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Income Tax Appellate Tribunal, “ A ” BENCH, AHMEDABAD
Before: MS. SUCHITRA KAMBLE & SHRI MAKARAND V. MAHADEOKAR
The captioned appeal has been filed at the instance of the Assessee against the order of the Learned Commissioner of Income Tax (Appeals), Vadodara, arising in the matter of assessment order passed under s. 143(3)
Shreenathji Associates vs. DCIT Asst. Year 2011-12 2 r.w.s 147 of the Income Tax Act, 1961 (here-in-after referred to as "the Act") relevant to the Assessment Year 2011-12.
The facts of the case are that the assessee firm filed its return of income on 08-09-2011 declaring total income of Rs. 5,80,030/- which was processed u/s 143(1) of the Act accepting total income as returned. Subsequently the case was reopened, after recording satisfaction note, by issue of notice u/s 148. The assessee filed an objection against the reassessment proceedings and the AO passed speaking order in respect thereof. As per the recorded reasons, a search action in the case of Pradeep Birewar was carried out along with various individuals who had obtained accommodation entries of Long-Term Capital Gains (LTCG) in the shares of Shri Ganesh Spinners Limited (now known as Yantra Natural Resources Limited) and one time accommodation entries from Shirish Chandrakant Shah (SCS) through Pradip Birewar. Pradip Birewar was a Ahmedabad based accommodation entry provider who was facilitating one-time (OT)also known as share capital related entries and other accommodation entries including LTCG (Long Term Capital Gain) entries to various clients on receipt of cash. He was facilitating these entries through bigger accommodation entry provider Shirish Chandra Shah (SCS).
2.1 On verification of the assessee's particular of income, submissions filed by the assessee AO observed that accommodation entries to the assessee have been provided by SCS through his company named Prraneta Industries Ltd. amounting to Rs.4 Cr. From the data seized from the office premises of SCS, an excel sheet was found in which one time accommodation entries were found relating to the assessee. The assessee Shreenathji Associates vs. DCIT Asst. Year 2011-12 3 was issued show cause notice as to why the same should not be added back to the total income. In reply to which the assessee asked for cross examination of the person on whose statement the AO relied on and reiterated that they have not received any accommodation entries.
2.2 As requested by the assessee, a summon dated 18-12-2018 was issued to Pradeep Birewar to attend the office on 21-12-2018, who remained absent on the said date. The assessee reserved its right of cross examination by submitting letter dated 23.10.2018. Not being satisfied with the reply of the assessee, the AO added RS. 4Cr u/s 68 of the Act and Rs. 8,00,000/- being 2% commission as unaccounted expense u/s 69C of the Act. While doing so the AO relied on some judicial precedents.
3. The assessee preferred an appeal before CIT(A) against the order passed by AO u/s 143(3) r.w.s. 147 of the Act. The CIT(A) issued 8 notices u/s 250 to the assessee on various dated from 05-02-2021 to 11-03-2024, but the assessee failed to comply with the same. Therefore, the CIT(A), relying on the decision of various adjudicating authorities dismissed the appeal.
The decisions relied on, as per order of CIT(A) are – 1. In case of CIT Vs. B.N. Bhattachargee & Another 118 ITR 461 (relevant pages 477 and 478) wherein their Lordships have held that "the appeal does not mean merely filing of appeal but effectively pursuing it". 2. In case of Estate of Late Tukoji Rao Holker Vs. CWT 223 IR 480 (MP) while dismissing the reference made at the instance of assessee in default made following observations in their order. "if the party at Shreenathji Associates vs. DCIT Asst. Year 2011-12 4 whose instance the reference is made fails to appear at the hearing, or fails in taking steps for preparation of the paper books so as to enable hearing of the reference, this court is not bound to answer the reference"
In the case of CIT Vs. Multiplan India Pvt. Ltd. 38 ITD 320 (Del). The appeal filed by the revenue before the Tribunal which was fixed for hearing but on the date of hearing nobody represented neither the revenue applicant nor any communication for adjournment was received. There was no communication or information as to why revenue choose to remain absent on that date. The Hon'ble Tribunal laid down the principle that on the basis of inherent power the appeal filed by the appellant can be treated as un-admitted.
The CIT(A) also noted the response from the assessee filed on 03-01- 2022, 10-11-2022 and 25-05-2023 requesting to adjourn the matter and reschedule the hearing by giving time till August 2023.
Aggrieved by the order of CIT(A), the assessee is in appeal before us with following grounds of appeal:
[I] The appeal be set-aside to the file of the Id. CIT(A) for deciding the same afresh.
1. The appellant humbly states that the submissions in support of the Grounds of Appeal could not be filed since the A.R. who was entrusted with and was handling the Income Tax matters neither informed the appellant about the notices received from the office of the Id. CIT(A) nor complied with the same by filing written submissions so much so that the appellant was also not aware of passing of an ex-parte order by the Id. CIT(A) since the same in all likeliness must have been uploaded on the email ID of the previous A.R. as appearing on ITBA platform. In view of above peculiar circumstances, the appellant humbly requests your honour to set-aside the matter to the file of Shreenathji Associates vs. DCIT Asst. Year 2011-12 5 the Id. CIT(A) for deciding the same afresh after giving adequate opportunity to the appellant. [II] Assessment u/s 147 of the Act.
1. The Id. CIT(A) has grievously erred in law and on facts in not considering the fact that the initiating the proceedings u/s 147 of the Act by the AO by issuing the notice u/s 148 of the Act and the impugned assessment order is bad in law and without jurisdiction inasmuch as notice u/s.148 of the Act on the basis of which the proceedings have been reopened being itself bad in law and invalid since there is no escapement of income at all as defined in section 147 of the Act which is a condition precedent for issuing notice u/s.148 of the Act. The allegation of payment of cash against amount received from Praneta Industries Ltd. is based entirely on surmises.
2. The Id. CIT(A) has failed to appreciate that on facts and in law, the material seized from a third party and relied upon in case of the appellant do not give any prima facie unambiguous finding that amount received from Prraneta Industries Ltd. is in the nature of accommodation entry and not a genuine transaction.
3. The Id. CIT(A) has further failed to appreciate that the re-assessment proceedings and consequential assessment order is bad in law and without jurisdiction and thus ought to have been quashed as void-ab-initio inasmuch as the same having been completed without granting the cross examination of various persons whose oral statements/affidavits have been relied upon for initiating the proceedings u/s 147 of the Act while issuing the notice u/s.148 of the Act.
4. The Id. CIT(A) has failed to properly appreciate that there is no failure on the part of the appellant since the amount received from Praneta Industries Limited and repayment thereof has already been disclosed in the accounts and considered while preparing the return of income. [III] Addition on account of unexplained cash credit u/s 68 of the Act in respect of amount received from Praneta Industries Limited - Rs.4,00,00,000/-
1. 1. The Id. CIT(A) has grievously erred in law and on facts in confirming the addition of Rs,4,00,00,000/- made by the AO being the amount received from Prraneta Industries Limited as unexplained cash credit us 68 of the Act on the on the basis of the observations and findings given in the assessment order.
2. The Id. CIT(A) has grievously erred in law and on facts in not appreciating the fact that the AO had failed to provide complete and specific details/material/evidences on which he has relied upon for making the addition in respect of loan received from Pranteta Industries Ltd. as unexplained cash credit u/s 68 of the Act. Thus, the addition by him being Shreenathji Associates vs. DCIT Asst. Year 2011-12 6 against the principle of natural justice and equity ought to have been deleted by the Id. CIT(A) on this ground itself.
3. The Id. CIT(A) has further erred in not appreciating the fact that the amount received from Praneta Industries Limited and repayment thereof is through legally acceptable channels and the same cannot be simply discarded by the AO merely on the basis of general and self-serving statements or averments of SCS, Pradip Birewar & Others, more particularly in absence of cross-examination of such persons.
4. The Id. CIT(A) has grievously erred in law and on facts in not appreciating the fact that the seized material relied upon by the AO as reproduced in the assessment order, nowhere mentions the name of the appellant against the noting of "Cash Received" and hence no nexus is proved or established as regards receipt of amount from Prraneta Industries Ltd. against payment of cash to SCS through Pradip Birewar as alleged by the AO.
5. The Id. CIT(A) has further erred failing to consider the fact that since the records on the basis of which adverse inference is drawn by the AO having been found/seized from the possession of a third party viz. Shirish Shah, the provisions of Section 132(4A) are applicable in his case and not the appellant. That since the said burden has not been prima facie discharged by Shirish Shah & Others, the addition by the AO ought to have been deleted.
6. The appellant submits that inasmuch as strong reliance placed by the AO on the statements of SCS and directors of Prraneta Industries [now known as Aadhar Ventures (India) Ltd] are concerned, reference is invited to the decision of Hon'ble Madhya Pradesh High Court in the case of Principal Commissioner of Income-tax 1) Indore v. Chain House International (P.) Ltd. [20181 98 taxmann.com 47, wherein interalia, the addition based on the statements/affidavits of Shirish C. Shah [SCS] and others in respect of transactions with Praneta Industries has been deleted. The SLP filed by the department against the said decision has also been dismissed by the Hon'ble Supreme Court vide its order dated 18/02/2019 as reported [20191103 taxmann.com 435. In view of the above, the Id. CIT(A) ought to have deleted the addition of Rs.4,00,00,000/- made by the AO u/s 68 of the Act. [IV] Addition on account of estimation of expenditure incurred on obtaining the alleged accommodation entry of Rs.4,00,00,000/- as commission income u/s. 69C of the Act @ 2% - Rs.8,00,000/- 1. The Id. CIT(A) has grievously erred in law and on facts in confirming the impugned addition made by the AO solely on adhoc and estimated basis without bringing on record even an iota of evidence in support of his assumptions. On facts and in law, the impugned estimated addition requires to be deleted.
Shreenathji Associates vs. DCIT Asst. Year 2011-12 7 2. The appellant submits that even otherwise, the said addition being consequential to the outcome of the main addition of Rs.4,00,00,000/- disputed hereinabove, the same maybe decided accordingly. The appellant craves leave to add, amend, alter, modify or delete any of the above grounds and to submit additional grounds at the time of hearing of the appeal.
Upon careful consideration of the facts and circumstances of the case, we find that the assessee has raised several grounds before us, primarily challenging the validity of the reopening of the assessment under Section 147 and the additions made under Sections 68 and 69C of the Act. The assessee also requested that the matter be remanded back to the CIT(A) for fresh adjudication, citing the lack of proper representation due to the inaction of the Authorized Representative (A.R.) and the failure to receive notices. We, without delving into the merits of the case or the grounds of appeal, finds that the CIT(A) dismissed the appeal solely on procedural grounds without considering the substantive issues raised. Given the procedural lapse at the assessment stage, particularly the denial of the right to cross-examine, and the subsequent non-compliance before the CIT(A), we deem it appropriate to set aside the order of the CIT(A) and restore the matter for fresh adjudication.
7.1 In light of the above, we set aside the order of the CIT(A) and remand the matter back to the CIT(A) for a fresh decision on the merits, ensuring that the assessee is given an adequate opportunity to present its case. The CIT(A) is directed to consider all submissions made by the assessee and to allow cross-examination of relevant witnesses, adhering to the principles of natural justice. The assessee is also directed to comply diligently with the timelines and notices issued by the CIT(A). Hence. The appeal is allowed for the statistical purposes
In the result, the appeal filed by the assessee is allowed for statistical purposes.
Order pronounced in the Open Court on 30th August, 2024 at Ahmedabad.