SOUMENDRA GUPTA,SUJAPUR, MALDA vs. ITO, WARD - 3(1), KOLKATA, KOLKATA

Soumendra Gupta …. Appellant (PAN: AUDPG1447N) Vs. Income tax Officer, Ward-3(1), Kolkata .… Respondent Appearances by: Shri Sunil Surana, FCA appeared for Appellant. Shri B. K. Singh, JCIT appeared for Respondent. Date of concluding the hearing : 18.07.2024 Date of pronouncing the order : 25.07.2024 ORDER This appeal filed by the assessee pertaining to the Assessment Year (in short “AY”) 2014-15 is directed against the order passed u/s 250 of the Income Tax Act, 1961 in short the “Act”) by Ld. Commissioner of Income-tax (Appeal), National Faceless Appeal Centre (NFAC), Delhi [in short Ld. “CIT(A)”] dated 24.04.2024 arising out of the assessment order u/s 147 r.w.s. 144B of the Act by AO, Income Tax Department, National Faceless Assessment Centre, Delhi dated 01.03.2022.

raised by the assessee are reproduced as under: “1. For that the Ld. CIT(A) erred in deciding the appeal ex parte when the alert for last hearing notice was not received either in mobile or e Soumendra Gupta AY : 2014-15 mail of the assessee hence reasonable opportunity of being heard was not granted.

2. For that even otherwise, the CIT(A) should have decided the appeal on merits instead of summarily dismissing the appeal.

3. For that on the facts and circumstances of the case, the reopening of assessment only for verification and examination of source of purchase of property was invalid and not in accordance with law and therefore the entire reassessment is liable to be quashed.

4. For that the Ld. AO erred in adding back Rs.40,16,261/- u/s. 69 being alleged unexplained investment in property when the source of the purchase was duly explained before the AO.”

3. Brief facts of the case are that the assessee is an individual engaged in the business of trading in vegetable products, seeds etc. However, the assessee does not file any return of income as he clams to earn income below the taxable limit. For the year under consideration, Ld. AO based on an information that assessee had purchased an immovable property, issued notice u/s. 148 of the Act. In response, the assessee filed return on 28.04.2021 declaring income of Rs.1,71,110/- followed by issuing of notices u/s. 143(2) and 142(1) of the Act. The property in question is owned by four persons, and assessee has one- fourth share which comes to Rs.40,16,261/-. Assessee submitted that he is carrying on the business for past many years and has also filed the Balance Sheet and P&L Account from AYs 2003-04 to 2012-13 and accumulated funds were sufficient and explained alleged investment in immovable property. Assessee also submitted that the case of the assessee falls under presumptive taxation scheme and since the income was below taxable limit there was no requirement to file the income tax return. Ld. AO, however, not satisfied with this submission and without giving any cognizance to the financial statements as well Soumendra Gupta AY : 2014-15 as proof of the assessee carrying on business, concluded the assessment making addition of Rs.40,16,261/-. Aggrieved, assessee preferred appeal before the Ld. CIT(A) but failed to succeed. Now assessee is in appeal before this Tribunal.

4. Ld. Counsel firstly made his submission challenging the reopening of the assessment proceeding on the ground that the reopening was done only for verification as to whether the transaction of purchase of immovable property has been declared in the return of income. But the same cannot be a ground for reopening of assessment specially when the requirement of section 147 is to form a belief that income chargeable to tax has escaped assessment. He also submitted that even for argument sake, if any transaction is not declared but which result in a loss, then there is no income which has escaped assessment. Reasons has to be read as they are recorded. Placing reliance on the judgment of Hon’ble Bombay High Court in the case of Hinduthan lever Ltd. 268 ITR 332, he submitted that no addition or substitution is permissible to the reasons recorded. On merits, it was submitted that the assessee is doing Hat Faria business since last several years and possess a trade licence from FY 1998-99 onwards which is also renewed year after year. Assessee maintains details of its financial transaction and has furnished the copies of Balance Sheet, Trading and P&L Account for all last ten years and the accumulated cash and bank balance has been to make the alleged investment.

5. On the other hand, Ld. DR vehemently argued supporting the orders of the lower authorities. Soumendra Gupta AY : 2014-15

6. I have heard both the parties and perused the material available on record. So far as the legal issue challenging the reopening of the assessment is concerned, I fail to find any merit in the contention of the Ld. Counsel for the assessee because the assessee is not filing income tax return. Specific information was available with the AO about investment in immovable property by four co-owners. The first step to be taken by the AO is to examine the income tax return but not finding the same on the record, he again asked the assessee to file copy of income tax return so as to examine the source of purchase of property/investment. Admittedly, assessee has not filed any income tax return and only in compliance to notice u/s. 148 of the Act return has been furnished. Had the assessee been filing the income tax return then at the preliminary stage itself when Ld. AO called for the information, the matter would have been resolved. But since the assessee is claiming to have income below taxable limit and not filing income tax return but investment in the property is to the tune of Rs.40,16,261/-, the Ld. AO had rightly carried out the reassessment proceedings. Therefore, the reopening proceedings are valid. Assessee fails to succeed on this legal ground.

7. As far as the merits of the case are concerned, I observe that the assessee is in the business of Hat Faria and purchase the goods from local hats and farmers and then sells in the market. The copy of trade license placed at pages 12 to 31 of the paper book indicates that the assessee is in the business for past many years and his trade licenses is also being renewed by year after Soumendra Gupta AY : 2014-15 year. Further, on perusal of the P&L Account and Balance Sheet for FYs 2002-03 till 2013-14 shows trading business and the statement of affairs. It shows that the assessee is earning income from trading business and also posses accumulated balance from past many years. He has been utilising the accumulated funds for the purpose of buying the stock so as to carry on the trading business. As on 31.03.2013 closing stock was Rs.15,92,860/- and cash in hand, cash at bank and other investment totalling to approx. Rs. 29,00,000/-. In FY 2013-14, assessee liquidated his major portion of closing stock since he wanted to purchase the property and also utilised the accumulated liquid funds. All these details supports the contentions of the assessee that assessee has sufficient funds for making investment in immovable property. Since the Ld. DR failed to rebut these details furnished by the assessee in the form of financial statement for last ten years as well as copies of trade licence, I am inclined to set aside the finding of Ld. CIT(A) and decide in favour of the assessee and accordingly delete the impugned addition of Rs.40,16,261/-. Ground no. 3 of the assessee is allowed.

8. In the result, appeal of the assessee is partly allowed. Order is pronounced in the open court on 25th July, 2024.