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Facts
The assessee, a partnership firm, had its assessment for AY 2015-16 reopened under Section 148. The Assessing Officer made additions of Rs. 1,15,77,211/- under Section 69A/115BBE as the assessee failed to file a return or respond to notices, reportedly due to the arrest and legal issues faced by a partner. The CIT(A) dismissed the assessee's appeal ex-parte.
Held
The Tribunal found merit in the assessee's argument that the partner's arrest hindered compliance. Consequently, the Tribunal remitted the case back to the Assessing Officer for a fresh decision on merits, granting the assessee a reasonable opportunity to be heard.
Key Issues
The key issue was whether the assessee's inability to respond to tax authorities due to a partner's arrest justified remanding the assessment for fresh consideration.
Sections Cited
148, 147, 69A, 115BBE, 271(1)(c)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, HYDERABAD BENCHES “B”, HYDERABAD
Before: SHRI MANJUNATHA. G & SHRI K. NARASIMHA CHARY
आदेश / ORDER PER K. NARASIMHA CHARY, J.M: Aggrieved by the order dated 29/08/2024 passed by the learned Commissioner of Income Tax (Appeals), Na�onal Faceless Appeal Centre, Delhi (“Ld. CIT(A)”), in the case of Sri Sai Krishna Rice Industry, Khammam (“the assessee”), assessee preferred this appeal for the AY 2015-16. 2. Brief facts of the case are that as per the informa�on available with the Department, the assessee is a partnership firm and has been iden�fied as non-filer with poten�al tax liabili�es and made certain transac�ons during the assessment year under considera�on. Subsequently, the assessee’s case was reopened and a no�ce U/s. 148 of the Income Tax Act, 1961 (“the Act”) was issued. Assessee, however, did not file return of income for the assessment year 2015-16 in response to the said no�ce.
Therea�er, learned Assessing Officer based on the material available on record issued show-cause no�ces on various dates and called for the complete details of transac�ons along with documentary evidence. However, the assessee did not respond to the show cause no�ces issued and therefore, in the absence of any explana�on / documentary evidence in support of the source of such transac�ons, the learned Assessing Officer proceeded to made addi�ons aggrega�ng to Rs. 1,15,77,211/- on account of varia�on in the accounts as discussed in assessment order and brought to tax U/s. 69A read with sec�on 115BBE of the Act.
Thus, learned Assessing Officer determined the assessed income of the assessee at Rs. 1,15,77,211/- and passed assessment order U/s. 147 read with sec�on 147 of the Act, dated 01/12/2023. Further, learned Assessing Officer has also ini�ated penalty proceedings U/s 271(1)(c) of the Act while passing the assessment order. Aggrieved, assessee preferred an appeal before the learned CIT(A).
During the First Appellate Proceedings, assessee made various submissions however, the learned CIT(A) did not consider the same and dismissed the appeal of the assessee ex-parte by holding that assessee had failed to refute the findings and evidence presented by the learned Assessing Officer in the assessment order and hence, the learned
Page 2 of 6 Assessing Officer’s ac�on is upheld. Aggrieved by the order of the learned CIT(A), the assessee is in appeal before the Tribunal.
Learned Authorized Representa�ve (“learned AR”) submi�ed that the assessee, M/s. Sri Sai Krishna Rice Industry, is a partnership firm, whose business is manufacturing and sale of rice. It was submi�ed that Mr. Seemakurthi Narasimha Rao, who is a partner of the assessee-firm was arrested on 17/07/2014 by the Circle Inspector of Aswaraopet and booked a criminal case on the ground that he failed to deliver rice worth Rs. 2,48,90,870/- (1,185.193 MTs) to the Food Corpora�on of India, Khammam as per the agreement entered with District Manager, APSCSCL, Khammam for custom milling opera�ons. Learned AR further submi�ed that loan recovery process to recover a secured debt of Rs. 1,13,92,402/- by auc�oning the rice mill, plant & machinery and equipment of the rice mill and house property of the partner was also ini�ated on 13/11/2014. Under these circumstances, the assessee-firm could not file the details / documentary evidence in support of the source of certain transac�ons as sought by the learned Revenue Authori�es. Without considering these submissions, learned CIT(A) sustained the addi�ons made by the learned Assessing Officer and dismissed the appeal of the assessee ex-parte. Learned AR further submi�ed that now, Mr. Seemakurthi Narasimha Rao, partner of the assessee-firm, is released and to some extent the legal issues involved are subsided. Therefore, learned AR prayed that the assessee may be given one more opportunity before the learned Assessing Officer to substan�ate its case.
Learned Departmental Representa�ve (“learned DR”) vehemently supported the orders of the lower authori�es and submi�ed that even though the assessee has been granted sufficient opportuni�es, the assessee failed to substan�ate its case along with suppor�ng
Page 3 of 6 documentary evidence therefore, the order of the lower authori�es need not be interfered with.
We have gone through the record in the light of the submissions made on either side. It is a fact that the assessee did not respond to the no�ces / show cause no�ces issued during the assessment proceedings as well as in First Appellate Proceedings. However, on a perusal of the submissions made by the assessee and on verifica�on of the documents filed before us, we find that Mr. Seemakurthi Narasimha Rao, who is a partner of the assessee-firm was arrested on 17/07/2014, whatsoever the reason may be, and was facing certain unavoidable legal issues during the relevant period of �me before the learned Assessing Officer as well as during First Appellate Proceedings. Since the assessee does not stand to gain by allowing the appeal to be dismissed exparte, we find merit in the argument of the learned AR that because of the said reasons, the assessee could not respond / file the submissions before the learned Revenue Authori�es.
As submi�ed by the learned AR, Mr. Seemakurthi Narasimha Rao, got released from the custody and the legal issues that were being faced by the assessee-firm were also subsided to some extent. Therefore, considering the facts and circumstance of the case and also the prayer of the learned AR, we are of the considered view that the ma�er needs to be revisited to the file of the learned jurisdic�onal Assessing Officer in order to take a fresh look into the issues involved and decide the case afresh a�er affording a reasonable opportunity of being heard to the assessee.
In view of the above, we hereby remit the ma�er to the file of the leaned jurisdic�onal AO to decide the case on merits and in accordance with law. Grounds are answered accordingly.
In the result, appeal of the assessee is allowed for sta�s�cal purposes as indicated herein above.
Order pronounced in the open court on the 23rd January, 2025.