OPG SONS PROPERTIES PVT. LTD.,SITAPUR vs. INCOME TAX OFFICER, SITAPUR

The facts of the case are that an information was flagged on the Insight Portal under CIB information module from the office of the DIT(I&CI), Lucknow regarding purchase of an immovable property for a consideration of Rs. 3,25,40,000/-. On perusal of the sources of this purchase, it was found that only Rs.40,00,000/- of the said investment was verifiable in the form of the unsecured loan. Thus, ld. AO, after perusing the income tax return, came to a conclusion that income amounting to Rs. 2,85,40,000/- had remained unexplained on account of this investment and for this reason, proceedings were initiated by issue of notice under section 148. No return was filed in response to this notice therefore, a further notice under section 142(1) was issued. However, as no compliance was received, the same were sent to the verification unit for physical service. These were served through speed post on 24.02.2022 but the ld. AO records that no compliance was made to them. In his assessment order, the ld. AO records details of six notices that were sent to the assessee for making up compliance but records that all of them were not complied with. However, in response to the final show cause notice, the assessee did submit that the original return filed under section 139(1) may be treated as the return filed under section 148 of the Act. Therefore, a notice under section 143(2) was issued to the assessee. The assessee also furnished documents and a note in response to the total cost incurred for the purchase of factory, land and building amounting to Rs. 3,25,60,000/-, which it sought to prove through an elaborate bank statement. The assessee claimed to have taken loans from four parties amounting to Rs. 24.07 Lacs and it furnished the copies of ITR and computation of income of these parties. However, the ld. AO OPG Sons Properties Pvt. Ltd. A.Y. 2013-14 notes that the assessee failed to submit the evidence with regard to the remaining sources of investment and therefore, after allowing for the sources of investment that were explained, he added the remaining amounts of Rs. 2,61,53,000/- back in the hands of the assessee under section 68 of the Income Tax Act and brought the same to tax under section 115BBE.

Aggrieved with this addition, the assessee filed an appeal before the NFAC. However, the ld. CIT(A) records the fact that five notices were issued to the assessee and while four of the notices resulted in adjournment applications, there was no response to the final notice that was issued. Accordingly, the ld. CIT(A) held that the assessee was not interested in pursuing the appeals and by placing reliance on the decision of the Hon’ble Supreme Court in the case of CIT vs. B.N. Bhattacharjee and Ors (1979) 118 ITR 461 (SC) and the decision of the Hon’ble Madhya Pradesh High Court in the case of Estate Of Late Tukojirao Holkar vs Commissioner Of Wealth-Tax (1997) 223 ITR 480 (MP), he dismissed the appeal of the assessee in limine for want of prosecution.

The assessee is aggrieved with this summary dismissal of his appeal and has accordingly come in appeal before us. Sh. Rakesh Garg, Advocate (hereinafter referred to as the ld. AR) appearing on behalf of the assessee submitted that there was no income that escaped assessment and therefore, the entire proceedings initiated under section 147 was without jurisdiction. It was pointed out that all the investment that had been made for the purchase of land and building with the plant was recorded in the books of accounts and debited under the head, “fixed assets”. The audited accounts of the assessee company were already on record and the total investment of Rs. 3,25,40,000/- as made, was appearing on the debit side of the balance-sheet. The entire payment made for the purchase of land, building and plant was through proper banking channels and was debited in the books of accounts. No part of the investment made in the purchase of land, building and plant was unexplained expenditure or undisclosed. It was submitted that the assessee had sufficient funds and which appear under the share capital, loan and advances. The assessee had explained that the investment in purchase of property OPG Sons Properties Pvt. Ltd. A.Y. 2013-14 was out of funds as per the books of accounts, and in support of the same had attached details of all loans and advances as appearing in the balance-sheet. The ld. AO had added a sum of Rs. 2,61,53,000/- on this account and the ld. CIT(A) had upheld the addition by dismissing the appeal ex parte. However, it was submitted that the statement of facts, the grounds of appeal and the assessment order were self-explanatory to show that the addition made by the AO under section 68 of the Act and as confirmed by the CIT, were contrary to the facts as narrated in the assessment order and contradictory to the provisions of law. It was further argued that the case had been opened for reason that the assessee had failed to disclose the investment but the addition had subsequently made on account of unexplained credit under section 68 of the Act. It was further submitted that section 68 could not be applicable for reason that the source of investment was not a cash credit and no addition could be made under this section until there was any difference in the value disclosed by the assessee in the books and as found by the DIT (I&CI). The ld. AR took us through the replies filed by the assessee before the AO, NFAC contained on pages 2 and 3 of the paper books. It was submitted that attached along with this reply was a confirmation certificate from M/s Agarwal Food Products regarding the debit balance in the account. Page 9 of the said paper book was highlighted which was a confirmation from M/s Agarwal Food Products that there was a debit balance of Rs. 1,53,17,392/- as on 31.03.2013. The ld. AR, thereafter invited our attention to the reply filed before the AO, NFAC on pages 4 to 8 of his paper book in which the entire details of the source for purchase of immovable property had been explained to the AO. It was therefore, submitted that the detailed submissions made by the assessee had not been rebutted or refuted at any stage by the AO or the ld. CIT(A) but had been brushed aside on the pretext that the assessee had failed to furnish some supporting documents. It was, therefore, prayed that the additions may be deleted or in the alternative restored back for the consideration of the lower authorities in view of the facts presented by the assessee.