M/S ASIT DIXIT,JABALPUR vs. INCOME TAX OFFICER WARD 2(2), JABALPUR

A.Y. 2005-06 M/s Asit Dixit, Kartik Hotel, Near vs. The ITO, Naudra Bridge, Jabalpur, M.P. Ward-2(2), Jabalpur PAN:GGKPS4130P (Appellant) (Respondent) Assessee by: Sh. Sanjay Seth, CA Revenue by: Sh. Alok Bhura, Sr. DR Date of hearing: 21.05.2025 Date of pronouncement: 30.6.2025 O R D E R PER NIKHIL CHOUDHARY, A.M. This is an appeal filed by the assessee against the orders of the learned CIT(A), NFAC under section 250 of the Income Tax Act, 1961 dated 25.09.2024 wherein the learned CIT(A) has dismissed the appeal of the assessee that was filed against the assessment order passed under section 254/147/144 of the Income Tax Act by the Assessing Officer on 27.03.2023. The grounds of appeal are under: -

1. That on the facts and in the circumstances of case the addition made is patently wrong and unwarranted as the AO has not followed the order of Hon’ble ITAT Bench Jabalpur for verification of capital introduced of Rs. 37,00,000/- by Late Santosh Kumar Jaiswal. Notice issued by CIT(A) for fixing the case for hearing are not seen as all are received in the SPAM folder and due to which the notices sent through mail were not seen by the assessee and the reply before the CIT (A) could not been submitted and the ex-party order was passed and appeal was dismissed. It is requested kindly delete the addition made by AO.

A.Y. 2005-06 M/s Asit Dixit 2. The assessee craves leave to add alter any of the grounds of appeal before or at the time of hearing.”

2. The facts of the case are that the assessee derives income from the purchase and sale of Country Liquor. The initial assessment was completed under section 144 and in the same, the status of the assessee was taken as a firm under section 184(5) and no deduction was allowed to the assessee by way of any payment of interest, salary, bonus, commission or remuneration paid by the firm to any of its partners. The net profit was estimated at 2% of sales of Rs.3,22,25,835/- which amounted to Rs.6,44,516/-. A sum of Rs. 37,80,000/- was also added back as unexplained capital introduced by partners and after taking into account income already shown by the assessee, the assessee was determined at Rs.44,60,570/-.

3. Aggrieved with the same, the assessee preferred an appeal before the ld. CIT(A) in which it was submitted that the net profit shown in the books should have been accepted; that the deduction of salary and interest payment to partners should have been allowed and; that the additional capital investment of Rs. 37,80,000/- was duly explained and therefore, any addition made on this basis was bad in law. However, the ld. CIT(A) was not convinced by the arguments of the assessee and the appeal was dismissed.

4. Being aggrieved, the assessee went in second appeal to the ITAT. However, the ITAT, while granting partial relief on the issue of capital introduction, remanded the case back to the ld. AO for providing an opportunity to the assessee, in respect of the capital introduced by the partner Shri. Santosh Kumar Jaiswal to the tune of Rs.37,00,000/-. In pursuance of the directions of the ITAT, the ld. AO issued notices calling for details alongwith the supporting documents to substantiate claims regarding the source of capital contributed by partner Shri. Santosh Kumar Jaiswal A.Y. 2005-06 M/s Asit Dixit alongwith the explanations regarding the mode of transfer etc,. The ld. AO records that the assessee did not comply with the notice within the stipulated time and therefore, the notices were repeated, but the assessee did not furnish any reply to the satisfaction of the ld. AO. Therefore, the ld. AO issued a show cause notice alongwith notice under section 142(1) on 20.03.2023, in response to which the assessee submitted a reply, the details of which are reproduced in the assessment order. After considering the same, the ld. AO concluded that the assessee had not produced any plausible documents to explain the said capital introduction, other than those that had already been produced during the original assessment proceedings. The ld. AO was not convinced with the replies of the assessee and he outlined the reasons for why he was not convinced with the said replies in his assessment order. Holding that the assessee had totally failed to produce any evidences to substantiate the creditworthiness of Sh. Santosh Jaiswal, the capital introduced by the said partner of Rs.37,00,000/- was again confirmed as an addition in the hands of the assessee and the assessment was finalized at Rs.44,60,558/-.

5. Aggrieved with this addition, the assessee went before the ld. CIT(A). Before the ld. CIT(A), it was submitted that the ld. AO had not followed the orders of the Hon’ble ITAT Jabalpur for verification of capital introduced by late Sh. Santosh Kumar Jaiswal. The ld. CIT(A) records that a notice under section 250 was issued to the assessee on nine occasions, but no compliance was made to the said notices. Therefore, the ld. CIT(A) concluded that the assessee was not interest in pursuing the said appeal and accordingly he dismissed the same without adjudicating on the merits of the case.

6. The assessee is aggrieved by this summary rejection of its appeal by the ld. CIT(A). Sh. Sanjay Seth, C.A. appearing on behalf of the assessee submitted that Sh. Santosh Kumar Jaiswal had expired on 26.06.2013 and his legal heir Sh. Kartik Jaiswal A.Y. 2005-06 M/s Asit Dixit had submitted all the documents before the ld. AO which were available with him i.e. the books of accounts, the tax audit reports of the related firms from which the capital was introduced, evidence of excise contract etc,. However, for verification of the capital, the ld. AO had asked for books of accounts of firms Santosh Jaiswal Excise Firm and Santosh Jaiswal, Sand contractor for the assessment year 2005-06, from where the capital was introduced. As the books of accounts of these firms were nearly eighteen years old, the same were not available with the said person due to which the same could not be submitted before the ld. AO. However, audited accounts including capital accounts having withdrawals, were submitted but the ld. AO had chosen to disregard them. It was, therefore, prayed that the ld. CIT(A) should have decided the issue on the basis of documents that the assessee was in a position to submit rather than to dismiss the case for non-compliance, losing sight of the fact that the said partner was no longer alive.

7. On the other hand, Sh. Alok Bhura, Sr. DR appearing for the Department argued that the matter had been remanded back by the ITAT only for providing an opportunity to the assessee to submit evidences in support of the introduction of capital and in view of the fact that the assessee could not produce evidences for the introduction of the capital that should be enough to confirm the addition made by the ld. AO.

8. We have duly considered the facts and circumstances of the case. The assessee has readily admitted that it is not in a position to produce primary books of accounts of the late Sh. Santosh Jaiswal (Excise Firm and Sand Contractor) owing to the fact that these are very old (18 years) and that they are not in the possession in the legal heir Sh. Kartik Jaiswal. However, the legal heir, claims to have submitted all the documents before the ld. AO that are available with him including book of accounts and tax audit A.Y. 2005-06 M/s Asit Dixit reports of the related firm from which capital was introduced, as also evidence of excise contract. The ld. CIT(A), even in the absence of compliance from the assessee, ought to have decided the matter in the light of the documents submitted by the legal heir of late Sh. Santosh Jaiswal and therefore, in the interest of justice, we deem it appropriate to restore the matter back to the file of the ld. CIT(A) so that the issue may be decided in accordance with law, after considering the evidences produced by the assessee during the re-assessment proceedings. Furthermore, the assessee is also advised to make due compliance before the ld. CIT(A) to aid him in coming to a satisfactory finding of fact on the basis of the documents available and caution that the failure to make compliance could be construed as a failure to explain the said deposits. Accordingly, the matter is restored back to the file of the ld. CIT(A) for a decision in accordance with law, after consideration of the evidences.