OMKARA IMPEX AND MERCHANDISE LLP,AHMEDABAD vs. THE ACIT, CIRCLE-3(3)(2), AHMEDABAD

ORDER \nPER MAKARAND V. MAHADEOKAR, AM:\nThis appeal by the assessee is directed against the order dated\n14/03/2024, passed by the Commissioner of Income Tax (Appeals), National\nFaceless Appeal Centre (NFAC), Delhi (hereinafter referred to as “CIT(A)"],\nconfirming the order of the Assessing Officer [hereinafter referred to as\n“AO"] under Section 147 r.w.s.144 of the Income Tax Act, 1961 [hereinafter\nreferred to as “the Act”] for the assessment year (AY) 2014-15.\nITA No.809/Ahd/2024\nOmkara Impex and Merchandise LLP vs. ACIT\nAsst. Year: 2014-15\n2\nFacts of the Case:\n2. The assessee is engaged in the business of trading. The assessment was\nreopened under Section 147 of the Act based on information received that the\nassessee had obtained accommodation entries of Rs.69,18,469/- from M/s.\nAryan Trading Co. in Financial Year (FY) 2013-14. Accordingly, a notice\nunder Section 148 of the Act was issued on 31/03/2021, after obtaining\napproval under Section 151. The assessee did not file its return of income in\nresponse to the notice under Section 148 of the Act. The AO issued multiple\nnotices under Sections 142(1) and 143(2) of the act, calling for details.\nHowever, the assessee remained non-compliant and failed to furnish\nsupporting documents to substantiate the purchases. The AO passed a best\njudgment assessment under Section 144 on 31/03/2022, making an addition\nof Rs.69,18,469/- to the assessee's income, treating the amount as bogus\npurchases/accommodation entry. The AO also initiated penalty proceedings\nunder Section 271(1)(c) of the Act for furnishing inaccurate particulars of\nincome.\n3. Aggrieved by the order of the AO, the assessee filed an appeal before\nthe CIT(A), NFAC, Delhi. Before the CIT(A), the assessee challenged the\nreopening of assessment under Section 147 of the Act, contending that it was\nwithout jurisdiction and bad in law. The assessee also objected to the best\njudgment assessment under Section 144 of the Act, arguing that it had sought\ntime for making submissions, which was not adequately considered. Further,\nthe assessee disputed the addition of Rs.69,18,469/-, claimed as alleged\naccommodation entry of purchases, and alternatively argued that if at all any\ndisallowance was warranted, it should be restricted to the profit element\nITA No.809/Ahd/2024\nOmkara Impex and Merchandise LLP vs. ACIT\nAsst. Year: 2014-15\n3\nembedded in the purchases. The assessee also contested the consequential\nlevy of interest and the initiation of penalty.\n4. During the appellate proceedings before the CIT(A), multiple notices\nwere issued to the assessee for compliance. However, the assessee failed to\nrespond on several occasions. As per the record, the CIT(A) sent notices on\n09/11/2022, 27/09/2023, 17/11/2023, and 29/12/2023, but the assessee did\nnot submit any reply. The only action taken by the assessee was a request for\nadjournment on 13/12/2023, which was granted, but no further submissions\nwere made. Consequently, the CIT(A) proceeded to decide the appeal ex-\nparte, solely based on the material available on record, without considering\nthe merits of the case. The appeal was dismissed, and the addition of\nRs.69,18,469/- was confirmed, along with the levy of interest and initiation of\npenalty proceedings.\n5. The assessee preferred an appeal before us with following grounds of\nappeal:\n1. The Ld. AO has erred in law and on facts of the case reopening the assessment\nu/s.147 of the Act. Under the facts and circumstances of the case, the action of\nreopening is without jurisdiction and in not permissible either in law or on facts.\n2. The Ld. CIT(A) has erred in law and on the facts in confirming Ex-parte\nassessment order framed by the Assessing Officer u/s.144 of the Act in spite of\nthe fact that the Appellant had sought time to make submissions.\n3. The Ld. CIT(A) has erred in disposing the impugned assessment order without\nstating the points for determination, the decision arrived at by the Ld. AO as well\nas the reasons for the decision, thereby violating section 250(6) of the Act.\n4. The Ld. CIT(A) has erred in law and on facts in confirming the addition of\nRs.69,18,469/- as alleged accommodation entry of purchases.\nITA No.809/Ahd/2024\nOmkara Impex and Merchandise LLP vs. ACIT\nAsst. Year: 2014-15\n4\n5. Alternatively, and without prejudice the addition may be restricted to the profit\nembedded in alleged bogus purchases.\n6. Both the lower authorities have passed the orders without properly appreciating\nthe facts and they further erred in grossly ignoring various submissions,\nexplanations and information submitted by the appellant from time to time which\nought to have been considered before passing the impugned order. The action of\nthe lower authorities is in clear breach of law and Principles of Natural Justice\nand therefore deserves to be quashed.\n7. The Ld. CIT(A) has erred in law and on facts of the case in confirming action of\nthe Id. AO in levying interest u/s.234A/B/C/D of the Act.\n8. The Ld. CIT(A) has erred in law and on facts of the case in confirming action of\nthe Id. AO in initiating penalty u/s.271(1)(c) of the Act.\n9. The Appellant craves leave to add, amend, alter, edit, delete, modify or change all\nor any of the grounds of appeal at the time of or before the hearing of the appeal.\n6. During the course of hearing before us, the learned Authorized\nRepresentative (AR) submitted that the assessee has now filed additional\nevidence to substantiate that the alleged accommodation entry of\nRs.69,18,469/- was a genuine purchase and that the transaction was duly\nrecorded in the books of accounts. The AR also contended that during the\nappellate proceedings before CIT(A), the assessee had sought an\nadjournment, but after granting only one adjournment, the CIT(A) passed the\norder without giving the assessee a further opportunity to present its case.\nThe AR argued that natural justice was violated, and the case was not\nadjudicated on merits.\n7. The learned Departmental Representative (DR) opposed the appeal,\nstating that the assessee had been non-compliant throughout the assessment\nand appellate proceedings. However, the DR did not raise any specific\nITA No.809/Ahd/2024\nOmkara Impex and Merchandise LLP vs. ACIT\nAsst. Year: 2014-15\n5\nobjection to the matter being restored to the file of the AO for fresh\nadjudication.\n8. We have carefully considered the submissions of both parties and\nperused the material available on record. It is evident that the CIT(A) passed\nan ex-parte order without adjudicating on the merits of the case. The record\nalso shows that the assessee has now submitted additional evidence to\nsubstantiate the genuineness of the purchases, which was not considered by\nthe AO or CIT(A). It is a settled legal position that justice should not be\ndenied due to procedural lapses, provided the assessee demonstrates a bona\nfide reason for earlier non-compliance. Many courts have held that when an\nassessee has not been granted an adequate opportunity of being heard, the\nmatter should be restored for fresh adjudication.\n8.