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Facts
The assessee, Raisoni Bagrecha Diamonds Pvt. Ltd., engaged in the jewellery business, faced additions by the AO for AYs 2015-16 and 2016-17, totaling Rs. 68,61,732/- and Rs. 1,04,00,363/- respectively, under section 69, for alleged bogus liability, undisclosed purchases, and suppressed sales. These additions stemmed from information indicating excess liabilities claimed by the assessee compared to corresponding debtors. The CIT(A) upheld these additions and rejected additional evidence due to the assessee's non-compliance with notices and failure to adhere to Rule 46A and defects in Form 35. The assessee argued that non-compliance was unintentional due to legal troubles of its partners.
Held
The Tribunal acknowledged that the assessee's non-compliance was not deliberate given the exceptional circumstances (partners' police custody and investigation). Consequently, it set aside the CIT(A)'s orders for both assessment years and restored the matters to the CIT(A) for fresh adjudication on merits. The Tribunal directed the CIT(A) to provide a reasonable opportunity of hearing to the assessee to present its case and documentary evidence.
Key Issues
Whether the CIT(A) was justified in dismissing the appeals on technical grounds without adjudicating on merits and upholding additions, or if the assessee's non-compliance, due to partners' legal issues, warrants a fresh opportunity for adjudication on merits.
Sections Cited
Section 69 of the Income Tax Act, 1961, Section 145A of the Income Tax Act, 1961, Section 147 of the Income Tax Act, 1961, Section 144B of the Income Tax Act, 1961, Section 148 of the Income Tax Act, 1961, Section 142(1) of the Income Tax Act, 1961, Rule 46A of the Income Tax Rules, 1962
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Income Tax Appellate Tribunal, “B” BENCH, PUNE
Before: SHRI R.K. PANDA & MS. ASTHA CHANDRA
BEFORE SHRI R.K. PANDA, VICE PRESIDENT AND MS. ASTHA CHANDRA, JUDICIAL MEMBER आयकर अपील सं. / & 2550/PUN/2025 धििाारण वर्ा / Assessment Year : 2015-16 & 2016-17 Raisoni Bagrecha Diamonds PNE-C-(25)(1), Pvt. Ltd. 288, Baliram Peth, Circle-1, Jalgaon Jalgaon-425001, Maharashtra Vs. PAN : AADCR 7439 N अपीलार्थी / Appellant प्रत्यर्थी / Respondent Assessee by : Shri Sanjay T. Tupe, CA Department by : : Smt. Indira R. Adakil –Addl. CIT Date of hearing : 04-12-2025 Date of Pronouncement : 01-01-2026 आदेश / ORDER
PER ASTHA CHANDRA, JM :
The appeals filed by the assessee is directed against the separate order(s) both dated 14.08.2025 of the Ld. Commissioner of Income Tax (Appeals), NFAC, Delhi [“CIT(A)/NFAC”] pertaining to Assessment Year (“AY”) 2015-16 and 2016-17.
The assessee has raised the following grounds of appeal :-
AY 2015-16 “Ground No. 1: Violation of Principles of Natural Justice The Ld. CIT(A) grossly violated principles of natural justice by deliberately not intimating the defect in Form 35 during the entire appellate proceedings and then invoking this very defect as grounds to dismiss the appeal in the final order, thereby denying the appellant any opportunity to rectify the error. Ground No. 2: Dismissal on Hyper-Technical Grounds Defeating Substantial Justice The Ld. CIT(A) erred in dismissing the appeal on hyper-technical grounds, thereby defeating the very purpose of the appellate remedy, especially when the CIT(A) had ample powers to condone the procedural lapse in the interest of substantial justice. Ground No. 3: Failure to decide the Appeal on Merits and substantiate the additions made by AO of Rs. 68,61,732/- (Rs.72,01,411 less Rs. 3,39,679).
The Ld. CIT(A) erred in failing to adjudicate the appeal on merits and examine the issues raised regarding the addition made by the Assessing Officer, thereby denying the appellant an effective appellate remedy. The appellant had raised substantial grounds challenging the addition of Rs. 68,61,732 made by the AO. The appellant had submitted a detailed explanation that the Learned AO erred in assuming a trade payable balance in the books of the appellant of Rs. 72,01.411/- towards the purchase of goods. Further, he compared the corresponding balances in the RB House under sundry debtors of Rs. 3,39,639, and the difference was considered as an income under section 69 of the Income Tax Act, 1961. The said balance in the books of RB House was in the name of Gopal Bhagwan Sonarf and not RBDPL. In the books of RB House ₹ 72,01,411/- was grouped under the head loands & advances. Ground No.4 : General Ground The appellant craves leave to add, alter or vary the grounds of appeal before or at the time of hearing.”
, AY 2016-17 “GROUND NO. 1: LD. CIT(A) GROSSLY ERRED IN NEGLECTING RECONCILIATIONS PROVIDED FOR MATCHING SALES, PURCHASES WITH BOOKS OF ACCOUNTS, AND VAT RETURNS FILED BY THE APPELLANT.
1. Without prejudice to the above grounds, the Ld. CIT(A) erred in rejecting the appellant's explanation regarding discrepancies in purchase and sales figures and in sustaining additions of Rs. 10,80,259/- and Rs. 2,55,498/-. The Ld. CIT(A) erroneously rejected this explanation without properly examining the reconciliation statements and purchase/sales registers submitted. The additions are arbitrary, unjustified, and contrary to the documentary evidence on record. GROUND NO. 2: ERROR IN REJECTING EXPLANATION REGARDING EERONEOUS COMPARISION OF FIGURES OF TRADE RECEIVABLES AND INCORRECT ADDITION OF RS. 90,64,606/-.
2. Without prejudice to the above grounds and to the extent the Ld. CIT(A) has made observations on merits, the Ld. CIT(A) erred in rejecting the appellant's explanation regarding the addition of Rs. 90,64,606/- u/s 69 as an alleged bogus liability, when the explanation was fully supported by documentary evidence.
3. The explanation and clarification were submitted with ledger extracts from the books of both entities to clarify the misunderstanding of Ld. AO by comparing the figures of two entities that were classified under different group heads.
4. In view of the above, the addition of Rs. 90,64,606/- is bad in law and contrary to facts.
GROUND NO. 3: THE LD. CIT(A) HAS GROSSLY ERRORED IN INTERPRETATION OF SECTION 145A OF THE ACT.
5. The Ld. CIT(A) erred in law and on the facts regarding exclusion of VAT from purchase and sales figures and in sustaining the additions of Rs. 10,80,259/- as alleged undisclosed purchases and Rs. 2,55,498/- as alleged suppressed sales, without properly appreciating the documentary evidence, accounting principles, and provisions of Section 145A of the Income Tax Act, 1961. GROUND NO. 4: GROSS VIOLATION OF PRINCIPLES OF NATURAL JUSTICE 6. The Ld. CIT(A) has grossly violated the principles of natural Justice by deliberately not intimating the defect in Form 35 (Column 12) during the entire appellate proceedings spanning nearly three years and then invoking this very defect as grounds to dismiss the appeal in the final order, thereby denying the appellant any opportunity to rectify the inadvertent error. This approach clearly demonstrates that the procedural defect was used merely as a convenient ground to avoid adjudicating the case on the merits. GROUND NO: 5 GENERAL GROUND The appellant craves leave to add to, alter, amend, or withdraw any of the above grounds of appeal at or before the time of hearing.”
Briefly stated the facts are that the assessee is a private company engaged in the business of jewellery. For AY 2015-16, the assessee filed its original return of income on 26.09.2015 declaring total loss of Rs.3,12,39,120/-. For AY 2016-17, the assessee filed its original return of income on 16.10.2016 declaring total loss of Rs.4,18,48,341/-. Based on the information received from the Investigation Wing that the assessee company, Raisoni Bagrecha Diamonds Pvt. Ltd. has shown trade payable (creditor) of Rs. 72,01,411/- for AY 2015-16 and Rs.94,04,285/- for AY 2016-17 towards M/s. RB Diamonds whereas M/s. RB diamond has claimed sundry debtors of Rs.3,39,679/- only, in its return of income for both the AYs 2015-16 and 2016-17 and thus the assessee company has claimed excess liability to the tune of Rs. 68,61,732/- and Rs. 90,64,606/- for AY 2015-16 and 2016-17 respectively. The reassessment proceedings u/s 147 of the Income Tax Act, 1961 (the “Act”) were initiated by issue of statutory notice(s) under section 148 and 142(1) of the Act from time to time which were duly served upon the assessee. The assessee filed reply to only one of the several notices issued under section 142(1) stating that it has filed its return of income for AY 2015-16 and 2016-17 on 12.02.2022. All other notices including the show cause notice remained uncomplied with. Due to lack of any details furnished by the assessee, the Ld. Assessing Officer (“AO”) passed the assessment order u/s 147 r.w.s. 144B of the Act on 28.03.2022 assessing the total income at Rs.68,61,732/- for AY 2015-16 and Rs. 1,04,00,363/- (comprising of bogus liability of Rs. 90,64,606 + purchase of Rs. 10,80,259 from undisclosed sources + suppressed sales of Rs. 2,55,498/- for AY 2016-17 as unexplained income u/s 69 of the Act.
On appeal, the Ld. CIT(A)/NFAC did not admit the additional evidence adduced before him by the assessee observing that none of the conditions required to admit additional evidence under Rule 46A of the Income Tax Rules, 1962 have been met by the assessee and the assessee has also failed to submit any explanation / clarification in support of its claim backed by documentary evidence. He therefore upheld the above addition(s) made by the Ld. AO for both the AYs in absence of any credible rebuttal filed by the assessee to the findings of the Ld. AO.
Aggrieved, the assessee is in appeal before the Tribunal and all the grounds of appeal for AY 2015-16 and 2016-17 reproduced above relate thereto.
The Ld. AR submitted that the assessee could not make proper and complete compliance before the Ld. AO because at the time of assessment proceedings, one of the partners, Mr. Pramod Raisoni, was under the police custody and the other partner, Mr. Pawan Bagrecha, was also under investigation by CID and the erstwhile tax consultant was also arrested. Thereafter, daughter of Mr. Bagrecha took charge of the tax matters and appeals were filed before the Ld. CIT(A)/ NFAC. He admitted that several notices were issued by the Ld. CIT(A)/ NFAC, out of which the assessee could submit its reply only to two of the notices, however, such non- compliance was not intentional but it was due to the issues faced by the assessee as one of the partner was a fraud. He therefore submitted that non-compliance before the lower authorities was not intentional but due to the unavoidable circumstances beyond the control of the assessee. The Ld. AR submitted that the assessee has a strong case on merits and given an opportunity, the assessee is now in a position to explain and substantiate its claim by filing all the requisite details/ documentary evidence before the Ld. CIT(A)/NFAC to his satisfaction. He, therefore, prayed that in the interest of justice, the matter may be restored to the file of the CIT(A)/NFAC to decide the issues raised by the assessee before him afresh on merits, after affording an opportunity of hearing to the assessee.
The Ld. DR supported the order of the Ld. DR but he had no serious objection if the above request of the Ld. AR is accepted.
We have heard the Ld. Representatives of the parties and perused the material available on record. We observe that the Ld. AO completed the assessment exparte qua the assessee for both the AYs under consideration due to non-compliance by the assessee of various notices issued by him. Admittedly, there was non-compliance to the notices before the lower authorities on account of the above mentioned reasons stated by the Ld. AR. The Ld. CIT(A)/ NFAC has sustained the additions made by the Ld. AO for want of sufficient explanation/ clarification and supporting documentary evidence. He rejected the additional evidences filed by the assessee before him on account of technical ground as the assessee failed to mention regarding the filing of additional evidences in Form 35 and any application for admission of the same under Rule 46A of the Act was not filed by the assessee. Undisputedly, despite number of opportunities granted, the assessee failed to comply with several notices issued by the Ld. AO and only some of the notices of the Ld. CIT(A)/NFAC were responded to by the assessee. We, however, find some force in the contention of the Ld. AR that such non-compliance was not deliberate. Due to lack of sufficient explanation / clarification backed by supporting documentary evidence, the Ld. CIT(A)/ NFAC was constrained to dismiss the appeals of the assessee. Before us, the Ld. AR has requested for grant of an opportunity to explain and substantiate its case before the Ld. CIT(A)/ NFAC by filing the requisite details/ documents to his satisfaction and has thus prayed for restoring the matter to the file of the Ld. CIT(A)/ NFAC for fresh adjudication on merits. Considering the totality of the facts of the case and in the interest of justice and without going into the merits of the appeals, we deem it fit and proper to set aside the impugned order(s) of the Ld. CIT(A)/NFAC for the both the AYs involved and restore the matter(s) back to his file with a direction to decide the impugned issues on merits afresh as per fact and law, after giving reasonable opportunity of being heard to the assessee. Needless to say, the assessee shall appear and make submissions before the Ld. CIT(A)/ NFAC on the appointed date without seeking any adjournment under any pretext, unless required for the sufficient cause, failing which the Ld. CIT(A) / NFAC shall be at liberty to pass appropriate order in accordance with law. We hold and direct accordingly. The grounds raised by the assessee in both the appeals for AY 2015-16 and 2016017 are accordingly allowed for statistical purposes.
In the result, the appeals of the assessee in for AY 2015-16 and in AY 2016-17 are allowed for statistical purposes.