M/S VARUN SALES PVT. LTD.,KOLKATA vs. I.T.O.WARD-11(3), KOLKATA

The main grievance of the assessee is against the action of the Ld. CIT(A) in confirming the addition made by the AO of Rs.6,26,467/-.

Brief facts of the case as noted by the AO are that the assessee did not file its return of income for the AY 2010-11. In view of this fact notice u/s. 148 of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) was issued and after serving of statutory notices the AO noted that the assessee company maintained its bank account with HDFC Bank, Stefen House Branch, Kolkata. According to AO, assessee received an amount of Rs.78,30,841/- . The AO noted that the assessee had received all the amount from various individual persons and various companies through cheques on different dates. According to AO, the assessee should have maintained its books of account u/s. 44AA of the Act and should have got it audited u/s. 44AB of the Act. Thereafter, the AO states that he had issued notice dated 28.01.2015 to the assessee company calling for explanation as to why the assessment should not be made u/s. 144 of the Act. According to AO, there was no response on the part of the assessee company, therefore, he resorted to section 144( best judgment assessment) and added 8% of the gross receipt of Rs.78,30,841/- which comes to Varun Sales Pvt. Ltd, AY- 2010-11 Rs.6,26,467/- as the total income of the assessee. Aggrieved, assessee preferred an appeal before the Ld. CIT(A) who has confirmed the same. Aggrieved, assessee is before this Tribunal.

I have heard both the sides and have perused the material available on record. It has been brought to my notice that in the re-assessment proceedings, pursuant to the AO issuing notice u/s. 142(1) of the Act the assessee had promptly filed detailed reply to the AO vide letter dated 12.03.2015 and the Ld. AR drew our attention to page 5 of the paper book which shows that the assessee had replied to the ITO, Ward-11(3) pursuant to his notice u/s. 142(1) wherein the following details were filed: “1. The nature of business as conducted by the company is mentioned in its Memorandum and Article of Association which is annexed herewith and marked as “A-1”. The company had been the supplier of cattle feed to the WB Diary and Poultry Development Corporation (Animal Husbandry), a Govt. undertaking against tender 2. At present, the Income Tax Return for the AY 2010-11 is not available with us.

Cash Book, ledger, bills of transactions can be produced at the time of hearing.

Details of Directors are already annexed in “A-2”.

No investment is made by the company during the Financial year.

At present, the details of TDS are not available. 11. there is no other income.

As no return for AY 2010-11 could be filed due to inadvertence. Hence computation could not be filed. However the company had incurred loss during the said Assessment year.”

I also note that the assessee had filed the audited financial statement which is placed at pages 6 to 17 of the paper book. It is noted that since the assessee had not filed the return of income and the assessee did not reply to the notice of the AO, the AO had made the GP addition. Regarding non-filing the ROI, the assessee had submitted that the accountant of the assessee Shri B. P. Mishra expired on 24.12.2012 and the director’s wife Smt. Sova Kanoria was also suffering from various ailments and she was admitted in M/s. Vision Care Hospital, Mukundapur, Kolkata and since the company incurred loss in this year, the director was of the bona fide belief that no return need to be filed. However, when the assessee received notice u/s. 142(1) of the Act he had filed the reply along with audited P&L Account and Balance Sheet and also other information which is shown (supra). Even though it is noted that the assessee had filed the aforesaid details still the AO has stated that there was no reply from assessee for his show cause notice u/s. 144 of the Act. So, he made Varun Sales Pvt. Ltd, AY- 2010-11 the best judgment assessment. On appeal, the Ld. CIT(A) has not given any other reason to confirm the order of AO. In such a scenario, it is noted that the AO has not been fair while framing the assessment. It has to be kept in mind that the AO has dual role of an investigator as well as an adjudicator. As an adjudicator he has to be reasonable and fair to the assessee while framing assessment. In this case though the assessee had replied to the notice u/s. 142(1) of the Act though belatedly, the AO has brushed it aside/ignored it and had proceeded to estimate the income by resorting to best judgment assessment which cannot be countenanced. Thus, this is a case where, according to me, no proper opportunity has been given to the assessee during the assessment stage. In such a scenario, relying on the decision of the Hon’ble Supreme Court in Tin Box Company Vs. CIT (2001) 249 ITR 216 (SC), I am inclined to set aside the impugned order of the Ld. CIT(A) and remand the matter back to the file of AO for de novo assessment in accordance to law after affording reasonable opportunity of hearing to the assessee. The assessee is directed to diligently take part in the assessment proceeding and furnish documents before the AO and the AO to frame assessment as per law.

In the result, the appeal of assessee is allowed for statistical purposes. Order is pronounced in the open court on 19th February, 2020.