M/S. BASE INDUSTRIES LTD.,SILVASSA vs. THE INCOME TAX OFFICER, VAPI WARD -1, VAPI

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND DR. ARJUN LAL SAINI, ACCOUNTANT MEMBER ITA No. 1581/AHD/2013 & ITA No.2422/AHD/2016(AY 2004-05) (Hearing in Virtual Court) M/s Base Industries Ltd., (1) Income Tax Officer B/h Hanuman Mandir, Nr. Canal, Ward-1, Vapi, 2ndFloor, Demini Road, Dadra, Silvassa- Shivam Commercial 396230 Complex, N.H.No.8, PAN : AACCR 6479 B Vapi e- Vs Gujarat mail:baseindustriesltdsilvasa@gmail.com (2) ACIT,Vapi Circle, Fortune Square-II, 7th Floor, Room No.704, Daman Road, Chala, Vapi- 396191 Assessee / appellant Revenue /respondent

Assessee by Shri Salil Kapoor, Advocate Revenue by Shri Sreenivas T. Bidari – CIT -DR Date of hearing 06.09.2021 Date of pronouncement 08.09.2021 Order under section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER: 1. These two appeals by same assessee are directed against the separate orders of ld. Commissioner of Income tax (Appeals), Valsad dated 15.03.2013 and 02.07.2016 for assessment year (AY) 2004-05. In ITA No.1581/AHD/2013 the assessee has challenged the addition in quantum assessment and validity of re-opening under section 147 of the Income Tax Act, 1961(

ITA No.1581/AHD/2013 (AY 13-14)& ITA No.2422/AHD/2016 M/s Base Inds. Ltd. ‘the Act’). In ITA No.2422/AHD/2016 the assessee challenged the penalty levied under section 271(1)(c) of the Act. Thus,certain facts in both the appeals are common, therefore, both the appeals were clubbed, heard together and are decided by common order to avoid the conflicting decision. In ITA No.1581/AHD/2013, the assessee has raised the following grounds of appeal:- “1. On appreciation of the facts and circumstances of the case the Learned Commissioner of Income Tax (Appeals) has erred in passing the appellate order without granting the appellant an opportunity of being heard. The action of the Learned Commissioner of Income Tax (Appeals) is contrary to the facts and circumstances of the case and prejudicial to the appellant. 2. On appreciation of the facts and circumstances of the case the Learned Commissioner of Income Tax (Appeals) has erred in confirming the action of the Learned Assessing Officer in making addition of Rs.1,66,300/- on account of depreciation. The action of the Learned Commissioner of income Tax (Appeals) is contrary to the facts and circumstances of the case and law and deserves to be deleted. 3. On appreciation of the facts and circumstances of the case the Learned Commissioner of Income Tax (Appeals) has erred in confirming the action of the Learned Assessing Officer in making addition of Rs.11,95,000/- out of share application money treating the same as income from undisclosed sources. The action of the Learned Commissioner of Income Tax (Appeals) is contrary to the

ITA No.1581/AHD/2013 (AY 13-14)& ITA No.2422/AHD/2016 M/s Base Inds. Ltd. facts and circumstances of the case and law and deserves to be deleted. 4. On appreciation of the facts and circumstances of the case the Learned Commissioner of Income Tax (Appeals) has erred in confirming the action of the Learned Assessing Officer in making addition of Rs.7,19,60,000/- out of share capital received treating the same as income from undisclosed sources. The action of the Learned Commissioner of income Tax (Appeals) is contrary to the facts and circumstances of the case and law and deserves to be deleted. 5. On appreciation of the facts and circumstances of the case the Learned Commissioner of Income Tax (Appeals) has erred in confirming the action of the Learned Assessing Officer in making addition of Rs.1,37,915/- treating the same as unverifiable purchases. The action of the Learned Commissioner of income Tax (Appeals) is contrary to the facts and circumstances of the case and law and deserves to be deleted. 2. Vide application dated 26.08.2021field on 04.09.2021, the assessee has also raised following additional grounds:- “Ground 8: “That in view of the facts and circumstances of the case, notice issued u/s 148 and the reassessment order passed u/s 143(3) r.w.s. 147 of the Income Tax Act, 1961 (“the Act”) are illegal, bad in law, barred by time limitation and without jurisdiction.” Ground 9: “That in view of the facts and circumstances of the case, notice issued u/s 148 and the reassessment order passed u/s 143(3) r.w.s. 147 are illegal bad in law as the approval u/s 151 of the Act is invalid and bad in law. That the purported approval has been granted without any application of mind and therefore, the same is not in terms of the provisions of Section 151”

ITA No.1581/AHD/2013 (AY 13-14)& ITA No.2422/AHD/2016 M/s Base Inds. Ltd. Ground 10: “That in view of the facts and circumstances of the case, the assessment order and the additions/disallowances made therein are illegal, bad in law and without jurisdiction as no notice u/s 1143(2) has been served as per the provisions of law and the Income Tax Act” Ground 11: “That in view of the facts and circumstances of the case, the AO has erred on law and in facts in denying the Assessee deduction u/s 80IB of the Act when the Assessee was entitled to claim the same. The AO has erred on facts and in law in holding that Assessee is not eligible for deduction u/s 80IB” Ground 12: “That in view of the facts and circumstances of the case, the assessment order as well as the order of CIT(Appeals) have been passed in gross violation of principles of natural justice as no adequate and reasonable opportunity was provided to the Assessee.” Ground 13: “That in view of the facts and circumstances of the case, the assessee was not given reasonable opportunity to present its case and the additions have been made in a hurried manner and against the principles of natural justice.” Ground No.14: “That, without prejudice, in view of the facts and circumstances of the case, the Assessee was also prevented buy reasonable and sufficient cause for not producing relevant documents/evidences/material and details before the AO.”

In ITA No.2422/AHD/2016, the assessee has raised the following ground grounds:-

“01. The order imposing penalty U/s 271(1)(c) of the Act is contrary to the facts of the case and prejudicial to the Law. The appellant company has neither concealed its income nor submitted any inaccurate particulars of income and the action of the Learned Commissioner of Income Tax

ITA No.1581/AHD/2013 (AY 13-14)& ITA No.2422/AHD/2016 M/s Base Inds. Ltd. (Appeals) is contrary to the facts of the case and law and deserves to be deleted.

Vide application dated 27.08.2021 field on 08.09.2021 the assessee has raised following additional grounds:

“Ground 5: “That in view of the facts and circumstances of the case, the notice issued under section 271(1)(c)/274 of the Act, and the order passed under section 271(1)(c) of the Act are illegal, bad in law and without jurisdiction.”

Ground 6: “That in view of the facts and circumstances of the case, no satisfaction has been recorded while completing the assessment proceedings, hence the notice issued under section 274 of the Act, and the order passed under section 271(1)(c) of the Act are illegal, bad in law and without jurisdiction.”

Ground 7: “That in view of the facts and circumstances of the case, the penalty has been initiated vide notice under section 271(1)(c) of the Act without any specific charge, hence, the said notice and the order passed under section 271(1)(c) of the Act are illegal, bad in law and without jurisdiction.”

ITA No.1581/AHD/2013 (AY 13-14)& ITA No.2422/AHD/2016 M/s Base Inds. Ltd. name and style of Base Industries Ltd.[formerly known as Ramkrishna Filament Ltd.] This was the first year of operation by the newly set up industrial undertaking. The assessee is also engaged in the business of trading of circulating knitted fabrics. The assessee filed its return of income for assessment year (A.Y.) 2004-05 on 31.010.2004 declaring nil income. The case of assessee was reopened under section 147 of the Act. The notice under section 148 dated 19.102010 was issued to the assessee. The reopening was made on perusal of statement of Bank account maintained with Axis Bank, Indore that assessee-company has introduced its on-money through Hindustan Continental Ltd., and Sunil Shares & Stock Ltd.,[interconnected with each other] through accommodation entries. It was further noted that cash was deposited systemically and funds were transferred to other accounts. It was further noted that in the computation of income, the assessee has determined the gross total income of Rs.1,18,768/- and after restricting the claim of depreciation to that extent total taxable income has been determined at nil. The assessee is eligible for deduction under section 80IB of the 6

ITA No.1581/AHD/2013 (AY 13-14)& ITA No.2422/AHD/2016 M/s Base Inds. Ltd. Act. The loss should be notional carried forward and to be set off against the profits of the industrial undertaking as per the provisions of section 80IA(5) of the Act. On the basis of aforesaid observation, the Assessing Officer was of the view that income of more than Rs.1.00 lakh has escaped assessment within the meaning of section 147 of the Act. The Assessing Officer also obtained necessary approval under section 152(2) of the Act for initiation of action under section 147 of the Act vide order dated 18.10.2010. 4. During the assessment, the Assessing Officer issued show cause notice that the assessee has received share capital amounting to Rs.7.31 crores (comprising share application money of Rs.11.95 lakh and share capital of Rs.7,19,60,000/-) no confirmation with regard to share capital has been furnished in absence of any evidence with regard to genuineness and creditworthiness of the transactions, the assessee was asked as to why the amount should not be treated as unexplained cash credit within the meaning of section 68 of the Act. The Assessing Officer noted that nobody attended the hearing nor furnished any confirmation. Thus, the 7

ITA No.1581/AHD/2013 (AY 13-14)& ITA No.2422/AHD/2016 M/s Base Inds. Ltd. assessee failed to discharge its onus. The Assessing Officer made the addition of Rs.7.31 crores under 68 of the Act. The Assessing Officer further noted that assessee has claimed expenditure of purchases of Rs.9,19,439/-. The assessee has not furnished the details names and addresses of the parties from whom the assessee has shown purchased. The Assessing Officer issued show cause and proposed to disallow part expenditure in absence of confirmation. The assessing officer noted thatthe assessee not filed any reply nor furnished any evidence, the Assessing Officer disallowed @ 15% of such purchases. The Assessing Officer further noted that the assessee had received share application money of Rs.14,50,000/- (750000 + 700000) from Hindustan Continental Pvt. Ltd., on 03.12.2008 and 23.12.2008 respectively. It was further noted that in the bank account of Hindustan Continental Pvt. Ltd., cash deposited and on the same day cheque was issued to the assessee-company. During the assessment, the assessee was asked to furnish the details of share application money. In response to assessee furnished return of income of M/s Hindustan Continental Pvt. Ltd., 8

ITA No.1581/AHD/2013 (AY 13-14)& ITA No.2422/AHD/2016 M/s Base Inds. Ltd. balance-sheet and copy of bank account. The Assessing Officer noted that the assessee-company introduced its on-money through M/s Hindustan Continental Pvt. Ltd., and its accommodation entry and made the addition of Rs.14.50 lakh. The Assessing Officer further noted that he has already made addition of Rs.7.31 crores under section 68 of the Act, thus no separate addition of Rs.14.50 lakh is made. The Assessing Officer further noted that assessee has claimed depreciation of Rs.1.25 crores. On verification of Schedule-D, forming part of Audit report and audited account. The assessee acquired entire plant and machinery of Rs.13.46 crores, during the year only and debited depreciation of Rs.1,06,300/- in the profit and loss account. The assessee was asked to furnish copies of bills in respect of depreciable asset acquired, as it was first year of operation of newly set up industrial undertaking. The assessee could not furnish any single bill for verification. The Assessing Officer in absence of any documentary evidence disallowed the depreciation of Rs.1,06,300/-. Similarly claim for carried forward of unabsorbed depreciation.

ITA No.1581/AHD/2013 (AY 13-14)& ITA No.2422/AHD/2016 M/s Base Inds. Ltd. 5. On appeal, the action of Assessing Officer was confirmed by Ld. Commissioner of Appeals [CIT(A) for short]. The Ld. CIT(A) confirmed the order of Assessing Officer that in ex parte order. The ld. CIT(A) while confirming the various additions noted that neither the assessee appeared norfurnished any documentary evidence, thus, he is constrained to agree with the finding of Assessing Officer on all additions. 6. We find that during the first appellate stage, the assessee has not raised any specific ground of appeal against the re-opening nor on issuance of notice under section 148 or 143(2) of the Act. The assessee has challenged only disallowance of depreciation of Rs.1,06,300/-, addition on account of share application under section 68 of the Act of Rs.7.31 crores and disallowance of purchase of Rs.1,37,915/-. Further aggrieved, assessee is filed present appeal before us. 7. We have heard the submission of ld. authorized representative (AR) for the assessee and the ld. Departmental Representative (CIT-DR) for Revenue and have gone through the orders of Authorities below. The Ld. AR for the assessee submits that he has raised additional grounds in both the appeals, which are 10

ITA No.1581/AHD/2013 (AY 13-14)& ITA No.2422/AHD/2016 M/s Base Inds. Ltd. purely legal in nature and facts related to the additional grounds are already on record. Therefore, the assessee may be allowed to raise the additional grounds of both the appeals. To support his submission, the Ld. AR of the assessee relied upon the landmark decision of Hon'ble Supreme Court judgment in the case of National Thermal Power Co. Ltd. Vs. CIT (1998) 229 ITR 383(SC). 8. On the other hand, Ld. CIT-DR for the Revenue submits that Ld. CIT(A) passed the ex-parte order as the assessee has not filed any submission nor attended hearing before Ld. CIT(A). No such legal ground was raised before the Ld. CIT(A) challenging the notice issued under section 148 or 143(2) of the Act. The Ld. CIT-DR for the revenue submits that the assessee should have raised all legal and factual issues before Ld. CIT(A). As the assessee has not appeared before the Ld. CIT(A), at the most the matter may be restore to the file of Ld. CIT(A) for adjudications of the issues on merit. 9. During the hearing of the submission of both the parties, we have perused the impugned order passed by Ld. CIT(A) dated 15.03.2013. We find that no such issues in the form of legal; 11

ITA No.1581/AHD/2013 (AY 13-14)& ITA No.2422/AHD/2016 M/s Base Inds. Ltd. grounds was raised before Ld. CIT(A). This fact was confronted to the Ld. AR of the assessee. The AR of the assessee submits that he has raised only legal ground that the re-assessment order is bad in law being barred by limitation and without jurisdiction. Further note notice under section 143(2) was served upon the assessee. Therefore assessment order is liable to be quashed. 10. We have considered the contentions of both the parties and perused the record carefully. We find that in the original appeal, the assessee has challenged the order of Ld. CIT(A) on the ground that order was passed without granting opportunity of hearing. On merit, the assessee has challenge the disallowance of depreciation, addition on account of share application and share capital and disallowance of bogus purchases. We find that the Assessing Officer made all additions by taking the view that no sufficient evidence substantiating the claim of depreciation, share application, and purchase were furnished. Similarly, the Ld. CIT(A) passed the impugned order ex parte proceedings. The Ld. CIT(A) in para-2 of the impugned order recorded that several notices for 12

ITA No.1581/AHD/2013 (AY 13-14)& ITA No.2422/AHD/2016 M/s Base Inds. Ltd. hearings were sent to the assessee. Notices were acknowledged by the assessee sought adjournments and adjournments were granted. On the fixed date as per assessee’s request, nobody attended nor any details were furnished. Accordingly, the Ld. CIT(A) decided the appeal of assessee on the materials available on record. As noted above, Ld. CIT(A) in upholding all three additions held as “No submission filed before him in spite of several opportunities were given to the appellant in absence of any rebuttal from the appellant in this matter, I am constrained to agree with the finding of the AO. This ground is accordingly dismissed.” 11. We find that Ld. CIT(A) has not recorded as to when the last date of hearing was fixed. The Ld. CIT(A) has not discussed the facts of the case, issues for determination and decision thereon. The Ld. CIT(A) has not discussed the facts of the case on adjudication point of determination and the decision thereon for such decision, meaning thereby the order passed by Ld. CIT(A) is not as per the mandate of section 250(6) of the Act. Therefore instead of going on the merit of additional grounds of appeals and on the original grounds of appeals, we 13

ITA No.1581/AHD/2013 (AY 13-14)& ITA No.2422/AHD/2016 M/s Base Inds. Ltd. restore the matter back to the Ld. CIT(A) to adjudicate all the issues afresh in accordance with law. The assessee is given liberty to raise all legal or factual issues before the Ld. CIT(A). The Ld. CIT(A) is directed to provide reasonable and fair opportunity of hearing to the assessee before passing the order afresh. The assessee is also directed to furnish all necessary documents, evidence and information in its power and possession without any further delay as the case relates to assessment year 2004-05. The assessee is also directed not to take adjournment without any valid reasons. The ldCIT(A) is expected to expedite the disposal of the appeal as the case relates to AY 2004-05. In the result, appeal of assessee is allowed for statistical purposes. ITA No.2422/AHD/2016 12. The Assessing Officer while passing the assessment order on 28.12.2011 initiating penalty under section 271(1)(c) of the Act. The Assessing Officer noted that there were two major additions (i) section 68 of the Act of share capital of Rs.7.31 crores and (ii) disallowance of purchase of Rs.1.37 lakhs. The assessee field quantum appeal before the Ld. CIT(A) which was 14

ITA No.1581/AHD/2013 (AY 13-14)& ITA No.2422/AHD/2016 M/s Base Inds. Ltd. dismissed vide order dated 02.07.2016, thereby addition was sustained. The Assessing Officer issued show cause notice for levying penalty under section 271(1)(c) of the Act. The assessee filed its reply dated 25.03.2015 and contended that they have neither concealed the income nor furnished any inaccurate particulars of income and further they have filed appeal before the Tribunal. Therefore the proceeding may be kept in abeyance till the disposal of appeal before Tribunal. The reply of assessee was not accepted by Assessing Officer. The Assessing Officer levied penalty @ 100% tax sought to be evaded on two major additions. The Assessing Officer worked out the penalty at Rs.2.62 crores vide order dated 27.03.2015. On further appeal before Ld. CIT(A) the penalty was upheld. The Ld. CIT(A) while upholding the penalty held that addition in quantum assessment is sustained. The Ld. CIT(A) noted that despite service of notices on four occasions the assessee had not cared to attend proceedings. Thus, the penalty under section 271(1)(c) was upheld. Further aggrieved, the assessee is filed appeal before the Tribunal.

ITA No.1581/AHD/2013 (AY 13-14)& ITA No.2422/AHD/2016 M/s Base Inds. Ltd. 13. Considering the facts and circumstances we have set aside the order of Ld. CIT(A) in quantum assessment and restore the appeal in quantum assessment to the file of Ld. CIT(A) for adjudication afresh. Therefore, this appeal is also restored back to the file of Ld. CIT(A) to decide after adjudicating in quantum assessment. The assessee is given liberty to raise additional / legal issues raised before the Ld.CIT(A). The Ld CIT(A) is directed to consider the factual and legal issue on merit and pass order in accordance with law. The assessee is also directed to attend the proceedings before Ld. CIT(A) as and when call and not to take further adjournment. In the result, appeal of assessee is allowed for statistical purposes. 14. In the result, both the appeal of the assessee are allowed for statistical purposes. A copy of the instant common order be placed in the respective case file(s). Order pronounced on 08/09/2021by placing the result on the Notice Board as per Rule 34(5) of the income Tax (Appellate Tribunal) Rule 1963. Sd/- Sd/- (Dr ARJUN LAL SAINI) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Surat, Dated: /09/2021 Dkp. OutSourcing Sr.P.S

ITA No.1581/AHD/2013 (AY 13-14)& ITA No.2422/AHD/2016 M/s Base Inds. Ltd. Copy to: 1. Assessee – M/s Base Industries Ltd., B/h Hanuman Mandir, Nr. Canal, Demini Road Dadar, Silvassa-396230 2. Revenue - ITO, Wd-1, Vapi, 2nd Floor, Shivam Commercial Complex, N.H.No.8 Vapi / ACIT, Vapi Circle, Fortune Square-II, 7th Floor, Room No.704, Daman Road, Chala, Vapi-396191 3. CIT(A)-Valsad 4. CIT 5. DR 6. Guard File True copy/ By order

Assistant Registrar, ITAT, Surat