decision of Delhi High Court is further followed by ITAT Delhi bench in the case of Shri Balwant Rai Wadhwa v. ITO, in I.T.A. No. 4806/Del/10. The ITAT bench held that if reasons are not supplied to the Assessee within the period of 6 years then it would be constructed that assessment has not been validly reopened.
In the case of the assessee in hand, the reasons to believe were not supplied by the AO to the assessee with in a period of six years rather could not be supplied on being asked by the Assessee for the copy of the reasons Dt. 10.12.2019.
ITO did not gathered any material before framing the assessment
In the facts and circumstance of the case the Ld. AO is not justified in framing the assessment u/s 144 without gathering any material as it is the prime duty of the AO to gather the sufficient material before making assessment. Which he failed to do so and decided the case in hurry. He has not checked the complete bank account before framing the best judgment assessment. The assessment framed u/s 144 without looking at the surrounding circumstances, without making field enquiries, without looking at the entire bank account of the assessee, without gathering any material, the assessment framed is bad.
AIR (ITD System Through Non Filers System) information made basis for reopening of the assessment
The information received from the department without independent enquiries is not sufficient for reopening the assessment u/s 147 of the Act.
In the facts and circumstances of the case the AO is not justified in relying only on the information of the department. Not making independent enquiries. He has not gathered any material before framing assessment u/s 144 of the Act. He has not checked the complete bank account before framing the best judgment assessment and even ignored the reply submitted by the assessee.
The Ld. AO is not justified without knowing the fact that assessee is in ownership of 10 Trucks and trucks plying income comes to the assessee which is in cash as well in bank. There is no other source of income with the assessee and he has not checked Form 26AS before deciding the case u/s 144 of the Act.
Only AIR information with the ITO that assessee has deposited cash with his saving bank account and formation of belief regarding escapement of income and recording of reasons is bad in law. In many cases the stand of the Hon’ble ITAT, Delhi is that there is no nexus between the cash deposit with the bank and escapement of Income. The assessee has relied on the judgment of Shri Inderjeet, Sohna Gurgaon, ITAT Delhi Dt. 3.12.2018 passed by a common order. It has been held that mere cash deposit in bank account is not sufficient to presume that it is a case of escapement of Income and formation of reasons to believe for escapement of Income and recording of the reasons is bad in law. First para of the assessment order clearly states that on the basis of AIR information notice u/s 148 was issued to the assessee dated 18.03.2019 which is bad enough without any corroborative evidence.
Cash deposited figures are different in Notice u/s 133(6) and Assessment Order
The Ld. AO is not justified in framing the assessment which is bad in law and spirits as notice u/s 133(6) was issued to the assessee with a figure of cash deposited which is quite different with the figures of cash deposited in the assessment order. Huge difference of INR 18,35,000/- is there.
Notice issued u/s 148
The notice u/s 148 is issued when definite information is there not for an enquiry. The notice has been issued on the presumption that the cash deposited with the bank is income of the assessee. This is only a presumption. The presumption however strong cannot take place of evidence.
Request for Fresh Start of the proceedings
The Hon’ble CIT(A), Faceless is requested further to start the proceedings at the stage when proceedings were concluded at the AO level in view of the judgment of Hon’ble Karnatka High court in Sri Shankar Khandasari Sugar Vs. CIT 193 ITR 669.
The revenue must act fairly in the matter of assessment as much as it is interested in collecting the tax. In the absence of any prejudice to the revenue and the basis of the tax under the Act being to levy tax, as far as possible, on the real income, the approach should be liberal in applying the procedural provisions of the act. An appeal is but a continuation of the original proceedings and what the Income tax officer could have done, the appellate authority could also do.
Reopening u/s 147 of the assessment is bad
The assessee has relied on the judgment of ITAT Delhi in the case of Ashok Kumar, Ghaziabad Vs. ITO Ward No. 1(1), Ghaziabad on 3.12.2018. ITA No. 2740/Del/2018.A.Yr. 2011-12 and other appeals decided with a common order wherein held the initiation of proceedings u/s 147 and issue of notice u/s 148 of the Act has been held invalid.
At the time of formation of belief by the ITO that the income has escaped assessment, the material must indicate income escaping assessment rather than desirability of further probe in the matter which may or may not lead to income escaping the assessment.
The observations of the Hon’ble Supreme Court in the case of ‘ITO vs. Lakhmani Mewal Das’103 ITR 437(SC), were reproduced as under:
It may be desirable, from the point of view of revenue authorities, to examine the matter in detail, but then reassessment proceedings cannot be resorted to only to examine the facts of a case, no matter how desirable that be, unless there is a reason to believe, rather than suspect, that an income has escapement assessment.”
Mere cash deposited information is not sufficient, not a prima facie belief that income is from undisclosed sources
Similarly in the case of CIT v. Indo Arab Air Services (2016) 130 DTR 78/ 283 CTR 92 (Delhi)(HC) it was held that mere information that huge cash deposits were made in the bank accounts could not give the AO prima facie belief that income has escaped assessment. The AO is required to form prima facie opinion based on tangible material which provides the nexus or the link having reason to believe that income has escaped assessment.
Reopening on borrowed satisfaction is bad
Re-opening based on borrowed satisfaction of the Assessing Officer is not valid – (CIT v. Greenworld Corporation 314 ITR 81)
Explanation 2 of section 147- The reopening u/s 147 of the Act is challenged
Authorizes the AO to reopen an assessment wherever there is an “understatement of income”, the AO is not entitled to assume that there is “understatement of income” merely because the assessee’s income is “shockingly low” and others in the same line of business are returning a higher income. The invocation of the jurisdiction u/s 147 on the basis of suspicions and presumptions cannot be sustained. (WP. No. 36483/2016, dt. 13.02.2017) (AY. 2012-13)
The reopening is bad only on the basis of cash deposited with bank not seen bank account. It is purely guess work of the AO that income has escaped. The AO proceeded on the fallacious assumption that bank deposits in cash constituted undisclosed income and overlooked facts that the cash deposits need not necessarily be the income of the assessee. It can be the gross receipts but entire cash deposits cannot be the income of the assessee. The assessee has relied on the judgment in the ITAT Delhi bench “A” Bir Bahadur Sijwali VS ITO , Ward 1,Haldwani Appeal No. 3814(Delhi) of 2011.
Assessee filed his ITR u/s 44AE(5)
Entire cash deposited with the bank is out of the gross receipts of truck plying and assessee is not required to maintain the books of Accounts when he has filed his ROI as per section 44AE of the Act. The cash deposited is part of the gross receipts of the assessee and assessee relies on section 44AE(5) of the Act.
Assessee holds sufficient proof for ownership of 10 Trucks during the F.Y. 2011-12 and sufficient proof for filing the ROI for AY 2012-13 with PAN ACXXX43XXH. There is no other income of the assessee during that year except the truck plying income. (Page no. 20-22 of the paperbook).
Regarding PAN of the assessee:
The filing with some other PAN; not with later one, non surrender of later PAN; PAN not changed with Bank, taking two PAN, not changed PAN with Bank is not fatal. The substance of the matter is filing of the return by the assessee with One PAN. What has to be seen is the substance and not the form and manner. The real substance is the Income earned by the assessee who is having two PANs out of innocence and filing of return with PAN which is in use regularly and paying taxes to the govt.
At the most, assessee has to file his return with one PAN (Regularly in use). He is unable to file the same return with two PAN. He filed his return with the PAN which was earlier obtained . Hence he got some other PAN (ANXXX35XXT) different from the earlier one (ACXXX43XXH). Assessee realizing the mistake started to use earlier PAN and nowhere and never used New PAN except bank account because bank account was opened for some astrological reasons .
Prayer
Prayer to the Hon’ble CIT (A), Faceless for production of all the documents
The demand raised by the AO is prayed to be deleted and assessment framed by AO to be made Void-ab-initio.
The Hon’ble CIT (A), Faceless is prayed to give a chance to produce all the evidences which could not be produced at the AO level so that assessee gets full justice as taxing statutes demand tax on earned income and not on income which was never earned. Tax is paid on the net income and not on the gross receipts.
The appellant also prays to produce additional evidence under Rule 46A of the Income Tax Rules, 1962 at the time of hearing or before it. Application and all the evidences are part of the Paper book.
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