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2014 (7) TMI 721 - HC - Income TaxService of notice u/s 282 for scrutiny assessment u/s 143(2) – Loss incurred because of drop in value of closing stock – Held that:- The questionnaire/notice sent by the AO to the assessee which mentioned that the notice u/s 143(2) had been duly received by the assessee on 31.10.2001 was not controverted during the assessment proceedings - the conclusion of the CIT that the assessee had duly received the notice in question on 31.10.2001 cannot be faulted. - the contention that the petitioner cannot be precluded from raising the objection as to receipt of notice since Section 292BB of the Act was not in force during the relevant Assessment Year is also not acceptable. Best judgement assessment - whether arbitrary and unreasonable - assessee claimed drop in the value of the closing stock and shortage in stocks. - Held that:- Such losses were clearly an aberration and in absence of sufficient material could not be accepted by the Assessing Officer in a best judgment assessment, especially where there was no material to substantiate the loss as declared in the returns and the statement of accounts furnished along with it. The Assessing Officer, therefore, rejected the loss as returned by the assessee and in our view, rightly so. Increase in sundry creditors and unsecured loans – Held that:- The AO also made additions on account of increase in sundry creditors and unsecured loans - assessee could easily obtain confirmation of outstanding balances from third parties, however, no confirmation was supplied to the AO - The scale of operations of the assessee during the year was not materially different from that in the preceding year, and in the circumstances a significant increase in the sundry creditors and unsecured loans was clearly unexplained and in the circumstances the Assessing Officer added the same u/s 68 of the Act - AO also added the increase in the account of the partners - The assessee attempted to explain the same by stating that the additions were from the funds withdrawn by the partners – the individual accounts of the partners which could have substantiated claim were, apparently, not produced before the AO - the explanation was also not accepted – thus, there was no infirmity in the order – Decided against Assessee.
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