The Ahmedabad Bench of Income Tax Appellate Tribunal(ITAT) quashed the assessment for failure to issue the required notice under Section 143(2)of Income Tax Act,1961 and unjustified additions.
Jivarajbhai Ramabhai Chaudhary,appellant-assessee, filed the appeal 63 days late due to an oversight by the Chartered Accountant. The delay was explained and not opposed by the revenue counsel. The delay was condoned and the appeal was heard on its merits.
The assessee contested the addition of Rs. 14,98,000 to income for unexplained cash deposits during the demonetization period. The Assessing Officer (AO) passed an ex-parte order under Section 144, adding deposits of Rs. 12,31,000 and Rs. 2,67,000 from two bank accounts.
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The assessee explained that the deposits were from cash sales of his agency business, “M/s. Babaramdev Sales.” The Commissioner of Income Tax(Appeals)[CIT(A)] reviewed the cash book and accepted Rs. 7,27,307 as opening cash balance, deleting that portion of the addition. However, the CIT(A) confirmed the remaining Rs. 7,70,693 and further added Rs. 3,05,000 to income, enhancing the assessed income.
The assessee raised several issues, including the invalidation of the return under Section 142(1), the assessment under Section 144, lack of notice under Section 143(2), and additions under Sections 69A and 251(2). Revised grounds filed on 25.07.2024 highlighted the invalidation of the return and assessment under Section 144 of the Act.
The assessee argued that the return could not be invalid due to its delay, citing that late returns were valid but attracted interest under Section 234A. The Department’s representative claimed the return was invalid under Section 139(9) but could not specify why. The ITAT agreed with the appellant, noting that belated returns were valid, and found the AO’s action unsustainable.
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The tribunal further noted that the AO had failed to issue the required notice under Section 143(2), rendering the assessment invalid.
The appellate tribunal also found that the AO had made a mistake by not issuing the required notice under Section 143(2) before completing the assessment.
A single member bench comprising Annapurna Gupta(Accountant Member) found that the CIT(A) had improperly accepted part of the cash book while rejecting the rest without proper justification. It ruled that either the entire cash book should have been accepted or rejected, and therefore, the addition to the assessee’s income was unjustified. The appeal was allowed.
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