INFINITY BUILDCOM,AHMEDABAD vs. ITO WARD 3(3)(2), AHMEDABAD, VEJALPUR, AHMEDABNAD

The brief facts of the case are that the assessee, a partnership firm namely Infinity Buildcom, filed its return of income for Assessment Year 2012-13 declaring total income of Rs.1,17,717/-. Subsequently, the Assessing Officer received information from the Investigation Wing that the assessee had received an unexplained amount of Rs.20,00,000/- from one Shri Aadilhusen A. Ansari. Based on this information, the Assessing Officer reopened the assessment under section 147 of the Income-tax Act, 1961 (“the Act”), after recording reasons and obtaining due approval, and notice under section 148 of the Act was issued. During the reassessment proceedings, the Assessing Officer issued notices under section 142(1) of the Act along with questionnaires calling upon the assessee to furnish details and explanations. As there was no compliance from the assessee, a show cause notice was issued proposing to complete the assessment ex- parte under section 144 of the Act. Despite opportunities, the assessee failed to file any reply or supporting documents. Infinity Buildcom vs. ITO Asst.Year –2012-13 - 3– 5. In the absence of any explanation, the Assessing Officer completed the assessment ex-parte under section 144 read with section 147 of the Act. The Assessing Officer treated the sum of Rs.20,00,000/- received from Shri Aadilhusen A. Ansari as unexplained income. Further, the Assessing Officer noticed that the assessee had shown unsecured loans of Rs.2,21,00,000/- in the return of income filed subsequently, whereas no such loans were reflected in the earlier year. Since no confirmations or explanations were furnished by the assessee, the same were added as unexplained cash credits under section 68 of the Act. The Assessing Officer also observed a substantial increase in sundry creditors, resulting in an unexplained difference of Rs.2,75,42,183/-, which the Assessing Officer treated as bogus creditors and added the same under section 68 of the Act as income of the assessee. Further, the Assessing Officer noticed that the assessee had purchased an immovable property amounting to Rs.45,00,000/-, which remained unexplained and accordingly, the Assessing Officer added the same as unexplained investment under section 69 of the Act. Accordingly, the Assessing Officer assessed the total income of the assessee at Rs.5,42,59,903/-, and also initiated penalty proceedings under sections 271(1)(c) and 271B of the Act separately.

Aggrieved, the assessee preferred an appeal before the CIT(Appeals). During the appellate proceedings, several notices of hearing were issued to the assessee over a prolonged period. However, except for one response containing general and legal assertions without any supporting evidence, the assessee failed to effectively participate in the appellate proceedings or furnish documentary evidence to rebut the findings of the Assessing Officer. Infinity Buildcom vs. ITO Asst.Year –2012-13 - 4– 7. On merits, the CIT(Appeals) dealt with each of the grounds raised by the assessee. With regard to the challenge to reopening under section 147 and issuance of notice under section 148, the CIT(Appeals) held that the Assessing Officer had acted within his jurisdiction after receiving credible information and after following due process, and therefore the contention that the proceedings were initiated by an unauthorised person was rejected. In respect of the additions made under sections 68 and 69 of the Act, the CIT(Appeals) observed that the assessment was completed under section 144 of the Act only because of the non-cooperation of the assessee, and in the absence of any explanation or evidence, the Assessing Officer was justified in making the additions on the basis of material available on record. The CIT(Appeals) further held that the demand raised under section 156 and initiation of penalty proceedings were consequential and valid in law. The allegations made by the assessee against the Assessing Officer regarding mala fides and liability for compensation were found to be baseless and unsupported by any material. In view of repeated non-compliance and lack of substantiation of grounds, the CIT(Appeals) dismissed the appeal and sustained all the additions made by the Assessing Officer.

The assessee is in appeal before us against the order passed by CIT(Appeals) dismissing the appeal of the assessee.

We have heard the rival contentions and perused the material on record. We find that the assessment in the present case has been completed ex-parte under section 144 read with section 147 of the Act due to non- compliance on the part of the assessee. We also note that before us, the assessee has contended that it was unable to effectively place its case and supporting material before the Assessing Officer as well as before the first Infinity Buildcom vs. ITO Asst.Year –2012-13 - 5– appellate authority. Considering the above facts and keeping in view the principles of natural justice, we are of the considered view that the assessee deserves one final opportunity to present its case on merits.

At the same time, we cannot lose sight of the fact that the assessee has remained non-cooperative at all stages of the proceedings and has failed to comply with statutory notices, which has resulted in protracted litigation. Therefore, in order to balance the interests of justice and to ensure discipline in the proceedings, we deem it appropriate to restore the matter to the file of the Assessing Officer for de-novo consideration, subject to payment of cost.

Accordingly, the matter is restored to the file of the Assessing Officer for fresh adjudication in accordance with law. The Assessing Officer shall afford reasonable opportunity of being heard to the assessee and shall decide the issues afresh after examining the evidence and explanations that may be filed by the assessee. The assessee is directed to fully cooperate in the proceedings and file all relevant details and documentary evidence as may be called for by the Assessing Officer. As a condition for such restoration, the assessee shall pay a cost of Rs. 5,000/- to the credit of the Prime Minister Relief Fund and shall produce proof of such payment before the Assessing Officer.