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Facts
The assessee filed a nil return for AY 2018-19. The Assessing Officer, under section 144, made an addition of Rs. 29,74,460/- by treating 1% of the opening stock/work in progress (Rs. 29,74,44,500/-) as income, as no closing stock was reflected and no business activities were shown. The CIT(A) upheld the assessment due to the assessee's non-compliance, as no reply was received despite notices.
Held
The Tribunal observed that the assessee neither appeared for the hearing nor sought adjournment. It affirmed the AO's calculation of taxable income at 1% of the work in progress/opening stock for AY 2018-19 as the profit element and found no infirmity in the assessment order, which was upheld by the Ld. CIT(A).
Key Issues
Whether the addition made by treating 1% of opening stock/WIP as taxable income is justified, particularly when the assessment was completed under best judgment without adequate opportunity of being heard, and when no business activities were shown.
Sections Cited
250, 144, 28, Income-tax Act, 1961
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Before: SHRI NARENDER KUMAR CHOUDHRY, JUDICIAL & SMT. RENU JAUHRI
Appellant by : None Respondent by : Shri Nagnath Pasale Date of Hearing 29.05 .2024 Date of Pronouncement 14.06.2024 आदेश / O R D E R PER RENU JAUHRI [A.M.] :-
This appeal is filed by the assessee against the order of the Learned Commissioner of Income-tax (Appeals), Mumbai/National Faceless Appeal Centre, Delhi [NFAC] [hereinafter referred to as “CIT(A)”] dated 26.10.2023 passed u/s. 250 of the Income-tax Act, 1961 [hereinafter referred to as “Act”] for Assessment Year [A.Y.] 2018-19.
P a g e | Maya Developers
The grounds of appeal
raised by the assessee are as under: “1 The grounds of appeal mentioned hereunder are without prejudice to one another. 2 The learned Commissioner of Income-tax (Appeals) National Faceless Appear Centre (CIT(A)] erred on facts as also in law in confirming addition of Rs. 29,74,455. The addition has been confirmed without considering the fact that the National e-Assessment Centre has passed the assessment order without providing proper opportunity of being heard and completed the assessment proceedings under best judgement without issuing show cause notice. The addition confirmed by CIT(A) is bad in low as also on facts and therefore the same may kindly be deleted.
3. The learned Commissioner of income-tax (Appeals), National Faceless Appeal Centre [CIT(A)] erred on facts as also in law in confirming addition of Rs 29,74,455/-. The audition has been confirmed by the appellant authority without providing opportunity of being heard despite of the fact that adjournment was sought against notices raised during appellant proceedings. The addition confirmed by CIT(A) in bad in law as also on facts and therefore the same may kindly be deleted.
4. The learned Commissioner of income-tax (Appeals), National Faceless Appeal Centre [CIT(A)] erred on facts as also in law in confirming addition of Rs.29,74,455/-. The addition has been made u/s 28 on the alleged ground of considering 1% value of WIP as Profit and gains on business and profession as income against NIL income. The addition confirmed by CIT(A) is bad in law as also on facts and therefore the same may kindly be deleted.”
P a g e | Maya Developers
The brief facts of the case are that the assessee filed his return declaring nil income for AY 2018-19 on 29.12.2018. The case was selected for complete scrutiny. The assessment was made u/s 144 of the Act vide order dated 30.04.2021 at an income of Rs. 29,74,460/- for the reason that while the assessee had shown opening stock of Rs. 29,74,44,500/- as on 01.04.2017 in the profit and loss account but there was no such closing stock reflected in the previous year. No business activities were shown by the assessee during the year, as such 1% of the inventories was treated as assessee’s income for the year under consideration.
Aggrieved with the order, the assessee filed an appeal before Ld. CIT(A)/NFAC on 30.05.2021. The Ld. CIT(A) vide order dated 26.10.2023 dismissed the appeal after observing that no reply was received from the assessee even after several notices were issued and the assessee only sought adjournment in response to these notices. The order of the AO was accordingly upheld by the Ld. CIT(A). 5. Aggrieved with the said order, the assessee is in appeal before us. On the date fixed for hearing i.e. 29.05.2024, the assessee neither appeared for the hearing nor any request for adjournment was filed. We, therefore, deem it fit to decide the appeal on merits. It is seen that the assessee had shown work in progress/opening stock of Rs. 29,74,44,500/- for F.Y. 2017-18 (A.Y. 2018-19). However, there was no closing stock as on 31.03.2017, hence, the AO has rightly calculated the taxable
P a g e | Maya Developers income at @1% of 29,74,44,500/- being the profit element embedded in the work undertaken during the year. We do not find any infirmity in the assessment order which was rightly upheld by the Ld. CIT(A). The appeal of the assessee, therefore, dismissed. 6. In the result, the appeal filed by the assessee is dismissed.
Order Pronounced in Open Court on 14.06.2024 Sd/- Sd/- (NARENDER KUMAR CHOUDHRY) (RENU JAUHRI) JUDICIAL MEMBER ACCOUNTANT MEMBER Place: Mumbai Date 14.06.2024 ANIKET SINGH RAJPUT/STENO आदेश की प्रतितलति अग्रेतिि/Copy of the Order forwarded to : 1. अपीलार्थी / The Appellant 2. प्रत्यर्थी / The Respondent. 3. आयकर आयुक्त / CIT 4. विभागीय प्रविविवि, आयकर अपीलीय अविकरण DR, ITAT, Mumbai 5. गार्ड फाईल / Guard file.