Loading judgment…
Facts
The assessee company's case was reopened based on information linking it to shell companies involved in bogus transactions. The Assessing Officer (AO) made additions for claimed bad debts and provision for doubtful debt, as well as an outstanding liability deemed fictitious. The assessee failed to comply with proceedings before the AO and the CIT(A).
Held
The Tribunal acknowledged the assessee's non-compliance but, in the interest of natural justice, decided to give one more opportunity. The case was remanded to the CIT(A) for de novo adjudication with a cost of Rs. 10,000/- imposed on the assessee for their recalcitrant attitude.
Key Issues
Whether the assessee should be given another opportunity to present its case before the CIT(A) despite prior non-compliance, and the implications of such non-compliance.
Sections Cited
250, 148, 148A, 133(6), 68, 41(1), 147, 144B, 34(4)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
(Assessment Year: 2018-19) Arcadia Trading Private Limited ITO-12(1)(1), Mumbai Office of the ITO-12(1)(1), 421, 4th 33, Shree Naman Plaza, Kandiwali, Mumbai – 400067. Vs. Floor, Aaykar Bhavan, M. K. Road, Mumbai – 400020. PAN/GIR No. AADCA4717C (Appellant) : (Respondent) Shri. Ashish Goyal (Virtually Appear) Assessee by : DR. K. R. Subhash, (CIT-DR) Respondent by : Date of Hearing : 07.05.2025 Date of Pronouncement : 26.05.2025 O R D E R Per Kavitha Rajagopal, J M: This appeal has been filed by the assessee, challenging the order of the learned Commissioner of Income Tax (Appeals) Delhi (‘ld. CIT(A)’ for short), National Faceless Appeal Centre (‘NFAC’ for short) passed u/s. 250 of the Income Tax Act, 1961 (‘the Act'), pertaining to the Assessment Year (‘A.Y.’ for short) 2018-19.
The assessee has raised the following grounds of appeal:
1. The ld. AO was not justified in passing the order, which is bad in law, void ab initio, barred by limitation, illegal, contrary to the facts and circumstances of the case, liable to be annulled.
2. The ld. CIT(A) was not justified in confirming the order, which is bad-in-law, void ab initio, barred by limitation, illegal, contrary to the facts and circumstances of the case, liable to be annulled.
(A.Y. 2018-19) Arcadia Trading Pvt. Ltd.
3. The ld. CIT(A) was not justified in ex-parte dismissing the appeal of the appellant, without deciding the appeal on merits, and that a fair and meaningful opportunity was not available to the appellant to present his case.
4. The Id CIT(A) was not justified in confirming the addition of Rs. 11,61,79,524/- on account of suo-moto disallowance without considering the facts and circumstances of the case.
5. The ld CIT(A) was not justified in confirming the addition of Rs. 10,71,53,459/- on account of disallowance of bad debts without considering the facts and circumstances of the case.
6. The ld CIT(A) was not justified in confirming the addition of Rs. 2,32,67,501/- on account of outstanding liability without considering the facts and circumstances of the case.”
Brief facts of the case are that the assessee company is a closely held company and had filed its return of income dated 20.09.2018, declaring total loss at Rs. 10,89,84,333/-. The assessee’s case was reopened based on the information received from DDIT(Inv)- 2(1), Mumbai, pursuant to the search and seizure action carried out in the case of M/s. Ruchi Soya Industries Ltd., who has indulged in creating several shell companies, where the assessee was also one of the 57 entities belonging to Ruchi Group. It was observed that the assessee has indulged in bogus transaction by claiming bad debts amounting to Rs. 10,71,53,459/- and provision for doubtful debt of Rs. 11,61,79,524/- in its financials. The learned Assessing Officer (ld. A.O. for short) issued notice u/s. 148, dated 07.04.2022 pursuant to order u/s. 148A(d). In response to the notice u/s. 148 of the Act, the assessee filed its return of income declaring loss of Rs. 22,51,63,857/-. and on perusal of the same, the ld. AO observed that the assessee has claimed a sum of Rs. 10,71,53,459/- as sundry balances written off which pertains to the trade receivable from M/s. Vision Millennium Export Pvt. Ltd. which did not respond to notice issued u/s. 133(6) of the Act and on further inquiry found to be a fictitious entry, the ld. AO (A.Y. 2018-19) Arcadia Trading Pvt. Ltd. made a disallowance of the said amount as unexplained credit u/s. 68 of the Act. Further, the ld. AO made an addition of Rs. 2,32,67,501/- u/s. 41(1) of the Act being the outstanding liability in the books of assessee in the name of M/s. Navrang Export Pvt Ltd. which according to the ld. AO was not a cessation of liability in the absence of the failure to produce the creditors, the correct address, PAN and confirmation from the creditors. The learned Assessing Officer (ld. A.O. for short) had passed the assessment order dated 07.03.2024, u/s. 147 r.w.s. 144B of the Act, determining total income at Rs. 2,14,36,627/-, after making various addition/disallowances.
Aggrieved the assessee was in appeal before the first appellate authority, who vide an ex parte order dated 25.02.2025 upheld the addition/disallowance made by the ld. AO on the ground that the assessee has been non-compliant and has failed to substantiate its claim.
The assessee is in appeal before us, challenging the impugned order of the ld. CIT(A).
We have heard the rival submissions and perused the materials available on record. It is observed that the assessee has challenged the assessment order before the ld. CIT(A) but has been non-compliant throughout the appellate authority proceeding.
The learned Authorised Representative ('ld. AR' for short) for the assessee contended that the assessee has got a good case on merit and prayed that the assessee be given one more opportunity to present its case before the first appellate authority.
The learned Departmental Representative (‘ld. DR’ for short) vehemently opposed to setting aside the issue back to the file of the ld. CIT(A) for the reason that the assessee (A.Y. 2018-19) Arcadia Trading Pvt. Ltd. has been given several opportunities which were not availed by it before the ld. CIT(A). The ld. DR relied on the orders of the lower authorities.
On the above facts of the case, we are of the considered view that the assessee may be given one more opportunity to present its case before the first appellate authority by adhering to the principles of natural justice and in the interest of justice dispensation. On considering the fact that the assessee has been non-compliant throughout the proceeding before the ld. CIT(A), we deem it fit to impose a cost of Rs. 10,000/- for the recalcitrant attitude of the assessee, which has to be deposited within one month from the date of receipt of this order to the Prime Minister Relief Fund and the same is to be produced before the ld. CIT(A). We, therefore, remand this issue back to the file of the ld. CIT(A) for de novo adjudication. The assessee is directed to comply with the proceedings without any undue delay on its side and needless it is to say that sufficient opportunity of hearing is to be given to the assessee.
In the result, the appeal filed by the assessee is allowed for statistical purpose. Order Pronounced under Rule 34(4) of the ITAT Rules by placing result on the notice board on. 26.05.2025 Sd/- Sd/- (OM PRAKASH KANT) (KAVITHA RAJAGOPAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai; Dated: 26.05.2025 Karishma J. Pawar (Stenographer) Copy of the Order forwarded to: 1. The Appellant 2. The Respondent 3. CIT- concerned (Dy./Asstt.Registrar) ITAT, Mumbai