DAS PROCESSORS,RAJNANDGAON,RAJNANDGAON vs. INCOME TAX OFFICER-1 RAJNANDGAON, RAJNANDGAON

The assessee has challenged the impugned order on the ground that the Ld. CIT(A) has dismissed the appeal in limine without condoning the delay in filing the appeal and affording reasonable opportunity of being heard. Further, the Ld. CIT(A) Das Processors vs. ITO-1, Rajnandgaon

The relevant facts giving rise to this appeal are that the assessee, a Civil Contractor, filed its Income Tax Return (‘ITR’) of the relevant year on 31.10.2018 declaring income of Rs.94,72,460/-. The case was picked up for scrutiny and consequential assessment order was passed under section 144 rws 143(3A) & 143(3B) of the Act as under: “4. On perusal of the profit and loss account, it is observed that during the year gross receipts of Rs.18,63,73,694/- were offered resulting in net Profit of Rs.94,72,461/-only with huge closing stock to the tune of Rs. 5,54,45,130/-. It is seen that very high expenditure was claimed relating to the closing stock as appearing in the contract account for the financial year under consideration. In this regard a detailed questionnaire u/s, 142(1) was issued on 07.01.2021, the extract of which is reproduced below:

Please give detailed note on your business activities of real estate involving various projects/sites as a going concern for the year and last 2 years Das Processors vs. ITO-1, Rajnandgaon

Please give complete details of revenue from Sale of services/B.T works etc. during the year with reconciliation of gross sales as made during the year and last 2 years and also reconcile the gross receipts of services with supporting GST returns/filings if any as applicable with detailed note of arithmetic workings. Accordingly, reconcile closing stock as appearing in the relevant year closing stock and of last 2 years.

Further, with reference to working of closing stock, please reconcile the material stock and work in progress etc. (as offered in schedule H' as annexure to the statement of accounts in the return of income) as appearing in closing stock with supporting advances received, if any, against these stock for which receipts are yet to be recognized

Please give detailed working of total income computation with head wise workings and proofs in support of the claims made in the return of income/computation as applicable along with ledger extracts of major expenses debited in the P&L a/c

However, the assessee has failed to substantiate this closing stock and expenditure claimed with supporting ledger extracts by duly reconciling head-wise workings of various expenses/materials consumed as forming part of this closing stock. In the absence of supporting proofs of closing stock with relevant workings as reconcilable with opening stock, purchases and expenses/work in progress included in this closing stock, it would be difficult to ascertain the correctness of assessee's claim as made in the P&L account / return of income. Apparently, closing stock is very high in comparison to the sales/revenue recognized during the year as attributable to this real estate business activity of the assessee resulting in Das Processors vs. ITO-1, Rajnandgaon

As the assessee has failed to submit any details pertaining to working of closing stock, it is reasonable to estimate income @12% on entire amount shown as expenditure which includes purchases, labour payment and material, BT work, CC road and concrete work, moorum and RBM work, petty contract work and time extension expenses.”

1 Later, the Ld. PCIT, invoking the provisions of section 263 of the Act, set aside the above mentioned scrutiny assessment order passed under section 144 rws 143(3A) & 143(3B) of the Act and directed the Ld. AO to make fresh assessment after conducting requisite inquiries with respect to loan of Rs.70,60,000/- received from following persons: S. No. Name of Lender Amount 1. Baba Furniture Rajnandgaon 15,00,000/- 2. Kavita Agrawal Rajnandgaon 4,00,000/- 3. Rina Sharma, Rajnandgaon 10,00,000/- 4. Santosh Kr Sharma, Rajnandgaon 5,00,000/- 5. Pratap Singh Maravi, Rajnandgaon 20,00,000/- 6. VRSV Buildicon, Rajnandgaon 16,60,000/-

2

Before us, the assessee was not represented by anyone. Therefore, we heard Dr. Priyanka Patel, Ld. Sr. DR, who argued the case vehemently and prayed for dismissal of the appeal.

We have heard the Ld. Sr. DR at length and have perused the material available on the record. We have perused the Central Board of Direct Taxes (CBDT) notification bearing F. No. S.O. 3296 (E), dated 25-9-2020 issued in exercise of the powers conferred under section 250(6B) of the Act. We have also taken note of the categorical observation of the Ld. CIT(A) that the assessee’s justification for condonation of delay was not satisfactory. After thoughtful consideration of the impugned order, we are unable to infer that whether the Ld. CIT(A) has provided any specific opportunity of being heard to the assessee before non-admitting the appeal on the issue of limitation. The right of appeal is a valuable right and unless expressly taken away or abandoned, it could not be held that the appellant had abandoned or lost such right by implication [Indian Aluminium Co Ltd. Vs. CIT 162 ITR 788 (Cal.)]. The right to appeal is not merely a matter of procedure. It is a substantive right. The Act read with the Notification F. No. S.O. 3296 (E), dated 25-9-2020 put specific restrictions and limitations on the scope and manner of Das Processors vs. ITO-1, Rajnandgaon

After thoughtful consideration of the material available on the record, we are of the view that the appellant assessee deserves reasonable opportunity of being heard to make shortcomings or non-compliance if any. Therefore, considering the facts of the case, afore-stated observations and without offering any comment on merit of the case, we, in the interest of justice, deem it fit to set aside the impugned order and remit the matter back to the file of the Ld. CIT(A) to provide an opportunity of being heard to the assessee before deciding the fate of the delay condonation application in accordance with the law and the Notification F. No. S.O. 3296 (E), dated 25-9-2020. The case on merit thereafter, if required, shall be decided as per the law. We order accordingly. The appellant assessee should ensure compliances during the remitted appellate proceeding before the Ld. CIT(A). Needless to say that the Ld. CIT(A) is also required to provide reasonable opportunities of being heard to the appellant assessee. Das Processors vs. ITO-1, Rajnandgaon