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Facts
The assessee company, Kelly Steel Corporation, filed its return for AY 2021-22. Subsequently, its case was selected for scrutiny due to verification of substantial purchases from non-filers or those with lower turnover. Various notices were issued, but the assessee failed to respond adequately, leading to additions made by the Assessing Officer.
Held
The Tribunal held that the impugned order was challenged on grounds of violation of principles of natural justice. Considering the circumstances, the Tribunal decided to set aside the impugned order and remand the case back to the CIT(A) for a fresh de novo assessment, providing one last opportunity to the assessee.
Key Issues
Whether the CIT(A) order was passed in violation of the principles of natural justice, and whether the assessee was given a reasonable opportunity to present its case.
Sections Cited
253, 143(2), 142(1), 68, 250, 246A, 143(3), 144B
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, CHANDIGARH BENCH, ‘A’, CHANDIGARH
Before: SHRI VIKRAM SINGH YADAV & SHRI PARESH M. JOSHI
आयकर अपील�य अ�धकरण,च�डीगढ़ �यायपीठ, च�डीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH, ‘A’, CHANDIGARH BEFORE SHRI VIKRAM SINGH YADAV, ACCOUNTANT MEMBER & SHRI PARESH M. JOSHI, JUDICIAL MEMBER आयकर अपील सं./ �नधा�रण वष� / Assessment Year: 2021-22 Kelly Steel Corporation, Vs. The ITO, बनाम 1, GT Road, Ward-2, Mandi Gobindgarh Mandi Gobindgarh 147301 �थायी लेखा सं./PAN No: AABFK1479L अपीलाथ�/ APPELLANT ��यथ�/ REPSONDENT ( Hybrid Hearing ) �नधा�रती क� ओर से/Assessee by : Shri Parkishit Aggarwal, CA राज�व क� ओर से/ Revenue by : Shri Rohit Sharma, CIT DR सुनवाई क� तार�ख/Date of Hearing : 30.01.2025 उदघोषणा क� तार�ख/Date of Pronouncement : 28.02.2025 आदेश/Order Per Paresh M. Joshi, JM :
This is an appeal filed by the Assessee under section 253 of the Income Tax Act, 1961 [ herein referred to as the Act – for the sake of convenience and ease] before the Tribunal. The Assessee is aggrieved by the order bearing number: ITBA/NFAC/S/250/2024- 869-Chd-2024 Kelly Steel Corporation, Mandi Gobindgarh
2 25-/1065869634(1) dated 20.06.2024 of CIT(A) which is hereinafter referred to as the “impugned order”. The relevasnt A.Y. is 2021-22 and the corresponding previous year is from 01.4.2020 to 31.03.2021. Factual Matrix 2. The Assessee was a company deriving income from business filed its return of income for the impugned AY 2021-22 declaring a total income of Rs. 34,751/-. Subsequently, the case was selected for complete scrutiny with a reason to verify the substantial purchases made from the suppliers who are either non-filers or having filed non-business ITR or reflected a substantially lower turnover in ITR". Accordingly, statutory notice u/s. 143(2) of the Act was issued on 13.07.2022. Further, notices u/s. 142(1) of the Act were issued on dated 18.07.2022, 29.07.2022, 30.08.2022 and 11.11.2022. However, the appellant had failed to respond to any of the notice issued. Therefore, a show cause notice dated 28.11.2022 was issued for furnishing the information: - i. Increase in the capital of Rs. 8,84,728/- from Rs. 79,50,435/- in AY2 020-21 to Rs. 88,35,163/- in AY 2021-22.
869-Chd-2024 Kelly Steel Corporation, Mandi Gobindgarh
3 ii. Increase of unsecured loans(others) of Rs. 2,50,000/- from Rs. 31,71,080/-in AY 2020-21 to Rs. 34,21,080/- in AY 2021-22 iii. Increase in Sundry creditors under current liabilities of Rs. 5,17,11,652/- from Rs. 4,68,58,398/- in AY 2020-21 to Rs. 9,85,70,050/- in AY 2021-22 iv. Disallowing of purchases to the tune of Rs. 8,92,06,746/- from parties whose identify is not established and genuineness of the transaction was not established. v. Disallowance of excess opening stock shown in the ITR for AY 2020-21 of Rs. 47,01,597/- being the difference in the closing stock of inventory AY 2020- 21 of Rs. 1,53,49,131/- and the opening stock of inventory of AY 2021-22 of Rs. 2,00,50,728/-.
However, there was no response from the appellant for the above show cause notice issued. Subsequently, the appellant had furnished the invoices from parties i.e. M/s Meho Enterprises and M/s Venus Enterprises on 12.12.2022, without giving any further information as to the relevant of such documents. The invoices submitted by the appellant does not support any of the information sought from the appellant and also the appellant has not submitted even a note to explain the details in invoices furnished. Therefore, the AO had concluded the assessment proceedings by 869-Chd-2024 Kelly Steel Corporation, Mandi Gobindgarh
4 making the following additions to the income returned by the appellant during the year under consideration. SI.No Description Amount in Rs. 1 Income as per Return of Income 34,750 filed 2 Income as computed u/s 143(1)(a) 34,750 3 Add: Unexplained increase in 8,84,728 capital 4 Add: Unexplained increase in 2,50,000 unsecured loans(others) 5 Add: Unexplained increase in 5,17,11,652 Sundry Creditors 6 Add: Disallowance of purchases 8,92,06,746 7 Add: Disallowance of excess 47,01,597 opening stock 8 Total income/loss determined 14,67,89,473 as per the above proposal 2.2 That the aforesaid assessment order bears Number: IT:BA/AST/S/143(3)/2022-23/1048113922(1) and is dated20.12.2022 which was passed u/s 143(3) r.w.s. 144B of the Act, which is herein after referred to as the “impugned assessment order”.
869-Chd-2024 Kelly Steel Corporation, Mandi Gobindgarh
5 2.3 That the Assessee being aggrieved by the aforesaid impugned assessment order preferred an appeal u/s 246A of the Act before CIT(A) who by ‘impugned order’ has dismissed the same.
2.4 That the Assessee being aggrieved by the ‘impugned order’ has preferred the present appeal and has raised following Grounds of appeal which are as under:-
1. That on the facts, circumstances and legal position of the case, Worthy CIT(A), • NFAC in Appeal No. NFAC/2020-21/10210963 has erred in passing order dtd. 20.06.2024 in contravention of provisions of S. 250 of the Income Tax Act, 1961 (hereinafter referred to as "Act").
2. That on facts, circumstances and legal position of the case, Worthy CIT(A) has erred in confirming addition of Rs. 8,84,728/- made by the Ld. AO by erroneously treating the increase in partner's capital as unexplained credit u/s 68 of the Act.
3. That on facts, circumstances and legal position of the case, Worthy CIT(A) has erred in confirming addition of Rs. 2,50,000 made by the Ld. AO by erroneously treating the increase in unsecured loan as unexplained credit u/s 68 of the Act.
4. That on facts, circumstances and legal position of the case, Worthy CIT(A) has erred in confirming addition of Rs. 5,17,11,652/- made by the Ld. AO 869-Chd-2024 Kelly Steel Corporation, Mandi Gobindgarh
6 by erroneously treating the increase in trade creditors as unexplained credit u/s 68 of the Act.
5. That on facts, circumstances and legal position of the case, Worthy CIT(A) has erred in confirming addition of Rs. 8,92,06,746/- made by the Ld. AO by erroneously holding the purchases as bogus/fictitious.
Record of Hearing 3. 3.1 That the hearing in the matter took place before this Tribunal on 30.01.2025 when the ld. AR for an on behalf of the Assessee appeared for this Tribunal and placed on record of this Tribunal a written submission cum paper book dated 27.1.2025 containing pages 1 to 24. Written submissions are having in total 3 pages. It was contended by the ld. AR that the impugned order is bad in law, illegal and in violation of the principles of natural justice and thus deserves to be set aside. It was contended by the ld. AR that during the Ist Appellate proceedings in reply to the Notice issued by ld. CIT(A), the Assessee filed adjournment by providing valid reasons for non-submission of documents by the ld. CIT(A) without considering the request of the Assessee passed ex-parte order. A table demonstrating of hearing notice issued by ld. CIT(A) and 869-Chd-2024 Kelly Steel Corporation, Mandi Gobindgarh
7 response submitted by Assessee are tabulated in written submissions dated 27.1.2025 which is reproduced below. Date Particulars Reason Assessee's Reply Enablement 0.1.03.202 of Communication No N/ 3 Response A Adjournme 07.12.2023 Hearing Notice u/s Counsel was out of nt 250 station Requested Adjournme Submission in 20.12.2023 Hearing Notice u/s nt preparation as 250 Requested accountant was not well Adjournme The firm 26.02.2024 Hearing Notice u/s nt discontinued its 250 Requested business and staff left the firm. The partners of the firm Were in the process to collect the necessary papers and evidences enquired for the case. Shortage of staff to Adjournme 19.04.2024 Hearing Notice u/s nt complete the 250 necessary papers. Requested Adjournme Case was under 01.05.2024 Hearing Notice u/s nt preparation. 250 Requested Adjournme New counsel 22.05.2024 Hearing Notice u/s nt appointed as the 250 previous counsel Requested was not cooperating.
3.2 The ld. AR contended that ld. ITA in the impugned order has erred in holding that the Assessee was not interested in 869-Chd-2024 Kelly Steel Corporation, Mandi Gobindgarh
8 prosecuting the appeal but from table (supra) it is clearly observed that the Assessee was in process of compilation of documents but due to unavoidable circumstances, the same could not be filed.
3.3 It was also contended by the ld. AR that during the first appellate proceedings, the Assessee firm was facing financial constraints too, due to which the staff left the Assessee firm and that it had to discontinue its operations. The partners of the firm were in process of collecting all the necessary documents and evidence as were required for the case but due to such adverse circumstances and shortage of staff, the required documents could not be compiled and submitted by the Assessee firm within the prescribed time.
3.4 It was contended before us that previous counsel of the Assessee firm failed to cooperate with the Assessee and did not exhibit due diligence in handing the proceedings. The Assessee firm was nto informed about the status of the proceedings in a timely manner and that the crucial dates were communicated only when the due date of filing the submissions were imminent.
869-Chd-2024 Kelly Steel Corporation, Mandi Gobindgarh 3.5 It was further contended that on last notice dated 22.5.2024 the Assessee firm filed adjournment stating that the Assessee has appointed a new counsel for handling the proceedings but the ld. CIT(A) without providing reasonable opportunity to be heard for filing the required documents dismissed the appeal of the Assessee.
3.6 The ld. AR has also placed on record a duly sworned affidavit wherein reasonable cause is shown for not filing the documents and that all notices of CIT(A) were replied.
3.7 Per contra the ld. DR appearing for and on behalf of the Revenue has contended that ‘impugned order’ and so also ‘impugned assessment order’ are correctly passed by the lower authorities.
Observations, finding and Conclusions: 4. We have minutely and carefully examined the records of the case and have heard rival submissions. Basically, the impugned order 869-Chd-2024 Kelly Steel Corporation, Mandi Gobindgarh
10 is challenged on Ground of violation of principles of natural justice. We are therefore, of the considered view that in order to meet the ends of justice one more opportunity as and by way of final opportunity should be afforded to the Assessee firm to comply with filing of all the necessary requisite documents in respect of his contentions on merit. We, therefore, in order to meet ends of justice set aside the impugned order and direct the ld. CIT(A) to pass a fresh order on de novo basis. We simultaneously direct that as and when the date of hearing would be fixed by ld. CIT(A), the Assessee would not seek unnecessary adjournments and would attend the proceedings and cooperate with the Department.
Order 5.1 In the premises drawn by us, we set aside the impugned order and remand the case back to the file of CIT(A) to pass a fresh order on de novo basis. The ld. CIT(A) to pass fresh order as expeditiously as possible, preferably within six months from the date of receipt of this order of Tribunal.
869-Chd-2024 Kelly Steel Corporation, Mandi Gobindgarh
11 5.2 In the result, the appeal of Assessee is allowed for statistical purposes.
Order pronounced on 28.02.2025.