JAGAT P. SHAH HUF,MUMBAI vs. ASST CIT 14(1), MUMBAI

The various grounds of appeal raised by the assessee are as under :

“1) The Ld. CIT (Appeals) fell in gross error of law & facts, by adopting the valuation of opening stock of contracts at a figure different than the valuation of closing stock for the immediately preceding year. With respect, such variation runs contrary to the settled position in law that closing stock of the preceding year forms the opening stock of the succeeding year.

The ld. AR submitted before the Bench that the additional ground raised before the Bench is emanating out of the record available before the FAA who has decided the appeal enhancing the assessment without issuing any notice to the assessee u/s 251 of the Act thereby violating the principle of natural justice. The ld. AR submitted before us that the assessee has disclosed net income in F&O transaction amounting to Rs.90,017/- and according to the assessee unexpired future and option contract as on 1.4.2008 was Rs.50,93,939/- which was added to business loss of Rs.5,82,655/- thereby reducing the said loss to be carried forward. The AO in the remand report changed the valuation of unexpired contract and came to the conclusion that net profit should be calculated at Rs.6,48,780/- by way of enhancement or net profit should be sustained at Rs.40,89,667/- instead of Rs.50,93,939/- as made by the AO while framing the original assessment. The ld. CIT(A) without giving any notice of enhancement u/s 251 of the Act passed an order enhancing the net profit to Rs.66,48,780/-. The ld. AR submitted that FAA has gravely violated the principle of natural justice and the order passed by the FAA is bad in law and should be quashed.

On the other hand, the ld. DR strongly objected to the arguments advanced by the ld.AR and heavily relied on the orders of authorities below.

We have heard the arguments of the parties, perused the material placed before us including the orders of authorities below. We find that the ld.CIT(A) has passed the order on the basis of remand report of the AO enhancing the assessment by taking net profit to Rs. 66,48,780/- without issuing any show cause notice u/s 251 of the Act to the assessee to present its case in the matter. In our opinion, the ld.CIT(A) should have given opportunity to the assessee to present his case which was not given and therefore violated the principle of natural justice. In view of this factual and legal position, the order passed by the FAA without giving opportunity to the assessee is bad in law and cannot be sustained. We, therefore, are of the opinion that this is a fit case for restoring back to the file of the AO by setting aside the order of the ld. CIT(A) to decide the same as per law after providing fair and reasonable opportunity of being heard to the assessee. We order according.

In the result, the appeal of the assessee stands allowed for statistical purposes.