This appeal pertains to an order passed by the Ld. CIT(A)/NFAC, Delhi, on 27th May 2024, related to assessment year 2013-14. The case has undergone multiple rounds of litigation, with the current appeal being the second round before the Tribunal. The assessee has filed various details before the Assessing Officer though not according to his satisfaction. Since the assessee in the instant case is engaged in plotting business and full details were not given before the Assessing Officer in the manner in which it should have been given as per the direction of the Assessing Officer and since the assessment year involved is assessment year 2013-14 which is very old and litigation must come to an end, therefore, considering the totality of the facts of the case and in the interest of justice, we are of the considered opinion that the estimation of income @ 10% of the total turnover of Rs.2,23,77,000/- as mentioned by the Assessing Officer in the assessment order will meet the ends of justice.
Background:
The appellant, Tanaji Parilal Gawade, is an individual and the proprietor of M/s Hindavi Developers, which is engaged in the business of developing and selling plots in rural areas. The appellant filed his return for the assessment year 2013-14 on 30th September 2013, declaring a total income of Rs.12,82,228/-. The return was processed under Section 143(1) of the Income Tax Act, 1961 (the Act) on 16th January 2014. The case was subsequently selected for scrutiny under the CASS norms, and statutory notices were issued to the appellant.
Despite several notices, the appellant did not attend the hearings and failed to furnish the necessary documents in response to the notice dated 03.11.2015. As a result, the Assessing Officer proceeded to complete the assessment under Section 144 of the Act, relying on the available records.
Key Issues Raised:
- Non-filing of Tax Audit Report:
The appellant did not submit the tax audit report, although the turnover exceeded Rs.1 crore. - Deduction under Section 80C:
The appellant claimed a deduction of Rs.1,50,000 for interest paid on a housing loan. However, the supporting certificate was dated for the next assessment year, and lacked details about the property for which the loan was granted. - Unexplained Cash Deposits:
Cash deposits of Rs.1,13,23,000/- were made in the bank, which the appellant claimed were advances from customers for the sale of plots. The Assessing Officer, however, disallowed these as unexplained. - Sundry Creditors:
An amount of Rs. 62,29,700/- was shown as sundry creditors in the balance sheet. The appellant was unable to provide sufficient details as requested by the Assessing Officer, leading to an addition of the same amount to the total income. - Disallowance of Expenses:
Several business expenses, such as interest payments, depreciation, printing and stationary expenses, and entertainment expenses, were disallowed due to insufficient documentation.
First Appeal:
The appellant filed an appeal before the Ld. CIT(A), challenging the assessment made under Section 144. However, the appeal was dismissed for lack of prosecution. The appellant then filed a second appeal before the Tribunal, which, in turn, remitted the case to the Ld. CIT(A) for a fresh hearing.
Order by the Ld. CIT(A) / NFAC:
The Ld. CIT(A) upheld the action of the Assessing Officer in completing the assessment under Section 144 due to the appellant’s failure to provide the necessary details. The appellant’s explanation was not found satisfactory for the various additions, including cash deposits and sundry creditors, and the appeal was thus dismissed.
Appeal Before the Tribunal:
The appellant raised the following issues before the Tribunal:
- Dismissal for Lack of Proper Hearing:
The appellant contended that the appeal was dismissed without proper hearing, despite a request for a personal hearing via video conference. - Completion of Assessment under Section 144:
The appellant argued that the assessment was completed under Section 144 despite providing certain submissions during the assessment proceedings. - Disallowance of Deductions and Additions:
The appellant requested relief on various grounds, including the disallowance of interest on housing loan, cash deposits, sundry creditors, and other business expenses.
Arguments by the Appellant:
The appellant’s counsel emphasized that the business operations primarily involved cash transactions due to the rural nature of the business. The appellant had filed relevant documents, including copies of agreements with creditors, bank statements, and major expenses incurred. However, these were not deemed sufficient by the Assessing Officer. Furthermore, the appellant’s books of account were audited under Section 44AB of the Act, and no defects were pointed out.
In regard to the unexplained cash deposits, the appellant contended that the deposits were received from customers for booking and installment amounts related to the sale of plots. The Assessing Officer, however, did not accept this explanation and made the addition.
Regarding sundry creditors, the appellant had provided the necessary agreements showing the land purchase and amounts payable. The appellant argued that the Assessing Officer could have verified the information using his powers, but failed to do so.
Arguments by the Department (Ld. DR):
The Ld. DR argued that despite multiple opportunities, the appellant had failed to submit the necessary documents. The Assessing Officer, therefore, made the additions based on the available information and the appellant’s partial compliance. The DR contended that the Assessing Officer had passed a reasonable order, and the additions should not be disturbed.
Tribunal’s Observations and Ruling:
After reviewing the case, the Tribunal observed that, It is an admitted fact that the assessee during the course of assessment proceedings has filed certain details but not filed the details as required by the Assessing Officer. The assessee in his submission has explained the source of such cash deposits as amounts received towards booking amount, installment amount and advances received from selling of plots from the various customers mainly from the rural areas. The assessee has also filed the copy of sundry creditors against the land purchase and the copy of purchase agreements as per its submission on 11.12.2015. Similarly, vide letter dated 08.03.2016 filed before the Assessing Officer, the assessee has again explained the cash deposited in the bank account as against the payments received on booking amount, installment amount, advances received from selling of plots from the various customers, etc. The assessee has also filed Xerox copy of certain major expenses such as advertisement, development expenses, petrol and diesel expenses, machinery hiring charges vide letter dated 11.12.2015 filed before the Assessing Officer. At the same time, the requisite details in the format as asked by the Assessing Officer were not filed to the satisfaction of the Assessing Officer.
The assessee has filed various details before the Assessing Officer though not according to his satisfaction. In our opinion and considering the nature of business carried on by the assessee and the turnover disclosed which is mainly received in cash and since it is also not the case of the Assessing Officer that total deposits in the bank account both cash and through cheques / DD etc. far exceeds the turnover disclosed by the assessee, the addition of the entire cash deposited in the bank account appears to be on the higher side. So also, the disallowance of sundry creditors especially when the assessee has given Ledger copy of various parties from whom land was purchased. At the same time, by not furnishing the full details as per the satisfaction of the Assessing Officer, the claim of the assessee that no addition is called for cannot be accepted. Since the assessee in the instant case is engaged in plotting business and full details were not given before the Assessing Officer in the manner in which it should have been given as per the direction of the Assessing Officer and since the assessment year involved is assessment year 2013-14 which is very old and litigation must come to an end, therefore, considering the totality of the facts of the case and in the interest of justice, we are of the considered opinion that the estimation of income @ 10% of the total turnover of Rs.2,23,77,000/- as mentioned by the Assessing Officer in the assessment order will meet the ends of justice. ITAT, therefore, direct the Assessing Officer to estimate the income @ 10% of sale of Rs.2,23,77,000/- which comes to Rs.22,37,700/-. Since the assessee has filed a copy of the interest certificate from the bank showing the repayment of principal amount of Rs.72,643/- and interest amount of Rs.3,59,357/- totaling to Rs.4,32,000/- for the period between 01.04.2012 to 31.03.2013 which was also filed before the Ld. CIT(A) , ITAT directs the Assessing Officer to allow the consequential deduction as per the provisions of section 80-C of the Act and interest on self occupied house property. The grounds raised by the assessee are accordingly partly allowed.
Final Words:
The Tribunal’s order provides relief to the appellant, particularly in terms of the excessive additions made to the income. The case highlights the importance of complying with procedural requirements, even if the taxpayer has made partial submissions, and the need for the Assessing Officer to consider all available evidence before making significant additions.
The appeal was partly allowed, with directions for the Assessing Officer to revise the assessment in light of the Tribunal’s findings.
