RAHUL CHANDRAKANT JHAVERI,MUMBAI vs. DCIT, CENTRAL CIRCLE 8(2), MUMBAI

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ITA 4509/MUM/2023Status: DisposedITAT Mumbai05 June 2024AY 2014-157 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal condoned the 17-day delay in filing the appeal, finding sufficient cause due to the huge demand and the assessee's situation as an alleged accommodation entry provider. The Tribunal noted that the assessee did not participate productively before the CIT(A) and also failed to participate in the assessment proceedings. In the interest of justice and fair play, the Tribunal restored the matter to the Assessing Officer for de novo investigation and determination of tax liability. The Assessing Officer is directed to carry out necessary investigations, identify beneficiaries, determine the income earned from the activity, and decide the tax liability after affording the assessee an opportunity to present arguments and evidence within 90 days. The Tribunal explicitly stated that no observations were made on the merits of the case. The appeal is partly allowed.

What were the facts?

The assessee, Rahul Chandrakant Jhaveri, is appealing an order dated 28.09.2023 by the CIT(A), NFAC, which upheld an addition of Rs. 16,74,53,674/- to his operational income for providing accommodation entries. The case originated from information received from GST authorities regarding a cartel, "One World Group," that issued invoices without actual supply of goods. A search was conducted on "One World Group" entities and the assessee's residence on 06.11.2019. Subsequently, the assessee was issued notices under Section 153A and 142(1) of the Income-tax Act, 1961, but failed to file returns. The Assessing Officer rejected the assessee's books of accounts and estimated income at 5% of the turnover. The CIT(A) passed an ex-parte order upholding the addition. The assessee's appeal to the ITAT was filed with a 17-day delay.

What were the issues?

1. Whether the assessee was prevented by circumstances beyond his control from responding to notices during assessment and appeal proceedings, and whether an opportunity of being heard should be granted as a matter of natural justice, as per Section 250 of the Income-tax Act, 1961. 2. Whether the assessment order passed under Section 153A read with Section 144 of the Income-tax Act, 1961, is bad in law because no incriminating materials were found during the search, and whether it should be quashed. 3. Whether the CIT(A) erred in upholding the rejection of books of accounts under Section 145(3) and the estimated addition of Rs. 16,74,53,674/- as accommodation entries, without considering income already declared and the assessee's statement. Assessee's Contentions: - The assessee claims unavoidable circumstances prevented him from responding to notices and requests an opportunity of hearing based on natural justice. - The assessment order under Section 153A read with Section 144 is bad in law due to the absence of incriminating material found during the search. - The rejection of books of accounts and the estimated addition are erroneous, and the income declared in the return should be accepted. Revenue's Contentions: - The assessee has not shown sufficient cause for the delay and for not participating in the proceedings before the lower authorities, and thus the appeal should be dismissed.

Which sections of the Income-tax Act were involved?

Section 250,Section 153A,Section 144,Section 145(3),Section 132,Section 139(1)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘D’ BENCH

Before: SHRI PRASHANT MAHARISHI, ACCOUNTANT & SHRI SUNIL KUMAR SINGH

Hearing: 15/05/2024

आदेश / O R D E R PER SUNIL KUMAR SINGH: 1. This appeal has been preferred against the impugned order dated 28.09.2023 passed by the Ld. Commissioner of Income–tax(Appeals), National Faceless Appeal Centre(NFAC) [hereinafter referred to as the “CIT(A)”] u/s. 250 of the Income–tax Act, 1961 [hereinafter referred to as “Act”] for the relevant Assessment year [A.Y.] 2014–15, Rahul Chandrakant Jhaveri wherein learned CIT(A) has upheld the addition of assessee’s operational income of Rs. 16,74,53,674/– for providing accommodation entries.

2.

The brief facts related to the appeal state that an information was received from GST authorities, that “One World Group” along with other companies/firms, formed a cartel of companies/firms, whereby, depending on the needs of each company/firm, other group companies/firm, issue sale or purchase invoices and vice versa without actual supply of goods. A search and seizure u/s. 132 of the Act was carried out on 06.11.2019 at the “One World Group” entities. The residence premise of Shri Rahul Chandrakant Jhaveri at Flat no–06, 3rd Floor, Malabar View–02, Morvi Lane, Chowpatty, Mumbai–07 was also searched. 2.1 Subsequently, the case of assessee was centralized with DCIT (CC)–7(2) Mumbai, who issued notice u/s. 153A of the Act to the assessee on 24.12.2020, requiring to file return within 30 days after receipts of this notice. However, the assessee did not file any return of income in compliance thereof. Thereafter, notice u/s. 142(1) of the Act was issued to the assessee, again requiring him to file the return of income but for no avail. Thereafter, the show cause notice was issued to proceed u/s. 144 of the Act. The assessee did not comply the statutory notices. Meantime, the PAN of the assessee was transferred to DCIT(CC)–8(2), Mumbai and assessee was informed about the same. During the assessment proceedings, it was found that Shri Rahul Chandrakant Rahul Chandrakant Jhaveri Jhaveri is the proprietor of M/s Shanaya enterprises, M/s Karishma Enterprizes, M/s Arvind Fashions, M/s SKNL Apparels, M/s Madura Fashions, M/s Indus Clothing, M/s Parx Designer, M/s Vogue Retail Ware. It was found that “One World Group” entities had shown purchases/sales from Shri Rahul Jhaveri’s entities without any actual movements of goods and only bogus purchase and sales bills were raised and money was transferred through bank accounts to show the transactions as genuine. All these entities were found to be operating from the house of Shri Rahul Jhaveri. During the search, no purchase bills, sales bills, transportation details, inward/outward registers were found from the premise of Shri Rahul Jhaveri. Shri Rahul Jhaveri admitted that there was no stock maintained at any of the above referred entities. Shri Rahul Jhaveri also admitted in his statement that these entities were directly managed and controlled by Shri Urvil Jani, director in “M/s One World Industries Pvt. Ltd.” and other group entities and he was merely a signing authority who used to sign blank cheques on instructions of Shri Urvil Jani. Learned Assessing Officer rejected books of accounts and estimated assessee’s operational income of Rs. 16,74,53,674/– @ 5% of total turnover of Rs. 334,90,73,487/–. 2.2 Aggrieved with the assessment order, assessee preferred an appeal before learned CIT(A), who passed ex–parte impugned order and upheld the additions made by the Assessing Officer and dismissed the assessee’s appeal.

1.

Rahul Chandrakant Jhaveri 3. The appellant assessee has approached this tribunal on the following grounds: “

1. On the facts and in the circumstances of the case, the Appellant submits that he was prevented by the circumstances beyond his control to reply to the various notices issued and upload responses for the submission during the assessment proceedings and appeal proceedings. The Appellant submits that an opportunity of being heard be given as a matter of natural justice.

2. On the facts and in the circumstances of the case the Appellant submits that the Hon'ble Commissioner of Income Tax (Appeals) erred in upholding the Assessment Order passed u/s 153A r.w.s. 144 at the Income Tax Act, 1961 passed by the Learned Assessing Officer which is non abated on the date of search i.e. 06.11.2019, in view of the facts that no incriminating materials were found during the search carried out u/s 132 at the residence of Appellant and therefore, the Appellant submits that it is bad in law. The Appellant submits that the Assessment Order passed u/s 153 A r.w.s. 144 at the Income Tax Act, 1961 be quashed.

3. On the facts and in the circumstances of the case the Appellant submits that the Hon'ble Commissioner of Income Tax (Appeals) erred in upholding the action of the Learned Assessing Officer of rejecting the books of accounts u/s 145(3) and making the estimated addition of Rs. 16,74,53,674/- being 5% of Rs 3,34,90,73,484/- i.e. aggregate of sales and purchases as per the Profit and Loss Account as accommodation entries without considering the income already declared in the Return of Income filed u/s139(1) and the statement of the Appellant recorded during the course of search and reproduced by the Learned Assessing Officer in the assessment order. The Appellant submits that books of accounts should be accepted and the addition of Rs. 16,74,53,674/- made on estimation be deleted and income shown in the Return of Income filed be accepted………”

4. In response to the issuance of notice by this tribunal, learned DR appeared and participated in the proceedings.

5. We have perused the material on record and heard learned representative for both the parties.

6. Learned representatives for the assessee has submitted that in view of the affidavit submitted by the assessee, 17 days delay in filing the appeal on 12.12.2023 may be condoned as the assessee went in mental trauma due to the additions made by the Assessing Officer and could not timely engage Rahul Chandrakant Jhaveri the counsel. He further submits that due to unavoidable circumstances, beyond his control, he could not respond to the various notices issued during the assessment proceedings and appellate proceedings. He further submits to afford an opportunity of hearing in view of principles of the natural justice.

7. Learned DR has submitted that the assessee has not shown any sufficient cause, for the delay and the reasons which prevented him from participating in the proceedings before the authorities below, prayed to dismiss the appeal.

8.

We have carefully considered the contentions and the reasons shown for the delay in filing of the appeal. We find that the delay caused in the filing of this appeal is 17 days. The assessee was met with the huge demand of Rs. 16,74,53,674/–. He also stated to be an accommodation entry provider, who has given the bills to the One World Group. It is also stated that assessee was running several proprietary concerns by giving bogus bills to only One entity i.e. One World Group. Therefore, in view of above, we find that there is sufficient cause to condone the delay in the filing of appeal. The 17 days delay is accordingly condoned.

Rahul Chandrakant Jhaveri 9. We find that learned CIT(A), in para 5 of the impugned order, has mentioned that assessee did not bother to pursue the appeal in any productive manner before him. Hence, the same was adjudicated ex–parte. Assessee has also not participated in the assessment proceedings.

10.

In view of the submissions made before us, in the interest and justice and fair play, we find it just and proper to restore the matter back to the learned Assessing Officer for denovo investigation and determination of tax liability. We, accordingly, restore this appeal to the file of The Jurisdictional Assessing officer with a direction to carry out all necessary investigation in this matter and thereafter determine the income of the assessee after finding out the beneficiaries, and then decide the income earned by the assessee from such an activity. The assessee is directed to remain present with all his arguments and evidence which he would like to make to help his case within 90 days from the date of receipt of this order. The failure of the assessee in so doing will empower the assessing officer to decide the issue in accordance with the law. Needless to say, that the learned assessing officer must follow the principles of natural justice. It is clarified that we have not made any observations on the Rahul Chandrakant Jhaveri merits of the case. The appeal deserves to be partly allowed accordingly.

11.

In the result, the appeal is partly allowed in above terms. Impugned order dated 28.09.2023 is set aside.

Order pronounced on 05.06.2024.

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