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Facts
The assessee, MAPSS Fats and Proteins Private Limited, filed its return for AY 2009-10. Following a survey under Section 133A, the assessment was reopened under Section 147, resulting in an addition of Rs.9,46,500/- for bogus purchases of rice bran from a supplier implicated in providing fake bills. The Ld. CIT(A)/NFAC subsequently dismissed the assessee's appeal ex-parte due to non-compliance.
Held
The Tribunal set aside the ex-parte order of the CIT(A)/NFAC and remanded the matter back for de novo adjudication. It granted the assessee a final opportunity to present its case on merits, directing the CIT(A) to conduct a detailed verification to ascertain if there was tax evasion or fraud, citing that fraud vitiates everything including natural justice.
Key Issues
Whether the ex-parte dismissal by the CIT(A) for non-compliance was justified given the allegations of bogus purchases and potential fraud, and if the assessee should be afforded a final opportunity for a merits-based hearing.
Sections Cited
Section 133A, Section 131, Section 147, Section 148, Section 250(4), Section 250(6)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, RAIPUR BENCH “SMC”, RAIPUR
Before: SHRI PARTHA SARATHI CHAUDHURY
आदेश / ORDER
PER PARTHA SARATHI CHAUDHURY, JM
This appeal preferred by the assessee emanates from the order of the Ld.CIT(Appeals)/NFAC, dated 11.02.2025 for the assessment year 2009-10 as per the grounds of appeal on record.
The relevant facts in this case are that the assessee company has filed its return of income for the year under consideration on 29.12.2016, declaring an income of Rs.95,680/-. A survey action u/s.133A of the Income Tax Act, 1961 (for short ‘the Act’) was conducted in the business premises of Shri Sanjay Sharma, Hanuman Market, Raipur and Shri Kamlesh Kumar Kesharwani, Cancassing Agent, Ramsagarpara, Raipur on 15.03.2016 which revealed that certain rice millers would procure bogus bills from brokers/entry operators without any actual purchase of goods. It was observed by the A.O that substantial incriminating material evidencing the aforesaid facts were found in the course of the aforesaid proceedings. The A.O also noticed that survey action was carried out in the case of Nagarik Sahakari Bank, Raipur where some of the brokers/entry operators maintained their bank accounts. It was further observed by the A.O that brokers/entry operators had in their respective statements that were recorded on oath u/s.131 of the Act had admitted of having provided bogus bills to rice traders and millers without any actual supply of goods.
Also, it was noticed by the A.O that certain rice millers had in their statements that were recorded on oath admitted of being involved in the nefarious activities of providing bogus bills without any corresponding sales of goods. After deliberating at length on the modus-operandi that was adopted by the brokers/entry operators and certain rice millers who had admitted of their involvement in providing/facilitating bogus bills in lieu of commission, and referring to their statements which were recorded u/s.131 of the Act a/w. those recorded in the course of their cross examination by rice millers who were alleged by them as beneficiary, it was observed by the A.O that brokers namely, Shri Sanjay Sharma, Shri Aditya Sharma, Shri Kamelsh Kesharwani, Shri Ghanshuam Rijwani and Shri Narad Sahu had stated on oath that they had provided bogus entries or bogus bills to various rice millers. It was also observed by the A.O that the assessee had failed to substantiate the genuineness of the purchases claimed to have been made from the aforementioned parties on the basis of supporting documentary evidences, viz. delivery challans.
Also, the fact reveals that the assessee had purchased rice bran from M/s. Tirupati Trading Company for Rs.28,02,000/- whose proprietor was Shri Narad Sahu (whose name is highlighted in the above reference of survey operations). Accordingly, case of the assessee was reopened u/s. 147 of the Act and notice u/s.148 of the Act was issued to the assessee. Assessment was completed by the A.O u/s.147 of the Act, dated 31.12.2016, wherein an addition of Rs.9,46,500/- was made on account of bogus purchases which comprises of viz. (i) disallowance of 25% of the total bogus purchases : Rs.7,00,500/- i.e. (25% of Rs.28,02,000/-) ; and (ii) addition of peak purchases : Rs.2,46,000/-. The tax effect involved in this case is of Rs.8,69,304/- as per Form 36 filed by the assessee.
That being aggrieved, the assessee carried the matter in appeal before the Ld. CIT(Appeals)/NFAC. It is noted that as per Pages 18 & 19 of the impugned order, the Ld.CIT(Appeals)/NFAC vide an ex-parte order had dismissed the appeal of the assessee due to non-compliance by the assessee. For the sake of clarity, Pages 18 & 19 of the Ld.CIT(Appeals)/NFAC order is culled out as follows: (relevant extract)
“F] Findings & Decision:- The Appeal was transferred to this office under e-Appeal Scheme dated 29/05/2023 duly notified in the Gazette of India vide CBDT's Notification No. 33/2023/F.No. 370142/10/2023- TPL. No information has been uploaded regarding the reason for non- submission of any reply to the notice dated 21/01/2025, though the reply to the earlier notice was furnished and this notice has been served through the same e-mail Ids. The Appellant itself has asked for further hearing in the reply dated 20/01/2025. 20 days have been passed since the notice has been served on 21/01/2025. In the notice u/s 250 dated 21/01/2025, on Page 1, it was written as:-"4.What if we do not hear from you? If no submissions/information/documents is/are received within the stipulated time period, it will be presumed that you have nothing more to say in this matter except what is stated in your grounds of appeal. The Department may proceed ahead based on material available on record, and the appellate order may be passed without affording further opportunity." The notice was served through five emails — all the e-mails are/ were used by the Appellant and informed to the Department. It can't be that none of the e-mails is noticed by the Appellant. Also a text message is sent to the registered Mobile Number of the Appellant as soon as any communication is sent through ITBA. The Appellant could have uploaded their reply at any time till today as long as the order is not passed and the e-proceedings are kept open. Now it is not that the Reply has to be uploaded on the Scheduled date and at the time of the hearing fixed. It can be uploaded at any time till the order is passed. So, sufficient time has been allowed. From non-compliance on the part of the Appellant to statutory notice issued, it is evident that Appellant is intransigent in not complying. The Appellant has failed to display any action that can lead to believe that Appellant would co-operate in the proceedings. No adjournment petition has been filed. No explanation or document has been filed as asked u/s.250 as in Para E 2 above.”
In this regard, the Ld. Sr. DR has fairly conceded that the matter may be adjudicated denovo on merits before the first appellate authority providing one final opportunity to the assessee.
I have heard the submissions of the parties herein and carefully considered the contents in the documents/material available on record. As per the aforesaid examination of the entire spectrum of the matter in the interest of natural justice, I deem it fit and proper to provide one final opportunity to the assessee to represent its case on merits before the Ld. CIT(Appeals)/NFAC.
In the overall spectrum of the ex-parte order being passed due to non-compliance by the assessee before the Ld.CIT(Appeals)/NFAC, I refer to the order of the ITAT, “Division Bench”, Raipur in the cases of Brajesh Singh Bhadoria Vs. Dy./ACIT, Central Circle-2, Naya Raipur, IT(SS)A Nos.1 to 6, 8 & 9/RPR/2025, dated 20.03.2025 wherein the Tribunal had dealt with similar issue on the same parameters of ex-parte order passed by the Ld. CIT(Appeals)/NFAC and remanded the matter back to the file of the Ld. CIT(Appeals)/NFAC.
Respectfully following the aforesaid order on the ex-parte issue, I am providing one final opportunity to the assessee to represent its case before the first appellate authority. Accordingly, I set-aside the order of the Ld. CIT(Appeals)/NFAC and remand the matter back to its file for denovo adjudication as per law while complying with the principles of natural justice.
I am further of the considered view that this is not simply a case of ex-parte matter since fact suggests as has been examined afore-stated that assessee had purchased rice bran from M/s.Tirupati Trading Company for Rs.28,02,000/- whose proprietor was Shri Narad Sahu (whose name is highlighted in the above reference of survey operations) who is providing bogus bills to rice millers or rice traders without any actual purchases, it is now the onus on the part of the Ld. CIT(Appeals)/NFAC to verify and examine in detailed manner whether there is any colourable device adopted by the assessee to defraud the revenue. That though on the ground of natural justice, one final opportunity has been given to the assessee but the genesis of the entire facts and circumstances needs proper verification by the department so to find out whether any lawful taxes remain unpaid to the department due to bogus purchase transaction by the assessee which shall be within purview of tax evasion amounting to fraud to the revenue and in such case, fraud vitiates everything including natural justice.
The application of principle of fraud was even considered by the Hon'ble Supreme Court in the case of Badami (deceased) by her LRs v. Bhali in Civil Appeal No.1723/2008, dated 22/05/2012 wherein the Hon'ble Supreme Court has held as follows:-
"20. In S. P. Chengalvaraya Naidu (dead) by L.Rs. v. Jagannath (dead) by L.Rs. and others AIR 1994 SC 853 this court commenced the verdict with the following words:- "Fraud-avoids all judicial acts, ecclesiastical or temporal"
It had been held that the courts of law are meant for imparting justice between the parties and one who comes to the court, must come with clean hands. A person whose case is based on falsehood has no right to approach the Court.
In another decision of the Hon’ble Supreme Court in the case of Smt. Shrist Dhawan v. M/s. Shaw Brothers AIR 1992 SC 1555, it has been held that fraud and collusion vitiates even the most solemn proceedings in any civilized system of jurisprudence including natural justice. Further, the Hon’ble Supreme Court in the case of Mc Dowell & Company Ltd. Vs. CTO [1985] 154 ITR 148 (SC) has held that "Tax planning may be legitimate provided it is within the framework of law, Colourable devices cannot be part of tax planning....".
Therefore, in my considered view, in the present matter it is the responsibility of the revenue authorities to investigate the matter in detailed manner as per law whether there is tax planning or tax evasion as per the transactions entered into by the assessee. If tax evasion is determined by the revenue in such circumstances additions are to be sustained in the hands of the assessee.
As per the aforesaid observations, I am of the considered view that there needs to be detailed verification and enquiry of the facts in the case of the assessee by the Ld. CIT(Appeals)/NFAC and after doing such exercise, the Ld. CIT(Appeals)/NFAC shall pass a speaking order in terms with Section 250(4) & (6) of the Act after complying with the principles of natural justice. The assessee is also directed to respond to all the hearing notices issued from the office of the Ld. CIT(Appeals)/NFAC since this is the final opportunity to the assessee to represent the matter on merits.
As per the above terms, the grounds of appeal raised by the assessee stands allowed for statistical purposes.
In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in open court on 18th day of June, 2025.