NFAC | HC Upholds Reassessment

The Madras High Court while upholding the income tax reassessment held that the assessee had not submitted the documents sought for by the National Faceless Assessment Centre (NFAC) and only computation of income and bank accounts were furnished, without any split up details with regard to sales made and the cash deposits.

The bench of Justice Krishnan Ramasamy has observed that only after providing sufficient opportunities to the Petitioner, the reassessment order came to be passed and therefore it cannot be that the order passed is in violation of principles of natural justice. If the Petitioner is so aggrieved by the impugned order, he could very well file an Appeal before the Appellate authority to substantiate its case.

Background

The petitioner/assessee is a partnership firm and a sub-dealer/Authorised Service Center to the authorised dealer of Bajaj Two Wheelers viz., M/s.VSG Motors. The Petitioner collects the amount payable from the purchasers and pays the same to the authorised dealer i.e., M/s.VSG Motors.

During the Assessment Year 2018-19, the Petitioner had collected an amount of Rs.1,96,49,455 from various customers for sale of two wheelers, which was deposited in its Bank account and thereafter the said amount was paid to the authorized dealer.

A fire accident took place in the Petitioner’s business premises and all the stocks, books, records and computers got totally damaged, due to which the Petitioner was not able to prepare accounts. On account of the loss incurred, the Petitioner stopped its business. While so, a Show Cause Notice was issued to the petitioner.

As the Petitioner’s partners were facing financial difficulties, they could not file any response and subsequently order under Section 148A(d) was passed and Notice under Section 148 was issued.

On receipt of the notice, the Petitioner immediately submitted its reply intimating the fire accident and sought one month’s time. Another notice under Section 142(1) was issued by the department, for which the petitioner submitted its reply, enclosing the bank statement.

The department again issued Show Cause notice to the Petitioner on 23.02.2024. The Petitioner has submitted its reply on along with confirmation letter from M/s.VSG Motors, enclosing copies of GST Returns of M/s.VSG Motors. But the department has passed the assessment order. The documents relating to M/s.VSG Motors and other documents called for by the Department were available with them and therefore seeks to remand the matter back to the Respondent for reconsideration.

Argument

The department contended that initially the Respondent issued Show Cause Notice dated 24.08.2023, to furnish nature and source of cash deposits, computation of income, copy of ITR, Copy of Bank Statements and other financial reports & nature of business activities of contractual receipt during the financial year 2018-19, for which the Petitioner sought one month time and even after the expiry of one month.

The department urged that the Petitioner had not furnished the documents sought for by the department and therefore another show cause notice dated 24.11.2023 was issued to the Petitioner, for which the Petitioner submitted its reply on 30.11.2023, furnishing only computation of income and bank accounts and no split up details with regard to the sales and how the cash amount was received were furnished to the Respondent.

The department contended that instead of submitting the documents sought for by the Respondent, they have given frivolous reply and therefore impugned order came to be passed. If the documents pertaining to M/s.VSG motors are available, they can file it very well before the Appellate authority by way of filing an Appeal against the order.