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Facts
The Assessee, a company in the construction business, filed its income tax return for AY 2018-19. The Assessing Officer (AO) made additions for difference in gross receipts and disallowed expenses under Section 40(a)(ia) for non-deduction of TDS. The Assessee appealed to the CIT(A). Due to non-compliance with notices and failure to respond to enhancement notices, the CIT(A) proceeded ex-parte, dismissed the appeal, and enhanced the addition.
Held
The Tribunal noted that the Assessee was not given a reasonable opportunity of being heard by the CIT(A) due to issues in the faceless regime and short notice periods. Additional evidence was filed by the Assessee which supported their claim. Therefore, the Tribunal set aside the CIT(A)'s order and remanded the case back to the CIT(A) for a fresh decision.
Key Issues
Whether the Assessee was denied a reasonable opportunity of being heard by the CIT(A) due to procedural issues in the faceless regime and short notice periods.
Sections Cited
143(3), 144B, 40(a)(ia), 250, 271E, 269T, 251(2), 271(1)(E)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, E BENCH, MUMBAI
IN THE INCOME TAX APPELLATE TRIBUNAL "E" BENCH, MUMBAI SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER SHRI RAHUL CHAUDHARY, JUDICIAL MEMBER ITA No.906/MUM/2024 (Assessment Year: 2018-19) (Assessment Year: 2018-19)
Hatim Glazing & Cladding Pvt. Ltd. Malhotra House, 2nd Floor, Office No.7&8, Walchand Hirachand Marg, Near CSMT Railway Station, Mumbai GPO [PAN: MUMH06844F] …………. Appellant Vs Assistant Commissioner of Income Tax 5(1)(1), Mumbai Mumbai-400020, Maharashtra. …………. Respondent Appearance For the Appellant/Assessee : Shri Shalin S. Divatia For the Respondent/Department : Shri P. D. Chougule Date Conclusion of hearing : 21.08.2024 Pronouncement of order : 29.10.2024
O R D E R Per Rahul Chaudhary, Judicial Member 1. These are two appeal preferred by the Assessee against the order passed by the by the National Faceless Appeal Centre (NFAC), Delhi, [hereinafter referred to as ‘the CIT(A)’] under Section 250 of the Income Tax Act, 1961 [hereinafter referred to as ‘the Act’] whereby the Ld. CIT(A) had dismissed the appeal against the Assessment Order, dated 30/12/2015, passed under Section 143(3) of the Act for the Assessment Year 2013-14. Since the appeals arise from common factual matrix the same were heard together and are being disposed off by way of a common order.
ITA No. 906&907/MUM/2024 Assessment Year: 2018-19
ITA 907/Mum/2024 (Assessment Year 2018-19)
The Assessee has raised following grounds of appeal :
“1. (a). The learned CIT(Appeals) has erred in upholding the disallowance made by the assessing officer on account of difference in gross receipts. The learned CIT(Appeals) has further erred in enhancing the amount of disallowance from Rs.20,38,312/- to Rs.2,54,78,900/- in respect of the same. (b). The learned CIT(Appeals) failed to appreciate the fact that the reconciliation statement was submitted before the Assessing Officer and the learned CIT(Appeals) reconciling the sales as per 26AS & as per the books and no addition was called for in this respect. (c). The appellant prays that the addition of Rs.2,54,78,900/- made to the income of the appellant be deleted. 2. (a). The learned CIT(Appeals) has erred in confirming the disallowance made by the Assessing Officer of Rs.15,42,750/- u/s.40(a)(ia) of the Income Tax Act, 1961. (b). The learned CIT(Appeals) failed to appreciate the fact that the TDS was paid by the appellant and also the fact that the corresponding receipts have been shown by the respective parties in their income and no disallowance was called for. (c). The appellant prays that the disallowance of Rs.15,42,750/- u/s.40(a)(ia) be deleted. 3. (a) The learned CIT(Appeals) has erred in confirming the initiation of penalty proceedings u/s.271E of the Income Tax, 1961. (b). The learned CIT(Appeals) failed to appreciate the fact that the amount of Rs.12,30,000/- was paid to Modi Infraventures Ltd by Account Payee Cheque and there was no violation of section 269T and hence no penalty is leviable u/s.271E of the Income Tax Act, 1961. (c). The appellant prays that the penalty proceedings initiated u/s.271E without any justification be dropped.” Assessment Year: 2018-19
The relevant facts in brief are that the Appellant, a company engaged in the construction business activity, filed return of income Assessment Year 2018-19 on 28/12/2018 declaring total income of INR.66,28,820/-. The case was selected for regular scrutiny. The Assessing Officer completed the assessment under Section 143(3) read with Section 144B of the Act vide Assessment Order 23/04/2021 at assessed income of INR.1,02,09,882/-, after making addition of (a) INR 20,38.312/- being 8% of difference between sale receipts reflected in Form 26AS and the sale receipts disclosed by the Appellant in the return and (b) disallowance of INR.15,42,750/- under Section 40(a)(ia) of the Act being amount computed at the rate of 30% amount of INR.51,42,500/- being amount paid by the Appellant without deducting tax at source.
Being aggrieved the Appellant carried out the issue before the CIT(A). Since the notices dated 16/12/2023, 15/01/2024, 24/01/2024 and 01/02/2024 were not complied with, the Appellant was proceeded ex-party and the grounds raised by the Appellant were dismissed by the CIT(A). Further, the CIT(A) noted that the show cause notice issued under Section 251(2) of the Act for enhancement of income was also not responded to by the Appellant. Therefore, the CIT(A) enhanced the addition of INR.20,38,312/- (8% of INR.2,54,78,900/-) to INR.2,54,78,900/- (100% of INR.2,54,78,900/-) holding that the Assessing Officer had erred in restricting the addition to 8% of difference in gross receipts. Thus, vide order dated 09/02/2024, the CIT(A) enhanced the addition of INR.20,38,312/- (8% of INR.2,54,78,900/-) to INR.2,54,78,900/- (100% of INR.2,54,78,900/-) confirmed the disallowance of INR.15,42,750/- made under Section 40(a)(ia) of the Act and declined to interfere with the order of initiation of penalty under Assessment Year: 2018-19
Section 271E of the Act.
Being aggrieved, the Appellant had preferred the present appeal before the Tribunal against the order passed by the CIT(A) on the grounds reproduced in paragraph 2 above. The Appellant has also made application for admission of additional evidence.
The Learned Representative for the Appellant has submitted that Appellant has good case on merits and in case an opportunity is granted the Appellant would be able make out his case before the CIT(A). It was submitted that the appeal before the CIT(A) was heard and disposed under the faceless regime and therefore, proper representation could not be made before the CIT(A). The Appellant did not receive correct legal advice on account of challenges being faced in communicating and understanding the issues under the faceless regime. The Learned Authorized Representative for the Appellant also invited our attention to the notices of hearing issued by the CIT(A) and submitted that all the notices were issued over a period of 60 days. Thus, sufficient time was not given to the Appellant to collect the documents and make proper representation before the CIT(A).
Per contra the Learned Departmental Representative submitted that despite that notice of hearing being been issued, the Appellant had failed to make any representation before the CIT(A) and therefore, the CIT(A) was justified in deciding the appeal on the basis of material on record.
We have given thoughtful consideration to the rival submission and have carefully perused the orders passed by the Authorities below. We find merit in the contention advanced on behalf of the Appellant that all the notice of hearing were issued over a period of 60 days. Thus, the Appellant was deprived of a reasonable Assessment Year: 2018-19
opportunity of being heard and therefore, failed to make proper representation before the CIT(A). We also take note of the fact that in the appellate proceedings before us, the Appellant has filed detailed additional evidence consisting of, inter alia the following:
(a) The various Sales Invoices of the appellant duly referenced with the Reconciliation as reproduced in the Order of the learned CIT(Appeals). (b) Returns filed under VAT and GST Laws, evidencing sales turnover of the appellant being: i. Audit Report in Form 704 filed under Maharashtra VAT Act for the period-April-June 2017. ii. Annual Return in Form GSTR-9 from July 2017 to March 2018 for Maharashtra State. iii. Quarterly VAT Return under West Bengal Value Added Tax Rules, 1975 for April to June 2017. iv. Annual Return in Form GSTR-9 from July 2017 to March 2018 for West Bengal State. v. Monthly VAT Return for April to June 2017, filed under Karnataka VAT Act. 9. The above additional evidence supports the reconciliation statement of gross receipts filed by the Appellant during the assessment proceedings which have been referred to by the CIT(A) in the year impugned (at page 12 to 15). Given the facts and circumstances of the present case we admit the additional evidence (running into 159 pages) filed by the Appellant. We have already concluded that the Appellant was not able to present his case before the CIT(A) effectively on account of lack of proper opportunity and the difficulties being faced by the Appellant in prosecuting the appeal in a faceless regime as there was lack of proper communication resulting in incorrect legal advice. Keeping in view of the overall facts and circumstances of the case, and also the substantial interest of justice, we deem it appropriate to grant another opportunity to the Appellant to Assessment Year: 2018-19
present his case before the CIT(A). Accordingly, the order, dated 09/02/2024, passed by the CIT(A) is set aside with the directions to decide the appeal afresh after granting the Appellant a reasonable opportunity of being heard. The Appellant is directed to be vigilant and track the proceedings over ITBA portal. It is clarified that in case the Appellant fails to enter appearance before the CIT(A) or fails to file relevant documents/details to support his claim, the CIT(A) would be at liberty to decide the appeal on the basis of material on record. In terms of the aforesaid the Ground No.1(a) to 1(c) and 2(a) to 2(c) raised by the Appellant are allowed for statistical purposes.
Ground No. 3(a) to 3(e) pertaining to initiation of penalty proceedings under Section 271E of the Act are dismissed as being premature.
Penalty Appeal: ITA No. 906/Mum/2024 - AY 2018-19 11. We would now take up ITA No. 906/Mum/2024 preferred by the Assessee challenging the Order, dated 09/02/2024 passed by the CIT(A) dismissing the appeal against the Penalty Order, dated 03/03/2022, passed under Section 271(1)(E) of the Act on the ground of non-prosecution.
We have, hereinabove, already restored the appeal against the quantum order before the CIT(A). In identical facts and circumstances, the Appellant was not able to pursue the appeal against the penalty order before the CIT(A) and failed to make proper representation. Accordingly, on parity of reasoning, we set aside the order, dated 09/02/2024, passed by the CIT(A) with the directions to decide the appeal afresh after granting the Appellant a reasonable opportunity of being heard. The Appellant is directed to be vigilant and track the proceedings over ITBA portal. It is clarified that in case the Appellant fails to enter Assessment Year: 2018-19
appearance before the CIT(A) or fails to file relevant documents/details to support his claim, the CIT(A) would be at liberty to decide the appeal on the basis of material on record. In terms of the aforesaid the Ground No.1 raised by the Appellant are allowed for statistical purposes.
In result, both the appeals preferred by the Assessee are allowed for statistical purposes.
Order pronounced on 29.10.2024. (Prashant Maharishi) Judicial Member म ुंबई Mumbai; दिन ुंक Dated : 29.10.2024 Milan, LDC
आदेश की प्रतितिति अग्रेतिि/Copy of the Order forwarded to : 1. अपील र्थी / The Appellant प्रत्यर्थी / The Respondent. 2. 3. आयकर आय क्त/ The CIT 4. प्रध न आयकर आय क्त / Pr.CIT 5. दिभ गीय प्रदिदनदध, आयकर अपीलीय अदधकरण, म ुंबई / DR, ITAT, Mumbai 6. ग र्ड फ ईल / Guard file.
आिेश न स र/ BY ORDER, सत्य दपि प्रदि //// उप/सह यक पुंजीक र /(Dy./Asstt.