DIAMOND INFOSYSTEMS LIMITED,VADODARA vs. THE DY.CIT, CENTRAL CIRCLE-3, VADODARA

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ITSSA 24/AHD/2025Status: DisposedITAT Ahmedabad30 June 2025AY 2017-187 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal noted that while the assessee made compliance before the Assessing Officer, it failed to do so before the CIT(A), despite being granted nine opportunities. The assessee's representative requested an opportunity to present its case before the CIT(A). The Tribunal acknowledged the assessee's non-compliance before the CIT(A) but also observed that the CIT(A)'s decision was based solely on the AO's findings due to the lack of assessee's participation. Considering the complexity of the issues and in the interest of substantial justice, the Tribunal decided to set aside the matter to the file of the CIT(A). The assessee was directed to pay a cost of Rs. 5,000/- to the Prime Minister's National Relief Fund within 15 days. The CIT(A) was directed to grant another opportunity of hearing to the assessee, verify the payment of cost, and proceed with the case. The assessee was also directed to cooperate fully in the set-aside proceedings, failing which the CIT(A) would be at liberty to decide on merits. The appeals were allowed for statistical purposes.

What were the facts?

The appeals by Diamond Infosystems Limited and Diamond Projects Limited concern assessment years 2013-14 to 2017-18. A search operation under Section 132 of the Income Tax Act, 1961, covered the assessee's premises. Subsequently, notices under Section 153A were issued. The Assessing Officer (AO) rejected the assessee's books of account, citing non-cooperation with a special audit under Section 142(2A), and made additions of Rs. 42,59,00,000/- based on industry gross margin and Rs. 2,33,610/- for delayed employee PF/ESIC contributions. Assessments were completed under Section 153A read with Section 144. The Commissioner of Income Tax (Appeals) dismissed the assessees' appeals. The assessees are now before the Income Tax Appellate Tribunal (ITAT).

What were the issues?

1. Whether the CIT(A) erred in passing an order without providing sufficient opportunity of being heard, thereby violating principles of natural justice, as argued by the assessee. The revenue did not record specific arguments on this point. 2. Whether the CIT(A) erred in confirming the AO's action of invoking Section 132 and conducting a search, as argued by the assessee. The revenue did not record specific arguments on this point. 3. Whether the CIT(A) erred in confirming the AO's action of making additions under Section 153A when no incriminating material was found during the search, and the assessment for the year had not abated, as argued by the assessee. The revenue did not record specific arguments on this point. 4. Whether the CIT(A) erred in confirming the AO's action of making high-pitched additions, as argued by the assessee. The revenue did not record specific arguments on this point. 5. Whether the CIT(A) erred in confirming the AO's action of rejecting books of accounts under Section 145 and completing the assessment under Section 144 on best judgment basis, as argued by the assessee. The revenue did not record specific arguments on this point. 6. Whether the CIT(A) erred in confirming the addition of Rs. 42,59,00,000/- in Gross Profit Margin after rejecting books of accounts, as argued by the assessee. The revenue did not record specific arguments on this point. 7. Whether the CIT(A) erred in confirming the AO's action of considering returned income as Nil and disallowing entire indirect expenses, as argued by the assessee. The revenue did not record specific arguments on this point. 8. Whether the CIT(A) erred in confirming the disallowance of Employees' Contribution to PF and ESIC of Rs. 2,33,610/- under Section 36(1)(va) due to late deposition, as argued by the assessee. The revenue did not record specific arguments on this point.

Which sections of the Income-tax Act were involved?

Section 132,Section 153A,Section 142(2A),Section 144,Section 145,Section 36(1)(va),Section 142(1)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, AHMEDABAD “C” BENCH, AHMEDABAD

Before: MS. SUCHITRA KAMBLE & SHRI NARENDRA PRASAD SINHA

For Appellant: Shri Manish J. Shah & Shri Rushin Patel, ARs
For Respondent: Shri Rignesh Das, CIT(DR)
Hearing: 12.06.2025Pronounced: 30.06.2025

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “C” BENCH, AHMEDABAD BEFORE MS. SUCHITRA KAMBLE, JUDICIAL MEMBER AND SHRI NARENDRA PRASAD SINHA, ACCOUNTANT MEMBER IT(SS)A Nos.20 to 24/Ahd/2025 Assessment Years: 2013-14 to 2017-18 Diamond Infosystems The Dy. Commissioner of Limited, Income Tax, 5-8/10, Essen Info House, Central Circle-3, Gorwa, Vs. Aaykar Bhavan, Vadodara – 390 003. Race Course Circle, Gujarat. Vadodara – 390 007. [PAN – AAACD 8085 B] Gujarat.

IT(SS)A Nos.25 to 29/Ahd/2025 Assessment Years: 2013-14 to 2017-18

Diamond Projects Limited, The Dy. Commissioner of D-7, BIDC, Income Tax, Gorwa, Central Circle-3, Vadodara – 390 003. Aaykar Bhavan, Vs. Gujarat. Race Course Circle, [PAN – AAACD 6470 C] Vadodara – 390 007. Gujarat. (Appellant) (Respondent) Assessee by Shri Manish J. Shah & Shri Rushin Patel, ARs Revenue by Shri Rignesh Das, CIT(DR) Date of Hearing 12.06.2025 Date of Pronouncement 30.06.2025

O R D E R PER BENCH: The above ten appeals are filed by two separate assessees against the orders of Commissioner of Income Tax (Appeal), Ahmedabad, (in short ‘the CIT(A)’), all dated 19.12.2024 for the Assessment Years (A.Y.) 2013-14 to 2017-18.

IT(SS)A Nos.20 to 24/Ahd/2025 & IT(SS)A Nos 25 to 29/Ahd/2025 Assessment Years: 2013-14 to 2017-18 Diamond Infosystems Limited vs. DCIT & Another Page 2 of 7 2. The facts involved in all these appeals are identical. Therefore, all the matters were heard together and are being disposed of vide this common order for the sake of convenience.

3.

We will take IT(SS)A No.20/Ahd/2025 for the A.Y. 2013-14 as the lead case.

IT(SS)A No.20/Ahd/2025 for A.Y. 2013-14

4.

The brief facts of the case are that the assessee had filed its return of income for the A.Y. 2013-14 on 30.11.2023 declaring total income of Rs.1,60,33,320/-. A search & seizure operation was conducted under Section 132 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) in the case of Diamond Power Group of Vadodara. In the course of search, the premises of the assessee M/s. Diamond Infosystems Limited was also covered. Subsequently, notice under Section 153A of the Act was issued on 25.10.2018 requiring the assessee to furnish the return of income, in response to which, the return was filed on 25.01.2021 declaring income of Rs.1,66,11,990/-. In the course of assessment, the Assessing Officer had examined the books of account and the incriminating materials received from other agencies viz. Central Bureau of Investigation (CBI) and Directorate of Enforcement (ED) and considering the voluminous nature of seized/impounded material and the complexity of accounts, the assessee was directed to get its books of accounts for F.Y. 2012-13 to F.Y. 2018-19 audited as per the provisions of Section 142(2A) of the Act. The assessee did not co-operate during the Special Audit under Section 142(2A) of the Act and the documents as per the direction of Special Auditor were not provided. In the course of assessment, the Assessing Officer had, therefore, rejected the books of account of the assessee and

IT(SS)A Nos.20 to 24/Ahd/2025 & IT(SS)A Nos 25 to 29/Ahd/2025 Assessment Years: 2013-14 to 2017-18 Diamond Infosystems Limited vs. DCIT & Another Page 3 of 7 on the basis of seized incriminating documents and other materials as available, had made addition of Rs.42,59,00,000/- by applying the gross margin rate of the Industry. Further, addition of Rs.2,33,610/- was also made in respect of delayed payment of employees’ contribution to PF and ESIC. The assessment was completed under Section 153A read with Section 144 of the Act on 27.01.2022 at a total income of Rs.46,46,00,000/-.

5.

Aggrieved with the order of the Assessing Officer, the assessee had filed an appeal before the First Appellate Authority which was decided vide the impugned order and the appeal of the assessee was dismissed.

6.

Now the assessee is in second appeal before us. The following grounds have been taken in this appeal: -

1.

On the facts and in on the facts and in the circumstances of your appellant’s case and in law, the Honorable CIT – Appeals-12, Ahmedabad, has erred in passing order u/s.250 without providing sufficient opportunity of being heard. 2. Without prejudice to the above ground, on the facts and in the circumstances of your appellant's case and in law, the Honorable CIT- Appeals-12, Ahmedabad, has erred in confirming the action of the AO of invoking provisions of Sec. 132 and carried out a search the premises of your appellant. 3. Without prejudice to Ground No.1, on facts and in the circumstances of your appellant's case and in law, the Honorable CIT-Appeals-12, Ahmedabad, has erred in confirming the action of AO of making additions u/s.153A where no incriminating material has been found during the course of search and seizure operation more specifically when the assessment for the year had not abated, and the case had already been assessed originally u/s.143(3).

4.

Without prejudice to Ground No.1, on the facts and in the circumstances of your appellant's case and in law, the Honorable CIT-Appeals-12, Ahmedabad, has erred in confirming the action of AO of issuance of the high-pitched additions.

IT(SS)A Nos.20 to 24/Ahd/2025 & IT(SS)A Nos 25 to 29/Ahd/2025 Assessment Years: 2013-14 to 2017-18 Diamond Infosystems Limited vs. DCIT & Another Page 4 of 7 5. Without prejudice to Ground No.1, on the facts and in the circumstances of your appellant's case and in law, the Honorable CIT-Appeals-12, Ahmedabad, has erred in confirming the action of ld. AO of rejecting books of accounts u/s.145 and completing assessment u/s.144 on best judgment. 6. Without prejudice to the above grounds, on the facts and in the circumstances of your appellant's case and in law, the Honorable CIT- Appeals-12, Ahmedabad, has erred in confirming the addition made by the AO of Rs.42,59,00,000/-in Gross Profit Margin after rejecting books of accounts. 7. Without prejudice to the above grounds, on the facts and in the circumstances of your appellant's case and in law, the Honorable CIT- Appeals-12, Ahmedabad, has erred in confirming the action of the AO of considering Retuned Income as Nil, taking Gross Profit of Rs.3,87,00,000/- as per Books of accounts which he has rejected and effectively disallowing entire Indirect expenses. 8. Without prejudice to the above grounds, on the facts and in the circumstances of your appellant's case and in law, the Honorable CIT- Appeals-12, Ahmedabad, has erred in confirming the action of the AO of disallowing Employees' Contribution of Rs.2,33,610/- towards PF and ESIC u/s. 36(1)(va) based on late deposition after the "due date" as defined in the respective acts. 9. Your appellant craves leave to add to and/or to amend/alter the ground(s) herein above raised. 7. Shri Manish J. Shah, Ld. AR of the assessee submitted, at the outset, that the assessee could not make compliance before the Ld. CIT(A) and the order of the Ld. CIT(A) was passed ex-parte. He, therefore, requested that, in the interest of justice, another opportunity may be allowed to the assessee by setting aside the matter to the file of the Ld. CIT(A). The Ld. AR assured that the assessee will make compliance before the Ld. CIT(A) in the course of set aside proceedings.

8.

Per contra, Shri Rignesh Das, Ld. CIT (DR) submitted that the Ld. CIT(A) had allowed as many as nine opportunities to the assessee but apart from seeking adjournment on few occasions, no compliance was made by the assessee. He further submitted that the assessee had not

IT(SS)A Nos.20 to 24/Ahd/2025 & IT(SS)A Nos 25 to 29/Ahd/2025 Assessment Years: 2013-14 to 2017-18 Diamond Infosystems Limited vs. DCIT & Another Page 5 of 7 explained the reason for non-compliance before the Ld. CIT(A). The ld. CIT-DR further submitted that the Ld. CIT(A) had also examined the merits of the case and given his findings. He, therefore, strongly supported the order of the Ld. CIT(A).

9.

We have carefully considered the rival submissions. It is found from the assessment order that in response to notice under Section 142(1) of the Act along with detailed questionnaire issued on 04.01.2021, 28.01.2021, 08.12.2021 & 04.01.2022, the assessee had made compliance and submitted the required details online through e- proceedings facility. Further, the compliance to the final show cause notice also made by the assessee. Though the assessment order was passed under Section 153A read with Section 144 of the Act, it was not a case of complete non-compliance before the Assessing Officer. However, before the Ld. CIT(A), the assessee did not make any compliance. It is found that the Ld. CIT(A) had allowed as many as nine opportunities, still no compliance was made. The assessee has also not explained any reason for non-compliance before the Ld. CIT(A). We, therefore, deem it proper to impose a cost of Rs.5,000/- (Rupees Five Thousand only) on the assessee which should be paid to the Prime Minister’s National Relief Fund within a period of 15 days from the date of receipt of this order. On merits, the Ld. CIT(A) has upheld the additions made by the Assessing Officer and rejected the grounds taken by the assessee in the appeal. However, the fact remains that the decision of Ld. CIT(A) was based on the findings of the Assessing Officer only as the assessee didn’t make any compliance before him. Considering the nature of additions and the complexity of the issues and in the interest of substantial justice, we deem it proper to set aside the matter to the file of the Ld. CIT(A) with

IT(SS)A Nos.20 to 24/Ahd/2025 & IT(SS)A Nos 25 to 29/Ahd/2025 Assessment Years: 2013-14 to 2017-18 Diamond Infosystems Limited vs. DCIT & Another Page 6 of 7 a direction to allow another opportunity of being heard to the assessee. The Ld. CIT(A) will proceed in the matter after verifying that the cost as imposed is paid by the assessee. The assessee is also directed to make compliance before the ld. CIT(A) in the set aside proceeding and respond to the notices and his directions. In case of any further non-compliance by the assessee, the Ld. CIT(A) would be at liberty to decide the issues on merits on the basis of the materials on record.

10.

In the result, appeal of the assessee is allowed for statistical purpose.

IT(SS)A No.21 to 24/Ahd/2025 & IT(SS)A Nos.25 to 29/Ahd/2025

11.

The grounds taken in all these appeals are identical to IT(SS)A No.20/Ahd/2025 except the quantum of addition and that the ground no.8 is not involved in these cases. The facts involved in all these appeals are identical to IT(SS)A No.20/Ahd/2025. Therefore, the decision as taken in IT(SS)A No.20/Ahd/2025 for A.Y. 2013-14 is applicable mutatis mutandis to all these appeals as well. Accordingly, all these appeals are also set aside to the file of the Ld. CIT(A) with a direction to allow another opportunity of being heard to the assessee subject to payment of cost of Rs.5,000/- each in respect of all these appeals.

12.

In the result, all the appeals filed by the assessees are allowed for statistical purpose.

Order pronounced in the open Court on this 30th June, 2025.

Sd/- Sd/- (SUCHITRA KAMBLE) (NARENDRA PRASAD SINHA) Judicial Member Accountant Member

IT(SS)A Nos.20 to 24/Ahd/2025 & IT(SS)A Nos 25 to 29/Ahd/2025 Assessment Years: 2013-14 to 2017-18 Diamond Infosystems Limited vs. DCIT & Another Page 7 of 7 Ahmedabad, the 30th June, 2025 PBN/*

Copies to: (1) The appellant (2) The respondent (3) The PCIT (4) The CIT(A) (5) Departmental Representative (6) Guard File

By order

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