SALONI JEWELLERS PVT LTD,MUMBAI vs. NATIONAL E-ASSESSMENT CENTRE-DELHI , MUMBAI

This is an appeal preferred by the assessee company against the order of the Ld. Commissioner of Income Tax (Appeals)/(NFAC), Delhi dated 07.02.2023 for the assessment year 2018-19.

At the outset, the Ld. AR of the assessee pointed out that the Ld. CIT(A)/NFAC has passed impugned order ex-parte qua assessee. It is noted that the assessee is a private limited company engaged in the business of trading and manufacturing jewelry like silver and gold items. The appellant filed original return of income u/s. 139(1) on 26.10.2018 declaring total income as “Nil” for A.Y. 2018-19. The assessee/appellant has taken loans from State Bank of India whereby the account amounting to Rs.129,87,70,130/- (approximately) was classified as declared as Non-Performing Asset (NPA category) on 28.07.2015. Therefore, according to Ld. AR, the appellant is a NPA 2 A.Y. 2018-19 Saloni Jewellers Pvt. Ltd. company wherein all the assets and bank accounts of the company are attached; and recovery proceedings are going on before the Debt Recovery Tribunal (DRT), Mumbai. Further the Ld. AR submitted that since the loan has been taken on the strength of hypothecated gold, raw-material (stock), no stock which have been attached can be sold without the permission of the SBI and the Tribunal.Thus, according to Ld. AR, the appellant company has been declared NPA since A.Y. 2016-17. And the Assessing Officer has passed the assessment order u/s. 143(3) r.w.s. 143(3A) and 143(3B) of the Income Tax Act, 1961 (hereinafter “the Act”) on 13.04.2021 by making two additions u/s 69 r.w.s. 115BBE of the Act as unexplained investment the closing stock of Rs.88,13,12,760/- which assessee contest; and according to assessee it is Rs.79,29,09,789/- and short-term borrowings of Rs.178,14,79,769/- as unexplained investment. Aggrieved by the assessment order, the appellant preferred an appeal before NFAC, for A.Y. 2018-19. According to Ld AR, the appellant being a loss-making company and even having its all accounts NPA does not have any staff working in their company as they are not in a position to pay salaries or afford any expenditure. And that the appellant company is closed down in terms of their business and is only functioning due to ongoing litigation and court cases against it. Therefore, the notices issued by the NFAC, Delhi on Income Tax portal or on the email-id was unnoticed and hence unattended. And the NFAC passed the impugned ex-parte order on 02.07.2023 confirming the action of AO. Aggrieved, the assessee is before us. And submitted that since assessee 3 A.Y. 2018-19 Saloni Jewellers Pvt. Ltd. was closed down from year 2015 and its assets are attached and loan recovery proceedings is going on against the assessee, and since the assessee didn’t receive the notice of hearing from office of Ld. CIT(A) and it was not able to appear/file relevant documents before Ld. CIT(A), who passed the ex-parte order. Therefore, he prays that one more opportunity may be given to assessee.

Per contra, the Ld. DR oppose the plea of the assessee for another innings before the Ld. CIT(A). According to him, sufficient opportunity was given to assessee, despite that assessee failed to comply. So according to him, no more opportunity be given to assessee.

We have heard both sides and perused the records. The main grievance of assessee is against the impugned action of Ld. CIT(A) dismissing the appeal of assessee exparte without hearing assessee. According to Ld. AR, assessee did not get copy of notice of hearing since its office was shut down from year 2015 onwards and assessee is facing DRT action (recovery of loan) and since assessee is in heavy loss and not able to employe staff, the office is normally shut down, so assessee didn’t receive any notice of hearing. Therefore, couldn’t appear before Ld. CIT(A) who passed the exparte order.

Be that as it may, we note that the Ld. CIT(A) has passed an exparte order. According to the Ld. CIT(A), he had giving sufficient opportunities of hearing to the assessee vide notices dated 29.09.2022, 4 A.Y. 2018-19 Saloni Jewellers Pvt. Ltd. 15.11.2022, 28.11.2022 and 10.01.2023 (final opportunity). And since no reply/submission has been filed by the assessee in response to the notices on four (4) dates (supra), he confirmed the action of the AO. The main grievance of the assessee is that the AO has passed the assessment order in the midst of Covid-19 Pandemic and the Ld. CIT(A) has passed the exparte order without hearing the assessee. Therefore, the Ld. AR prays that the appeal be restored back to the file of the Ld. CIT(A). The reason for the non-compliance to the notices issued by the Ld. CIT(A) according to the Ld. AR was that the notices were issued in September and November, 2022 and January, 2023. During this period, the assessee’s business was closed and there was nobody to receive the notices due to which the assessee was not aware of any notices from the office of the Ld. CIT(A). In the light of the above facts and taking note that from year 2015 onwards assessee’s account has been NPA and the SBI has initiated proceedings for recovery of the debt of more than 172 crores and its accounts as well as the properties have been attached, therefore, the assessee’s office was closed and therefore assessee was not aware of the notice of hearing from the Ld. CIT(A). Taking note of the aforesaid facts, we are inclined to set aside the impugned order of the Ld. CIT(A) and restore the appeal back to the file of the Ld. CIT(A), with a direction to give proper opportunity to the assessee and to pass reasoned order. The assessee is also directed to be diligent and file relevant documents/written submission before the Ld. CIT(A) and request for hearing if it desires as per Rules and Ld. CIT(A) to adjudicate the 5 A.Y. 2018-19 Saloni Jewellers Pvt. Ltd. grounds of appeal in accordance to sub-section (6) of section 250 of the Act.