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Facts
The assessee company did not file its income tax return for Assessment Year 2011-12. The case was reopened under Section 147/148 of the Income-tax Act, 1961, and the Assessing Officer made an ex parte addition of Rs. 11,60,278/- as unexplained income under Section 68, which was subsequently sustained by the CIT(A).
Held
The Income Tax Appellate Tribunal observed that the CIT(A) failed to adjudicate a crucial legal ground raised by the assessee concerning the validity of the assessment order passed against a company that had been struck off the Registrar of Companies. The Tribunal, therefore, set aside the CIT(A)'s order and remanded the appeal back to the CIT(A) for fresh adjudication on all grounds raised.
Key Issues
Whether an assessment order passed against a company struck off the Registrar of Companies is void-ab-initio and affects the jurisdiction of the assessing authority; whether the addition of Rs. 11,60,278/- as unexplained income under Section 68 was justified; and the failure of CIT(A) to adjudicate a jurisdictional ground.
Sections Cited
147, 148, 68, 144
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH “SMC”: NEW DELHI
Before: SHRI KUL BHARAT
O R D E R PER KUL BHARAT, JM:
This appeal, by the assessee, is directed against the order of the National Faceless Appeal Centre (NFAC), Delhi, dated 12.12.2023, pertaining to the assessment year 2011-12. The assessee has raised following grounds of appeal:
“1. That the assessment order passed by Ld. AO as well as the appellate order passed by Ld. CIT(A) are bad in law and have been passed in contravention of prevailing law as well as faces of the case, therefore liable to be annulled. 2. That the notices issued u/s 148 and assessment order passed by Ld. AO are void-ab-initio invalid being issued and passed in the name of a struck-off company
That the Ld. CIT(A)) grossly erred in law in not providing opportunity of being heard and to fide rebuttal to remand report received from Ld. AO 4. That the Ld. AO grossly erred in law and in facts of the case in assessing the entire receipts of Rs 11.60.278/- appearing in Form 26AS as income of assessee without allowing deduction of any expenses incurred to earn such income. 5. That the Ld. AO grossly erred in law and in facts of the case in assessing business receipts appearing in Form 26AS as unexplained cash credits u/s 68 of the Act. 6. That the AO grossly erred in law and in facts of the case in not allowing TDS credit of Rs. 1,16,031/- appearing in Form 26AS despite assessing the receipts appearing therein as income of the assessee 7. That the assessee company seeks leave to add, alter, modify or delete any ground of appeal
during the course of appellate proceedings.”
2. Facts of the case, in brief, are that the assessee company did not file its return of income for A.Y 2011-12. The case was reopened u/s 147/148 of the Income-tax Act, 1961 (the “Act”) on the basis that an income of Rs. 11,60,278/- had escaped assessment for A.Y. 2011-12. Before AO there was no representation on behalf of the assessee. Therefore, AO proceeded to make assessment ex parte to the assessee and vide order dated 14.12.2018 made addition of Rs. 11,60,278/- as unexplained income u/s 68 of the Act and assessed the assessee’s income accordingly. Aggrieved against it the assessee appealed to the CIT(A), who also sustained the addition. Aggrieved against this the assessee is in appeal before this Tribunal.
3. Apropos to the grounds of appeal, learned counsel for the assessee took us through the impugned order and submitted that a specific legal issue was raised before learned CIT(Appeals) regarding assessee company was struck off from the register of the Registrar of Companies. He contended that learned CIT(A) failed to decide this ground and erroneously dismissed the appeal of the assessee. He submitted that the issue goes to the root of the jurisdiction and validity of the order passed by the assessing authority against a non-existent entity.
4. On the other hand, learned DR submitted that against the order of Registrar of Companies the Revenue had already filed an appeal before the NCLT, therefore, the issue of striking off was under challenge. The authorities below have, therefore, rightly proceeded to frame the assessment and in sustaining the same.
I have heard rival contentions and perused the material available on record.
There is no dispute with regard to the fact that before learned CIT(A) there was a specific ground by the assessee about the validity of assessment on the ground that the assessee company was struck off from the Registrar of Companies at the time of framing of assessment. Hence, the assessment so framed was against the non- existing entity. Undisputedly, the learned CIT(A) dismissed the appeal of the assessee by observing as under:
“5. The matter has been carefully considered. It could be seen from the facts that in this case, all the grounds raised by the appellant company
Rs.11,60,278/- on account of undisclosed income u/s 68 of the Act and the same is adjudicated as under :- 5.1. The appellant is a company and did not file any return of income for the AY 2012-13 despite receiving commission income & fees for professional & technical services amounting to Rs.11,60,278/-. Therefore the case was reopened u/s 147 of the Act and notice u/s 148 of the Act was issued to the appellant. During the assessment proceedings, the AO perused the Form 26AS of the appellant company and noted that during the FY 2010-11 relevant to the AY 2011-12, the appellant company received commission income & fees for professional & technical services from 10 parties amounting to Rs. 11,60,278/-. The AO provided many opportunities to the appellant to file return of income and explain nature & source of such income received during the year under consideration. In response, the appellant company neither filed the return of income nor furnished supporting documentary evidences to explain the nature & source of income received. Therefore, the assessment proceedings u/s 144 of the Act were completed by passing order dated 14/12/2018 wherein the addition of Rs.11,60,278/- was made as undisclosed income u/s 68 of the Act. 5.2. During the appellate proceedings, the appellant contended that he was engaged in the business to provide consultancy services for Human resources development, training and Placement, recruiters, campus Interview managers, maintenance of Data Bank, selection of Suitable Personnel & their training, Providing Information for Human Resources requirements availability in India and Abroad for all fields and also act as consultants and commission agents for this type of business. In support of its contention, the appellant furnished the written submissions, bank account statement etc. Since these were the additional documentary evidences, the same were forwarded to the AO with direction to furnish the remand report. Accordingly the AO verified the documentary evidences and submitted the remand report. The AO noted that there was no reasonable cause for failure to file the return of income. Also AO stated that the nature & source of income received remained unexplained and hence recommended to uphold the additions made during the assessment proceedings. Therefore in the absence of return of income & supporting documents, the commission income & fees for professional & technical services amounting to Rs. 11,60,278/- remained unexplained. In view of the facts & remand report submitted by the AO, the nature & source of income earned by the appellant remained unexplained. Thus the 68 of the Act. Hence, the addition made by the AO of Rs.11,60,278/- as undisclosed income u/s 68 of the Act is confirmed. Accordingly, all the grounds of appeal are dismissed.”
6. From the above it is clear that there is no whisper about the ground taken by the assessee. The learned CIT(A) committed an error in not adjudicating the ground raised by the assessee. I, therefore, set aside the impugned order and restore the appeal to the file of learned CIT(A) to decide all the grounds taken by the assessee by way of speaking order, preferably within three months from the date of receipt of this order. Grounds are allowed for statistical purposes.
Appeal of the assessee is allowed for statistical purposes.
Order pronounced in open court on 27.06.2024.