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Income Tax Appellate Tribunal, RAIPUR BENCH “SMC”, RAIPUR
Before: SHRI RAVISH SOOD
आदेश / ORDER
PER RAVISH SOOD, JM:
The present appeal filed by the assessee is directed against the order passed by the Commissioner of Income-Tax (Appeals), National Faceless Appeal Center (NFAC), Delhi, dated 13.06.2023, which in turn arises from the order passed by the A.O under Sec. 147 r.w.s.144 of the Income-tax Act, 1961 (in short ‘the Act’) dated 12.12.2018 for the assessment year 2011-12. The assessee has assailed the impugned order on the following grounds of appeal:
“1. The first ground of appeal is against the Ground No.1 filed before the CIT(Appeals), which has not been allowed. The learned Commissioner of income Tax (Appeals) – National Faceless Appeal Centre has erred in law, on facts and in the circumstances of the case by not allowing this ground of appeal. The entire addition of Rs.20,00,000 needs to be deleted.
2. The second ground of appeal is against the Ground No.2 filed before the CIT(Appeals), which has not allowed. The learned Commissioner of income Tax (Appeals) – National Faceless Appeal Centre has erred in law, on facts and in the circumstances by not giving specific directions to assessing officer as not to levy any tax on the interest income of Rs.1,53,786 being below the basic exemption limit of Rs. 2,50,000.
3. The Third ground of appeal is against the Ground No.3 filed before the CIT(Appeals), which has not been allowed by the CIT(Appeals). The directions need to be given to assessing officer to give consequential relief in respect of levy of Interest under section 234B and 234C of the Act.
4. The Fourth ground of appeal is against the Ground No.4 filed before the CIT(Appeals), which has not been allowed by the CIT(Appeals). The directions need to be given to assessing officer for not levying any penalty under section 271(1)(c) of the Act as there is no concealment of facts.
5. The ground No.5 of appeal is an additional ground which was not raised earlier before the first appellate authority. The assessing officer has determined tax payable of Rs.14,42,320 as mentioned in 3 Ajay Kumar Kanojia Vs. ACIT, Circle-2(1), Raipur the demand notice dated 12.12.2018. The assessing officer needs to be given directions to give calculation sheet for tax payable of Rs.14,42,320 as mentioned in the demand notice dated 12.12.2018.
6. The ground No.6 of appeal is an additional ground which was not raised earlier before the first appellate authority. The directions need to be given to the assessing officer to give credit of tax deducted at source Rs.39,313 as appearing in the Form 26 (Annual Tax Statement) under Section 203AA of the Income Tax Act for Assessment Year 2011-12.
7. The Appellant, craves leave of the Hon’ble Tribunal to add or amend any grounds of appeal before the appeal is heard or disposed of.”
Also, the assessee has raised an additional ground of appeal which reads as under:
“Without prejudice to the merits of the case, the assessment made under section 147 read with section 144 of the Income Tax Act is bad in law under the circumstances of the case and the assessment order dated 12.12.2018 needs to be quashed.”
On the basis of information that though the assessee had made investment in mutual funds amounting to Rs.20 lacs and also earned interest income of Rs.1,53,786/- during the year under consideration but had not file his return of income, the A.O initiated proceedings u/s.147 of the Act. Notice u/s.148 of the Act dated 27.03.2018 was issued by the A.O. As the assessee failed to make necessary compliances and did not file his return of income despite reminders, therefore, the A.O, finding no other alternative, framed the assessment vide an ex- parte order u/s.144 of the Act dated 12.12.2018. As the assessee had failed to effect necessary compliance and did not furnish any explanation, therefore, the A.O made additions of Rs.20 lacs towards purchase of mutual funds units a/w.
4 Ajay Kumar Kanojia Vs. ACIT, Circle-2(1), Raipur interest income of Rs.1,53,786/- and determined the assessee’s income at Rs.21,53,786/-.
Aggrieved the assessee carried the matter in appeal before the CIT(Appeals). As the assessee had failed to participate in the course of the proceedings before the CIT(Appeals) and did not upload any submission on the ITBA portal, therefore, the CIT(Appeals) after deliberating on the facts as were discernible from the records proceeded with and dismissed the appeal of the assessee. For the sake of clarity, the relevant observations of the CIT(Appeals) are culled out as under:
“5. DECISION: I have carefully considered the facts of the case, the grounds of appeal and the statement of facts, made during the course of the appellate proceedings. The hearing in this case was fixed on a number of occasions as mentioned in the para 1 above but no written submissions were filed by the assessee. From the above discussion and the conduct of the assessee, it appears that the assessee does not wish to pursue appeal filed by her. The appeal being very old, it cannot be kept pending indefinitely. Accordingly, I proceed to pass the order ex-parte on the basis of material available on record. 5.1 In this case, the AO was in receipt of an information that the assessee had made investments in mutual funds amounting to Rs.20,00,000/- any he had also earned interest income of Rs.1,53,786/- during the F.Y. 2010-11 relevant to A.Y.2011-12. Since the assessee had failed to file the return of income for the said A.Y. u/s.139(1) of the Act, the AO initiated proceedings u/s. 147 of the Act by issue of notice u/s 148 of the Act on 27.03.2018. after recording the reasons and obtaining necessary approval from the competent authority. In response to the said notice, no return of income was filed by the assessee. The assessee did not respond to the subsequent statutory notices issued by the AO. Thereafter, the AO issued a final show cause dated: 07.12,.2018 which was also not responded to by the assessee. Therefore, in view of non-cooperative attitude of the assessee, the AO had no other alternative but to complete the assessment proceedings as per material/information available on record and pass an ex-parte order u/s.144 of the Act. Accordingly, the AO on the basis of information available with the department that the assessee had made investments in mutual funds amounting to Rs.20,00,000/- and he had also 5 Ajay Kumar Kanojia Vs. ACIT, Circle-2(1), Raipur earned interest income of Rs.1,53,786/- during the F.Y. 2010-11 relevant to A.Y.2011-12 added these amounts to the income of the assessee and assessed the income of the assessee at Rs.21,53,786/- for A.Y.2011-12. 5.2 On the other hand, it is the contention of the assessee that he is a citizen of UK and the investments in mutual funds were made out of tax paid income of the assessee earned in UK and the AO did not make inquiry with the bank to find out the source assessee's investments. I find that the assessee has admitted to have made the investments as determined and held by the AO in his assessment order, by stating in the statement of facts filed along with Form No.35. However, no roof of earning of income in UK and transfer of funds to India was provided by the assessee either before the A.O or during the appellate proceedings. The assessee has been non cooperative during the assessment proceedings as well as during the appellate proceedings resulting in ex-parte orders at assessment stage as well as at the appellate stage. Ample opportunities were afforded to the assessee by the AO during the assessment stage and a final show cause was also issued by the AO. Similarly, ample opportunities were afforded to the assessee during the appellate stage as well. The assessee chose not to respond to any of the notices. In view of the foregoing, I have no reason to interfere with the order of the AO in assessing the income of the assessee for A.Y.2011-12 at Rs.21,53,786/- on account of investments in mutual funds amounting to Rs.20,00,000/- and interest income of Rs.1,53,7861- during the F.Y. 2010- 11 relevant to A.Y.2011-12. Hence, the grounds of appeal of the assessee are Dismissed.
6. The Ground of appeal No.3 pertains to the charging of interest u/s.234B and 234C of the Act. These grounds are consequential in nature. The AO is directed to levy interest as per law. The ground is allowed for statistical purpose.
7. Vide Ground of appeal No.4, the appellant has challenged the initiation of penalty proceedings u/s.271(1)(c) of the Act. The AO has not yet passed the penalty order u/s.271(1)(c) of the Act. The cause of grievance is yet to arise. Hence, the ground is premature. Accordingly, the ground is dismissed.
8. In the result, the appeal of the assessee is Dismissed.”
The assessee being aggrieved with the order of the CIT(Appeals) has carried the matter in appeal.
6 Ajay Kumar Kanojia Vs. ACIT, Circle-2(1), Raipur
The assessee has filed before me an application seeking admission of additional evidences a/w. liberty to place on record certain documents which could not be filed before the lower authorities, as under:
(i) Mutual Fund statement of the assessee for the period 01.04.2010 to 31.03.2011, Page 11-12 of APB; (ii) Copy of work permits (UK) dated 05.12.2005, Page 18-20 of APB; (iii) Employees National Insurance Number, Page 21 of APB; (iv) NHS statement a/w. self-assessment statement, Page 22-23 of APB; (v) Savings-Account-NRO A/c No.499-302156-006 for the period 01.04.2010 to 31.09.2010, Page 24-34 of APB. (vi) Savings Account-NRE A/c. No.499-302156-007 with HSBC Bank, Page 35 of APB; and (vii) Copy of acknowledgement of application for adjournment uploaded with CIT(Appeals) dated 19.06.2023, Page 36 of APB.
Per contra, the Ld. Departmental Representative (for short ‘DR’) objected to the admission of the fresh additional documentary evidence. It was submitted by him that as the assessee had been afforded sufficient opportunity to place on record the aforesaid documents which he had failed to do, therefore, the same did not merit admission at this stage.
I have given a thoughtful consideration and find substance in the claim of the Ld. AR that the assessee had remained divested of a sufficient opportunity to place on record the aforesaid documentary evidence in the course of proceedings before the lower authorities. As the documentary evidences filed by the assessee
7 Ajay Kumar Kanojia Vs. ACIT, Circle-2(1), Raipur will have a strong bearing on the adjudication of the issue before me, therefore, I have no hesitation in admitting the same.
Shri Pankaj Rai Gupta, Ld. Authorized Representative (for short ‘AR’) for the assessee submitted that as the assessee who is doctor by profession settled abroad for last many years had remained unaware about the proceedings before the lower authorities, therefore, for the said bona fide reason he had failed to put up an appearance and place on record aforementioned documents before them. It was submitted by the Ld. AR that as the assessee had remained divested of a sufficient opportunity for placing on record the aforesaid documents which have a material bearing on the adjudication of the issue in hand, therefore, in all fairness, the same be admitted. Elaborating his aforesaid contention, the Ld. AR submitted that not only the assessee had been visited with an ex-parte order u/s.144 of the Act which was framed without validly putting him to notice but also had suffered dismissal of the appeal by the first appellate authority without sufficient opportunity of being heard.
Apropos the merits of the case, it was submitted by the Ld. AR that both the lower authorities had grossly erred in most arbitrarily treating the investment made by the assessee towards mutual funds units of Rs.20 lacs as the unexplained income of the assessee. The Ld. AR submitted that the investment towards purchase of the mutual funds units was sourced from opening balance of Rs.9,52,267/- on 01.04.2010 in assessee’s NRO A/c. No. 499-302156-006 and maturity proceeds of fixed deposits that were liquidated and credited in the said
8 Ajay Kumar Kanojia Vs. ACIT, Circle-2(1), Raipur bank account during the year i.e. on 27.04.2010. The Ld. AR had drawn my attention to the savings account-NRO A/c. No. 499-302156-006 held by the assessee with HSBC Bank, Branch: Noida. The Ld. AR specifically took me through the opening balance in the aforesaid bank account and maturity proceeds of the FDRs that were credited on liquidation of the fixed deposits in the said bank account which, thereafter, were utilized for making investment of Rs.20 lacs towards purchase of units of mutual funds. On the basis of his aforesaid contention, the Ld. AR submitted that now when the investment towards purchase of mutual funds units was made out of the accumulated savings of the preceding years and duly explained source for the year under consideration, i.e., maturity proceeds of FDRs, thus, there was no justification for the A.O to have held any part of the said investment as having been sourced out of unexplained income of the assessee.
The Ld. AR also submitted that the assessee had on 28.11.2008 executed FDRs of Rs.13 lacs from his savings account-NRE A/c. No. 499-302156-007 with HSBC bank, Branch: Noida, which, thereafter, had matured at Rs.13.67 lacs (supra) and was credited in the assessee’s savings account-NRO A/c. No. 499- 302156-006 with HSBC bank, Branch : Nodia. The Ld. AR in order to fortify his aforesaid claim had drawn my attention to assessee’s NRE A/c. No. 499-302156- 007 (supra), Page 35 of APB. On the basis of the aforesaid facts, it was submitted by the Ld. AR that now when the source of the investments made by the assessee towards purchase of mutual funds units of Rs.20 lacs was totally out of his
9 Ajay Kumar Kanojia Vs. ACIT, Circle-2(1), Raipur explained sources, therefore, addition to the said extent made by the A.O by treating the same as assessee’s unexplained income was liable to be vacated.
Per contra, the Ld. DR relied on the orders of the lower authorities.
I have heard the Ld. Authorized Representatives of both the parties, perused the orders of the lower authorities as well as material available on record.
Controversy involved in the present appeal lies in a narrow compass, i.e., sustainability of the addition of Rs.20 lacs made by the A.O by treating the investment made by the assessee towards purchase of units of mutual funds as having been sourced out of his unexplained income. As is discernible from the records, the assessee had made investment of Rs.20 lacs towards purchase of mutual funds units, as under:
Date Particulars Amount 23rd April, 2010 Investment in Reliance Rs.2 lacs Vision Fund-Growth plan (Growth option) 23rd April, 2010 Investment in IDFC Rs.2 lacs Premier Equity Fund- Growth 28th April, 2010 Investment in HDFC Rs.2 lacs Equity funds-Growth 28th April, 2010 Investment in Fidelity Rs.2 lacs Equity Fund-growth 28th April, 2010 Investment in HDFC Top Rs.2 lacs 200 Growth 29th September, 2010 Investment in Rs.2 lacs Prudential ICICI Infrastructure fund
10 Ajay Kumar Kanojia Vs. ACIT, Circle-2(1), Raipur
Growth 29th September, 2010 Investment in DSP Rs.2 lacs BlackRock Small & Midcap Fund- Institutional plan- Growth 30th September, 2010 Investment in HDFC Mid Rs.2 lacs Cap Opportunities fund- Growth 30th September, 2010 Investment in DSP Rs.2 lacs BlackRock Small & Midcap Fund-Regular plan 30th September, 2010 Investment in Reliance Rs.2 lacs Equity Opportunities Fund-Growth plan Total Rs.20 lacs
Admittedly, it is a matter of fact borne from record that the entire investment towards purchase of mutual funds units of Rs.20 lacs were sourced out of the withdrawals made from the assessee’s savings account-NRO A/c. No. 499- 302156-006 with HSBC bank, Branch: Noida. Also, it is a fact that the aforesaid investments made by the assessee were primarily sourced out of the opening balance of Rs.9.52 lacs (approx.) in his aforesaid savings bank-NRO A/c. No. 499- 302156-006 as on 01.04.2010 a/w. maturity proceeds of FDRs aggregating to Rs.13.67 lacs (approx.) that were credited in his aforesaid bank account, as under:
11 Ajay Kumar Kanojia Vs. ACIT, Circle-2(1), Raipur
I have given a thoughtful consideration and though find substance in the claim of the Ld. AR that the source of the investment of Rs.20 lacs towards purchase of mutual funds units by the assessee were sourced out of his duly explained sources, i.e., opening balance in his savings account-NRO A/c. No. 499- 302156-006 with HSBC bank, Branch: Noida of Rs.9.52 lacs (approx.) and maturity proceeds of FDRs of Rs.13.67 lacs (supra), but at the same time I cannot remain oblivion of the fact that aforesaid bank account statements as had been filed before me for the first time, were not there before the lower authorities. Considering the aforesaid facts, I am of the view that the matter in all fairness requires to be restored to the file of the A.O who is directed to readjudicate the matter after considering the aforesaid additional documentary evidence that has been filed by the assessee before me. Needless to say, the A.O in the course of set-aside proceedings shall afford a reasonable opportunity of being heard to the assessee who will remain at a liberty to further substantiate his claim/contentions on the basis of fresh documentary evidence.
12 Ajay Kumar Kanojia Vs. ACIT, Circle-2(1), Raipur
In the result, appeal of the assessee is allowed for statistical purposes in terms of the aforesaid observations.