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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI RAMIT KOCHAR
Grounds for A.Y. 2009–10 1. The CIT (A) has erred in upholding the validity of the order u/s. 143(3) of the Income Tax Act, 1961 passed by the A.O. Your appellant respectfully submits that on facts and in law the passing of order u/s. 143(3) is bad in law and should therefore be annulled.
2. The learned A.O. has erred in estimating and assessing Total Income of your appellant at Rs. 25,00,000/- without any basis and that too without specifying the head of income under which the income is estimated and assessed. Your appellant respectfully submits that the unjustified estimate and assessment of income at Rs. 25,00,000/- should be deleted since no income has in fact been earned during the relevant previous year.
3. Your appellant prays that each of the, above grounds may please be read / treated as without prejudice to one another and also prays for a leave to allow it to add to or alter the Grounds for A.Y. 2010–11 “1. The CIT (A) has erred in upholding the validity of the order u/s. 144 of the Income Tax Act, 1961 passed by the A.O. Your appellant respectfully submits that on facts and in law the passing of order u/s. 144 is bad in law and should therefore be annulled.
3 M/s. Royal Rich Developers Pvt. Ltd.
2. The learned CIT (A) is grossly erred in not accepting the additional evidence produced before him. Your appellant respectfully the learned CIT (A) ought to have accepted the additional evidence.
3. The learned C.I.T. (A) has erred in upholding the action of the Learned A.O. by which the Learned A.O has estimated and assessed Total Income of your appellant at Rs. 28,29,345 without any basis and that too without specifying the head of income under which the income is estimated and assessed. Your appellant respectfully submits that the unjustified estimate and assessment of income at Rs. 28,29,345 should be deleted since no income has in fact been earned during the relevant previous year.
4. Your appellant prays that each of the above grounds may please be read / treated as without prejudice to one another and also prays for a leave to allow it to add to or alter the above ground.”
Brief facts, more or less common in both the appeals are, the assessee a company was formed with an object of engaging itself in the business of development of properties. For the assessment year 2009–10, assessee did not file any return of income. As observed by the Assessing Officer, though, notices were issued under section 143(2) and 142(1), the assessee neither filed its return of income nor furnished the required information. In fact, the assessee never appeared before the Assessing Officer. Therefore, the Assessing Officer was forced to complete the assessment under section 144 of the Act. The Assessing Officer noticing that in the assessment year 2008–09, the assessee had filed its return of income declaring income of ` 25,98,330, took that as a base and proceeded to estimate the income
4 M/s. Royal Rich Developers Pvt. Ltd. of the assessee for the impugned assessment year at ` 28,29,345. Similarly, in assessment year 2010–11 also, the assessee did not file any return of income. Though, the assessee in response to notices issued under section 143(3) and 142(1) of the Act, appeared before the Assessing Officer, but, as alleged by the Assessing Officer neither any information was submitted nor any books of account were produced. Therefore, the Assessing Officer proceeded to estimate the income at ` 25 lakh. Against the assessment order so passed, the assessee preferred appeals before the learned Commissioner (Appeals).
The learned Commissioner (Appeals) also finding no merit in the submissions of the assessee upheld the determination of income in the assessment order. Being aggrieved, assessee is in appeal before the Tribunal.
Learned Authorised Representative questioning the validity of the assessment order passed under section 144 submitted, the Assessing Officer never called for return of income in the notice issued under section 142(1) of the Act. He further submitted, the very fact that the Assessing Officer issued notice under section 143(2) suggests that there was a return of income available on record. Learned Authorised Representative submitted, even as far as assessment year 2010–11 is 5 M/s. Royal Rich Developers Pvt. Ltd. concerned, the facts are similar. Learned Authorised Representative explaining the cause for non–filing of return of income submitted, though, the assessee was intending to carrying on business in development of properties, but till date the business has not commenced. He submitted, in assessment year 2008–09, the assessee had earned some interest income on loans and advances given to parties which was declared in the return of income filed. However, in assessment year 2009–10 and 2010–11, since the assessee had not earned any income no return of income was filed. Learned Authorised Representative submitted, in the course of assessment proceedings, for the assessment year 2011–12, the Assessing Officer being satisfied with the fact that the assessee has not commenced its business activities and has not earned any income, has completed assessment under section 143(3) by accepting nil income. He submitted, though, the facts in the impugned assessment years are identical and the assessee before the first appellate authority had explained that it has not earned any income, the explanation of the assessee was brushed aside without proper examination. He submitted, neither the Assessing Officer nor the learned Commissioner (Appeals) have afforded reasonable opportunity of being heard to the assessee. Therefore, assessments for both the assessment years are required to be 6 M/s. Royal Rich Developers Pvt. Ltd. restored to the file of the Assessing Officer for re–framing the assessment afresh.
Learned Departmental Representative has no serious objection in restoring back the assessment to the file of the Assessing Officer for re–framing them afresh.
We have considered the submissions of the parties and perused the material available on record. Undisputedly, the assessee has not filed any return of income for both the assessment years under appeal. Therefore, issuance of notice under section 143(2) by the Assessing Officer appears to be a mistake. As it appears, due to some communication gap between the assessee and the Department, there was a lack of representation by the assessee in the course of assessment proceedings. Therefore, the Assessing Officer was compelled to complete the assessment on the basis of material on record and, he estimated the income of the assessee for the aforesaid assessment years on the basis of income declared by the assessee in assessment year 2008–09. As it transpires in assessment year 2008– 09, the income shown by the assessee was interest earned on loans and advances given to some parties and not from its business activities as a developer. On a perusal of the assessment order, it is evident, the Assessing Officer has not mentioned under which head he
7 M/s. Royal Rich Developers Pvt. Ltd. has assessed the income on estimate basis. It further appears before the learned Commissioner (Appeals) the assessee had produced certain additional evidence but he has refused to accept them and proceeded to uphold the order of the Assessing Officer by observing that the assessee has failed to furnish necessary information called for by the Assessing Officer. However, it is pertinent to observe, the Assessing Officer in the assessment order passed u/s 143(3) for the assessment year 2011–12 a copy of which is placed at Page–89 of the paper book, has accepted assessee’s claim that it has not commenced its business activities and assessed the income at nil. It is the contention of the assessee before us, in the impugned assessment years, the facts remain same as the assessee has neither commenced its business activities nor has earned any income. Prima–facie, we find substance in the aforesaid contention of the assessee. Therefore, in our view, the assessee deserves an opportunity to justify its claim that in the impugned assessment years also neither it has commenced business activities nor has earned any income. Therefore, without entering into the controversy whether statutory notices under section 143(2) and 142(1) were validly issued and serviced on the assessee, we deem it appropriate to restore the assessment for both the impugned assessment year to the file of the Assessing Officer for denovo assessment after due opportunity of being heard to the 8 M/s. Royal Rich Developers Pvt. Ltd. assessee. We also make it clear that the assessee must extend its co– operation to the Assessing Officer for finalisation of the assessment proceedings.
In the result, assessee’s appeals are allowed for statistical purposes. Order pronounced in the open Court on 27.05.2016