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Facts
The assessee filed a NIL return for AY 2017-18. During limited scrutiny, the AO added Rs.1,25,98,000/- under Section 68 for an unsecured loan, considering it an accommodation entry, and disallowed Rs.23,142/- as 'Other Expenses'. The CIT(A) dismissed the assessee's appeal ex-parte due to non-compliance, confirming the additions.
Held
The ITAT condoned the 220-day delay in filing the appeal. It found that the CIT(A) erred by passing an ex-parte order without considering evidence already on record and without deciding on the merits of the case. The ITAT set aside the CIT(A)'s order and restored the matter for fresh adjudication on merits, providing the assessee a fair hearing opportunity.
Key Issues
Whether the CIT(A) was justified in passing an ex-parte order without considering available evidence; and whether the additions under Section 68 and for 'Other Expenses' were sustainable.
Sections Cited
250, 143(3), 142(1), 68, 271AAC
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Income Tax Appellate Tribunal, “C” BENCH, AHMEDABAD
Before: MS. SUCHITRA KAMBLE & SHRI MAKARAND V. MAHADEOKAR
आयकर अपीलीय अिधकरण, अहमदाबाद "ायपीठ “सी“, अहमदाबाद । IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, AHMEDABAD सु"ी सुिच"ा का"ले, "ाियक सद" एवं "ी मकरंद वसंत महादेवकर, लेखा सद" के सम"। ] ] BEFORE MS. SUCHITRA KAMBLE, JUDICIAL MEMBER AND SHRI MAKARAND V. MAHADEOKAR, ACCOUNTANT MEMBER आयकर अपील सं / Year : 2017-18 Raghuvir International The Income Tax Officer बनाम/ Private Limited Ward-2(1)(2) v/s. Chhinoi Building Vadodara – 390 007 Station Road, Godi Road Vadodara – 390 020 "थायी लेखा सं./PAN: AAGCR 6132 F अपीलाथ%/ (Appellant) &' यथ%/ (Respondent) Assessee by : Shri Darshan Belani, AR Revenue by : Shri Rignesh Das, Sr.DR सुनवाई की तारीख/Date of Hearing : 24 /03/2025 घोषणा की तारीख /Date of Pronouncement: 25 /03/2025 आदेश/O R D E R PER MAKARAND V. MAHADEOKAR, AM:
This appeal by the assessee is directed against the order dated 27.09.2023 passed under section 250 of the Income-tax Act, 1961 (hereinafter referred to as "the Act") by the Commissioner of Income Tax, (Appeals), National Faceless Appeal Centre (NFAC), Delhi (hereinafter referred to as "CIT(A)") for the Assessment Year (AY) 2017–18 arising out of the assessment order dated 12.12.2019 passed under section 143(3) of the Act by the Income Tax Officer, Ward 2(1)(2), Vadodara (hereinafter referred to as "AO"). Raghuvir International Pvt.Ltd. Asst. Year : 2017-18 2 2. The facts in brief are that the assessee had filed its return of income for the A.Y. 2017-18 on 09.01.2018 declaring total income at Rs.NIL. The case was selected for limited scrutiny through CASS to examine two specific issues: (i) expenses incurred for earning exempt income, and (ii) investments/advances/loans. During the assessment proceedings, the Assessing Officer observed from the balance sheet that the assessee had shown long-term borrowings of Rs.14.76 crores, which included an unsecured loan of Rs.1,25,98,000/- from M/s Aalya Traders Pvt. Ltd.. The AO issued multiple notices under section 142(1) of the Act calling upon the assessee to substantiate the identity, genuineness, and creditworthiness of the lender. Though the assessee furnished confirmation, bank statement and copy of return of income of the lender, the AO, based on inputs received from the office of the DCIT, Central Circle-2(2), Mumbai, concluded that the said lender was a non-genuine entity controlled by one Shri Shirish C. Shah, who was allegedly engaged in providing accommodation entries. Consequently, the AO held that the assessee had failed to prove the genuineness of the loan and made an addition of Rs.1,25,98,000/- under section 68 of the Act. Further, the AO noticed that the assessee had debited Rs.23,142/- in the profit and loss account under the head “Other Expenses,” despite having not carried out any business activity during the year under consideration. Since no explanation was offered or supporting evidence submitted, the AO disallowed the said amount and added it to the total income. The assessment was completed determining total income of Rs.1,26,21,142/-, and penalty proceedings under section 271AAC of the Act were also initiated.
Aggrieved, the assessee filed an appeal before the CIT(A), National Faceless Appeal Centre. However, despite issuance of multiple notices on the Raghuvir International Pvt.Ltd. Asst. Year : 2017-18 ITBA portal on 20.01.2021, 28.01.2023, 21.03.2023, 19.04.2023, 31.08.2023 and a final show-cause notice on 22.09.2023, there was no compliance from the side of the assessee. Accordingly, the CIT(A) passed an ex-parte order, confirming the additions made by the Assessing Officer for want of evidence. The CIT(A) held that the appeal cannot be allowed to remain pending indefinitely due to non-cooperation of the appellant and thus dismissed the appeal ex-parte without entering into the merits of the grounds raised.
Being aggrieved, the assessee is in further appeal before us raising following grounds of appeal:
1. The learned CIT(A) erred in law and on facts in deciding the appeal ex-parte. It is submitted that the Appellant had genuine and reasonable cause for not being able to file written submissions before the learned CIT(A), and therefore, the order passed by the learned CIT(A) ex-parte be quashed and the matter be restored to the file of the learned CIT(A) for adjudication denovo.
The learned CIT(A) erred in confirming the addition of Rs.1,25,98,000/- u/s 68 of the Act, which was beyond the scope of limited scrutiny for which its case was taken up for scrutiny as mentioned by the learned Assessing Officer in the assessment order. It is submitted that the case was selected for limited scrutiny to verify the exempt income as well as investment/advance/loan which suggests that the learned Assessing Officer was required to inquire about the investment made or loans and advances given by the Appellant and not in respect of the unsecured loans availed by the Appellant. The learned Assessing Officer has, thus, exceeded the jurisdiction beyond limited scrutiny, and hence, the order passed by him as confirmed by CIT(A) is bad in law and liable to be quashed.
3. The learned CIT(A) erred in law and on facts in confirming the addition of Rs.1,25,98,000/- received as unsecured loan by the Appellant during the year under consideration u/s.68 of the Act. It is submitted that the Appellant has led sufficient evidences in order to prove identity of the party, genuineness of the transaction and creditworthiness of the party, and thus, discharged the onus that lay upon it u/s.68 of the Act. It is submitted that it be so held now and the addition of Rs.1,25,98,000/-made by the learned Assessing Officer and confirmed by CIT(A) be deleted.
4. The learned CIT(A) erred in confirming the disallowance of Rs.23,142/- made by the learned Assessing Officer by disallowing expenses under the head "Other Raghuvir International Pvt.Ltd. Asst. Year : 2017-18 4 Sources". It is submitted that the said expenses are incurred for the purpose of business of the Appellant and should not have been disallowed. It is submitted that it be so held now and the disallowance made by the learned Assessing Officer as confirmed by CIT(A) be deleted.
5. The appellant reserves the right to add, alter or amend any of the grounds of appeal.
At the outset, it is noted that there is a delay of 220 days in filing the present appeal. The assessee has filed a condonation application supported by an affidavit sworn by Shri Jayeshbhai R. Thakkar, Managing Director of the assessee company, wherein it has been explained that the delay occurred due to the person handling taxation matters leaving the company without intimating the management about the requirement to file the appeal. On discovery of the lapse, legal advice was obtained and the appeal was filed. The explanation offered is bona fide and supported by affidavit. The learned Departmental Representative (DR) has not raised any objection to the condonation of delay.
Having regard to the facts and circumstances and in the interest of substantial justice, we are satisfied that there exists reasonable cause for the delay. Accordingly, the delay of 220 days is hereby condoned, and the appeal is admitted for adjudication.
During the course of hearing, the learned Departmental Representative submitted that the CIT(A) has passed the order ex parte and has not discussed the merits of the case and fairly agreed that the matter may be restored to the file of the CIT(A) for fresh adjudication on merits. The Authorized Representative (AR) of the assessee also agreed that the CIT(A) has passed the order without going into the merits of the case. Raghuvir International Pvt.Ltd. Asst. Year : 2017-18
We have heard the rival submissions, perused the orders of the lower authorities and considered the material available on record. It is an admitted position that during the course of the assessment proceedings, the assessee had submitted various documents in support of the unsecured loan of Rs.1,25,98,000/- received from M/s.Aalya Traders Pvt. Ltd. These documents included a copy of the confirmation of the lender, copy of return of income, bank statement, and other supporting material to establish the identity, creditworthiness, and genuineness of the transaction. These details were very much part of the assessment record and were referred to by the Assessing Officer in the assessment order dated 12.12.2019 passed under section 143(3) of the Act. However, while disposing of the appeal, the learned CIT(A) has passed an ex parte order on the ground that the assessee failed to respond to notices issued through the ITBA portal. The CIT(A) has neither taken note of the documentary evidence already available on record from the assessment proceedings nor has examined the merits of the grounds of appeal raised by the assessee. The order is thus devoid of any reasoned discussion or independent analysis of the submissions and evidence already on file.
8.1. The learned DR has also fairly submitted that the impugned order passed by the CIT(A) is ex-parte and without consideration of the documentary evidence already submitted by the assessee during the assessment and has no objection if the matter is restored to the file of the CIT(A) for decision on merits.
In our considered opinion, the appellate authority is duty bound to decide the matter in a judicious manner by appreciating the evidence available on record and dealing with the contentions raised by the assessee. Raghuvir International Pvt.Ltd. Asst. Year : 2017-18 6 Mere non-compliance to notices issued electronically, without considering the evidence already forming part of the assessment record, cannot be a valid basis for dismissal of the appeal. The action of the CIT(A) in not dealing with the submissions and material already available on record has resulted in denial of effective appellate remedy and has violated the principles of natural justice.
In view of the above and in the interest of substantial justice, we are inclined to set aside the impugned order of the CIT(A) and restore the matter to his file for de novo adjudication on merits, after affording reasonable opportunity of being heard to the assessee.
10.1. Accordingly, the order passed by the CIT(A) is hereby set aside, and the matter is restored to the file of the CIT(A) with a direction to adjudicate the appeal afresh by passing a speaking and reasoned order after affording due opportunity of hearing to the assessee.