Loading judgment…
Facts
The assessee filed a return of income declaring a loss for AY 2015-16, which was accepted by the AO under Section 143(3). The PCIT subsequently initiated proceedings under Section 263, alleging the assessment order was erroneous and prejudicial due to the AO's failure to inquire into investments in unlisted equities and loans/advances. Despite multiple opportunities, the assessee did not appear, leading the PCIT to pass an ex-parte order setting aside the assessment for de novo consideration by the AO.
Held
The Tribunal acknowledged that the assessee failed to utilize opportunities before the PCIT. However, to prevent a miscarriage of justice, the Tribunal quashed the PCIT's order. The matter was remitted back to the PCIT for fresh adjudication, with a direction to provide the assessee a fresh opportunity of being heard and to consider all evidence.
Key Issues
Whether the PCIT's ex-parte order setting aside the assessment under Section 263 was valid, given the assessee's non-appearance and the PCIT's contention of lack of inquiry by the AO regarding investments and advances.
Sections Cited
Section 263, Section 143(3), Section 56(2)(viia)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH ‘C’, NEW DELHI
Before: SHRI G. S. PANNU & MS. MADHUMITA ROY
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘C’, NEW DELHI BEFORE SHRI G. S. PANNU, VICE PRESIDENT AND MS. MADHUMITA ROY, JUDICIAL MEMBER I.T.A. No. 1447/Del/2021 (Assessment Year : 2015-16) Indian Durobuild (P.) Ltd. Vs. PCIT Pra Tax India D-28, Delhi - 4 South Extension, Part-I, New Delhi-53 PAN: AAACS 6592 G (Appellant) .. (Respondent)
Appellant by : Shri Rakesh Gupta, Adv. & Shri Deepesh Garg, Adv. Respondent by : Shri T. James Singson, CIT-D.R. 27.06.2024 Date of Hearing 05.07.2024 Date of Pronouncement O R D E R PER MS. MADHUMITA ROY – JUDICIAL MEMBER :
The instant appeal filed by the assessee is directed against the order dated 01.03.2021 passed by the Pr. Commissioner of Income Tax (PCIT) – Delhi-4 under Section 263 of the Income Tax Act, 1961 (hereinafter referred as to ‘the Act’) holding the order dated 06.04.2017 passed by the Income Tax Officer, Ward-12(2), New Delhi under Section 143(3) of the Act for Assessment Year 2015-16 as erroneous and prejudicial to the interest of Revenue thereby, setting aside the issue to
ITA No.1447/Del/2021 Indian Durobuild (P.) Ltd. vs. PCIT Asst.Year :2015-16 - 2 - the file of the Learned AO for passing fresh assessment order denovo as per certain observations and/or directions made by the Learned PCIT.
The brief facts leading to the case is this that the assessee filed its return of income declaring loss at Rs.25,91,778/- on 24.09.2015. Upon selecting the case for scrutiny the assessment was completed on 06.04.2017 accepting the return filed. Subsequently, on 07.01.2020, a show-cause notice under Section 263 of the Act was issued by the Learned Pr.CIT – Delhi-4 and duly served upon the assessee, the content whereof is as follows: “Sir/Madam/ M/s, Subject: Show Cause Notice u/s 263 of the Income Tax Act, 1961, A.Y. 2015-16 -regarding. Ref: Assessment Order u/s 143(3) of the I.T. Act, 1961 dated 06/04/2017 for A.Y. 2015-16. COME 1961 TAX DEPARTME Please refer to the notice No. ITBA/COM/F/17/2019- 20/1023659963(1) dated 07.01.2020 on the above mentioned subject vide which an opportunity of being heard was provided to you to contest the charge made in ibid notice on 13.01.2020 at 03.15 PM. However, no compliance has been made in regard to the notice either personally or through an authorized representative. You are again afforded an opportunity of being heard in your case. Whereas I have examined the assessment records of M/s Indian Durobuild Private Limited(AAACS6592G), (here-in-after referred to as the assessee) for A.Y. 2015-16 and the other relevant record and noticed following facts of the case
The Return of income for the said assessment year was filed by the assessee on 28/09/2015 declaring total loss of Rs.25,91,778/-.
ITA No.1447/Del/2021 Indian Durobuild (P.) Ltd. vs. PCIT Asst.Year :2015-16 - 3 - 2. Assessment was completed under Section 143(3) of the IT Act on 06.04.2017 accepting the returned loss of Rs 25,91,778/ A perusal of assessment records of the assessee for the A.Y. 2015-16 reveals that the assessee company did not receive any business receipts during the year. It has declared a gross loss of Rs. 25.50,000/- on sale of investments The case was selected for limited scrutiny under CASS and notice u/s 143(2) was issued on 28.07.2016 for following reasons (i) Low income and high loans/advances/investments. (ii) Investment in unlisted equities. 1. Low income and high investments One of the reasons for selection of the case for scrutiny under CASS was- large increase in investment in unlisted equities during the year. This issue has two aspects ie source of funds for these investments and applicability of section 56(2)(visa) of the Act (in cases of acquisition of unlisted shares other than fresh issue by investee company). As per details filed, the assessee company purchased share of various unlisted companies during the year and the total investment on fresh purchases was Rs. 6,18,43,100/- The AO neither verified the availability of funds with the assessee company for this investment nor the applicability of sec.56(2)(viia) of the Act and completed the assessment without calling relevant details in this regard Similarly, on the other reason for selection of this case under scrutiny Le. low income and high loans/advances, as per the balance sheet, the assessee company had given an advance amounting to Rs. 5.50 crores to two companies against property in earlier years. The AO did not make any effort to ascertain the exact nature of advance or since when the said advance was outstanding. No documents in this regard were called upon by the AO. Thus the assessing officer completed the assessment without making requisite enquiries and without examining the relevant details. In view of the facts and issues discussed in the preceding paras, I consider hat the assessment order dated 06/04/2017 has been passed without making adequate inquiries and verification which should have been made and thus it is erroneous in so far as prejudicial to the
ITA No.1447/Del/2021 Indian Durobuild (P.) Ltd. vs. PCIT Asst.Year :2015-16 - 4 - interest of revenue, to the above extent for which action u/s 263 of the Act is warranted. You are, therefore, directed to show cause as to why the assessment orders dated 06/04/2017 should not be revised on the issues discussed above. You are hereby, again afforded an opportunity of being heard to contest the charge made in this notice by appearing personally or through an authorized representative on the 21.01.2020 at 3:15 PM in Room No. 251, C.R. Building, I.P. Estate, New Delhi-110002 or file a written submission by the appointed date, failing which it will be presumed that you have no submission to make in this regard and the matter will be decided without further notice.”
The assessee was directed to submit the reply by 13.01.2020 but without any result. Hence, further opportunity was given by and under the notice dated 17.01.2020 followed by another notice dated 16.03.2020 granting opportunity which remained un-complied with. Thereafter, in response to a further notice dated 18.12.2020, on 07.01.2021, the assessee was represented through one Ashish Bhalla who requested for adjournment before the Learned PCIT and the matter was adjourned to 08.02.2021. As none appeared on behalf of the assessee on the said date the PCIT finalized the order holding the assessment order dated 06.04.2017 as erroneous and prejudicial to the interest of the Revenue with an opinion that the Assessing Officer completed the assessment without making requisite enquires and without examining the relevant details of the following issues :
(i) Low income and high loans/advances/investments. (ii) Investment in unlisted equities. (iii) Low income and high investments.
ITA No.1447/Del/2021 Indian Durobuild (P.) Ltd. vs. PCIT Asst.Year :2015-16 - 5 - 4. Hence, the instant appeal before us.
At the time of hearing of the instant appeal the Learned Counsel appearing for the assessee made submissions in regard to the merit of the matter in order to establish that requisite enquiries were duly been made by the Assessing Officer during the course of assessment proceeding, which was finalized accepting return so filed by the assessee and therefore, the order passed by the Learned PCIT is not sustainable in the eye of law holding the same erroneous. However, at the end of his submission, he finally prayed for setting aside the issue to the file of the Learned PCIT for re-adjudication of the same denovo upon granting an opportunity of being heard to the assessee as the order passed by the Learned PCIT is admittedly an ex parte one. Such prayer made by the Learned Counsel for the assessee, has not been objected by the Learned DR with all his fairness.
Having heard the Learned Counsels appearing for the parties and having regard to the facts and circumstances of the case, we find that though the assessee was given number of opportunities by the Learned PCIT to represent his case, for some reason or the other, the assessee was not been able to be represented before the said authority and the matter stood finalized by the Learned PCIT by setting aside the order passed by the Learned AO where the return of income filed by the assessee was accepted.
ITA No.1447/Del/2021 Indian Durobuild (P.) Ltd. vs. PCIT Asst.Year :2015-16 - 6 - 7. Thus, in our considered opinion in order to prevent the miscarriage of justice, a further opportunity be given to enable the assessee to represent his case effectively before the PCIT. In that view of the matter, we quash the impugned order and remit the issue to the file of Learned PCIT for adjudication afresh upon providing an opportunity of being heard to the assessee and upon considerating the evidence on record or any other evidence which the assessee may choose to file at the time of hearing of the matter.
In the result, appeal filed by the assessee is allowed for statistical purposes.
This Order pronounced in Open Court on 05/07/2024
Sd/- Sd/- (G. S. PANNU) (Ms. MADHUMITA ROY) VICE PRESIDENT JUDICIAL MEMBER Dated 05/07/2024 Priti Yadav, Sr.PS* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI