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Facts
The Assessing Officer (AO) rejected the appellant's books of account and made an ad-hoc addition of 15% on gross receipts. The CIT(A) dismissed the appeal for non-compliance with notices, without going into the merits of the case.
Held
The Tribunal noted that the AO's addition was made without proper reasoning and the CIT(A) did not decide the case on merits. Therefore, the Tribunal set aside the order and remanded the matter back to the CIT(A) for adjudication on merits.
Key Issues
Whether the CIT(A) erred in dismissing the appeal without adjudicating on merits, and whether the AO's addition was justified without proper reasoning.
Sections Cited
139, 148, 145, 147
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Income Tax Appellate Tribunal, Mumbai “A” Bench, Mumbai.
Before: Shri Beena Pillai (JM) & Shri Omkareshwar Chidara (AM)
In the present appeal, the Ld. AO has rejected books of account of the appellant and estimated net profit @ 15% of the total gross receipts admitted by the appellant. The total gross receipts admitted by the appellant is Rs. 9,31,19,817/- and the Ld. AO made addition of 15% of this gross receipts which comes to Rs. 1,39,67,972/- as net profit while completing this scrutiny assessment.
Aggrieved by this addition made by the Ld. AO appeal was filed by the appellant before the first appellate authority, before Ld. CIT(A).
During the appeal proceedings, Ld. CIT(A) gave five opportunities of hearing and in fact it was mentioned on 5.1.2024 by Ld. CIT(A) that the same is a final opportunity and if there is no compliance to the notices, the addition made by the Ld. AO would be confirmed. From the appeal order of Ld. CIT(A) it is seen that the appellant has not complied with any of these notices nor filed any written submission/documentary evidences during the course of appeal proceedings and hence Ld. CIT(A) has adjudicated that 2 Anilkumar Shrichandra Jha there is no material on record to warrant interference in the order of the Ld. AO and grounds of appeal of the appellant were rejected and appeal was dismissed.
Aggrieved by this order of the Ld. AO and Ld. CIT(A), further appeal was filed by the appellant before this Tribunal with following grounds of appeal :-
1. On the facts and circumstances of the case and in law, the Learned CIT (Appeal) failed to consider the fact that the Assessing Officer has not provided the copy of reasons recorded to the appellant.
2. On the facts and circumstances of the case and in law, the Learned CIT(Appeal) has not provided proper opportunity of being heard to the appellant.
3. On the facts and circumstances of the case and in law, the Learned CIT (Appeal) has failed to appreciate the fact that the appellant has filed the return of income u/s. 139 of the act as well as in response to notice u/s. 148 of the Income Tax Act and books of accounts were maintained.
4. On the Facts and circumstances of the case and in law, the Learned CIT (Appeal) has failed to appreciate the facts that the appellant has submitted the details from time to time as asked by Ld. Assessing Officer.
5. On the facts and circumstances of the case and in law, the Learned CIT(Appeal) erred in confirming the rejection of books of accounts of the appellant u/s. 145 of the Income Tax Act, 1961 without appreciating the facts and submissions made by the appellant during the re-assessment proceedings.
6. On the facts and circumstances of the case and in law, the Learned CIT (Appeal) erred in confirming the addition of Rs. 1,39,67,972/- being 15% of the total gross receipt disclosed in return of income by rejecting books of accounts u/s. 145 of the Act, without considering facts of the case.
6.1 On the facts and circumstances of the case and in law, the learned Assessing Officer erred in considering the returned income of Rs. Nil instead of loss of Rs. 9,25,352/- and set off of loss is not considered while calculating assessed income.
Without prejudice, on the facts and circumstances of the case and in law, reasonable profit embedded in business to be added by the Learned Assessing Officer instead of at the rate of 15%.
3 Anilkumar Shrichandra Jha
8. The appellant craves leave to add, alter, amend or modify any or all grounds till the disposal of the Appeal.
During the hearing proceedings before the Bench, Ld. AR of the appellant has stated that due to some unavoidable circumstances the appellant has not responded to the notices issued by Ld. CIT(A). It was submitted that the order passed by Ld. CIT(A) is not on merits and order was passed dismissing the appeal only due to not responding to the notices issued by the office of Ld. CIT(A).
Ld. DR has heavily relied on the order of the Ld. AO and argued that since there is no response to the notices issued by Ld. CIT(A), addition made by the Ld. AO should be confimred.
7. Hearing both sides. From the assessment order of the Ld. AO it is observed that an adhoc addition of 15% was made on the gross receipts without proper reasoning and also without exactly pointing out the defects in the books of account. Ld. CIT(A) has also not gone into the merits of the case and basis of addition was also not discussed by him. As addition was sustained by Ld. CIT(A) without going into the merits, it is decided that one more opportunity is given to the appellant to demonstrate that the additions made by the Ld. AO are not correct. As the Order was not decided on merits while dismissing the appeal of the appellant, it is decided to send the matter back to the file of the Ld. CIT(A) with a direction to adjudicate the same on merits after giving adequate opportunity to the appellant.
The appeal of the appellant is allowed for statistical purposes.
Order pronounced in the open Court on 06/02/2025.