Loading judgment…
Facts
The assessee, engaged in mushroom production, reported agricultural income of Rs. 15,12,47,000/-, which the AO subsequently taxed as business income following a review under Section 263 upheld by the Delhi High Court. The CIT(A) dismissed the assessee's appeal, noting a failure to provide sufficient material. The assessee filed the present appeal, arguing a lack of proper opportunity of being heard in the faceless appeal proceedings.
Held
The Tribunal acknowledged the challenges of the faceless appeal system and the appellant's contention regarding insufficient opportunities for hearing. It set aside the CIT(A)'s order and remanded the case back to the CIT(A), directing that the assessee be granted one final opportunity to submit all relevant details and present its case on merits, thereby upholding the principles of natural justice.
Key Issues
Whether agricultural income from mushroom production was correctly taxed as business income, and if sufficient opportunity of being heard was provided during the faceless appeal proceedings.
Sections Cited
115JB, 143(3), 80IC, 14A, 263
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH ‘B’: NEW DELHI
Before: SHRI C. N.PRASAD & SHRI AVDHESH KUMAR MISHRA
ORDER PER AVDHESH KUMAR MISHRA, AM
The appeal filed by the assessee is directed against the order, dated 08.05.2023, of Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), New Delhi [In Short ‘the CIT(A)’].
The assessee/appellant, vide four grounds of appeal, challenged the taxability of its agricultural income disclosed in its return of income under the head ‘profit & gains of business or profession by the Assessing Officer [In short ‘the AO’]. All grounds of appeal revolve around the taxability of agricultural income of Rs. 15,12,47,000/- under the head ‘profit & gains of business or profession.
3. The relevant facts, in brief, emerged from the details filed by the assessee/appellant are that the assessee/appellant is engaged in mushroom production. The assessee/appellant filed its return of income for the relevant assessment year declaring income of Rs. 17,17,610/-. Later on, the assessee revised its return of income declaring ‘NIL’ income under normal provisions of the Income Tax Act, 1961 [in short ‘the Act’] and book profit of Rs. 4,78,13,000/- in accordance with the provisions of Section 115JB of the Act. The case was scrutinized and consequential assessment order was passed u/s 143(3) of the Act determining the income at Rs. 23,75,422/-after disallowing part of deduction u/s 80IC of the Act and making disallowance u/s 14A of the Act under normal provision of the Act and book profit of Rs. 4,78,13,000/- in accordance with the provisions of Section 115JB of the Act. Later, the case was reviewed by the Pr. Commissioner of Income Tax u/s 263 of the Act. The order passed u/s 263 of the Act was challenged before the ITAT and later on before the Hon’ble Delhi High Court. The Hon’ble Delhi High Court upheld the finding of the ITAT wherein the order passed u/s 263 of the Act for conducting enquiries/ verification of agricultural income of Rs.15,12,47,000/- was held justified. Accordingly, the consequential assessment order was passed u/s 263 r.w.s. 143(3) of the Act on 26.12.2018 determining the income at Rs. 15,36,22,420/-wherein the Ld. AO taxed the returned agriculture income of Rs. 15,12,47,000/- as business income. Aggrieved, the assessee/appellant filed appeal before the CIT(A) who dismissed the appeal on the reasoning that the assessee/appellant failed to bring any material on the record to controvert the findings of the AO even after affording reasonable opportunities of being heard. Aggrieved, the assessee/appellant filed this appeal.
We have heard the rival parties. We perused the case records and orders of the subordinate authorities.
The Ld. AR submitted that the ld. CIT(A) had not provided sufficient opportunities of being heard during the faceless appeal proceedings. It was contended by the Ld. AR that the faceless system of appeal was in transition phase in the year 2001 and 2022 as there were a lot of teething problems in the nascent stage. It was further submitted Page 3 of 7 by the Ld. AR that the Faceless Appeals System was not smooth for uploading of any information on the Portal in the initial two years. It was further emphasized by the Ld. AR that no opportunity of being heard had been provided to the assessee/appellant in 2021 to 2023 by the CIT(A) before deciding the case though some communications regarding uploading of information had been received by the assessee/appellant from the office of the NFAC; hence, it was contended that the appellate order is contrary to the principle of natural justice as raised in the grounds of appeal also. The Ld. AR therefore, prayed for remitting the matter back to the CIT(A) for fresh adjudication opportunities of being heard.
The Ld. DR, placing emphasis on the appellate order and facts brought in the assessment order demonstrating non-genuineness of the agricultural operations and income thereof submitted that the agricultural operations of the assessee were in loss what to talk about any income. It was submitted by the Ld. DR that the assessee/appellant had laundered its black money to the extent of Rs. 15,12,47,000/- in the garb of agricultural income. The Ld. DR also placed emphasis on the fact that the Ld. CIT(A) had provided six opportunities of being heard before the faceless appeal system to the assessee/appellant but in vain. Later on, the faceless appeal had also provided reasonable opportunities of being heard which were not availed off by the assessee/appellant. In such facts and circumstances, the Ld. DR prayed for dismissal of the appeal.
We have heard the rival parties and perused the case records. We have taken the note of the observations of the CIT(A) that the assessee/appellant had failed to file/submit any additional evidence in support of its claim of agricultural income during the first appellate proceedings even after categorical mention of the same in the Form 35 and affording reasonable opportunities of being heard. We are aware of the hardships faced by the taxpayers in the initial stage of stabilization of the faceless appeal system. Therefore, in the interest of justice and considering the hardships faced by the taxpayers as mentioned above in faceless appeal proceedings & non-affording reasonable opportunity of being heard in the year 2021 to 2023, we are of the considered view that one final opportunity should be provided to the assessee/appellant to file the relevant details before the Ld. CIT(A) and represent its case on merits. After all, the Ld. CIT(A) has to pass the order as per law and therefore, she/he is free to examine and verify all documentary evidences furnished by the assessee/appellant and do needful as per the law. In view thereof, we set aside the order of the Ld. CIT(A) and remand the matter back to his file with the aforesaid directions and complying with the principles of natural justice.
In view of the above, appeal is allowed for statistical purposes. Order pronounced in open Court on 06 May, 2024