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आदेश/Order
PER N.K. SAINI, VICE PRESIDENT
This is an appeal by the Assessee against the order of the Ld. CIT(A)-43, New Delhi dt. 27/07/2021.
Following grounds have been raised in this appeal:
That the Ld. Commissioner of Income Tax (Appeals) has erred in law in upholding the framing of ex-parte assessment framed u/s 148 in the absence of service of any notice upon the assessee which is against the Principals of Natural Justice and as such the order passed is illegal, arbitrary and unjustified.
2. That the Ld. Commissioner of Income Tax (Appeals) has erred in law in upholding the reopening the assessment by issuance of notice u/s 148 of the Act in as much as there has been no escapement of income and order upheld is illegal, arbitrary and unjustified. 3. That the Ld. Commissioner of Income Tax (Appeals) has erred in law in rejecting the additional evidence which goes to the root of the matter only on the basis of the observations of Assessing Officer in Para 5.4 of his order which is arbitrary and unjustified. 4. That the Ld. Commissioner of Income Tax (Appeals) has further erred in upholding the addition of Rs.2,56,70,000/- in utter disregard of the explanation and evidence placed on record only on the basis of remand report which was never confronted to the assessee and as such the order passed is arbitrary and unjustified.
5. That the Ld. Commissioner of Income Tax (Appeals) has further erred in upholding the addition of Rs. 1,43,707/- as interest income which in fact was short term Capital gains in utter disregard of the explanation and evidence placed on record only on the basis of remand report and as such the addition upheld without application of mind is arbitrary and unjustified.
6. That the Ld. Commissioner of Income Tax (Appeals) has erred in observing that the assessee appellant had failed to substantiate the claim before the Assessing officer when in fact no notice was given by the assessing officer to appear before him and as such the additions upheld is arbitrary and unjustified.
That the appellant craves leave to add or amend the grounds of appeal
before the appeal is finally heard or disposed off.
8. That the order of the Ld. CIT (A) is erroneous, arbitrary, opposed to the facts of the case and thus untenable.
3. The main grievance of the assessee vide Ground Nos. 1, 2 & 3 relates to the sustenance of the exparte assessment framed by the A.O. by invoking the provisions of Section 148 of the Income Tax Act, 1961 (for short the ‘Act’) and rejection of the additional evidence furnished by the assessee before the Ld. CIT(A).
Facts of the case in brief are that the A.O. on the basis of the information that the assessee had purchased mutual funds of Rs 2,56,70,000/- and earned interest income of Rs. 1,43,707/- issued the notice under section 148 of the Act. Since there was no compliance to the notice issued by the A.O., the assessment was framed exparte under section 144 of the Act by making the addition of Rs. 2,56,70,000/- on account of purchase of mutual funds and Rs. 1,43,707/- on account of interest income received by the Assessee.
Being aggrieved the assessee carried the matter to the Ld. CIT(A) and challenged the validity of the assessment framed in the absence of service of notice to the assessee by the A.O. The written submissions were furnished by the assessee which have been incorporated by the Ld. CIT(A) in para 4 of the impugned order which read as under:
4, Written submission as submitted bv the appellant are as under:-
Most humbly, it is submitted that the order u/s 144 r.w.s. 147 of the Income Tax Act, 1961 for the Assessment Year 2011-12 was passed by the Deputy Commissioner of Income Tax, International Taxation. Circle - Chandigarh making addition amounting to Rs. 2.58, 13,707/- to die total income of the assesse. In respect of the above it is submitted that the Ld. Assessing Officer made addition u/s 69 of the Income Tax Act, 1961 on account of investment made by the assesse in mutual fund amounting to Rs. 2,56,70,000/- and interest income amounting to Rs. 1.43,707/- .The Ld. Assessing Officer has erred in making the above additions. Since the address available with the department i.e. Street No. 5, Rohan Road, Kuldeep Nagar Basti, Jodhewal, Ludhiana was not correct. Moreover the assesse has also moved from its overseas address i.e. 89, Salcombe Gardens, Lowfell Gateshed, United Kingdom and the notices did not reach the assesse. In the above overseas address the assesse elderly ailing father live and the assesse was not aware of the notices received. The assesse when went to meet his ailing father in December 2018 the assesse came to knew about the case but the order u/s 144 r.w.s. 147 was framed till then. Since the assesse has neither received notice u/s 142(1) nor the show cause notices issued by the Ld, Assessing Officer. The Ld. Assessing Officer did not appreciate the facts that the assesse was nonresident and the assesse was living abroad and while the assesse could collect the information called by the Ld. Assessing Officer and appoint any authorized representative to represent his case the Ld. Assessing Officer passed order u/s 144 r.w.s, 147 of the Income Tax Act 1961.
Hence the total investment made by the assesse in mutual funds during the Assessment Year 2011-12 amounted to Rs. 2,69,30,000/- while the total redemption from mutual funds during the year amounted to Rs. 2,68,08,448/- and balance investment was made by the assesse out of the old savings i.e. balance available in his bank account. The entire investment made by the assesse in mutual funds was through proper banking channel. The copy of bank account statement depicting the same is enclosed here with for your ready reference.
The Ld. Assessing Officer did not appreciate the facts available on records in shape of bank account statements and treated the entire investment made by the assesse in the mutual funds as unexplained investments and made addition thereon. The Ld. Assessing Officer has treated the entire investments made by the assesse as unexplained and has not relied on the information available on record. As per section 144 of the Income Tax Act, 1961 Assessing Officer after taking into account all relevant material gathered make assessment to the total income or loss to best of his judgment. The Act emphasis on all relevant material gathered and best of his judgment In tire above case the Ld. Assessing officer has called information from various concerned authorities u/s 133(6) of the Income Tax Act, 1961 and made addition merely on the basis of information received and made addition thereof without relying on the information available on records. The information called by the Ld. Assessing Officer in shape of Bank statement and the bank statement clearly depicted that the investment made in the mutual funds was out of redemption made, of already purchased mutual funds. Hence the investment made by the assesse in mutual funds does not stand unexplained investments as the Ld. Assessing Officer did not rely on the information available on records and passed order u/s 144 of the Income Tax Act, 1961. Moreover the case of the assesse with similar facts for the succeeding Assessment Year i.e. 2012-13 has been decided by the Deputy Commissioner of Income Tax, International Taxation, Circle Chandigarh in favour of assesse. The copy of assessment order for the Assessment Year 2012-13 is also enclosed here with for your kind reference. Also the Ld. Assessing Officer made addition on account of interest income amounting to Rs. 1,43,707/- whereas as per the information available on records in shape of bank account statement the assesse has earned interest income amounting to Rs.5.939/- during the Assessment Year 2011-12 relevant to Financial Year 2010-11. The copy of interest certificate from HSBC Bank depicting the same is also enclosed here with for your ready reference. Although the assesse has earned short term capital gain amounting to Rs. 1,43,707/- during the Assessment Year 2011-12. The assesse gross total income during the year under consideration i.e. Assessment Year 2011,-12 amounted to Rs. 1.49,646/- i.e. (Income from Short Term Capital Gain amounting to Rs. 1,43,707/- & Income from Saving Bank Account Interest amounting to Rs. 5,939/-). Since the assesse gross total income during the Assessment Year 2011-12 was below the threshold exemption limit the assesse did not file his return of income for the said period. Therefore, the Ld. Assessing officer has erred in making the above mentioned addition. As the assessing officer has erred in making above addition hence, the same may kindly be deleted.
5.1 The Ld. CIT(A) after considering the submissions of the assessee observed that he assessee had furnished copy of Bank Statement, Bank Interest Certificate and the Capital Gain Statement which were forwarded to the A.O. for the comment on its admissibility and as well as on its merit. The Ld. CIT(A) mentioned that a Remand Report dt. 23/12/2020 had been received in his office, in the said report the A.O. stated that the case of the assessee did not fall in any of the four circumstances mentioned in Rule 46(i) of the Income Tax Rule 1962. The Ld. CIT(A) sustained the addition made by the A.O. by observing in para 5.5 of the impugned order as under:
On merits the assessing officer has commented that documents attached as Annexure A&B relate to Bahl Singh Dhindsa and not to the appellant. Moreover the capital gain statement shown as annexure C does not explain the source of investment of the mutual fund. As per the office records of the Assessing officer it is evident that in financial year 2010-11 the appellant has invested a sum of Rs. 80 lakhs in mutual fund of ICICI Prudential but the capital gain statement is showing investment of only Rs. 40 lakhs in ICICI Prudential mutual fund during financial year 2010-11. Besides as per office records of A.O. the appellant has also invested in HDFC mutual fund & IDFC mutual fund which are not appearing in the statement submitted a additional evidences. Accordingly the appellant has failed to submit any evidence to counter the addition made in the assessment order. As the Appellant has failed to substantiate its claim before the A.O. regarding the additional documents submitted before this office to justify the sources of investments in mutual funds. Therefore the appeal is dismissed.
Now the assessee is in appeal.
7. The Ld. Counsel for the Assessee submitted that the A.O. framed the assessment exparte by making the arbitrary additions and that the assessee furnished all the evidence before the Ld. CIT(A) who neither rejected nor accepted those evidence furnished before him but acted only on the report of the A.O. without confronting the same to the assessee. It was stated that in the subsequent years the A.O. accepted the investment made by the assessee in mutual funds. However for the year under consideration he made the addition of the total investment made by the assessee, therefore the addition made by the A.O. and sustained by the Ld. CIT(A) deserves to be deleted.
In her rival submissions the Ld. Sr. DR strongly supported the impugned order passed by the Ld. CIT(A) and reiterated the observations made therein.
We have considered the submissions of both the parties and perused the material available on the record. In the present case it is not in dispute that the A.O. framed the assessment exparte under section 144 of the Act and the assessee furnished the written submissions alongwith additional evidence before the Ld. CIT(A) who had discussed the submissions of the assessee in para 4 of the impugned order. However the Ld. CIT(A) acted upon the remand report dt. 23/12/2020 received from the A.O. but no opportunity was given to the assesse to comment upon the said report. It is also noticed that the Ld. CIT(A) neither rejected nor accepted the additional evidences furnished by the assessee first time before him. We therefore considering the totality of the facts deem it appropriate to setaside the impugned order and remand the issue back to the file of the Ld. CIT(A) to be adjudicated afresh in accordance with law after providing due and reasonable opportunity of being heard to the assessee.
In the result, appeal of the Assessee is allowed for statistical purposes.