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Facts
The assessee's assessment for AY 2016-17 was reopened due to alleged accommodation entries from manipulated derivative transactions (Rs. 50,03,600), unexplained income from penny stock sales (Rs. 83,43,819), and unexplained expenditure (Rs. 4,17,191) under Section 69C. The Assessing Officer made additions aggregating to Rs. 1,37,64,610, and the CIT(A) dismissed the assessee's appeal ex-parte due to non-furnishing of details.
Held
The Tribunal found that the CIT(A) dismissed the appeal ex-parte without considering the merits despite multiple opportunities. To ensure natural justice, the Tribunal remitted the matter back to the CIT(A) to decide afresh on merits, directing the assessee to cooperate promptly.
Key Issues
Whether the CIT(A) was justified in dismissing the appeal ex-parte without addressing the merits of the case, and if the assessee should be granted a further opportunity for a fair hearing.
Sections Cited
148, 148A(d), 132, 133, 142(1), 68, 69C
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Income Tax Appellate Tribunal, ‘A’ BENCH, KOLKATA
Before: Shri Duvvuru RL Reddy, Vice-(KZ) & Shri Rajesh Kumar
Per Duvvuru RL Reddy, Vice-President (KZ):- The present appeal is directed at the instance of assessee against the order of ld. Commissioner of Income Tax (Appeals), (A.Y. 2016-2017) Mangalam Viniyog Pvt. Limited National Faceless Appeal Centre (NFAC), Delhi dated 4th October, 2024 passed for Assessment Year 2016-17.
Brief facts of the case are that the assessee is a Private Limited Company, which filed its return of income for AY 2016-17 on 03.10.2016 declaring total income of Rs.7,66,720/-. According to information received from the DDIT(Inv.), Unit-6(3), Mumbai, the assessee-company transacted in Illiquid Derivative Sector through ‘Reversal of Trades’, trade at the end of the expiry period in illiquid derivatives options on BSE platform, entered into through broker M/s. N.S. Broking Pvt. Limited, whose name appeared in the report for providing accommodation entry for the said transaction to the tune of Rs.50,03,600/- in FY 2015-16 related to the AY 2016-17. The assessment in the case of assessee has been reopened after obtaining prior approval from the ld. Pr. CIT, Kolkata. Notice under section 148 dated 05.07.2022 was issued and served through ITBA along with copy of order under section 148A(d) dated 05.07.2022. Subsequently, revised order under section 148A(d) of the Act has been passed on 27.09.2022 on the direction of the Hon’ble Calcutta High Court, which has been duly served upon the assessee. A search and survey operations under section 132/133 of the Act was conducted by the Investigation Wing of the Income Tax Department on Dutta and Tyagi Group on 16.05.2018 and during the search enquiries of the case, it has been gathered by the Investigation Wing that scrip of (A.Y. 2016-2017) Mangalam Viniyog Pvt. Limited M/s. Yamini Investment Company Ltd. was managed and controlled to benefit certain pre-decided persons. The assessee purchased 3,55,080 shares of M/s. Yamini Investment Company Ltd. for Rs.1,60,55,368/- and sold the same during the FY 2015-16 for Rs.83,43,819/- and booked loss of Rs.77,11,548/-. The assesese has not filed the return of income in response to notice issued under section 148 of the Act. Thereafter, in response to notice issued under section 142(1), the assessee submitted a few details and not properly explained the transaction made in derivative and equity transaction during the year under consideration. The assessee was show-caused vide notice dated 07.05.2023 to explain why addition of Rs.50,03,600/- on account of manipulated transaction in illiquid derivative sector through reversal of trades, through broker M/s. N.S. Broking Pvt. Ltd. should not be made to its total income. The assessee was required to furnish its reply to the show-cause notice by 11.05.2023, but the assessee did not submit any reply nor sought any extension of time for furnishing its reply. The assessee was one of the beneficiaries who has taken accommodation entry from the transaction in the scrip of M/s. Yamini Investment Company Ltd. Another show-cause notice dated 17.05.2023 was issued to the assessee to explain why the entire sale consideration of Rs.83,43,819/- received on the purported sale of scrip of M/s. Yamini Investment Company Ltd. should not be treated as its unexplained cash credit under section 68 of the Act. The (A.Y. 2016-2017) Mangalam Viniyog Pvt. Limited assessee was show-caused to explain why commission @ 5% of total entry amount paid for taking accommodation entry should not be treated as its unexplained expenditure under section 69C of the Act and the same should not added to its total income. As the assessee did not furnish any satisfactory reply, the ld. Assessing Officer assessed the taxable total income of the assessee being unexplained income for transaction made in illiquid stock amounting to Rs.50,03,600/-, unexplained income for transaction made in penny stock amounting to Rs.83,43,819/- and unexplained expenditure for commission paid u/s 69C amounting to Rs.4,17,191/-, which aggregated to Rs.1,37,64,610/-. Being aggrieved, the assessee preferred an appeal before the ld. CIT(Appeals).
The ld. CIT(Appeals) dismissed the appeal of the assessee ex- parte by mentioning in the appellate order that inspite of several opportunities given, the assessee had no evidence to substantiate the grounds taken and not even has argued with any supporting documents in favour of its grounds of appeal. The ld. CIT(Appeals) also observed that the ld. Assessing Officer made the additions after considering the facts of the case and there is no material before him to deviate from the order of the ld. Assessing Officer.
4. On being aggrieved, the assessee preferred an appeal before the ITAT.
1. (A.Y. 2016-2017) Mangalam Viniyog Pvt. Limited 5. At the time of hearing, ld. Counsel for the assessee contended that the ld. CIT(Appeals) dismissed the appeal of the assessee ex- parte without going into the merit of the case. The ld. CIT(Appeals) was of the view that in absence of any submission inspite of given so many opportunities to the assessee to substantiate its claim in support of its contention as well as in absence of any material before him to deviate from the order of ld. Assessing Officer, he dismissed the appeal ex-parte. The ld. Counsel prayed before the Bench to set aside both the orders of revenue authorities and remit the matter back to the file of ld. CIT(Appeals) to decide the issue afresh.
6. At the outset, ld. Departmental Representative submitted that sufficient opportunity was being provided to the assessee but the assessee failed to appear before the ld. CIT(Appeals). Therefore, the ld. CIT(Appeals) has no other option except dismissing the appeal and he pleaded to uphold the order passed by the ld. CIT(Appeals).
We have heard both the sides and perused the material available on record. We find that the ld. CIT(Appeals) dismissed the appeal of the assessee ex-parte without going into the merit of the case. By considering the totality of the facts and circumstances of the case, and in order to ensure the principle of natural justice, we are of the view that it is a fit case to provide one more opportunity to the assessee. Therefore, we remit the matter back to the file of ld. CIT(Appeals) with a direction to dispose of the appeal without any inference on the observations of earlier order passed by him (A.Y. 2016-2017) Mangalam Viniyog Pvt. Limited and to decide it afresh on merit. At the same breath, we also hereby caution the assessee to promptly co-operate with the proceedings before the Ld. CIT(Appeals) failing which the Ld. CIT(Appeals) shall be at liberty to pass appropriate order in accordance with law and merits of the case, based on the materials available on the record. Thus, the grounds raised by the assessee are allowed for statistical purposes.