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Income Tax Appellate Tribunal, PUNE ‘B’ BENCH, PUNE
Before: HON’BLE SHRI S. S. GODARA & SHRI G. D. PADMAHSHALI
आदेश / ORDER Per G. D. Padmahshali, AM; Against the DIN & Order No. ITBA/NFAC/S/250/2023-24/1060794097(1) dt. 12/02/2024 passed by National Faceless Appeal Centre, Delhi [‘NFAC’] u/s 250 of the Income Tax Act [‘the Act’] the assessee company instituted the present appeal.
2.1 Tersely stated facts of the case are that; the return of income [‘ITR’] filed by the assessee company u/s 139(1) of the Act was in first placed summarily proceed u/s 143(1) of the Act and then subjected to scrutiny.
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Patodia Forgings and Gears Ltd. Vs ITO 2.2 After analysing the transactions, evidences, documents and other material placed on records by the assessee, the Ld. AO rejected the books of accounts u/s 145(3) of the Act holding them as unreliable, incorrect and incomplete and incapable of deducing true & correct profits/income therefrom. And taking into consideration the gross profit earned in the preceding year, the gross profit for the year under was estimated @15.20% of total turnover which resulted into addition of ₹9,47,65,952/-. In result the assessment u/s 143(3) r.w.s.144B of the Act was framed assessing total income at ₹8,43,90,230/- as against the returned loss ₹1,03,75,722/-.
2.3 The assessee unsuccessfully contested the aforestated rejection of book and estimations of gross profit vis-à-vis addition in appeal before Ld. NFAC.
2.4 Aggrieved by the action of both the tax authorities the assessee came in present appeal challenging the action of tax authorities on following grounds ; 1. ‘The Learned CIT (A) NFAC, Delhi has blatantly ignored the written submission along with relevant annexures submitted by the Appellant on 9th Feb 2024 in response to the notice u/s 250 dated 31 Jan 2024. The response submitted on 9th Feb 2024 was within the time frame as mentioned in the notice u/s 250 dated 31st Jan 2024.
2. The Learned CIT (A) NFAC, Delhi has erred in confirming the action taken by the Ld. Assessing Officer by rejecting the books of accounts of the Appellant under section 145(3) of the Act without appreciating the facts of the case in the right perspective.
3. The Learned CIT (A) NFAC, Delhi has erred in confirming the action taken by the Ld. Assessing Officer in estimating the GP at 15.2 percent which comes to Rs.3,01,97,001/- by applying the GP of the previous financial year without appreciating the facts of the case in the right perspective.
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Patodia Forgings and Gears Ltd. Vs ITO
4. The Learned CIT (A) NFAC, Delhi has erred in confirming the action taken by the Ld. Assessing Officer in making an addition of Rs. 9,47,65,952/- on account of GP to the income of the Appellant without appreciating the facts of the case in the right perspective.
5. The Learned CIT (A) NFAC, Delhi has erred in confirming the action taken by the Ld. Assessing Officer by initiating Penalty proceedings under section 270A of the Act without appreciating the facts of the case in the right perspective. 6. The Appellant craves leave to make further submission during the course of Appellate proceedings. 7. The ground of appeal
is without prejudice to the other.
8. The Appellant craves leave to make further submissions during the course of Appellate proceedings.’
3. The was called twice, none appeared at the bequest of the appellant assessee company, in the event, with able assistance from the Ld. DR we proceeded to adjudicate the matter ex-parte u/s 24 of the Income Tax Appellate Rules, 1963. [‘ITAT-Rules’].
The case of the respondent is that, during the course of first appellate proceedings, vide notices dt. 25/07/2023, 05/12/2023 and 31/01/2024 was called upon the assessee to substantiate its claim with documentary evidences and written submissions. The assessee however failed to make any representation which resulted into ex-parte culmination on the basis of order of assessment and appeal memo. The appellant assessee on the other hand through first ground claims that, in response to notice dt. 31/01/2024 & in support of its grounds of appeal before Ld. NFAC a documentary evidences alongwith written submissions was uploaded by it online on 09/02/2024. However, turning blind eye to such online submissions, the Ld. NFAC ITAT-Pune Page 3 of 6
Patodia Forgings and Gears Ltd. Vs ITO completed the proceedings ex-parte. Thus, the impugned proceedings and resultant appellate order is passed in violation of principle of natural justice.
Without going into merits of the case, perused the material placed on record in light of rule 18 of ITAT-Rules and heard the Ld. DR who solidified the facts from records that, in response to notice dt. 31/01/2024 the written submission made by the appellant company on 09/02/2024 was well within the permitted time limit, this submission however inadvertently lost the sight of the Ld. NFAC who proceeded ex-parte on the basis of records..
The assessing officer and first appellate authority are quasi-judicial authorities and the respective proceedings they undertake are quasi-judicial proceedings. The section 136 of the Act however relishes that ‘Proceedings before Income-tax Authorities to be judicial proceedings’. As per the said provision, the proceedings before the Income-tax Authorities are deemed to be judicial proceedings for the purposes of section 196 of Indian Penal Code as laid in ‘Chickanna Silk House Vs State of Madras’ [1974, 95 ITR 422 (Mad.)]. Now the term ‘proceedings’, in stricter sense signifies a set of actions undertaken in relation to subject. Accordingly, the proceedings relate to the methods in which they are conducted and concluded judicially in accordance with statute/law, thus proceedings are prescribed course of action and sum of all the steps taken by either party for the enforcement of their respective legal rights & obligations. The proceedings under the Act includes proceedings at original assessment, re-assessment stage, appellate stages ITAT-Pune Page 4 of 6
Patodia Forgings and Gears Ltd. Vs ITO Act. In nutshell under the Act the proceedings thus represents either the steps taken by taxpayer assessee or the acts of Income-tax Authorities. Any action/step of Income Tax Authorities which creates obligation on the part of taxpayer assessee needs to be validated from its contents. The action/step of Revenue if taken without cognizance of taxpayers step/action i.e. reply or submission, would in effect overturn the formers action as unlawful.
The Hon’ble Jurisdictional High Court in ‘Pankaj Vs Ne-AC’ [2022, 286 Taxman 228 (Bom)] in similar circumstances annulled the order passed by the Revenue ignoring the reply filed by the assessee holding that, the validity of the order would have to be judged from its contents, therefore any order passed without considering the reply filed by the assessee in response to show cause notice is bad in law and deserves to be set-aside. The matter in result remanded back to the file of assessing officer for fresh consideration.
On a similar line the Hon’ble Madras High Court in ‘Chennai Silk VS Asstt Commissioner (ST-FAC) [2023, 157 Taxmann.com 65 (Mad)] occasioned to considered the validity of assessment where the Revenue failed to considered the reply or submission of the assessee. Their Hon’ble Lordship therein held that, failure on the part of the Assessing Officer to address the reply of the assessee by a speaking order, would vitiate the impugned proceedings. A similar ratio can also be squinted in the decision of ITAT-Pune Page 5 of 6
Patodia Forgings and Gears Ltd. Vs ITO ‘Bhagyam Exports Vs AC-ST’ [2024, 160 Taxmaan.com 521 (Mad)], ‘PBL Transport Corp. Pvt. Ltd. Vs AC-ST’ [2024, TaxPub(GST) 210 (AP)].
In instant case, the impugned appellate proceedings were culminated without considering/addressing the submissions of the appellant company which was admittedly filed on 09/02/2024. The impugned proceedings thus suffered from judicial process and hence cannot be sustained in view of the former judicial precedents.
In absence of anything contrary brought to our notice, without offering any comments on the merits of the case, in the light of judicial precedents cited herein above, we deem it fit to set-aside the impugned order and remit the matter back to the Ld. NFAC with a direction deal therewith de-nova in accordance with applicable law and pass a speaking order in terms of section 250(6) of the Act on the basis of material already placed on records by the appellant assessee. Ergo ordered accordingly.
In result, the appeal is ALLOWED FOR STATISTICAL PURPOSE. U/r 34 of ITAT Rules, the order pronounced in the open court on this Monday 27th day of May, 2024.
-S/d- -S/d- S. S. GODARA G. D. PADMAHSHALI JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे / PUNE ; ददनाांक / Dated : 27th day of May, 2024. आदेश की प्रनिनलनप अग्रेनषि / Copy of the Order forwarded to :
1. 1. अपीलाथी / The Appellant. 2. प्रत्यथी / The Respondent.
3. The CIT(A)-NFAC, Delhi (India) 4. The Concerned CIT (MH-India) 5. DR, ITAT, Bench ‘B’, Pune 6. गार्डफ़ाइल / Guard File. आदेशानुसार / By Order, वररष्ठ दनजी सदिव / Sr. Private Secretary आयकर अपीलीय न्यायादधकरण, पुणे / ITAT, Pune.
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