The Chennai Bench of the Income Tax Appellate Tribunal (ITAT) has remanded a case involving additions of Rs. 2.31 crore back to the Assessing Officer (AO) for fresh adjudication, citing the need for appropriate enquiries into unexplained cash deposits and disallowances under Section 40(a)(ia) of the Income Tax Act.
JCR Traders (assessee) a partnership firm filed its return of income for the Assessment Year (AY) 2017-18 declaring a taxable income of Rs. 11,25,800. The case was selected for complete scrutiny under the Centralized Automated Scrutiny Selection (CASS).
The AO issued a notice and the assessee failed to respond to notices. The AO issued show-cause notice (SCN) to complete the assessment under Section 144 of the Income Tax Act, but the assessee did not comply with the SCN.
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The AO observed that the assessee had debited expenses, including an audit fee of Rs. 1,95,000 and interest & finance charges of Rs. 3,71,550, without deducting Tax Deducted at Source (TDS). The AO disallowed these expenses under Section 40(a)(ia) of the Act. The AO noted cash deposits of Rs. 2,14,94,744 which remained unexplained due to the assessee’s non-compliance.
The AO completed the assessment and determined a total income of Rs. 2,31,87,090, including disallowances under Section 40(a)(ia) and an addition for unexplained money under Section 69 of the Act.
Aggrieved by the AO’s order, the assessee appealed to the Commissioner of Income Tax (Appeals) [CIT(A)]. However, the CIT(A) dismissed the appeal for want of prosecution, as the assessee did not provide any representation or details.
Aggrieved by the order, the assessee filed an appeal before the ITAT. The assessee Contended that the cash deposit of Rs. 34,83,000 pertained to trading receipts and should not be treated as unexplained under Section 69. The assessee also contended that the disallowance under Section 40(a)(ia) should be restricted to 30% of the disqualified expenditure.
The two-member bench comprising S.S. Viswanethra Ravi (Judicial Member) and S.R. Raghunatha (Accountant Member) observed the lack of assistance from the assessee before both the AO and CIT(A).
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The tribunal observed that by considering the facts and in the interest of justice it was appropriate to remand the matter to the AO for fresh adjudication and directed the AO to conduct appropriate enquiries.
The tribunal also directed the assessee to furnish complete details before the Assessing Officer for completing the assessment process. The appeal of the assessee was allowed for statistical purposes.
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