AJAYKUMAR JINDAL (HUF),MUMBAI vs. ITO 13(2)(4), MUMBAI

This appeal is filed by the assessee against the order of the Ld. CIT(A)-24, Mumbai dated 26.03.2014 pertaining to assessment year 2007-08.

In this appeal, the assessee is challenging the order of the Ld. CIT(A) in confirming the estimation of net profit while completing the assessment u/s. 143(3) r.w.s. 147 of the Act and also confirming the addition made u/s. 68 towards capital contribution of the members of the HUF.

Shri Ajay Kumar Jindal, the Karta of the assessee HUF appeared himself on behalf of the HUF. He submits that additions were made without properly appreciating the submissions of the assessee. He submits that reasons for reopening the assessment were also not served on the assessee. The net profit was estimated at 1.5% instead of 0.45% as returned by the assessee. Shri Ajaykumar Jindal further submits that addition u/s. 68 was made being the capital introduced by the members of HUF without appreciating that these amounts were borrowed from members of HUF in their individual capacity and used as capital in the HUF. He further submits that there was no proper opportunity given by the Assessing Officer before assessment was completed. Therefore, he prays for setting aside the assessment for doing afresh providing proper opportunity to substantiate the claims of the assessee HUF.

The Ld. Departmental Representative vehemently supports the orders of the lower authorities and submits that in the absence of the details furnished before the Assessing Officer to prove the source for investments and in view of the fact that the assessee has shown less profit, the Assessing Officer is perfectly justified in estimating the net profit and bringing to the tax the unexplained cash credits introduced by the assessee into the books of HUF.

Heard both parties, perused the orders of the lower authorities. On reading from the assessment order, we find that in this case return of income was filed on 30.3.2009 declaring total income of Rs. 77,441/-. The return was processed u/s. 143(1) and was not selected for scrutiny, therefore there was no scrutiny assessment u/s. 143(3). Later on notice u/s. 148 was issued on 22.3.2011 and the assessment u/s. 143(3) r.w. Sec. 147 was completed on 8.12.2011 determining the income at Rs. 12,21,940/-. On perusal of the assessment order, we do not find the reasons for issue of notice u/s. 148 for reopening the assessment. We also find from page-3 of the assessment order that the Assessing Officer on observing from the record and taking note of certain facts was of the opinion that assessee in its return of income certain sales were not accounted for and this is the reason he mentioned for reopening the assessment. It was the submission of the assessee that the reasons were not served on the assessee. The Revenue also did not produce the reasons for reopening of the assessment before us. It is also the submission of the assessee that the capital introduced into the HUF is all borrowed from the members of HUF and there was no proper opportunity given to prove credit worthiness of the parties making such contribution as capital of HUF. Taking the totality of facts into consideration, we set aside the assessment and direct the Assessing Officer to frame the assessment denovo after providing adequate opportunity of being heard to the assessee. The assessee shall co- operate with the Assessing Officer and provide necessary details for completion of assessment. The Assessing Officer shall also provide reasons for reopening the assessment to the assessee and complete the assessment accordingly.

In the result, the appeal filed by the assessee is allowed for statistical purpose.