HOTEL SONIYA,AURANGABAD vs. ITO WARD 1 (5) AURANGABAD, AURANGABAD MAHARASHTRA

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ITA 1431/PUN/2024Status: DisposedITAT Pune01 October 2024AY 2017-2018Bench: HON’BLE SHRI G. D. PADMAHSHALI, ACCOUNTANT MEMBER AND HON’BLE SHRI VINAY BHAMORE (Judicial Member)4 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal noted the assessee's lack of representation and failure to produce supporting documents before the lower authorities. It decided to grant one more opportunity for effective representation and compliance.

What were the facts?

During a survey, the assessee declared an expenditure of ₹1,25,00,000 on hotel construction, funded by a bank loan and additional investment. The assessee later filed a NIL income return and failed to respond to notices, leading to an ex-parte assessment adding ₹35,00,000 as unexplained investment.

What were the issues?

Whether the ex-parte assessment and confirmation of addition by the lower authorities were justified without proper adjudication on merits due to the assessee's non-compliance.

Which sections of the Income-tax Act were involved?

Section 133A,Section 131A,Section 143(2),Section 142(1),Section 144,Section 69,Section 250

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘SMC’ BENCH PUNE

Before: HON’BLE SHRI G. D. PADMAHSHALI & HON’BLE SHRI VINAY BHAMORE

For Appellant: Mr Ramesh Thete [‘Ld. AR’]
For Respondent: Mr BS Rajpurohit [‘Ld. DR’]
Pronounced: 01/10/2024

ORDER PER G. D. PADMAHSHALI, AM; This appeal agitates DIN & Orders ITBA/APL/S/250/2024- 25/1064475124(1) dt. 30/04/2024 passed by the first appellate authority [‘Ld. NFAC/ CIT(A)’ hereinafter] u/s 250 of the Income- tax Act, 1961 [‘the Act’ hereinafter] which in turn confirms the ex- parte order of assessment passed u/s 144 of the Act by the Income Tax Officer, Ward-1(12), Ch. Sambhaji Nagar [‘Ld. AO’ hereinafter] for assessment year 2017-18 [‘AY’ hereinafter]; ITAT-Pune Page 1 of 4 M/s Hotel Soniya Vs ITO AY: 2017-18 Succinctly stated facts of the cases are that, the assessee is a 2. partnership firm carrying on veg-restaurant business on which a survey action u/s 133A of the Act on 06/10/2017 was carried out. During the survey on the basis of documents impounded a statement was recorded u/s 131A of the Act whereby the assessee declared certain income. The assessee filed its return of income for the year under consideration on 19/03/2018 declaring NIL income. The return was subjected to scrutiny wherein the assessee was called upon to explain as to why the income declared in survey proceedings should not be added to total income. When notices issued u/s 143(2), 142(1) of the Act remained un- responded, the Ld. AO after putting assessee to show cause notice culminated the proceedings to the best of judgement by treating the amount of ₹35,00,00/- as unexplained investment u/s 69 of the Act which represented the portion of unexplained expenditure incurred by the assessee on construction of its hotel building and framed the assessment accordingly u/s 144 of the Act.

3.

The first appeal challenging the former addition was dismissed ex-parte in absence of evidential documents in support of claims/grounds raised in appeal before the Ld. NFAC.

ITAT-Pune Page 2 of 4 M/s Hotel Soniya Vs ITO AY: 2017-18 Without touching merits of the case, we have heard rival 4. parties on the limited issue of ex-parte dismissal of first appeal and subject to rule 18 of ITAT-Rules, 1963 perused material placed on record. We observed that, during survey a notebook ‘3D-Art’ was found & impounded u/s 133A(3)(ia) of the Act. The said notebook revealed that the appellant in constructing its hotel building had incurred a total expenditure of ₹1,25,00,00/-. When confronted one of its partners while confirming the expenditure & sources on statement recorded u/s 133A(1) of the Act stripped its sources as funded out of (a) bank loan of ₹90,00,00/- and (b) balance ₹35,00,00/- out of additional investment, which was admitted for taxation. In scrutiny assessment when it has come to the notice that the portion of income admitted/declared in the recorded statement was not offered to tax by the appellant and no explanation vis-à-vis material placed in refuting the taxability of such unexplained source, the Ld. AO treated the same as unexplained investment u/s 69 of the Act and made the addition while framing the ex-parte assessment. On the other hand, in the event of non-prosecution of appeal the Ld. NFAC reiterated the Ld. AO’s findings in confirming the addition ex-parte vide para 12 of the impugned order. ITAT-Pune Page 3 of 4 M/s Hotel Soniya Vs ITO AY: 2017-18 We note that, neither during assessment nor during first 5. appellate proceeding the appellant could produce any convincing documents in support of its claim that such amount is not exigible to tax. Per contra, there was complete non-representation / non- prosecution before both the tax authorities below and the appellant is indifferent even in present proceedings. In these circumstances it would lead to unjust to either party if we advance the adjudication ducking the verification of corroborative & cogent evidences by tax authorities below first. In view thereof without offering any comments on merits of the case, we deem it fit to accord one more opportunity to the appellant for effective representation vis-à-vis compliance so as to enable the Ld. NFAC on remand to adjudicate this issue de-novo in accordance with law. Ordered accordingly.

6.

In result, the appeal is ALLOWED FOR STATISTICAL PURPOSES. In terms of rule 34 of ITAT Rules, the order pronounced in the open court on this Tuesday 01st Day of October, 2024

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