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Income Tax Appellate Tribunal, DELHI BENCH ‘E’ : NEW DELHI
Before: SHRI R.K. PANDA & SHRI KULDIP SINGH
(PAN : AADCM7507J) (APPELLANT) (RESPONDENT) ASSESSEE BY : S/Shri Rajiv Mago & Anuj Maheshwari, CAs REVENUE BY : Shri Manoj Kumar, Senior DR Date of Hearing : 17.08.2017 Date of Order : 11.10.2017 O R D E R
PER KULDIP SINGH, JUDICIAL MEMBER :
The appellant, Income Tax Officer, Ward 6 (1), New Delhi (hereinafter referred to as ‘the Revenue’), by filing the present appeal, sought to set aside the impugned order dated 29.05.2014 passed by the Commissioner of Income-tax (Appeals)-IX, New Delhi qua the assessment year 2009-10 on the grounds inter alia that :-
“1. Whether in the facts and circumstances of the case & in law, the Ld. CIT(A) erred in declaring the assessment order u/s 144/143(2) as invalid without appreciating the facts that assessee has narrated wrong facts to Ld. CIT(A)?
Whether in the facts and circumstances of the case & in law, the Ld. CIT(A) erred in deleting the disallowances u/s 68 amounting to Rs.40,21,948/-?
3. Whether in the facts and circumstances of the case & in law, the Ld. CIT(A) erred in deleting the disallowances u/s 40 & 43B of Rs.17,83,830 and Rs.25,825/- ,without appreciating the fact that AO has given various opportunities to assessee to substantiate its claim.?
4. Whether in the facts and circumstances of the case & in law, the Ld. CIT(A) erred in deleting the disallowances u/s 37, amounting to Rs.15,00,000/- on account of adhoc addition on expenditure claimed, without appreciating the fact that AO has given various opportunities to assessee to substantiate its claim.?
5. Whether in the facts and circumstances of the case & in law, the Ld. CIT(A) erred in deleting the disallowances of Rs.9,73,613/- on account of increase in creditor, without appreciating the fact that assessee has failed to substantiate its claim?
6. Whether in the facts & circumstances of the case & in law the Ld. CIT(A) is right in accepting the additional evidences in violation of rule 46A, when the assessee has failed to avail the opportunities provide to him during the course of assessment proceedings?
7. That the order of the Ld. CIT(A) is erroneous and is not tenable on facts and in law.
8. That the grounds of appeal are without prejudice to each other.” 2. Briefly stated the facts necessary for adjudication of the controversy at hand are : during scrutiny proceeding, first notice under section 143 (2) of the Income-tax Act, 1961 (for short ‘the Act’) was issued on 16.09.2010 which was served on the assessee company. Then, detailed questionnaire was issued to the assessee on 18.08.2011. Thereafter, AO issued notices u/s 143 (2) and 142 (1) with detailed questionnaire on 16.09.2010, 08.07.2011, 03.08.2011,18.08.2011, 07.10.2011 and 31.10.2011 and then final notice u/s 144 was issued on 04.11.2011. Notices were sent on the address given in PAN database and as per address given in the return of income for AYs 2009-10, 2010-11 as well as on the address of all the Directors of the company given in the return.
However, assessee remained unserved. Then notice was also issued u/s 133 (6) and the statutory auditor, M/s. V.K. Sehgal & Co., CA, has filed audited balance sheet for the year ending 31.03.2008 and 31.03.2009. Assessee is into the business of manufacturing of wooden handicraft and furniture and has declared sales of Rs.1,65,00,000/- during the year under assessment as against Rs.2,85,00,000/- in the immediately preceding year, thus declared loss of Rs.8,38,977/-. Assessee’s gross profit was at 18.41% & 39.23% and net profit was at 0.48% & 1.57% for AY 2008-09 & 2009-10 respectively. Assessee declared book profit at Rs.2,59,051/- and has declared nil tax payable u/s 115JB after setting off brought forward losses / unabsorbed depreciation.
3. From the balance sheet, AO noticed that there is an increase of Rs.40,21,948/- in the unsecured loans during the year under assessment and an amount of Rs.95,29,888/- has been declared as unsecured loan received as on 31.03.2009 as against Rs.55,07,940/- as on 31.03.2008. On failure of the assessee to discharge onus u/s 68 of the Act by not proving the creditworthiness of the creditors, the AO made addition of Rs.40,21,948/- on account of unsecured loans. Assessee claimed an amount of Rs.17,83,830/- to be allowable u/s 40 and Rs.25,825/- u/s 43B in computation of income. On failure of the assessee to file supporting documents, the AO made an addition of Rs.18,09,655/- to the income of the assessee. On failure of the assessee to produce documents, vouchers, bills or ledgers in respect of expenditure claimed under the head ‘expenses’ viz. interest expenses to the tune of Rs.36,74,674/-. AO disallowed an expenditure of Rs.15,00,000/- and added the same to the net profit of the assessee. AO further noticed that the assessee has declared credit of expenses and advances from customers to the tune of Rs.26,29,494/- and Rs.1,21,251/- respectively as on 31.03.2009 as against RS.17,77,132/- and Rs.Nil as on 31.03.2008 as per balance sheet. On failure of assessee to explain the same, the AO made an addition of Rs.9,73,613/- on account of unexplained cash credit u/s 68 of the Act.
Assessee carried the matter by way of filing appeal before the ld. CIT (A) who has partly allowed the appeal . Feeling aggrieved, the Revenue has come up before the Tribunal by way of challenging the impugned order passed by ld. CIT (A).
We have heard the ld. Authorized Representatives of the parties to the appeal, gone through the documents relied upon and orders passed by the revenue authorities below in the light of the facts and circumstances of the case.
Undisputedly, initially first notice dated 16.09.2010 was issued and second notice issued after 10 months by the AO on wrong address i.e. on the address collected from PAN database. It is also not in dispute that except notice dated 16.09.2010, all other notices have been issued by the AO after prescribed period of limitation. It is also not in dispute that notices dated 03.08.2011, 07.10.2011, 31.10.2011 and 04.11.2011 which were addressed at 63-C, Pocket – 1, Mayur Vihar Phase – 1, New Delhi – 110 091 were issued beyond the prescribed period of limitation u/s 143 (2) which remained undelivered due to the reasons that the assessee has vacated the premises and none of the notices reached in the hands of the assessee. Further notice issued on 18.08.2011 in the name of Directors at B – 54, Ashoka Niketan, Delhi also not reached in the hands of the assessee because the Directors have vacated the premises way-back in 2001 so this notice also remained unserved.
The ld. CIT (A) quashed the assessment made u/s 144 of the Act merely on the ground that AO have never issued the notices on the address mentioned in the return of income filed by the assessee from AYs 2005-06 to 2009-10 nor the AO has made any effort to serve the assessee on correct address.
However, the AO in the assessment order has merely given the detail of notices u/s 143 (2) and 142 (1) along with questionnaire to the assessee company and its directors at various addresses but has not preferred to explain “whether the summon issued to the assessee company or its directors received back unserved or they have refused to accept the summons or the summons sent have never received back served/unserved.”
This aspect of the case has also not been examined by the ld. CIT (A). In order to raise the presumption that summons have been issued and presumed to have been served on the assessee, there must be cogent material on the file but AO as well as CIT (A), both are silent as to the fate of the repeated notices issued to the assessee company or its directors from time to time.
For ready perusal, the details of notices issued by the AO for service of the assessee company or its directors compiled in the assessment order is reproduced as under :-
“2. Following notices have been issue dot the assessee company which have not been complied with :
Sl. Notice Date of Due date Issued to Address to which Statu No. u/s Issue of of s of notice compliance compl iance 1 143(2) 16.09.2010 24.09.2010 M/s. Madhusudan FFIE, Ganesh None Woodcraft P Ltd. Nagar – II, atten Madhusudan Road, ded Shakarpur, Delhi- 110092. 2 143(2) 08.07.2011 18.07.2011 M/s. Madhusudan FFIE, Ganesh None Woodcraft P Ltd. Nagar – II, atten Madhusudan Road, ded Shakarpur, Delhi- 110092. 3 143(2) 03.08.2011 11.08.2011 M/s. Madhusudan 63 – C, Pocket – 1, None Woodcraft P Ltd., Mayur Vihar, Phase atten C/o Shri Puneet – 1, New Delhi – ded Maheshwari, 110091 Director 4 142(1) 18.08.2011 24.08.2011 M/s. M/s. B-54, FFIE, None with Madhu- Madhu- Ashoka Ganesh atten detailed sudan sudan Niketan Nagar – ded questio Wood- Wood- Delhi II, n-naire craft craft Madhus P Ltd. P Ltd. udan C/o Road, Shri Shakarp Puneet ur, Mahesh Delhi- -wari, 110092. Directo r 5 Non- 07.10.2011 17.10.2011 M/s. Madhusudan 63 – C, Pocket – 1, None comp- Woodcraft P Ltd., Mayur Vihar, Phase atten liance – 1, New Delhi – ded letter 110091 with Notices u/s 142(1) and 143(2) 6 142(1) 31.10.2011 08.11.2011 M/s. Madhusudan 63 – C, Pocket – 1, None Woodcraft P Ltd. Mayur Vihar, Phase atten – 1, New Delhi – ded 110091 7 Show 04.11.2011 14.11.2011 M/s. Madhusudan 63 – C, Pocket – 1, None cause (Final Woodcraft P Ltd. Mayur Vihar, Phase atten u/s 144 show – 1, New Delhi – ded cause) 110091
But the assessee company did not file any reply. As per records of this office following addresses of the assessee company were identified :
Address as per PAN data FF 1E, Ganesh Nagar – base II, Madhudan Road, Shakarpur, New Delhi Address as per return of 63 – C, Pocket – 1, income for AY 2009-10 Mayur Vihar, Phase – 1, New Delhi – 110091 Address as per return of 63 – C, Pocket – 1, income for AY 2010-11 Mayur Vihar, Phase – 1, New Delhi – 110091 Address of all Directors as 63 – C, Pocket – 1, per return Mayur Vihar, Phase – 1, New Delhi – 110091
3.1 Efforts made by this office to serve the notice at all the addresses given above failed. In the circumstances notices were served by affixture.”
Bare perusal of the aforesaid details given by the AO in the assessment order as to the issuance of the summons for service of the notices u/s 143 (2) and 142 (1) to the assessee company or its directors goes to prove that the AO has not preferred to bring on record if the summons issued by him were received back unserved for want of correct address or assessee has refused to accept the summons so as to raise a valid presumption of service of summons.
So, merely issuing the summons cannot and will not amount to service of summons to proceed ex-parte against the assessee. The ld. CIT (A) has lost sight of all these facts by quashing the assessment order u/s 144 of the Act merely on the ground that apart from notice dated 16.09.2010, all the summons were issued beyond the prescribed period of limitation u/s 143 (2). When undisputedly AO has issued the notice dated 16.09.2010 well within the prescribed period of limitation u/s 143 (2), it needs to be brought on record if the said notice was received back unserved or assessee has refused to accept the notice. The AO has also not preferred to serve the assessee through affixture. Before proceeding further, the CIT (A) was required to ensure if notice dated 16.09.2010 was served upon the assessee.
In view of what has been discussed above to decide the legal issue as to the jurisdiction of the AO to make assessment u/s 144 is required to be decided only when the AO proves on record that the notices issued to the assessee within prescribed period of limitation were served but the assessee has not preferred to attend the assessment proceedings. AO has merely mentioned the status of compliance as “none attended”. So, in these circumstances, we are of the considered view that impugned order passed by ld. CIT (A) quashing the assessment u/s 144 of the Act is not sustainable in the eyes of law, hence this case is restored back to the AO who shall verify from the record as to the notices issued to the assessee within limitation were actually received by the assessee and then to proceed after providing opportunity of being heard to the assessee. Consequently, appeal filed by the Revenue is allowed for statistical purposes. Order pronounced in open court on this 11th day of October, 2017.