CHANDAKA VENKATA SUBBARAO,THONDANGI vs. THE INCOME TAX OFFICER, WARD-1, TUNI, TUNI

The brief facts of the case are that the assessee is an individual and a partner in the firm M/s Velugu Aquatech, which is engaged in the business of aquaculture. During the financial year 2014-15, relevant to the A.Y. 2015-16, the assessee introduced capital of Rs.46,00,000/- into the said firm. The assessee claimed that the investment was made out of compensation received from the Government for acquisition of agricultural land. As the assessee had not filed his return of income for the A.Y. 2015-16, the A.O. initiated reassessment proceedings by issuing notice u/s 148 of the Income-tax Act, 1961 on 10.03.2020. Subsequently, the A.O. issued notices u/s 142(1) of the Act, calling for the return of income and details regarding the source of investment. However, the assessee did not respond to the notices issued by the A.O.

The A.O., after considering the information available on record, observed that the assessee had introduced capital of Rs.46,00,000/- into the firm M/s Velugu Aquatech during the financial year 2014-15. The A.O. further observed that the compensation relied upon by the assessee had been received during the financial years 2005-06 to 2011-12 and, therefore, the assessee had not satisfactorily explained the source of the investment made during the relevant financial year. Accordingly, the A.O. treated the amount of Rs.46,00,000/- as unexplained investment u/s 69 of the Act, and added the same to the total income of the assessee. Consequently, the A.O. determined the total assessed income at Rs.46,00,000/-.

Aggrieved by the assessment order, the assessee preferred an appeal before the Ld. CIT(A), challenging the addition made by the A.O. u/s 69 of the Act, towards unexplained investment of Rs.46,00,000/- being the capital introduced in the firm M/s Velugu Aquatech. The assessee also challenged the validity of the reassessment proceedings on the ground that the notice issued

The Ld. CIT(A), after considering the grounds of appeal and the material available on record, observed that the A.O. had provided adequate opportunity to the assessee during the reassessment proceedings and that no infirmity was found in the assessment order. The Ld. CIT(A) further observed that, several notices u/s 250 of the Act, were issued during the appellate proceedings on 11.07.2022, 15.11.2022, 23.10.2024 and 17.12.2025, but the assessee failed to comply with the notices or furnish supporting documentary evidence. Accordingly, the Ld. CIT(A) held that, the

Aggrieved with the order of the Ld. CIT(A), the assessee is now in appeal before the Tribunal.

The learned counsel for the assessee, Shri GVN Hari, Advocate, submitted that, the assessee had introduced capital of Rs.46,00,000/- in the firm M/s Velugu Aquatech during the financial year 2014-15 and that the said investment was made out of compensation received from the Government towards acquisition of agricultural land. The learned counsel for the assessee further submitted that, the compensation was received in instalments from Kakinada SEZ and that the assessee invested the amount in the firm for carrying on the business of aquaculture. He submitted that the assessee could not respond to the notices issued by the A.O. as he was not aware of the notices issued through the income tax portal and email. He further submitted that, the assessee had no other sources of income and had not filed the return of income for the relevant assessment

The learned Senior A.R. for the Revenue, Shri Venkanna Tejavath, on the other hand, supporting the orders of the lower authorities submitted that, the assessee had failed to establish the source of the capital of Rs.46,00,000/- introduced in the firm M/s Velugu Aquatech. The Ld. Sr. A.R. further submitted that, the assessee had not responded to the notices issued by the A.O. or furnished supporting documentary evidence before the Ld. CIT(A).

We have heard both the parties, perused the material available on record and had gone through the orders of the authorities below. We find that, the assessee did not respond to the notice issued by the Ld. CIT(A), and consequently, the appeal was dismissed ex parte for non-prosecution. However, the assessee filed written submissions on 21.07.2022 in response to the notice issued by the Ld. CIT(A) on 11.07.2022. It is an admitted fact that the Ld. CIT(A) dismissed the appeal filed by the assessee for non- prosecution. We further find that, the Ld. CIT(A) has not considered the written submissions filed by the assessee while disposing of the appeal. Therefore, we are of the considered view that, the order passed by the Ld. CIT(A) cannot be sustained and needs to be set aside. Accordingly, the matter is required to be restored to the file of the Ld. CIT(A) for fresh consideration of the appeal after taking into account the written submissions filed by the assessee.

In view of the above facts and circumstances of the case, we are of the considered view that, the assessee should be provided one more opportunity to present his case before the Ld. CIT(A). Accordingly, we set aside the order of the Ld. CIT(A) and restore the matter to the file of the Ld. CIT(A) for adjudication afresh on merits. The Ld. CIT(A) is directed to consider the written submissions filed by the assessee on 21.07.2022, along with the grounds of appeal raised by the assessee, and examine the issues involved in the appeal in accordance with law. The Ld. CIT(A) shall provide an adequate opportunity of being heard to the assessee before deciding the appeal afresh. We order accordingly.

In the result, the appeal filed by the assessee is allowed for statistical purposes.