DHARMENDRA JINENDRA JAIN,AHMEDABAD vs. THE INCOME TAX OFFICER, WARD-1(2)(1), AHMEDABAD

The grounds of appeal raised by the assessee in Memo of of appeal filed with Income Tax Appellate Tribunal, Ahmedabad Bench, Ahmedabad, reads as under:-

The brief facts of the case are that the assessee has filed return of income for assessment year 2017-18 on 04-11-2017, declaring income of Rs. 12,62,400/-. The case of the assessee was selected by Revenue through CASS for framing scrutiny assessment. Notice u/s. 143(2) was issued by the AO dated 08-08-2018 which was claimed by the AO to have been served upon the assessee through speed post and ITBA. Subsequently, statutory notices u/s. 142(1) were issued and claimed to have been served by the AO upon the assessee. In Page No. 3 Dharmendra Jinendra Jain v. ITO response to the notices, the assessee filed certain details but the assessee could not file details regarding the payment made to company whose registration has been cancelled by the Ministry of Corporate Affairs(MCA). The assessee paid job work charges of Rs. 9,00,000/- to Times Press Pvt. Ltd. , whose registration was struck off by MCA. The Assessing Officer observed that the assessee is in the business of publishing daily newspaper and derives income from sale of newspaper and advertisement income. The Assessing Officer issued show cause notice dated 02.12.2018 to the assessee as to why job work charges of Rs. 9,00,000/- paid to Times Press Private Limited may not be treated as unexplained expenditure from unexplained income from undisclosed sources. The Assessing Officer also observed that the assessee has made payment to Times Press Pvt. Ltd. towards job work charges of Rs. 9,00,000/- which payment is covered u/s. 40A(2)(b) of the Act , and further the registration of the said company has been cancelled by MCA. The assessee in his reply submitted that the registration of Times Press Pvt. Ltd. was struck off by MCA because of non-filing of ROC return regularly by the said company , and not because of shut down of business activity by Times Press Private Limited. It was submitted that the said company has option to revoke the striking off of its name by MCA, by making application to Hon’ble NCLT. The AO rejected the contentions of the assessee because as per AO, the Page No. 4 Dharmendra Jinendra Jain v. ITO assessee has failed to furnish supporting documents or satisfactory explanation in respect of payment made to a company whose registration has been cancelled by MCA as the name of Times Press Private Limited was struck off by MCA which as per the AO means that the company is in effect not working and payment to a struck off company cannot be accepted. Thus, the AO disallowed the payment of Rs. 9,00,000/- and made addition of Rs. 9,00,000/- to the income of the assessee as unexplained expenditure incurred from undisclosed source, vide assessment order dated 13.12.2019 u/s 143(3).

Aggrieved , the assessee filed first appeal before CIT(A). The ld. CIT(A) issued six notices of hearing to the assessee but no reply was filed by the assessee, and ld. CIT(A) dismissed the appeal of the assessee ex-parte in-limine without discussing the issues arising in the appeal on merits vide appellate order dated 14.02.2024, by holding as under:- “This appeal instituted on 31.01.2020 arises from the Assessment Order dated 31.12.2019 passed by Assessing Officer, M Pradeep Kumar, Ward 1(3)(1), Ahmedabad(in short "the AO") u/s 143(3) of the Income-Tax Act, 1961 (hereinafter referred to as "the Act") for A.Y. 2017-18. The appellant was given many hearing notices dated 07.09.2020, 14.01.2021. 02.08.2022, 21.11.2023,13.12.2023 and 13.02.2024 but no reply was filed by the appellant against any of the above notices. Further, it is noted that despite giving various opportunities to represent the case, the appellant has chosen not to submit any documents. It is apparent that appellant has not shown any interest in pursuing the appeal. Therefore, considering the facts of the case, the appeal is hereby dismissed for statistical purposes.”

Aggrieved, the assessee has now filed second appeal with the Tribunal. The ld. counsel for the assessee opened argument before the Tribunal , and at the outset submitted that the assessee in the business of publishing of daily hindi newspaper namely ‘Young Leader’ from Ahmedabad which is even published now continuously, and a copy of the Ahmedabad edition of 27th June, 2024 was filed by the assessee before the Tribunal. The assessee submitted that in the publishing of the said newspaper, the assessee is availing the services of Times Press Pvt. Ltd. and our attention was drawn to the newspaper of 27.06.2024 filed by the assessee, wherein as per requirement of RNI at page No. 4 on the left side of the said newspaper, it is mentioned that the Chief Editor of the newspaper ‘Young Leader’ is Shri Dharmendra Jain and the owner and the publisher is also Shri Dharmendra Jain , and the newspaper is printed at Times Press Private Limited, R.B. House, J.P. Chowk, Khanpur, Ahmedabad-380001. It was submitted by the ld. counsel for the assessee that the said Times Press Pvt. Ltd. is still functioning and carrying out is business activities, although the said company is stuck off by MCA for non filing of returns such as Annual Return and Annual Report etc. with ROC/MCA. It was also submitted that the said company Times Press Pvt. Ltd. is filing its return of income regularly Page No. 6 Dharmendra Jinendra Jain v. ITO with Income Tax Department, and the copies of return of income for assessment year 2010-11 to 2021-2022 are placed on record at page no. 123-134 of the paper book. The assessee has filed paper book containing 162 pages which is placed on record in file. The ld. counsel for the assessee submitted that the said company Times Press Pvt. Ltd. is still functioning. It was submitted that the assessee has got the printing of its newspaper ‘Young Leader’ from Times Press Pvt. Ltd. during the impugned assessment year , and the printing job charges bills were raised by said company Times Press Pvt. Ltd. which has been disallowed on the ground that the said company is stuck off by the MCA. Our attention was drawn to MOU signed by the assessee company with Times Press Pvt. Ltd. which is placed in the Paper Book at page 97-102. Several other registration and other documents of Times Press Pvt. Ltd. are filed in paper book such as Municipal Tax Bill, Electricity Bills, Shops and Establishment registration etc. . Thus, it was claimed that the Assessing Officer erred in disallowing the expense of the assessee, and the assessee is not at fault if the company Times Press Private Limited is struck off by MCA from its records. It was submitted that MCA stuck off Times Express Pvt. Ltd. from its record on the ground that it did not filed its returns such as annual returns, annual reports with MCA . The AO has also invoked provisions of Section 40A(2)(b), but no further comparative details are Page No. 7 Dharmendra Jinendra Jain v. ITO furnished before disallowing the expenses by the AO. It was submitted that the assessee did not appear before the CIT(A) due to medical/health reasons of the family members, and hence the assessee could not appear before the CIT(A) or could not make compliance of the notices of the CIT(A). The assessee has also filed audited accounts of Young Leader which are placed in paper book at page no. 6 to 9. The assessee has also filed Profit and Loss account as well Balance Sheet of Times Press Private Limited. It was submitted that the appellate order passed by ld. CIT(A) is not in compliance with the provisions of section 250(6) of the Act as it is a cryptic order wherein ld. CIT(A) has not dealt with the issues arising in the appeal on merits and the appeal was dismissed ex-parte by passing a non speaking and non reasoned order. The ld. Departmental Representative on the other hand relied upon the appellate order passed by ld. CIT(A) , but fairly submitted that the ld CIT(A) has not dealt with the issues on merits and passed an ex-parte order in-limine without discussing the issues on merit, and matter can be set aside to the file of ld. CIT(A) for fresh adjudication of the appeal of the assessee.

I have heard contentions of both the parties and perused the material on record. I have observed that the assessee is engaged in the business of publishing of hindi daily newspaper ‘Young Leader’ published from Ahmedabad, Gujarat. The Page No. 8 Dharmendra Jinendra Jain v. ITO assessee has claimed to have paid job charges to Times Press Pvt. Ltd. of Rs. 9,00,000/- during the impugned assessment year for printing of the aforesaid newspaper , but the same was disallowed by the authorities below on the ground that the name of the said company Times Press Pvt. Ltd. has been stuck by MCA from its record. The assessee has claimed that the name of M/s Times Press Private Limited was struck off by MCA from its records as the said company did not filed annual reports as well annual returns with MCA/ROC, and the said company has always choice to get it revived by Hon’ble NCLT. The name of the said company Times Press Private Limited continued to be struck off by MCA/ROC from its records. The assessee has filed newspaper dated 27.06.2024 as additional evidence before ITAT, wherein the assessee has shown that the said Times Press Pvt. Ltd. continues to be publishing the aforesaid newspaper even as of today. The assessee has also filed documents showing that the said company Times Press Private Limited is registered under the Shops and Establishment Act, Municipal Corporation bill in favour of Times Press Private Limited is also enclosed. Copy of electricity bill issued by Torrent Power Limited in favour of Times Press Pvt. Ltd. is enclosed. It is claimed that the said Times Press Private is continuously filing its return of income with Income Tax Department, and return of income for assessment year 2011-12 to 2021-22 are enclosed. Bank Page No. 9 Dharmendra Jinendra Jain v. ITO statements of Times Press Pvt. Ltd. are enclosed. The assessee has filed copy of newspaper dated 27th June, 2024 to demonstrate that the said newspaper is still published by the assessee on daily basis in Hindi from Ahmedabad, and the same is published by Times Press Pvt. Ltd. on behalf of the assessee. The assessee has also filed death certificate of Smt. Neelam Jain, Director of Times Press Pvt. Ltd. The Assessing Officer has invoked the provisions of section 40A(2)(b), and also expenses were disallowed on the ground that the said company is stuck off by MCA from its records . These evidences filed by the assessee requires verification by authorities below. Further , I have observed that the assessee did not appear before the ld. CIT(A) nor did complied with the notices of hearing issued by ld. CIT(A) . On its part, the ld. CIT(A) has passed an ex-parte order in-limine without deciding the issues on merits on ground of non prosecution of appeal by the assessee and simply assessment order was upheld , which appellate order is not in compliance with the provisions of section 250(6). The ld. CIT(A) has claimed to have issued notice of hearing to the assessee, but there is no mention of mode of service of notice nor whether the notices were served on the assessee. The power of ld. CIT(A) are co-terminus with the power of Assessing Officer which even includes power of enhancement(Section 251(1)(a)). The ld. CIT(A) is required to adjudicate the issues on merit in accordance with law , as is Page No. 10 Dharmendra Jinendra Jain v. ITO provided u/s. 250(6). The ld. CIT(A) has to state point for determination, his reasons for decision and the decision thereof as provided u/s 250(6). The assessee has claimed that the payment of job work charges of Rs. 9,00,000/- was made to Times Press Private Limited for publishing its daily hindi newspaper ‘Young Leader’ published from Ahmedabad, Gujarat. It is also claimed that the name of Times Press Private Limited was struck off by MCA from its register owing to non filing of annual report and annual returns, but the said company Times Press Private Limited is still running its business despite its name being struck off from the register of MCA. The CIT(A) has power to make such inquiries as he thinks fit and may also direct AO to make such enquiries and report to ld CIT(A), as is provided u/s 250(4), and to adjudicate issues arising in the appeal before him on merits in accordance with law. The CIT(A) could have issued summons u/s. 131 to the assessee or could have called for information from third parties such as Times Press Private Limited or from the office of MCA, GOI u/s. 133(6) , in case there was non- compliance on the part of the assessee. The ld. CIT(A) ought to have called for assessment record. There are other powers vested with ld. CIT(A) as is provided under the 1961 Act. The ld. CIT(A) has not rebutted the claim of the assessee, but dismissed the appeal of the assessee on ground of non filing of documents/details by the assessee and for non prosecution Page No. 11 Dharmendra Jinendra Jain v. ITO and simply upholding the additions. The ld. CIT(A) is required and obligated to pass order in compliance with the provisions of section 250(6), as ld CIT(A) is required to pass reasoned and speaking order on merits in accordance with law, but the appellate order passed by ld. CIT(A) is a cryptic non speaking and non reasoned appellate order which is not in compliance with provisions of Section 250(6) and is liable to be set aside. The appellate order passed by ld. CIT(A) is subject to further appeal with ITAT u/s 253. The appellate order passed by ITAT is subject to further appeal before Hon’ble High Court u/s 260A. The judgment and order passed by Hon’ble High Court is also subject to challenge before Hon’ble Supreme Court. Thus, the appellate order passed by ld. CIT(A) is not a final order, as it is subject to challenge before higher appellate authority. Thus, Reasons which weighed in the minds of the adjudicating authority while adjudicating appeal on merits of the issue are cardinal as the higher appellate authority can then adjudicate appeal on the issues arising in appeal before them, based on decision and reasoning of ld. CIT(A) in deciding the issues. If the ld. CIT(A) simply dismiss the appeal merely because the assessee did not appear before ld. CIT(A) or did not comply with the notices, in limine without adjudicating issues arising in the appeal on merits , such order is not sustainable in the eyes of law keeping in view provisions of Section 250(6) , and also higher appellate Page No. 12 Dharmendra Jinendra Jain v. ITO authorities will be deprived to see what weighed in the mind of the ld. CIT(A) while adjudicating appeal as it will be an order passed without reasoning on the issues on merits . There is not even mention of the service of the notice by ld. CIT(A) to the assessee. The ld. CIT(A) is not toothless as his powers are co-terminus with the powers of the AO. He could have made enquiries himself or have caused enquiries to be made by the AO and submit remand report to him to enable ld. CIT(A) to adjudicate the appeal(Section 250(4)). There are other vast powers vested under the 1961 Act with ld. CIT(A). It is equally true that the assessee also did not complied with the notices issued by ld. CIT(A) and did not file the requisite details/documents to support his contentions. The assessee is also equally responsible for its woes. Under these circumstances and fairness of both the parties, in the interest of justice, the appellate order of CIT(A) is set aside and the matter can go back to the file of ld. CIT(A) for fresh adjudication of the appeal of the assessee on merit in accordance with law after giving opportunities to both the parties. The ld. CIT(A) shall pass the order in compliance with the provision of section 250(6) of the Act on merit in accordance with law, in set aside proceedings ,after giving opportunity to both the parties in compliance with principles of natural justice. The assessee on his part is also directed to comply with the direction/notices of CIT(A) , and in case of Page No. 13 Dharmendra Jinendra Jain v. ITO failure of the assessee, the ld. CIT(A) shall be free to pass such order as deemed fit ex-parte in accordance with law on merits and after complying with the provisions of section 250(6) of the Act. Thus, the appeal of the assessee is allowed for statistical purposes and the matter is restored back to the file of ld. CIT(A) for fresh adjudication of the appeal of the assessee on merit in accordance with law. I clarify that I have not commented on the merits of the issues in the appeal. Thus, the appeal of the assessee is allowed for statistical purposes. I order accordingly.

In the result, the appeal of the assessee is allowed for statistical purposes.