M/S. PURVA METAL SECTIONS PRIVATE LIMITED,BANGALORE vs. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE- 5(1)(3), BANGALORE

The assessee has filed this appeal challenging the order dated 29-03-2019 passed by Ld CIT(A)-5, Bengaluru and it relates to the assessment year 2015-16. The assessee is aggrieved by the decision of Ld CIT(A) in confirming the addition of share capital & share premium received by the assessee u/s 68 of the Act.

The Ld A.R submitted that the assessee is engaged in the business of manufacturing/trading in iron and steel. The Ld A.R submitted that the return of income filed by the assessee for the year under consideration was selected for limited scrutiny by the AO. During the course of assessment proceedings, the AO converted the limited scrutiny into complete scrutiny, after getting sanction from Principal CIT on 28-12-2017. The AO passed the order immediately on the next day, i.e., on 29-12-2017. The Ld A.R submitted that the assessee was not given adequate time to furnish explanations. The Ld A.R submitted that the assessee has received share capital & share premium to the tune of Rs.14.76 crores from various persons and the same was added by the AO u/s 68 of the Act without providing sufficient opportunity to the assessee. He submitted that the assessing officer has collected certain details from Investigation wing, Kolkatta and formed the view that the various share applicants are shell companies. The AO has fully relied upon the information supplied by the investigation wing, which, inter alia, contained statements taken from some of the directors of the share applicant companies. However, the assessee could not get sufficient time for furnishing explanations and further the opportunity to cross examine various persons was also not provided to the assessee. He further submitted that the Ld CIT(A) did not address this issue. Accordingly he prayed that the entire issues may be restored to the file of the AO.

The Ld D.R, on the contrary, submitted that the assessee was given sufficient opportunities. Inviting our attention to the page 2 of the assessment order, the Ld D.R submitted that the assessee did not respond to six notices sent by the AO and against seventh notice only, the assessee has furnished certain bare details. The Ld D.R further submitted that the assessee has not furnished various details that were called for by the AO. Hence the AO did not have any other option, but to draw adverse inferences on the basis of materials available with him.

In the rejoinder, the Ld A.R submitted that the assessee has furnished details called for by the AO on 08-12-2017. He further submitted that the assessee has since shifted its address and the earlier six notices were sent to old address. The seventh notice was sent by e-mail and hence the assessee has immediately responded. Accordingly he submitted that there was reasonable cause for the assessee for not responding to the earlier notices, as the assessee was not aware about them.

We heard the parties and perused the record. We notice that the assessment order mention the address of a building located in “Old Madras Road”. According to Ld A.R, the present address of the assessee is the building located in B.Narayanapura area. The new address has been mentioned in Form No.35 filed before Ld CIT(A). According to Ld A.R, the assessee could not receive notices due to change of address. Be that as it may, we notice that the AO has converted the limited scrutiny into complete scrutiny on 28-12- 2017 and the assessment order was passed on 29-12-2017. Since the assessee has claimed that it has not received earlier notices and since the assessment order was passed immediately on the next day after conversion of limited scrutiny into complete scrutiny, we are of the view that there is merit in the submission of Ld A.R that the assessee did not get sufficient opportunity to present its case before the AO. Accordingly, in the interest of natural justice, we are of the view that entire issues contested before us need to be restored to the file of the AO for examining them afresh. Accordingly, we set aside the order passed by Ld CIT(A) on the issues contested before us and restore all the issues to the file of the AO for examining them afresh. After affording adequate opportunity of being heard, the AO may take appropriate decision in accordance with law.

The Ld A.R submitted that the bank accounts of the assessee has been attached and the AO may be directed to lift the same. Since we have restored all the issues to the file of AO, the assessing officer may lift attachment of bank accounts upon the application moved by the assessee.

In the result, the appeal of the assessee is treated as allowed.