TEJAS TRANSCOM (P) LTD.,BURDWAN WEST vs. I.T.O., WARD - 1(2), DURGAPUR, DURGAPUR

Present for: Appellant by : None Respondent by : P.P. Barman, Addl. CIT, Sr. DR Date of Hearing : 18.09.2024 Date of Pronouncement : 20.09.2024 O R D E R

PER RAKESH MISHRA, ACCOUNTANT MEMBER:

2. The grounds of appeal

raised by the assessee are reproduced as under: “1 FOR THAT the Ld. Commissioner of Income Tax (Appeals), N.F.A.C. failed to appreciate that none of the conditions precedent existed and/or have been complied with and/or fulfilled by the Ld. Income Tax Officer, Ward 1(2). Durgapur for his alleged assumption of jurisdiction u/s. 147 of the Income Tejas Transcom (P) Ltd. AY: 2010

11. Tax Act, 1961 on 31-03-2017 in the facts and circumstances of the instant case and the alleged assessment order dated 21-11-2017 framed u/s. 144/147 of the Act in pursuance to such notice issued u/s. 148 of the Act is therefore ab initio void. ultra vires, and null in law.

2. FOR THAT on a true and proper interpretation of the scope and ambit of the provisions of s. 147 of the Income Tax Act, 1961. the Ld. Commissioner of Income Tax (Appeals). N.F.A.C. was absolutely in error in upholding the action of the Ld. Income Tax Officer, Ward 1(2), Durgapur of issuing notice u/s 148 of the Act de hors any proper reasons as required thereunder and the purported assessment order framed u/s. 144/147of the Income Tax Act, 1961 is completely opposed to law.

3. FOR THAT the Ld. Commissioner of Income Tax (Appeals), N.F.A.C. was absolutely in error in upholding the action of the Ld. Income Tax Officer, Ward 1(2), Durgapur of issuing notice u/s. 148 of the Act without adducing any tangible material on record in support of such illegitimate exercise and the purported conclusion reached on that behalf is completely unfounded, unlawful. and untenable in law.

4. FOR THAT the spurious action of the Ld. Commissioner of Income Tax (Appeals). N.F.A.C. in upholding the initiation of proceedings u/s. 147 of the Income Tax Act, 1961 by the Ld. Income Tax Officer, Ward 1(2), Durgapur without any proper application of mind on the specious information received from any extraneous source is invalid for want of jurisdiction as the pre- conditions for initiation of the proceedings as stipulated therein are not fulfilled in the circumstances of the case.

5. FOR THAT the Ld. Commissioner of Income Tax (Appeals). N.FAC acted unlawfully in upholding the validity of notice dated 31-03-2017 issued u/s. 148 of the Income Tax Act, 1961 by the Ld. Income Tax Officer, Ward 1(2). Durgapur without any proper approval required u/s. 151 of the Income Tax Act. 1961 from the competent authority as required under the statute and the purported action on that behalf is thoroughly opposed to law.

6. FOR THAT on a true and proper interpretation of the scope of the provisions of s. 68 of the Income Tax Act, 1961, the Ld. Commissioner of Income Tax (Appeals), N.F.A.C. acted unlawfully in upholding the specious addition in the amount of Rs. 69,70,000/- as resorted to by the Ld. Income Tax Officer, Ward 1(2). Durgapur on account of Share application received without considering the matter in the proper perspective and such spurious conclusion reached on extraneous considerations not germane to the issue in dispute is totally arbitrary. unwarranted, and perverse.

7. FOR THAT the Ld. Commissioner of Income Tax (Appeals), N.F.A.C. gravely erred in sustaining the purported addition resorted to by the Ld. Income Tax Officer. Ward 1(2). Durgapur in the sum of Rs. 69,70,000/- under the Tejas Transcom (P) Ltd. AY: 2010-11 allegation of undisclosed income by misreading the facts and circumstances of the instant case and the adverse conclusion reached on that behalf in blatant violation of the statutory prescription is wholly illegal, illegitimate, and infirm in law.

8. FOR THAT on a proper conspectus of material on record, preponderance of probabilities and circumstances attending, the specious action of the Ld. Commissioner of Income Tax (Appeals). N.F.A.C. in upholding the impugned addition in the amount of Rs. 10,23,120/- as resorted to by the Ld. Income Tax Officer, Ward 1(2). Durgapur on account of unverified Sundry Creditors is based on extraneous parameters not germane to the issue, which is completely unfounded, unjustified, and untenable in law.

An application for recall of the appeal heard ex parte on the 18th day of September 2024. We are duly authorized by the aforesaid appellant to represent them in the instant appeal. The appeal was posted for hearing on the 18th day of November, 2024 without any intimation to the appellant. It bears mention that no notice of hearing of the appeal was either served or e-mailed to the appellant at their address provided in Form 36. However, the appeal was heard ex-parte qua the appellant thereby prejudicing its rights. It is the sacred duty of the authority proceeding to hear any matter ex-parte to verify whether proper opportunity for representation was provided to such party or not. However, in the present context, there will be no evidence on record that fulfills such criteria. Accordingly, it is prayed that an opportunity of being heard may kindly be given to the appellant so that he may put forward the arguments to be made on legal times raised as well as on merits. It is most respectfully prayed that your Honours may be graciously kind enough to afford us another opportunity to represent the appellant in the instant appeal and oblige.

7. The Ld. Sr. DR submitted that Ground Nos. 1 to 5 related to legal ground of reopening of the case. Ground Nos. 6 and 7 related to the addition u/s 68 of the Act for an amount of Rs. 69,17,000/-, and Ground No. 8 related to the addition of Rs. 10,23,120/- on account of unverified sundry creditors. No statement of facts has been filed along with the appeal memo. However, the same as filed before the Ld. CIT(A) has been culled out from Form No. 35 enclosed with the appeal memo, which is as under:

1.0 The Appellant is a private limited company. It originally filed its Return of Income on 13.03.2011 declaring total income of Rs. 3,10,305/-. 1.1 In the Return of Income, the assessee truly and fully disclosed all the information that were required from it or were expected from it. There was full disclosure about the increase in share capital of Rs. 6,97,000/- and share premium of Rs. 62,73,000/- in the Return of Income. 1.2 The Return was accepted by issue of Intimation u/s 143(1) dated 31.05.2011. The Department did not find any anomaly or discrepancy in the same. 1.3 The Department did not issue any notice u/s 143(2) within the normal specified period i.e. within 30.09.2011. The Department was satisfied that the Tejas Transcom (P) Ltd. AY: 2010-11 assessee has not understated the income or has not computed excessive loss or has not under-paid the tax in any manner, thus 1.4 The Department did not issue any notice u/s 148 within a period of 4 (four) years from the end of the relevant assessment year i.e. by 31.03.2015 i.e. the Department did not have any reason to believe that any income chargeable to tax has escaped assessment for that year till 31.03.2015. 1.5 The Department did not have any reason to believe about any escapement of any income by the assessee within the period from 31.03.2015 to 30.03.2017 too. 2.0 The appellant received one e-mail enclosing one notice purportedly to be u/s 148 proposing to assess/reassess (which is not clear from the notice), on the very last day of the time barring period at about 8.46 p.m. i.e. after the close of the office hours and just a few hours before the midnight when the date of 31.03.2017 was about to expire. No notice in hardcopy form was served at any time on the appellant. 2.1 The notice u/s 148 is a stereotyped printed notice which has been issued in a mechanical way without application of mind by the AO himself. The irrelevant portion in the notice had not been struck off. The designation of the competent authority giving the approval for issue of notice u/s 148 is not clear. No reason was mentioned in the notice u/s 148 for issue thereof. 2.2 The appellant did not file any Return as the notice issued u/s 148 itself was invalid. 2.3 The appellant did not receive any further notice either u/s 142(1) or u/s 144 from the Department in the matter. 2.4 The appellant became aware of the completion of assessment sometime in the month of January, 2018, when it came to know of the cessation of operation in its bank account by the its bankers on the instructions of the Department. 2.5 Thereafter, the appellant applied for the certified copies of the assessment order, order- sheets, various notices etc. and the same have been supplied in the month of February, 2018. 3.0 The assessment has been made ex-parte u/s 144/147 of the Act by making the following addition to the Income originally returned in the Return of Income filed on 31.05.2011: SI No. Particulars Amount (Rs.) 1. Addition of share capital 69,70,000.00 2. Sundry Creditors 10,18,120.00

4.0 Out of the total increase of share capital amounting to Rs. 69,70,000, an amount being the share application money amounting to Rs. 64,70,000/- had been received in the year ended 31.03.2009 (corresponding to A.Y. 2009-10). The said information is duly appearing in the Balance Sheet as on 31.03.2009, Tejas Transcom (P) Ltd. AY: 2010-11 already on the records of the Department. During the year only the allotment in respect of the said share application money of Rs. 64,70,000/- was made. 4.1 During the year, only a sum of Rs. 500,000/- was received as share application money from genuine persons whose creditworthiness is beyond doubt. Share allotment was done against this amount too. 5.0 The AO has further made additions of Rs. 10,18,120/- being the differential amount of the closing balance and opening balance of the Sundry Creditors arbitrarily. The Sundry Creditors are genuine and has arisen during the course of normal business operations of the company and have been duly paid in the next year. 5.1 The AO has accepted the Expenditure and Receipts as per the Profit & Loss Account.”

“1. For that the notice u/s 148 is bad in law having been issued arbitrarily; the notice needs to be struck down.

4. For that the AO erred in law as well as in facts making an addition of Rs. 69,70,000/- to the Returned Income of the appellant; the addition so made without sanction of law needs to be deleted in full; 5. For that the Id. AO further erred in making the additions of Rs. 10,18,120/- being the differential amount of the Opening and Closing Balance of Sundry Creditors arbitrarily; the additions so made on surmises and conjectures needs to be deleted in full.

6. For that the Id. AO is unjustified in initiating the Penalty proceedings u/s 271(1)(c); the proceedings so initiated needs to be dropped;

The return of income was e-filed on 13.03.2011 bearing acknowledgement No. 196122371130311 declaring total income of Rs.3,10,305/- which was processed on 31/05/2011 resulted in tax of Rs. 1,11,943/. Subsequently, the case was re- opened for scrutiny after getting approval from appropriate authority. Accordingly, Notice u/s 148 of the I.T. Act, 1961 was issued on 31/03/2017 and duly served upon the assessee company requiring it to file a return within 30 days from the receipt of the notice in the prescribed form of its income for the said assessment year. There was no compliance. Thereafter an official letter bearing No. ITO/Ward- 1(2)/Dgp/Letter/2017-18/83 dated 10/07/2017 was issued and duly served upon the assessée company requesting the assessee company to file return of income in response to notice/s 148 of the I.T. Act. But assessee company failed to file the return of income in response to notice 148 of L.T. Act, 1961. On 27.07.2017 a Notice U/s 142(1) of L.T. Act was issued to the assessee requiring him to appear on 10.08.2017 for hearing with requisitions as per notice u/s 142(1) of LT. Act, 1961. But there was non compliance. Further, on 29.09.2017 a Notice U/s 142(1) of 1.T. Act was issued to the assessee requiring him to appear on 06.10.2017 for hearing with requisitions as per notice u/s 142(1) of 1.T. Act, 1961. But there was again non-compliance. On 10.10.2017 a show cause letter issued to the assessee asking him why not his case be decided an ex-parte for which a last and final opportunity was given to the assessee to appear before undersigned on 16.10.2017 with requisition as per previous notices u/s 142(1) of LT. Act, 1961 dated 27.07.2017 and 29.09.207 issued to the assessee. But once again there was non-compliance on the part of the assessee. Having no other way and considering the fact that books of accounts as well as other documents were not produced before me, I am constrained to conclude that this is a fit case for the best judgement assessment u/s 144 of the I.T. Act, 1961 and the assessment is being completed on the basis of materials available on record and information gathered by invoking notice u/s 133(6) of the I.T. Act, 1961.

as noted in the preceding paragraph. The Ld. CIT(A), vide order dated 25.04.2024, noted that there was no compliance to the notices u/s 250 of the Act dated 18.01.2021, 23.05.2023 and 05.04.2024 and there was no response to the opportunities of being heard to furnish explanation in respect of grounds of appeal raised. The Ld. CIT(A) was of the view that the burden of proof lies on the assessee to prove that the facts and the findings of the Ld. AO are incorrect and if the assessee fails to disprove or rebut with cogent evidence such facts and findings, no interreference was required. Since the assessee did not choose to avail the opportunities in the appellate proceedings, the same lead to the only conclusion that there is no evidence or explanation against the order of the Ld. AO. Relying upon the decisions in the cases of (a) Titaghur Paper Mills Co. Ltd. Vs. State of Tejas Transcom (P) Ltd. AY: 2010

11. Orissa: Pinaki Sengupta Vs. State of Orissa (1983) 142 ITR 663 (SC), (b) Vipul Logistic & Warehousing (P) Ltd. Vs. ITO (ITA No. 5454/Del/10 for AY 2006-07), (c) CIT Vs. Gold Leaf Capital Corporation Ltd. on 02.09.2011 (ITA No. 798 of 2009), (d) Chemipolvs Union of India Vs. Central Excise Appeal No. 62 of 2009 (e) Tukojirao Holkar Vs. CWT (223 ITR 480) (f) CIT Vs. B.N. Bhattacharya (118 ITR 461) (g) whirlpool India Ltd. Vs. DCIT (ITA No. 2006/Del/2011 dated 19.12.2011), the Ld. CIT(A) has held in para 3.10 as under:

“3.10 From the aforementioned discussion, it is clear that no written submissions have been made. Therefore, it is stated that no useful purpose would be served by keeping the appeal pending and therefore the appeal is decided on the basis of documents available on record. There may be various reasons with the appellant to remain absent at the time of hearing. One of the reasons may also be a desire or absence of need to prosecute the appeal or inability to assist in the appellate proceeding in a proper manner or to take benefit of vagaries of law. However, the exact reasons for non-attendance/non- submission are only known to the appellant. The CIT (Appeal) can under such circumstances, invoke the inherent powers vested therein. These powers are embedded with certain inherent obligations also. One of such obligations is that the appellant must not be deprived of being heard. Therefore, the easiest way for appellant in this case was to furnish the written submission in support of grounds of appeal and attend the hearing. But instead, the appellant in this case not only chose to ignore the date of hearing but even did not furnish any submissions.”

12. We have gone through the facts of the case and the grounds of appeal. The grounds related to reopening were assailed before the Ld. CIT(A) as well. However, in stead of deciding the same, he has dismissed the appeal on account of non-appearance of the assessee. The assessee also raised grounds relating to addition on account of share capital and share premium and sundry creditors added on which there is no finding by the Ld. CIT(A). The Ld. CIT(A) has not adjudicated upon the grounds of appeal raised and has dismissed the appeal on account of non- prosecution. In this respect, it is relevant to examine the provisions of section 250(6) of the Act, which are reproduced as under:

“250(6) – The order of the Commissioner (Appeals) disposing of the appeal shall be in writing and shall state the points for determination, the decision thereon and the reason for the decision.”

in assessee's appeal; he cannot dispose assessee's appeal merely by holding that Assessing Officer's order is a self-speaking order which requires no interference. The relevant extract from the order is as under: 6. … The first respondent is the appellate authority. Needless to state that the Appellate Authority is also a fact finding authority and therefore, he has to consider the order of assessment on the grounds raised in the appeal and thereafter, pass a speaking order on merits and in accordance with law by giving his own reasons and findings as to whether the order of assessment can be sustained or not. In other words, the order passed by the Appellate Authority should explicitly exhibit his application of mind to the facts and circumstances and the objections raised in the grounds of appeal, also by expressing his reasons and findings in support of his conclusion.

7. In this case, the Appellate Authority, after extracting the order of the Assessing Officer in full, has not given any other reason or finding to dismiss the appeal except by stating that he is of the considered view that the Assessing Officer's order is a self speaking order and does not call for any interference. In my considered view, such single line finding of the Appellate Authority, cannot be sustained as a proper exercise of the Appellate Authority, while disposing the appeal. Therefore, it is apparent that the order impugned in this writ petition is an outcome of total non-application of mind. Consequently, the impugned order cannot be sustained. It is further contended that before passing the order, the petitioner was not heard.

14. It has also been held in the case of Commissioner of Income-tax (Central) Nagpur Vs. Premkumar Arjundas Luthra (HUF) [2016] 69 Tejas Transcom (P) Ltd. AY: 2010-11 taxmann.com 407 (Bombay) that the law does not empower the CIT(A) to dismiss the appeal for non-prosecution as is evident from the provisions of the Act. The relevant extract is as under: 7. An appeal is filed with the CIT(A) from appealable orders listed in Section 246A of the Act. We find that the procedure in appeal before the CIT(A) and the powers of the CIT(A) are governed by Sections 250 and 251 of the Act respectively. The relevant provisions for consideration are as under:— 'Procedure in appeal 250 (1) . . . . . . . . . . . . . (2) . . . . . . . . . . . . . . . . . (3) . . . . . . . . . . . . . . . . . . (4) The Commissioner (Appeals) may, before disposing of any appeal, make such further inquiry as he thinks fit, or may direct the Assessing Officer to make further inquiry and report the result of the same to the Commissioner (Appeals). (5) . . . . . . . . . . . . . . . . . . (6) The order of the Commissioner (Appeals) disposing of the appeal shall be in writing and shall state the points for determination, the decision thereon and the reason for the decision. (6A) . . . . . . . . . . . . . . . . . . (7) . . . . . . . . . . . . . . . . . . Powers of the Commissioner (Appeals) "Section 251(1) In disposing of an appeal, the Commissioner (Appeals) shall have the following powers — (a) in an appeal against an order of assessment, he may confirm, reduce, enhance or annul the assessment. (aa) . . . . . . . . . . . . . . . . . . (b) in an appeal against an order imposing a penalty, he may confirm or cancel such order or vary it so as either to enhance or to reduce the penalty." (c) . . . . . . . . . . . . . . . . . . (2) The Commissioner (Appeals) shall not enhance an assessment or a penalty or reduce the amount of refund unless the appellant has had a reasonable opportunity of showing cause against such enhancement or reduction. Explanation. - In disposing of an appeal, the Commissioner (Appeals) may consider and decide any matter arising out of the proceedings in which the order appealed against was passed, notwithstanding that such matter was not raised before the Commissioner (Appeals) by the appellant.' 8. From the aforesaid provisions, it is very clear once an appeal is preferred before the CIT(A), then in disposing of the appeal, he is obliged to make such further inquiry that he thinks fit or direct the Assessing Officer to make further inquiry and report the result of the same to him as found in Section 250(4) of the Act. Further Section 250(6) of the Act obliges the CIT(A) to dispose of an appeal in writing after stating the points for determination and then render a decision on each of the points which arise for consideration with reasons in support. Section 251(1)(a) and Tejas Transcom (P) Ltd. AY: 2010-11 (b) of the Act provide that while disposing of appeal the CIT(A) would have the power to confirm, reduce, enhance or annul an assessment and/or penalty. Besides Explanation to sub-section (2) of Section 251 of the Act also makes it clear that while considering the appeal, the CIT(A) would be entitled to consider and decide any issue arising in the proceedings before him in appeal filed for its consideration, even if the issue is not raised by the appellant in its appeal before the CIT(A). Thus once an assessee files an appeal under Section 246A of the Act, it is not open to him as of right to withdraw or not press the appeal. In fact the CIT(A) is obliged to dispose of the appeal on merits. In fact with effect from 1st June, 2001 the power of the CIT(A) to set aside the order of the Assessing Officer and restore it to the Assessing Officer for passing a fresh order stands withdrawn. Therefore, it would be noticed that the powers of the CIT(A) is co-terminus with that of the Assessing Officer i.e. he can do all that Assessing Officer could do. Therefore just as it is not open to the Assessing Officer to not complete the assessment by allowing the assessee to withdraw its return of income, it is not open to the assessee in appeal to withdraw and/or the CIT(A) to dismiss the appeal on account of non-prosecution of the appeal by the assessee. This is amply clear from the Section 251(1)(a) and (b) and Explanation to Section 251(2) of the Act which requires the CIT(A) to apply his mind to all the issues which arise from the impugned order before him whether or not the same has been raised by the appellant before him. Accordingly, the law does not empower the CIT(A) to dismiss the appeal for non-prosecution as is evident from the provisions of the Act.

Order pronounced in the open court on 20th September, 2024.