PARMANAND MELUMAL JHAMATANI,,PUNE vs. DEPUTY COMMISSIONER OF INCOME-TAX,,

आदेश / ORDER

PER VIKAS AWASTHY, JM

These two appeals by assessee for assessment year 2006-07 and 2007-08 are directed against the orders of Commissioner of Income Tax (Appeal)-2, Nashik for the respective assessment years.

2 ITA Nos.910 & 911/PUN/2015 A.Ys. 2006-07 & 2007-08

In ITA No.910/PUN/2015, the assessee has assailed the order of

Commissioner of Income Tax (Appeal)-2, Nashik dated 13.03.2015 for

assessment year 2006-07 and in ITA No.911/PUN/2015, the assessee has

assailed the order of Commissioner of Income Tax (Appeal)-2, Nashik of even

date for assessment year 2007-08. Since, issues involved in both appeals are

arising from same set of facts, the appeals are taken up together for

adjudication and are disposed of vide this common order.

a proprietor of M/s. Jhamtani Agencies engaged in trading of building material

and property. The assessee is also a partner in M/s. Supreme Developers and a

director in M/s. Jhamtani Constro Agencies Pvt. Ltd. A survey action u/s.133A

of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) was carried out

on 22.01.2009. During the course of survey, it transpired that though the

assessee is having turnover of more than Rs. 40,00,000/-, but the assessee has

failed to comply with the provision of Section 44AB of the Act in getting its

accounts audited. It was further observed that assessee has not filed return of

income from assessment year 2006-07 onwards. In survey proceedings certain

loose papers/pocket diaries etc. were found and seized by the Department.

Notice u/s.148 of the Act were issued to the assessee for assessment years

2006-07 and 2007-08. In response to the said notice, assessee filed his return

of income for the assessment year 2006-07 on 12.02.2009 declaring total

income of Rs.1,80,79,300/- and for assessment year 2007-08 on 31.03.2009

declaring total income of Rs.7,71,320/-. On the basis of materials/documents

found and seized during survey, the Assessing Officer vide assessment order

dated 31.12.2009 passed u/s.143(3) r.w.s. 147 of the Act made addition of

Rs.44,47,000/- for assessment year 2006-07. Similarly for assessment year

2007-08, on the basis of material/documents seized during survey, the

3 ITA Nos.910 & 911/PUN/2015 A.Ys. 2006-07 & 2007-08

Assessing Officer made addition of Rs.92,73,094/- vide assessment order dated

31.12.2009.

the assessee filed appeals before Commissioner of Income Tax (Appeal). In

appeal for assessment year 2006-07, the First Appellate authority confirmed the

addition to the tune of Rs.40,59,000/- and for assessment year 2007-08, the

Commissioner of Income Tax (Appeal) confirmed the addition of Rs.86,17,997/-.

Against the findings of Commissioner of Income Tax (Appeal) confirming the

additions in both the impugned assessment years, now the assessee is in

second appeal before the Tribunal.

during assessment proceedings the Assessing Officer made additions on the

basis of loose papers, small pocket diaries and documents impounded during

course of survey operation u/s.133A of the Act. While making additions, the

Assessing Officer failed to take into consideration the submissions of assessee

that figures mentioned in impounded loose papers, small pocket diaries etc.

were merely proposed transactions which never fructified. During proceedings

before First Appellate authority, the assessees vide letter dated 10.10.2011

furnished details and explanations in respect of the recordings made in

impounded documents. It was also contended that the Assessing Officer without

making proper enquiries from third parties made additions in an arbitrary and

unjustified manner. The Commissioner of Income Tax (Appeal) vide order dated

20.10.2011 directed the Assessing Officer to conduct necessary enquiries and

furnish report by 29.11.2011. The order of Commissioner of Income Tax

(Appeal) seeking report is at page 221 of the paper book. During remand

proceedings for assessment year 2006-07 and 2007-08, the assessee furnished

4 ITA Nos.910 & 911/PUN/2015 A.Ys. 2006-07 & 2007-08

information as sought by Assessing Officer from time to time. The Assessing

Officer issued notice to the assessee on 28.02.2014 granting final opportunity to

submit parawise explanation along with documentary evidences on or before

06.03.2014. The copy of said notice is at page 234 of the paper book. The

Assessing Officer on the same date i.e. 28.02.2014 closed the remand

proceedings and furnished remand report in the case of assessee for

assessment year 2006-07 and 2007-08 to the Commissioner of Income Tax

(Appeal). The copy of remand report is at page 237 to 239 of the paper book.

The assessee furnished explanation regarding additions made in assessment

orders for assessment years 2006-07 and 2007-08 on 06.03.2014 before the

Assessing Officer. The final submissions made by assessee before the Assessing

Officer on 06.03.2014 are at page 242 to 145 of the paper book. It was then that

the assessee learnt that remand report has already been furnished by the

Assessing Officer to the Commissioner of Income Tax (Appeal) on 28.02.2014

itself. The Assessing Officer erred in sending the remand report to the

Commissioner of Income Tax (Appeal) on the date of issuing notice to the

assessee for 06.03.2014. The Assessing Officer furnished remand report without

considering the final submissions of the assessee. This fact was brought to the

notice of Commissioner of Income Tax (Appeal) by assessee vide communication

dated 12.05.2014. The assessee specifically pointed that the remand

proceedings were concluded by the Assessing Officer before the date of final

opportunity of hearing granted by the Assessing Officer to the assessee. The

Commissioner of Income Tax (Appeal) also failed to call for final report from

Assessing Officer or to consider final submission made by Assessee on

06.03.2014. The ld. AR further pointed that the Assessing Officer failed to

conduct complete enquiries from third parties as was directed by Commissioner

of Income Tax (Appeal).

5 ITA Nos.910 & 911/PUN/2015 A.Ys. 2006-07 & 2007-08

4.1. The ld. AR further submitted that principles of natural justice have been

violated by Authorities below in not considering final submissions of assessee.

After having issued notice of hearing for 06.03.2014 to the assessee, the

Assessing Officer concluded remand proceedings on 28.02.2014 itself and sent

the report to the Commissioner of Income Tax(Appeal), Nashik on the same

date, thus depriving the assessee from concluding his submissions.

4.2 The ld. AR submitted that if an opportunity is granted to the assessee,

assessee would be able to show that the amount recorded in the loose

papers/slips/pocket diaries seized during survey were in respect of proposed

transactions which never fructified.

vehemently defended the order of Commissioner of Income Tax (Appeal) in

confirming the additions. The ld. DR submitted that sufficient opportunity was

granted to the assessee by Assessing Officer during remand proceeding. Notices

were sent by the Assessing Officer to third parties on the addresses furnished

by assessee. Notices sent by the Assessing Officer were either not served or

parties did not appear before the Assessing Officer. Therefore, the plea of

assessee that final opportunity of hearing was not granted to the assessee, is

without any basis. Loose papers/slip/pocket diaries seized during survey

clearly indicate that entries recorded in the documents were in respect of

completed transactions and not in respect of proposed transactions or

transaction which according to the assessee did not fructify. The ld. DR prayed

for confirming the findings of Commissioner of Income Tax (Appeal) in both the

impugned assessment years and dismissing the appeals of assessee.

6 ITA Nos.910 & 911/PUN/2015 A.Ys. 2006-07 & 2007-08

and have perused the orders of Authorities below. It is an undisputed fact that

during impugned assessment years, the additions have been made on the basis

of impounded loose papers/slips/pocket diaries and other documents found

and seized during survey operation carried out at the premises of assessee on

22.01.2009. During the course of First Appellate proceedings, Commissioner of

Income Tax (Appeal) vide order dated 20.10.2011 called for report from the

Assessing Officer in respect of various transactions recorded on loose

papers/diaries seized during survey for the assessment years 2006-07 and

2007-08 after necessary enquiries. The ld. AR of the assessee has drawn our

attention to the notice dated 28.02.2014 issued by Assessing Officer to the

assessee granting final opportunity to submit point wise explanation along with

documentary evidences on or before 06.03.2014. The copy of said notice is at

page 234 of the paper book. On the same date i.e. 28.02.2014, the Assessing

Officer finalized the remand report and furnished to the Commissioner of

Income Tax (Appeal) disregarding the fact that he has issued notice to the

assessee granting final opportunity to submit documents and explanations on

or before 06.03.2014. After having furnished remand report on 28.02.2014, no

effort was made by the Assessing Officer to file final/supplementary remand

report after receiving final submissions of the assessee on 06.03.2014. The pre-

closure of remand proceedings and furnishing of report by the Assessing Officer

on 28.02.2014 without considering the final submissions of the assessee is

patent violation of principles of natural justice.

Commissioner of Income Tax (Appeal) on 12.05.2014 reveal that assessee had

taken a specific objection that the remand report was sent before considering

the final submission of assessee which the assessee had filed on 06.03.2014 in

7 ITA Nos.910 & 911/PUN/2015 A.Ys. 2006-07 & 2007-08

accordance with the notice of the Assessing Officer. The impugned order shows

that the Commissioner of Income Tax (Appeal) has neither dealt with the

objection raised by assessee nor has considered the submission of assessee

dated 06.03.2014 filed before the Assessing Officer during remand proceedings.

Thus, in view of the facts of the case and the manner in which the proceedings

have been conducted by authorities below, we are of considered view that both

the appeals need re-visit to the file of Commissioner of Income Tax (Appeal). The

Commissioner of Income Tax (Appeal) shall consider the submission of the

assessee dated 06.03.2014 filed before the Assessing Officer during remand

proceedings. The Commissioner of Income Tax (Appeal) is at liberty to consider

the submissions of assessee and the material placed before him before passing

the fresh order or the Commissioner of Income Tax (Appeal) may seek

report/comments from the Assessing Officer before passing the order. Needless

to say that Commissioner of Income Tax (Appeal) shall follow principles of

natural justice before deciding the issues afresh, in accordance with law. Thus,

without commenting on the merits of additions in both the appeals, we are

restoring the appeals to Commissioner of Income Tax (Appeal). Accordingly,

appeals of the assessee are allowed for statistical purposes.

Sd/- Sd/- (डी. क�णाकरा राव/D. KARUNAKARA RAO) (�वकास अव�थी /VIKAS AWASTHY) लेखा सद�य/ACCOUNTANT MEMBER �या�यक सद�य/JUDICIAL MEMBER

पुणे / Pune; �दनांक / Dated : 09th February, 2018 SB

8 ITA Nos.910 & 911/PUN/2015 A.Ys. 2006-07 & 2007-08

आदेश क� ��त�ल�प अ�े�षत / Copy of the Order forwarded to :- अपीलाथ� / The Appellant. 1. ��यथ� / The Respondent. 2. 3. The CIT (Appeal)-2, Nashik. 4. The Pr.CIT-5, Pune. 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, “बी” ब�च, पुणे / DR, ITAT, “B” Bench, Pune. गाड� फ़ाइल / Guard File. 6.

// स�या�पत ��त // True Copy //

आदेशानुसार / BY ORDER,

�नजी स�चव / Private Secretary आयकर अपील�य अ�धकरण, पुणे / ITAT, Pune.