e-Assessment proceedings can lead to erroneous assessment if AO not able to understand transactions and accounts without a personal hearing
ABCAUS Case Law Citation:
ABCAUS 3263 (2020) (02) HC
Important case law relied upon by the parties:
Smt. Shrilekha Banerjee Vs. CIT 1964 AIR SC 697
In the instant case, a Writ Petition had been filed under Article 226 of the Constitution of India seeking to quash the impugned order passed by the Assessing Officer in respect of the amount received by the petitioner post demonetization.
The petitioner submitted that regular returns were filed for the Assessment Year 2017-18. After the returns were filed, proceedings were taken up and notice for completing the assessment was issued under Section 143(2) followed by notices under Section 142(1) of the Income Tax Act 1961 (the Act).
The petitioner responded to the notices pursuant to which the impugned assessment order had been passed.
The AO concluded that the cash collected by the petitioner during the demonetisation period was huge and remained unexplained by the petitioner and therefore same was liable to be treated as unaccounted money in the hands of the petitioner under Section 69A of the Act. Therefore, the AO passed the impugned order making the petitioner liable to tax at the maximum marginal rate of tax by invoking Section 115BBE of the Act placing reliance on the decision of the Honourable Supreme Court.
The Petitioner submitted that the amount which was sought to be treated as unexplained income in the impugned order was nothing but the collection made from regular chit fund business of the petitioner.
It was the contention of the petitioner that in the impugned order, the respondent Deputy Commissioner had erroneously came to a conclusion that the petitioner had not properly explained the deposit of cash collected during the demonetization into their account and that the petitioner had claimed the source of cash deposit during demonetization as the accumulated opening cash balance wrongly.
The Petitioner had contended that the impugned order, it had been held that the petitioner had not properly explained the source and the purpose of huge cash along with party wise break up as was asked vide notice u/s 142(1) of the Act. But the informations were furnished very early as per the formats requested by the AO. He further submitted that the petitioner had closing balance of cash on hand as on 31.10.2016 which would consist of both demonetized and non-demonetized cash until then and thereafter, the petitioner received further cash deposit from the various sources out of which a sum had already been deposited before the demonetization.
According to the petitioner, details which were called for were duly furnished therefore the observation made in the impugned order that the petitioner had not properly explained could not be countenanced. He further submitted that the petitioner was governed by the Provisions of Chit Fund Act, 1982 and State Chit Funds Rules, as per which the petitioner was required to maintain the ledger details for each of the subscribers and the amount deposited by the petitioner was only out of the amounts collected which were reflected in the records under the Act.
The petitioner therefore submitted that the impugned order can be set aside and the case be remitted back to concerned officer to pass fresh orders after considering the records filed by the petitioner.
The Revenue submitted that for the Assessment Year 2017-18 onwards, assessments are through e-proceedings. The Income Tax Department has developed an e-proceedings facility, wherein a simple method of communication between the department and assessee has been devised negating the visit by the assessee or his representatives to the Department. The information which are loaded will be scrutinized and appropriate orders will be passed. He further submitted that is was open for the petitioner to call for the report of the respondent as per note on e-proceedings and the Commissioner (Appeals) has ample powers to pass appropriate orders.
e-Assessment proceedings can lead to erroneous assessment without personal hearing
The Hon’ble High Court though lauded the steps taken by the Income Tax Department to pave way for an objective assessment without human interaction, but pointed out that at the same time, such proceedings can lead to erroneous assessment if officers are not able to understand the transactions and statement of accounts of an assessee without a personal hearing.
The Hon’ble High Court stated that the AO should have to be therefore at least called for an explanation in writing before proceeding to conclude that the amount collected by the petitioner was unusual.
The Hon’ble High Court stated that since the assessment proceedings no longer involve human interaction and is based on records alone, the assessment proceeding should have commenced much earlier so that before passing assessment order, the respondent assessing officer could have come to a definite conclusion on facts after fully understanding the nature of business of the petitioner. However, in the instant case the assessment proceeding commenced much later towards the end of the period prescribed under section 153 of the Act.
The Hon’ble High Court opined that e-assessment proceeding would require proper determination of facts by proper exchange and flow of correspondence between the petitioner and the respondent Assessing Officer.
Accordingly, the Hon’ble High Court set aside the impugned order and the case was remitted back to the AO to pass a fresh order.
The Hon’ble High Court stated that since the Government of India has done away with the human interaction during the assessment proceedings, it is expected that the petitioner will clearly explain its stand in writing so that the respondent assessing officer can come to an objective conclusion on facts based on the records alone.
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