9911796707
TMI Blog2025 (1) TMI 1171X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 250 of the Act dated 12.02.2024 is erroneous both on facts and in law to the extent the order is prejudicial to the interest of the appellant. 2. The Ld.CIT(A) erred in upholding the order of assessment passed by the AO on 29.12.2019 without actually appreciating the facts of the case and submissions made by the assessee, which is against the provisions of law and principles of natural justice. 3. The Ld.CIT(A) ought to have appreciated the fact that the appellant has reasonable cause for non-compliance to notice issued during the assessment proceedings and that completing the assessment by the AO by applying the provisions of Section 144 of the Act is not correct, which is liable to be quashed. 4. The Ld.CIT(A) ought to have quashed the assessment made u/s 144 of the Act and ought to have appreciated the fact that when the assessment itself is invalid, the additions made in such assessment are invalid and are liable to be deleted. 5. The Ld.CIT(A) erred in upholding the addition of Rs. 27,70,67,789/- made towards ad-hoc 10% of sale of services, which is purely based on surmised and assumptions. 6. The Ld.CIT(A) ought to have appreciated the fact that the appellant h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tute any other points to the grounds of appeal at any time before or at the time of hearing of the appeal. 3. The brief facts of the case are that the assessee, M/s Meena Jewellers Extension Private Limited is into the business of trading in jewellery, filed its return of income, for the A.Y.2017-18 on 07.11.2017, declaring Nil income, after carrying forward current year losses of Rs. 37,31,97,233/-. The case was selected for scrutiny and notice u/s 143(2) of the Income Tax Act, 1961 ("the Act") dated 08.08.2018 and notice u/s 142(1) of the Act were issued from time to time to the assessee company through ITBA portal, calling for relevant information / documents. However, the assessee neither appeared, nor filed any details. Therefore, the AO issued final show cause notice dated 29.11.2019 and called upon the assessee to explain as to why the assessment proceedings shall not be completed u/s 144 of the Act, based on the material / information available on record. Since there is no response and compliance from the assessee, the AO has completed the assessment u/s 144 of the Act on 29.12.2019 and determined total loss of the assessee under normal provisions at Rs. 9,61,29,444/-, by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imation is based on the material available on record, which also involved certain degree of guess work. The Ld.CIT(A) had also upheld the additions made by the AO towards estimation of net profit on total turnover by following the decision of Hon'ble Supreme Court in the case of Commissioner of Sales Tax Vs. H.M. Esufali H.M.Abdulali [1073] 90 ITR 271(SC) and observed that in this line of business, normal profit margin would be in the range of 43.5% in 2013 and 42.6% in 2017. Therefore, the AO has reasonably adopted 10% net profit, based on the material available on record. Therefore, the findings and facts recorded by the Assessing Officer, while estimating net profit on sales turnover cannot held to be on higher side. The Ld.CIT(A) had also upheld the additions made towards liabilities u/s 68 of the Act, by following certain judicial precedents and held that when the assessee had not filed relevant evidences to prove the identity, genuineness and creditworthiness of the parties, the additions made by the AO towards liabilities u/s 68 of the Act needs to be upheld. Likewise, the Ld.CIT(A) upheld the additions made by the AO towards cash deposits during the demonetizaiton period u/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hough the assessee has maintained regular books of accounts and the money deposited in their bank accounts were recorded in the books of accounts. The assessee had also explained the source for the cash deposited, out of sales declared for the relevant period. Since the assessee has not filed relevant evidences before the Assessing Officer, the Assessing Officer has made additions towards total cash deposits made during the demonetization period. These facts need to be examined by the Assessing Officer. Therefore, the matter may be set aside to the file of the Assessing Officer to give another opportunity of hearing to the assessee. 8. The learned DR, on the other hand, supporting the order of the Ld.CIT(A) submitted that admittedly, assessment proceedings before the Assessing Officer are ex-parte. The assessee neither appeared nor filed any details, therefore, we cannot find any fault with the best judgment assessment order passed by the Assessing Officer. Further, the assessee could not file any details before the Ld.CIT(A). Even though the assessee claims that it has filed relevant details, from the observation of the Ld.CIT(A), it is undoubtedly clear that the assessee could n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear under consideration and given the chance, the assessee will produce all evidences to justify the case. 10. Having considered the arguments of both the sides, we find that admittedly, the AO has made additions towards net profit from business by estimating 10% profit on total turnover of the assessee. Although the AO has estimated profit from the business, there is no finding from the AO in respect of books of accounts maintained for the relevant assessment year and its correctness. It is a well settled principle of law by the decision of various courts that before going for best judgement assessment u/s 144 of the Act, the AO needs to reject the books of accounts of the assessee with valid reason. In the present case, although the AO has discussed the financial results of the assessee declared for the impugned assessment year and observed that the net profit margin of 1.95% declared by the assessee is very low, there is no reason as to how the Assessing Officer has arrived at said conclusion with relevant evidences, including comparable cases and its own financial statement for earlier years. In our considered view, unless the Assessing Officer reject the books of accounts wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sh deposited during the demonetization period is out of sales recorded in the books of accounts of the assessee during the relevant period. The assessee has maintained books of accounts and explained sources for cash deposited. The bank accounts considered by the AO are part of regular books of accounts of the assessee and therefore requested to set aside the issue to the file of the AO for examination of the facts. In our considered view, the AO has made additions towards total cash deposited during demonetization period without any analysis, whether it is recorded in the books of accounts of the assessee or it is unexplained money, not recorded in the books of accounts of the assessee, to make additions u/s 69A of the Act. In our considered view, in order to make additions u/s 69A of the Act, the AO has to give a clear finding that the assessee is owner of the money and could not explain the source of the said money to the satisfaction of the AO. Since the AO has not recorded any findings as to how the money is as in the nature of unexplained money and made additions only on the basis of bank statements, in our considered view, this issue also needs to go back to the file of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... additions made by the AO towards estimation of profit, addition towards unexplained cash credit u/s 68 of the Act and also additions made towards cash deposited during the demonetization period. 16. In the result, appeal filed by the assessee in ITA 329/Hyd/2024 and 285/Hyd/2024 are allowed for statistical purpose. ITA No.330/Hyd/2024 17. The facts and issues involved in this appeal filed by the assessee are identical to the facts and issues, which we had considered in ITA No.328/Hyd/2024 for the A.Y.2017-18. But for figures, the facts and issues involved in this appeal are identical to the issues, which we had considered in ITA No.328/Hyd/2024 for the A.Y.2017-18. The reasons given by us in preceding paragraph No.8 to 13 shall mutatis-mutandis apply to this appeal, as well. Therefore, for similar reasons, we set aside the order of the Ld.CIT(A) and restore the issue to the Ld.CIT(A) for denovo consideration of the issue. The Ld.CIT(A) is directed to reconsider the issue, after providing reasonable opportunity of hearing to the assessee. Needless to say, the assessee shall appear and file necessary details, without seeking any adjournment. 18. In the result, appeal filed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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