SALIG RAM TIMBERS,LUDHIANA, PUNJAB vs. INCOME TAX OFFICER, WARD 6 (1), LUDHIANA, PUNJAB
What did the Tribunal hold?
The Tribunal held that while the assessee's non-compliance was not satisfactory, the assessee should not be denied a chance to contest the addition on merits, especially given prior submissions. The matter was restored to the CIT(A) for de novo adjudication with a cost imposed.
What were the facts?
The assessee, engaged in timber and plywood trading, filed a return declaring income. The AO made an addition of 25% of purchases treating them as bogus. The CIT(A) dismissed the assessee's appeal ex parte for non-compliance.
What were the issues?
Whether the appeal should be dismissed ex parte due to procedural shortcomings, or if the assessee should be granted an opportunity to present substantive grounds on merits?
Which sections of the Income-tax Act were involved?
AI-generated summary — verify with the full judgment below
Order PER LALIET KUMAR, J.M: This appeal is filed by the assessee against the order dated 25.06.2024 passed by the Ld. CIT(A), National Faceless Appeal Centre (NFAC), Delhi for the Assessment Year 2021–22 under section 250 of the Income-tax Act, 1961. 2. In the present appeal Assessee has raised following grounds:
1. That the order of Ld. CIT(A) is against the law and facts of the case.
That the Learned CIT(A) has grossly erred in upholding the Order of the Ld. AO0, by passing non speaking, ex parte and non-reasoned order and even without considering substantial replies, evidences and documents of the assessee submitted before the |Ld. AO and the complete assessment record is duly available on the Income Tax E-portal. 3. That the Learned CIT(A) has grossly erred in sustaining the order of the Ld. AO and relying solely on the illegal observations of the Ld, AO in gross violation of principles of Natural Justice and without appreciating the observations of the Ld. AO are totally arbitrary and without controverting the evidences, confirmations, submissions and even without considering the GST Returns filed on the Revenue/GST Portal. 4. That the learned CIT(A) is not justified by upholding the order of the Ld. Assessing Officer, wherein illegal and arbitrary addition of Rs. 23,99,36,780/- has been made by disallowing 25% of the total genuine purchases, which has exorbitantly elevated/ higher the NP too high as compared to the past history of the assessee appellant and against the well settled law and thus making the exorbitant NP/GP, which is impossible in line of business of appellant. 5. That the learned CIT(A) has grossly erred in upholding the order of the Ld. Assessing Officer, wherein illegal addition of Rs. 23,99,36,780/- has been made on surmises and conjectures without appreciating the fact that the purchases are genuine more so without doubting the corresponding sales made through the trading of Plywood and Ply Date: board and also in cutting of timbers. 6. That the appellant craves leave to add or amend the grounds of appeal before the appeal is finally heard and disposed off.
3. Briefly the facts of the case are that the assessee is engaged in the business of trading in timber and plywood. It filed a return declaring income of Rs.3,08,090/-. During assessment, based on information that the assessee made purchases from non-genuine parties, the AO treated a part of the purchases as bogus and made an addition of 25% of the total amount.
Against the order of the AO the assessee went in appeal before the Ld. CIT(A) who has since dismissed the assessee’s appeal on the ground that despite issuance of six notices, the assessee failed to upload any submissions substantiating the grounds of appeal. The appeal was accordingly decided ex parte.
5. Against the order of the Ld. CIT(A) the assessee preferred an appeal before the Tribunal.
During the course of hearing the Ld. Counsel for the Assessee submitted that all relevant documents and evidence had already been filed during the penalty proceedings before the Assessing Officer. It was submitted that due to the inadvertent and negligent conduct of the Chartered Accountant, the same could not be filed before the appellate authority. The Ld. Counsel for the Assessee has also drawn our attention to the affidavit explaining the reasons for non filing the documents before the lower authorities. It was contended that the assessee, being a layperson, should not suffer for the professional lapse of the authorized representative. It was submitted that the appeal, being otherwise maintainable and based on substantive grounds, ought not to have been dismissed on account of such procedural shortcomings. The assessee assured that, if granted a final opportunity, all relevant material would be duly furnished to substantiate the case.
Per contra, the Ld. DR strongly opposed the request for remand. He submitted that the Ld. CIT(A) had issued six notices dated 01.03.2023, 03.10.2023, 23.02.2024, 12.03.2024, 26.03.2024 and 17.05.2024. In response, the assessee filed only an adjournment request on 19.03.2024 and failed to upload any submissions even after a lapse of three months.
7.1 The Ld. DR further pointed out that the Ld. CIT(A), in a detailed finding, had examined the assessment record and concluded that the Assessing Officer had given sufficient opportunities to the assessee during the assessment proceedings to furnish party-wise purchase details, invoices, and bank statements. However, the assessee failed to do so.
7.2 The Ld. CIT(A) noted that on verification, the parties from whom purchases were claimed to have been made were non-existent and were merely paper entities for accommodation entries. The disallowance of 25% of such purchases amounting to Rs. 23,99,36,780/- was based on judicial precedents cited by the AO. The Ld. CIT(A), therefore, upheld the disallowance, observing that:
...the appellant has miserably failed to substantiate the complete purchases with supporting material evidence and prove the payments made through the banking channel... The AO has rightly brought to tax the unproved purchases. Under the circumstances, the ground raised is dismissed.
7.3 The Ld. DR submitted that the self-serving affidavit filed at this belated stage should not override the consistent non-compliance of the assessee before the Ld. CIT(A), and remanding the matter would only prolong litigation without any guarantee of outcome.
We have heard the rival submissions and perused the record. It is evident that the CIT(A) had granted multiple opportunities which the assessee failed to utilize. However, the assessee has now filed an affidavit explaining that the lapse was on account of professional negligence by the Chartered Accountant.
8.1 In our view, while the reasons for non-cooperation are not entirely satisfactory, the assessee should not be denied the opportunity to contest the addition on merits, especially when the affidavit is supported by prior submissions made during the penalty proceedings. Admittedly, the assesses had already filed the documents before the lower authorities which goes to the root of the matter. It was submitted if these documents are considered then no addition can be made in the hands of the assessee.
8.2 Nonetheless, the assessee also bears responsibility for supervising the conduct of its authorized representative. Therefore, while we set aside the impugned order and restore the matter to the file of the CIT(A) for de novo adjudication, we impose a cost of Rs.5,000/- on the assessee for failure to diligently pursue the appellate proceedings. The ld. CIT(A) is requested to considered the documents, if any filed by the assessee in accordance with law. Needless to the Ld. CIT(A) shall call for the Remand Rport from the Assessing Officer before passing the reasoned speaking order dealing with the documents filed by the assessee.
In the result, appeal of the assessee is allowed for statistical purposes.
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