KUMAR ANIL AGARWAL,MUMBAI vs. ITO 18 (2)(2), MUMBAI

O R D E R

PER RAVISH SOOD, JM

1. The Commissioner of Income-tax (Appeals) - 29, Mumbai (hereinafter referred to as the CIT(A)) erred in framing an ex-parte order. The appellant contends that on the facts and in the circumstances of the case and in law, the CIT(A) ought not to framed an ex-parte order.

2. The CIT(A) erred in upholding the action of the Income-tax Officer-18(2)(2), Mumbai (hereinafter referred to as the Assessing Officer) in making an addition of Rs.1,61,80,924/-, holding the capital gains on sale of long-term capital assets being, shares of P a g e | Mr. Kumar Anil Agarwal Vs. Income-tax Officer-18(2)(2) Surabhi Chemicals and Investments Ltd to he non-genuine and thereby not allowing exemption under section 10(38) of the Act. The appellant contends that on the facts and in the circumstances of the case and in law, the CIT(A) ought not to have Upheld the action of the Assessing Officer in considering the capital gains on sale of long-term capital assets being, shares of Surabhi Chemicals and Investments Ltd to be non-genuine inasmuch as the said shares have been purchased during an earlier year are investments; the same being sold shall necessarily give rise to capital gains and the impugned shares being long-term capital asset, the capital gains are long- term capital gains in respect of which the Assessing Officer ought to have allowed exemption of section 10(38) of the Act; accordingly, the impugned addition under section 68 of the Act is not justified. The appellant further, contends that the CIT(A) ought not to have upheld the action of the Assessing Officer in making the impugned addition inasmuch as the assessment order has been framed in violation and utter disregard to the principles of natural justice inasmuch as, amongst others, the Assessing Officer has not given the documents/ statements on oath to the appellant for rebuttal, which are in his possession and on which he has relied upon and has not given an opportunity to the appellant to cross examine the persons whose statement the Assessing Officer has relied upon. The appellant further, contends that the CIT(A) ought not to have upheld the action of the Assessing Officer in making the impugned addition inasmuch as the Assessing Officer has not proved that the cash emanated from the coffers of the appellant.

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2. Briefly stated, the assessee had e-filed his return of income for A.Y. 2015-16 on 25.08.2015, declaring his total income at Rs.11,19,140/-. Subsequently, the case of the assessee was selected for scrutiny assessment under Sec.143(2) of the Act. The A.O while framing the assessment observed that the assessee had during the year claimed to have sold 1,82,500 shares of M/s Surabhi Chemicals and Investments Ltd. for a consideration of Rs.1,61,61,120/-. After claiming deduction of the purchase price of Rs.2,73,750/-, the assessee had claimed the balance LTCG of Rs.1,58,87,370/- as exempt under Sec. 10(38) of the Act. The A.O was of the view that the assessee had obtained an accommodation entry for bogus profit on sale of shares amounting to Rs.1,61,80,924/- (as per the AIR transaction report of ITD system). Alternatively, the A.O held a conviction that the impugned sale price of the shares represented the income of the assessee from „other sources‟, which however was wrongly P a g e | Mr. Kumar Anil Agarwal Vs. Income-tax Officer-18(2)(2) projected by him as his income in the nature of capital gain. Apart therefrom, the A.O was of the view that for obtaining the aforesaid accommodation entry of bogus profit on sale of shares the assessee would also had paid commission @ 0.5% of the impugned sale consideration of the sale price of shares amounting to Rs.1,61,80,924/- (as per the AIR transaction report of the ITD system). On the basis of his aforesaid observations, the A.O concluded that the impugned sale consideration of shares of M/s Surabhi Chemicals and Investments was in fact the unexplained investment made by the assessee in cash to obtain the equivalent amount as bogus profit on sale of shares. Accordingly, the A.O made an addition under Sec. 69 of Rs.1,61,80,924/-. Also, an addition of commission of Rs.80,905/- that was alleged to have been paid by the assessee for facilitating obtaining of the aforesaid accommodation entry was made in the hands of the assessee. In the backdrop of his aforesaid deliberations the A.O assessed the income of the assessee at Rs.1,73,80,970/-.

3. Aggrieved, the assessee assailed the assessment framed by the A.O in appeal before the CIT(A). However, the CIT(A) not finding favour with the contentions advanced by the assessee dismissed the appeal.

4. The assessee being aggrieved with the order of the CIT(A) has carried the matter in appeal before us. The ld. Authorized Representative (for short „A.R‟) for the assessee at the very outset of the hearing of the appeal submitted, that the CIT(A) had dismissed the appeal on the basis of an ex-parte order. It was averred by the ld. A.R that the failure on the part of the assessee to put up an appearance before the CIT(A) was backed by an inadvertent mistake on the part of his chartered accountant. It was submitted by the ld. A.R that the assessee after having received the notice fixing the hearing of the appeal on 25.03.2019 before the CIT(A)-29, Mumbai, had forwarded the same to his chartered accountant i.e M/s P.D. Saraf & Co. on 22.03.2019. However, on account of an inadvertent mistake the chartered accountant had failed to deliver the same Mr. Rajiv Khandelwal, chartered accountant, who was engaged by the assessee to represent his case before the first appellate authority. In sum and substance, it was the claim of the ld. A.R that the failure on the part of the assessee to comply with the notice intimating the fixation of the appeal before the CIT(A)-29, Mumbai on 25.03.2019 was purely on account of a bonafide mistake on the part of the assesse‟s chartered accountant. In order to fortify his aforesaid contention the ld. A.R had drawn our attention to the „affidavit‟ dated P a g e | Mr. Kumar Anil Agarwal Vs. Income-tax Officer-18(2)(2) 19.06.2019 of the assessee wherein the aforesaid facts had been deposed by him. Apart therefrom, it was submitted by the ld. A.R that on two other occasions i.e on 20.11.2018 and 20.12.2018 the assessee had specifically filed applications seeking adjournment of the hearing of the appeal. In the backdrop of the aforesaid facts, it was submitted by the ld. A.R that the CIT(A) was in error in stating in his order that on the aforesaid two dates also the assessee had failed to effect necessary compliance and had not put up an appearance before him. It was averred by the ld. A.R that in all fairness the matter may be restored to the file of the CIT(A) with a direction to dispose off the appeal after affording an opportunity of being heard to the assessee.

5. Per contra, the ld. Departmental Representative (for short „D.R‟) submitted that as the assessee had failed to put up an appearance on the respective dates on which the appeal was fixed for hearing before the CIT(A), therefore, the latter had rightly disposed off the appeal after affording sufficient opportunity to the assessee who had chosen not to avail the same. It was averred by the ld. D.R that as the assessee was already afforded sufficient opportunity by the CIT(A), therefore, its claim that the matter be restored for fresh adjudication did not merit acceptance.