MODAK DYEING AND PRINTING COMPANY PRIVATE LIMITED,LUDHIANA vs. INCOME TAX OFFICER, LUDHIANA

Order

PER LALIET KUMAR, J.M: The present appeal has been filed by the assessee against the order dated 16.03.2024 passed by the Ld.CIT(A)-5, Ludhiana for the assessment year 2012-13, on various grounds mentioned in the caption appeal memo. 2. Briefly the facts of the case are that the assessee filed its return declaring income of Rs. 3,48,944/-. The assessment was completed under section 143(3) of the Act assessing the income at Rs. 8,62,89,944/- after making additions of Rs. 8,59,41,000/- u/s 68. 3. The Assessing Officer made two additions: (i) Addition of Rs. 5,40,00,000/- in the name of M/s Shirdi Overseas Imports & Exports, Ludhiana. The AO observed that this concern had raised sales bills only on the assessee and no payments were received. The entire outstanding was transferred to “share application money.” Its balance sheet showed negative capital of Rs. 8,41,57,519.64 and creditors of Rs. 40,60,98,698.66. No challans, freight charges or transport details were produced. The AO therefore treated the sum as unexplained credit. (ii) Addition of Rs. 3,19,41,000/- in the name of M/s Gupta Loom Industries, Ludhiana. Here also, large bills were raised but except one RTGS of Rs. 2 lakhs, no payment was received. The outstanding was again transferred to “share application money.” The 2 concern had only Rs. 2,13,063/- capital and creditors exceeding Rs. 3,43,67,991.61. No proof of movement of goods was provided. The AO thus concluded that the transaction was not genuine and added the amount u/s 68. 4. Feeling aggrieved by the order passed by the Assessing Officer, the assessee preferred the appeal before the Ld. CIT(A). The Ld. CIT(A), after obtaining a remand report from the AO and recording that no rejoinder was filed by the assessee, confirmed both the additions observing that the assessee failed to controvert the AO’s findings. 5. Now the assessee is in appeal before us on the grounds mentioned in the present appeal. 6. At the outset the Ld. AR submitted that the order of the Ld. CIT(A) suffers from a violation of the principles of natural justice. It was pointed out that though the remand report was allegedly given in 2017, the order was passed only in 2024. In the interim, no effective opportunity was granted to the assessee. At page 2 of the order, several notices are listed, but there is no proof of their actual service either by post or email. Even assuming notices were issued, a meaningful opportunity to file a rejoinder to the remand report was never given. It was urged that the assessee has been prejudiced and therefore the matter be remanded back to the file of the Ld. CIT(A). 7. Per contra, the Ld. DR, on the other hand, supported the impugned order and contended that sufficient opportunities were granted. Reliance was placed upon the following observation of the Ld. CIT(A): “The appellant filed written submissions on 07.02.2017 and 10.03.2017. The response filed by the appellant was sent to the Assessing Officer for remand report. The Assessing Officer sent a remand report, a copy of which was provided to the appellant. But till date no rejoinder or even adjournment application has been filed even after giving various opportunities… In view of these facts, I find no merit in the arguments of the appellant. Therefore, the addition made by the AO is sustained.” 8. We have heard the rival contentions of the parties and perused the material available on record. It is evident that the additions were made primarily because both concerns lacked creditworthiness, there was no proof of movement of goods, and the balances were merely transferred as share application money. The CIT(A) confirmed these findings. 8.1 However, the critical issue is the procedure adopted in the appellate proceedings. The assessee had filed written submissions in 2017, which were 3 forwarded for remand. The remand report was received; however, there is no evidence to demonstrate that the assessee was effectively confronted with it and granted an opportunity to file a rejoinder. Although the CIT(A) has mentioned that several notices were issued, no proof of their service is available. The fact that the appeal was decided only in 2024, nearly seven years after it was filed, lends strength to the plea that no real opportunity was afforded to the assessee. 8.2 The principles of natural justice require that before relying on any adverse remand report, the assessee must be given a fair and meaningful chance to rebut the same. In the present case, such an opportunity was clearly lacking, which vitiates the order of the Ld. CIT(A). 8.3 In the totality of facts, we set aside the impugned order and restore the matter to the file of the Ld. CIT(A) with the direction to provide a copy of the remand report to the assessee, grant adequate opportunity to file a rejoinder, and then adjudicate the appeal afresh by a reasoned order in accordance with law. 8.4 The assessee is directed to cooperate in the proceedings and not to seek undue adjournments. 9. In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the open Court on 03/09/2025 मनोज कुमार अ"वाल लिलत कुमार (MANOJ KUMAR AGGARWAL) (LALIET KUMAR) लेखा सद"/ ACCOUNTANT MEMBER