The Ahmedabad Bench of Income Tax Appellate Tribunal ( ITAT ) remanded the case to the Assessing Officer ( AO ) for re-examination of cash deposits and bank entries due to improper assessment. A cost of Rs. 20,000 was also imposed for non-compliance, to be paid within two weeks before the AO could proceed further.
Shree Harekrishna Medical Store,appellant-assessee,was a partnership firm that failed to file its original income tax return for the relevant year. In response to a notice issued under Section 142(1) on March 12, 2018, it filed a belated return on September 23, 2019, declaring a loss of Rs.5,790.
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During assessment, the AO found an unexplained cash deposit of Rs.10,90,000 during the demonetization period. Despite repeated notices, the assessee did not respond, leading to an ex-parte assessment under Section 144 on December 23, 2019, with the income determined at Rs.59,52,030.
Dissatisfied with the AO’s order, the assessee filed an appeal before the Commissioner of Income Tax (Appeals)[CIT(A)],which was later dismissed.The assessee then appealed before the tribunal.
The appeal was delayed by 220 days. The assessee stated that the e-mail ID in Form No. 35 belonged to the Chartered Accountant ( CA ), who did not respond to communications or inform the assessee about the CIT(A)’s order. The delay was caused by the CA’s inaction, and the assessee only became aware of the order on 01.07.2024. Given the situation, the tribunal agreed to condone the delay.
The Tribunal considered the submissions and noted that the assessee had filed documents with the return on 23.09.2019, which the AO acknowledged but did not address in the assessment order. The AO added all credit entries from the bank, including cash and cheque deposits, to the income, without accounting for the debit entries. Even with non-compliance, the AO incorrectly treated the entire bank credits as income. The CIT(A) dismissed the appeal without reviewing the merits.
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The two member bench comprising T.R.Senthil Kumar ( Judicial Member ) and Narendra Prasad Sinha ( Accountant Member ) remanded the matter to the AO, instructing him to allow the assessee a chance to explain the bank entries. The assessee was directed to comply and avoid seeking adjournments. If non-compliance persisted, the AO could decide based on the bank transactions.
The tribunal found the explanation for non-compliance insufficient and noted no action had been taken against the CA. A cost of Rs.20,000 was imposed on the assessee, payable within two weeks, before the AO could proceed.
Ultimately,the appeal filed by the assessee was allowed for statistical purposes.
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