SHAILESHBHAI KANAIYALAL MEHTA,VADODARA vs. THE DY. CIT, CIRCLE-3(1), VADODARA

The grounds of appeal are as under:-

The assessee filed his return of income for assessment year 2010-11 declaring therein total income of Rs. 20,26,230/- . The assessee is engaged in the business of providing rooms to students popularly known as hostel in proprietary concern, namely Mehta Girls Hostel. As per information received from the DCIT, Central Circle, Baroda-2 on 23-03-2017 which was conveyed/communicated to the Assessing Officer that during the course of search of Sigma Group, a loose paper filed (Annexure A-1) was seized from the residence Shri Mahesh M Kachiya. The loose paper filed contains noting of Rs. 32,25,000/- being cost of house of Krishna Leela, VIP road, Vadodara, purchased for Shri Manish B. Shah on 02-03-2010. Particulars of payment made towards purchase of sale of property revealed that Shri Shailesh Kanaiyalal Mehta was Page No. 4 Shaileshbhai Kanaiyalal Mehta vs. Dy. CIT paid Rs. 16,00,000/- cash on 16-01-2010 which is informed to be not accounted in the books. After recording reasons for initiating proceedings u/s. 147 of the Act on 25-03-2017 and approval for reopening, the Assessing Officer issued notice u/s. 148 on 28-03-2017. In response to the said notice, the assessee requested to treat the original return of income filed in compliance to the notice u/s. 148. Further, notice u/s. 143(2) of the Act was issued on 07-08-2017 and duly served upon the assessee. Notice u/s. 142(1) was issued on 25-10- 2017 and was duly served upon the assessee. In response to the notices, the chartered accountant who was duly authorized by the assessee attended the assessment proceedings and furnished the requisite details. During the assessment proceedings, a show cause notice was issued on 08-12-2017 thereby asking the assessee to give the particulars of information including the details of bank account statement mentioned in the said notice. The said show cause notice mentioned that the date of compliance was fixed from 15th December, 2017. The Assessing Officer passed the assessment order on 12-12-2017 which is prior to compliance date given under the notice dated 08-12-2017. The Assessing Officer made addition of Rs. 40,25,806/- being closing cash on hand and addition of Rs. 16,00,000/- being receipts of funds on sale of property as per loose paper sheet seized during search operations from the premises of Sigma Group.

Being aggrieved by the assessment order, the assessee filed appeal before the CIT(A). The CIT(A) dismissed the appeal of the assessee.

The ld. Authorized Representative submitted that the assessee was not given proper opportunity and the sufficient time to represent his case before the Assessing Officer as the compliance of the show cause notice was on the later date but the assessment was passed prior to the said compliance date. The ld. Authorized Representative submitted that the CIT(A) has also not taken cognizance of the additional evidence and therefore the matter may be remanded back to the file of Assessing Officer for proper adjudication of the evidences submitted by the assessee before the CIT(A).

The ld. Departmental Representative relied upon the assessment order and the order the CIT(A).

We have heard both the parties and perused all the relevant materials available on record. It is pertinent to note that the assessee was given the time frame for compliance of the show cause notice dated 08-12-2027 but the Assessing Officer passed the order prior to the said compliance date which amounts to not following principles of natural justice and not allowing the assessee to represent his case fully and Page No. 6 Shaileshbhai Kanaiyalal Mehta vs. Dy. CIT properly as per due process of law. Therefore, it will be proper to remand back this matter to the file of the Assessing Officer for proper adjudication of the evidences which were filed by the assessee before the CIT(A) and after taking cognizance of the same as well as verifying the same and adjudicate as per Income Tax Statute. Needless to say, the assessee be given opportunity of hearing by following principles of natural justice.

In the result, the appeal of the assessee is partly allowed.