PINKI FRESH FOODS LIMITED,CHITTOOR vs. ITO., WARD-1, CHITTOOR

Succinctly stated, the A.O. based on information that the assessee company had during the subject year sold immovable property and also received interest income, but had not filed its return of income, initiated proceedings under Section 147 of the Act. Notice under Section 148 of the Act was issued to the assessee company.

During the course of assessment proceedings, the A.O. observed that the assessee company had in the subject year sold an immovable property for a consideration of Rs. 12 crore. Also, it was observed by him that the assessee company during the subject year had received interest income of Rs. 2,77,140/- on which tax was deducted at source by the deductor under Section 194A of the Act.

As the assessee company had failed to comply with the notice issued by the A.O. u/s 142(1) of the Act, the A.O. was constrained to proceed with and frame the assessment to the best of his judgment u/s 144 of the Act. Accordingly, the A.O., in the absence 4 Pinki Fresh Foods Limited. of any information forthcoming framed the assessment, vide his order passed u/s 147 r.w.s. 144 r.w.s. 144B of the Act, dated 30.03.2022, wherein he assessed the income of the assessee company at Rs.12,02,77,140/- after making the aforementioned additions, viz. (i) treating the entire amount of sale proceeds of immovable property as capital gain: Rs.12 crore; and (ii) addition of the interest income by treating it as income of the assessee company from unexplained sources: Rs.2,77,140/-.

Aggrieved, the assessee company carried the matter in appeal before the CIT(A).

Ostensibly, as the assessee company, despite having been put to notice about the date of hearing of appeal (through ITBA/email) on four occasions, i.e., for 11-12-2023, 19-12-2023, 03-01-2024, and 12-01-2024, failed to respond, therefore, the CIT(A), held a firm conviction that the assessee company was not interested to prosecute the matter, and proceeded with to dispose of the appeal on merits.

On merits, the CIT(A), after deliberating on the facts involved in the case before him, in the backdrop of the observations of the 5 Pinki Fresh Foods Limited.

The assessee company, being aggrieved with the order of the CIT(A), has carried the matter in appeal before us.

We have heard the Ld. Authorized representatives of both parties, perused the orders of the lower authorities and the material available on record.

Sri K.A. Sai Prasad, C.A. the learned Authorized Representative (for short “ld. AR”) for the assessee company, at the threshold of hearing of the appeal, submitted that the present appeal involves a delay of 270 days. Elaborating on the reasons leading to the delay, the Ld. AR had drawn our attention to the application filed by the assessee company seeking condonation of the delay, along with a supporting “affidavit” of even date. The Ld. AR, explaining the sequence of events right from the stage of assessment, submitted that during the relevant period, i.e., February 2024 to October 2024, there was a change in the directors of the assessee company. Elaborating further on his contentions, the Ld. AR submitted that as the email address of a former employee of the assessee company, who had way back resigned, was linked with the e-filing portal of the assessee 8 Pinki Fresh Foods Limited. company, therefore, the current directors were unaware of the assessment proceedings u/s 147 of the Act. The Ld. AR submitted that it was only when Mr. G. Balaji, an erstwhile director of the assessee company, had in June, 2022 received a call from the Income Tax Department about the outstanding demand that the assessee company on learning about the assessment framed in its case had thereafter filed an appeal before the CIT(A).

Carrying his contention further, the Ld. AR submitted that, as the subsequent notices intimating the fixation of the hearing of the appeal were sent by the office of the CIT(A) to the former employee's email address, thus, the same resulted in non- compliance and eventually dismissal of the appeal vide an ex-parte order on 02-02-2024. The Ld. AR submitted that the current director of the assessee company had remained under a bona fide belief that the tax consultant, who was engaged to appear before the CIT(A) would handle all further proceedings relating to the appeal. The Ld. AR submitted that as Mr. Prem Kumar, the earlier director, who was looking after the income tax matters, had resigned as a director in September, 2023, therefore, the current directors remained unaware of the dismissal of the appeal by the 9 Pinki Fresh Foods Limited.

The Ld. AR submitted that as the delay in filing of the present appeal had crept in for bona fide reasons and not on account of any lackadaisical approach of the assessee company, therefore, the same, in all fairness, be condoned.

Shri B. Bala Krishna, CIT-DR (for short “Ld. DR") vehemently opposed the seeking of the condonation of the delay by the assessee company. The Ld. DR submitted that considering the conduct of the assessee company right from the initiation of the assessment proceedings till the filing of the appeal before the Tribunal, it is evident that it had throughout adopted a casual and lackadaisical approach regarding its income tax matters. Elaborating on his contention, the Ld. DR submitted that the 10 Pinki Fresh Foods Limited. assessee company, despite having sold an immovable property for a consideration of Rs. 12 crores during the subject year, had evaded filing its return of income. The Ld. DR submitted that despite the A.O. having issued a notice u/s 148 calling upon the assessee company to file its return of income, it had neither filed any such return of income in compliance thereto nor complied with the notices issued u/s 142(1) of the Act, due to which the A.O. was constrained to frame the assessment vide an ex parte order passed u/s 147 r.w.s. 144 r.w.s. 144B of the Act, dated 30.03.2022.

The Ld. DR submitted that the lackadaisical approach of the assessee company did not end there and continued even in the course of the appellate proceedings before the CIT(A), wherein it had delayed the filing of the appeal, which, however, was condoned by the CIT(A) u/s 249(3) of the Act. The Ld. DR submitted that even thereafter the assessee company chose not to correct itself and filed the present appeal involving a delay of 270 days. The Ld. DR submitted that considering the aforesaid facts, it can safely be inferred that the delay involved in filing the present appeal had occasioned because of the casual and lackadaisical approach that 11 Pinki Fresh Foods Limited. had consistently been adopted by the assessee company qua its income tax proceedings. The Ld. DR, based on the aforesaid contentions, submitted that, as the delay in filing of the present appeal had not occasioned for any bona fide reason but because of the lackadaisical approach of the assessee company, the same does not merit to be condoned.

We have heard both parties qua the reasons leading to the delay involved in the filing of the present appeal. Admittedly, it is a matter of fact borne from the record that the present appeal filed by the assessee company involves a delay of 270 days. Considering the fact, as had been brought to our notice by the Ld. CIT-DR, viz.,

Considering the fact that the assessee company was not validly put to notice about the fixation of the hearing of its appeal on either of the four occasions, we are of the firm conviction that it had remained divested from both participating in the proceedings before the CIT(A) and also, for the said reason, 13 Pinki Fresh Foods Limited. remained unaware about the dismissal of its appeal by him vide order dated 02-02-2024. We thus, in terms of our aforesaid observations, condone the impugned delay of 270 days involved in filing of the present appeal by the assessee company before us.

The Ld. AR, at the threshold of hearing of the appeal, submitted that an application under Rule 29 of the Income Tax Appellate Tribunal Rules, 1963, seeking liberty to file certain documents which have a strong bearing on the adjudication of the present appeal, has been filed. The Ld. AR submitted that as the assessee had no opportunity to furnish the said documents in the proceedings before the lower authorities, the same, in all fairness, be admitted.

Apropos the merits of the case, the Ld. AR submitted that both the A.O. and the CIT(A) had grossly erred in law and on facts of the case in assessing the sale consideration of Rs. 12 crores received by the assessee company on the sale of its rural agricultural land by bringing the same to tax under the head "Capital Gains".

We have perused the documents that the assessee has filed before us, for which the assessee company has sought liberty for admission as additional evidence as under:

On merits, it is the Ld. AR's claim that as the subject land, i.e., 24 acres and 53 cents, situated at Sadakuppam Gram Panchayat, Sadakuppam Revenue Village, Bangarpalem Mandal, District : Chittoor, Andhra Pradesh, that was sold by the assessee company during the year under consideration is rural agricultural land, which neither falls within the municipal limits or a 15 Pinki Fresh Foods Limited. cantonment board having a population of more than ten thousand, as envisaged in Section 2(14)(iii)(a) of the Act; nor is situated within the notified area limits as contemplated in Section 2(14)(iii)(b) of the Act, therefore, the same is not a “Capital Asset”. Elaborating further on his contention, the Ld. AR submitted that both the authorities below had loosing sight of the aforesaid material aspects, grossly erred in law and on facts of the case in bringing the transfer transaction of the subject land to tax under the head “Capital Gains.” Also, the Ld. AR submitted that the A.O., while bringing the interest income of Rs.2,77,409/- received by the assessee on its deposits with Canara Bank to tax, had grossly erred in not allowing the credit of the corresponding tax deduction at source (TDS) of Rs. 2,77,409/- that was disclosed in its Form 26AS. The Ld. AR, to buttress his claim that the subject land sold by the assessee during the year under consideration was an agricultural land, had drawn our attention to the copy of the sale deed dated 11-09-2014, wherein it was, inter alia, stated that there were 300 mango trees on the said land (Page 28 of the APB).

Per contra, the Ld. DR submitted that, as there was no material available on record that revealed that the land in question 16 Pinki Fresh Foods Limited. was a rural agricultural land and thus, not a capital asset, therefore, the A.O. had rightly brought the sale transaction to tax under the head "Capital Gains".

We have thoughtfully considered the contentions advanced by the learned Authorized Representatives of both parties in the backdrop of the material available on record.

As observed hereinabove, it is a matter of fact discernible from the record that the CIT(A), without validly putting the notice to the assessee company about the fixation of hearing of the appeal by sending the notices on either of the four occasions on which the appeal was fixed for hearing at the address that it had specifically provided at Column no.17 of “Form No.35”, had divested the assessee company of its right to defend its case before him. Considering the aforesaid facts, we are of the firm conviction that, because of the aforesaid reason, the assessee company had remained oblivion about the dismissal of its appeal by the CIT(A) vide order dated 02-02-2024. We thus, are unable to persuade ourselves to concur with the summary dismissal of the appeal by 17 Pinki Fresh Foods Limited. the CIT(A) without affording an opportunity of being heard to the assessee company.

Apart from that, we find that the claim of the assessee company that the subject land sold during the year under consideration was rural agricultural land, that did not fall within the meaning of a “Capital Asset” u/s 2(14) of the Act had not been addressed by the authorities below. Although we are of the view that the assessee company ought to have remained vigilant and participated in the proceedings before the lower authorities, but, at the same time cannot loose sight of the facts due to which it had remained divested from appearing before the CIT(A) and had been visited with the dismissal of its appeal by an ex parte order.

Be that as it may, we find that the claim of the assessee company that the subject land sold during the year under consideration, being a rural agricultural land that was not a “Capital Asset” could not have been brought to tax under the head “Capital Gains,” had not been addressed by either of the authorities below, therefore, we are of the firm conviction that, in the totality of the facts involved in the case, the matter, in all 18 Pinki Fresh Foods Limited. fairness, requires to be restored to the file of the A.O., who is directed to re-adjudicate the issue in hand after affording a reasonable opportunity of being heard to the assessee company. Also, the claim of the assessee company that the credit of the tax deducted at source (TDS) corresponding to the bank interest that had been brought to tax in its hands be also considered in the said de novo proceedings. We thus, in terms of our aforesaid deliberations, set aside the matter to the file of the A.O. for fresh adjudication.

Grounds of Appeal Nos. 2 to 5 are allowed for statistical purposes.

Grounds of Appeal Nos. 1 and 6, being general in nature, are dismissed.

Resultantly, the appeal filed by the assessee company is allowed for statistical purposes in terms of our aforesaid deliberations.