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Facts
The assessee acquired shares of Riddhi Siddhi Recyclers Pvt. Ltd. with face value and premium, which was later investigated. The company was found to have raised capital through shell companies and lacked creditworthiness. The assessee's investment was substantial relative to their declared income.
Held
The Tribunal noted the assessee's non-cooperation throughout the proceedings. Despite the addition, considering the quantum, the matter was restored to the Assessing Officer for de novo consideration.
Key Issues
Whether the addition of Rs. 30,00,000/- as unexplained investment is justified, and whether the assessee's non-cooperation warrants a de novo assessment.
Sections Cited
147, 144, 250
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Income Tax Appellate Tribunal, “SMC” BENCH, AHMEDABAD
Before: DR. BRR KUMAR & SHRI SIDDHARTHA NAUTIYAL
(Assessment Year: 2012-13) Pinal Prafulbhai Patel, Vs. Income Tax Officer, A-9, New Jashpark, Isanpur Gam, Ward-3(2)(9), Isanpur, Ahmedabad-382443 Ahmedabad [PAN No.BIXPP0138A] (Appellant) .. (Respondent) Appellant by : Shri Vivek Chavda, A.R. Respondent by: Smt. Mamta Singh, Sr. DR 24.02.2025 Date of Hearing Date of Pronouncement 12.03.2025 O R D E R
PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER:
This appeal has been filed by the Assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals), (in short “Ld. CIT(A)”), National Faceless Appeal Centre (in short “NFAC”), Delhi, vide order dated 23.06.2022 passed for A.Y. 2012-13.
The Assessee has taken the following grounds of appeal:-
“1.1 The order passed u/s. 250 on 23.06.2022 for A.Y.2012-13 by National Faceless Appeal Center (NFAC), Delhi upholding the addition of Rs.30,00,000/- made by AO is wholly illegal, unlawful and against the principles of natural justice. 1.2 The Ld. CIT(A) has grievously erred in law and or on facts in not considering fully and properly the eccentric facts and evidence available with regard to the impugned additions. 1.3 The Ld. CIT(A) has grievously erred in law and on facts in not carrying out any inquiry with regard to the applicability of the provisions of Income tax Act and thereby violated the principle of natural justice. The appellant had specifically denied at the time of filing Form No.35 to receive the notices on Email, however, the Pinal Prafulbhai Patel vs. ITO Asst.Year –2012-13 - 2– CIT(A) has kept on sending the same on Emails rather than sending physically which could not be served to the appellant. Therefore, the appellant shall be granted opportunity to produce additional evidences. 2.1 The Ld. CIT(A) has grievously erred in law and or on facts in upholding the reopening the case under section 147. 2.2 That in the facts and circumstances of the case and in law, the reopening upheld by the CIT(A) was wholly illegal, unlawful and against the principle of natural justice which deserves to be quashed as it is out of jurisdiction. 3.1 The Ld. CIT(A) has grievously erred in law and or on facts in upholding the addition of Rs.30,00,000 as unexplained investment. 3.2 That the Ld. CIT(A) ought not to have upheld addition of Rs.30,00,000 as unexplained investment.”
At the outset, we observe that the appeal is time barred by 378 days. The assessee filed an Affidavit for condonation of delay vide Affidavit dated 22.02.2025, wherein the assessee stated that the order of NFAC was served on his email address rather than serving it on his communication address. The assessee was not conversant with the emails and login of the Income Tax portal. The assessee is residing out of India which caused delay in filing of the appeal by 378 days. The Counsel for the assessee submitted that there was no mala fide in delaying the filing of the appeal and hence the same may be kindly condoned.
Looking into the instant facts and the reasons cited by the assessee for the delay of 378 days in the filing of the present appeal, in the interest of justice, the delay in filing of the present appeal is hereby condoned.
The brief facts of the case are that, as per information received from DDIT (Investigation) Unit-1, Ahmedabad, the assessee had Pinal Prafulbhai Patel vs. ITO Asst.Year –2012-13 - 3– acquired 150,000 shares of M/s. Riddhi Siddhi Recyclers Pvt. Ltd., each with a face value of Rs. 10/- and a premium of Rs. 10/- during the Financial Year 2011-12. Upon further investigation, it was found that the assessee had filed a return of income for the assessment year (AY) 2012- 13 on 11.05.2013, declaring a total income of Rs. 1,78,375/-. During a search and seizure operation conducted by the Ahmedabad Investigation Wing against the Kushal group, it was discovered that M/s. Riddhi Siddhi Recyclers Pvt. Ltd. had raised substantial share capital through bogus shell companies based out of Kolkata, but the company had no genuine business or creditworthiness. The assessee was one of the investors in the shares of Riddhi Siddhi Recyclers Pvt. Ltd. The assessee had not filed a return of income for AY 2011-12, and the return filed for AY 2012-13 showed a minimal income of Rs. 1,78,375/-. Upon analysis of the return of income filed by the assessee, the Assessing Officer was of the view that the assessee did not have the creditworthiness to make such a significant investment in the shares of Riddhi Siddhi Recyclers Pvt. Ltd. The financial records of Riddhi Siddhi Recyclers Pvt. Ltd. also failed to justify the issuance of shares at a premium to the assessee. Accordingly, the assessment of the assessee was reopened under Section 147 of the Act. During the course of assessment proceedings, the Assessing Officer issued several notices of hearing, but the assessee failed to respond or furnish the required information as called for in such notices issued by the Assessing Officer. Given the lack of cooperation from the assessee, the AO was left with no other option but to finalize ex-parte assessment under Section 144 of the Act, based on the available facts and material on Pinal Prafulbhai Patel vs. ITO Asst.Year –2012-13 - 4– record. The AO observed that the assessee had not filed any return of income for AY 2011-12, and in the return for AY 2012-13, the assessee declared only a minimal income of Rs. 1,78,375/-, which was inconsistent with the significant investment made in the shares of Riddhi Siddhi Recyclers Pvt. Ltd. The financials of the company did not support the issuance of shares at such a high premium. The AO further noted that the assessee failed to provide any explanation regarding the source of investment in the shares of M/s. Riddhi Siddhi Recyclers Pvt. Ltd. As a result, the investment of Rs. 30,00,000/- was treated as unexplained income and added to the total income of the assessee.
In appeal, Ld. CIT(Appeals) confirmed the additions made by the assessing officer by noting that despite issuance of as many as six notices of hearing, the assessee failed to cause appearance and furnish any explanation regarding the source of investment made in the shares of Riddhi Siddhi Recyclers Pvt. Ltd. While passing the order, Ld. CIT(Appeals) made the following observations:
“6.2 In the statement of facts, it has been claimed that he is non-resident staying USA. it was also claimed that he had remitted sum of Rs 7837583 to his brother Shri Ketan Gunvatnbhai Patel having PAN ABVPP9101D residlng at 43 Girdharnagar Society Shahibaug Ahmedabad in his Axis Bank Shahibaug Branch in his Savings Bank Account No 910010026493982 till the year ending 31 03 2012 out of his income earned in USA and from USA bank account. Out of above remitted sum appellant have instructed said Shri Ketanbhai Gurwantbhai Patel to invest Rs 6000000 on his behalf in the shares of M/s. Riddhi Siddhi Recylers Private Limited as per following details (A) Rs 3000000 in appellants name ie Pinal Prafulbhai Patel being consideration of 150000 Equity Share of Rs 10 per shares at a premium of Rs 10 per shares (B) Rs 3000000 in the name of brother of appellant Shri Alpesh Prafulbhai Patel having PAN AOAPP1630H being consideration of 150000 Equity Share of Rs 10 per shares at a premium of Rs 10 per shares.
Pinal Prafulbhai Patel vs. ITO Asst.Year –2012-13 - 5– 6.3 The aforesaid claim made in the statement of facts by the appellant are not supported by any documentary evidence and hence cannot be accepted. There is no proof that the appellant had remitted the sum out of his earnings in USA through the bank account of Ketan G. Patel for making investment in shares of M/s. Riddhi Siddhi Recylers Private Limited. Therefore, the addition made by the AO amounting of Rs.30,00,000/- on account of unexplained investment is held as correct and justified. In view of above, I do not have any material to interfere with the order passed by the AO and the addition of Rs.30,00,000/- is confirmed and the grounds of appeal filed by the appeliant are hereby dismissed.
7. In the result, the appeal is treated as dismissed.”
7. The assessee is in appeal before us against the aforesaid order passed by Ld. CIT(Appeals). Before us, the counsel for the assessee submitted that the assessee is a non-resident residing in the USA and investment in the shares of Riddhi Siddhi Recyclers Pvt. Ltd were sourced out of remittances made by the assessee into the bank account of his brother. The counsel for the assessee submitted that all the investments were made through banking channels and if given an opportunity of hearing, the assessee would be in a position to completely explain the source of investments made in the shares of M/s Riddhi Siddhi Recyclers Pvt. Ltd.
8. On going through the facts of the instant case, we observe that the assessee has all throughout, both during the course of assessment proceedings and proceedings before Ld. CIT(Appeals), remained non-co- operative and despite issuance of several notices of hearing, failed to furnish source of investments in the shares of Riddhi Siddhi Recyclers Pvt. Ltd. However, keeping into consideration the quantum of addition made, in the interest of justice, the matter is restored to the file of assessing officer for de novo consideration, after giving due opportunity of hearing to the assessee. The assessee would also be required to pay cost of ₹3000/- to be deposited in the Prime Minister’s relief fund.
In the result, the appeal of the assessee is allowed for statistical purposes. This Order pronounced in Open Court on 12/03/2025
Sd/- Sd/- (DR. BRR KUMAR) (SIDDHARTHA NAUTIYAL) VICE PRESIDENT JUDICIAL MEMBER Ahmedabad; Dated 12/03/2025 TANMAY, Sr. PS TRUE COPY आदेश की �ितिलिप अ�ेिषत/Copy of the Order forwarded to : अपीलाथ� / The Appellant 1. 2. ��थ� / The Respondent. 3. संबंिधत आयकर आयु� / Concerned CIT 4. आयकर आयु�(अपील) / The CIT(A)- 5. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER,