M/S INTERNATIONAL CUSTOMER RELATED MANAGEMENT SERVICES PRIVATE LIMITED,CHANDIGARH vs. D.C.I.T., CIRCLE 6(1), MOHALI

आदेश/ORDER

PER A.D.JAIN, VICE PRESIDENT

NFAC, Delhi.

1. That on the facts and circumstances of the case and in law, the Commissioner of Income Tax (Appeals) ['CIT(A)'] erred in dismissing in limine, the appeal of the appellant against the order dated 31.03.2016 passed under ITA 436/CHD/2022 A.Y.2008-09 Page 2 of 19 section 143(3) r.w.s. 147 of the Income Tax Act, 1961 ('the Act') ex-parte, without affording adequate opportunity of being heard and denying inspection of assessment records, in gross violation of principles of natural justice.

2. That, the CIT(A) erred in dismissing the appeal in limine without adjudicating on merits the grounds of appeal

. On Merits

3. That on the facts and circumstances of the case and in law the reassessment order dated 31.03.2016 passed under section 143(3) r.w.s. 147 of the Act is without jurisdiction and bad in law. 4.1. That on the facts and circumstances of the case and in law, the reassessment order being passed beyond the period of limitation prescribed under section 153(2) of the Act is beyond jurisdiction and bad in law. 4.2. That on the facts and circumstances of the case and in law, the proceedings under section 147 of the Act having been initiated without there being "reason to believe' that income of the appellant had escaped assessment, the impugned order is illegal and bad in law. 4.3 That on the facts and circumstances of the case and in law, the reassessment proceedings under section 147 of the Act having being initiated merely on the basis of information received, without independent application of mind by the assessing officer to such information and forming opinion thereof, is illegal and bad in law.

4.4. That on the facts and circumstances of the case and in law, the assessing officer erred in making additions in respect of independent/unconnected issues, which did not form the basis of re-opening assessment under section 147 of the Act.

4. That the assessing officer erred on fapts and in law in assessing the income of the appellant at Rs.l00,29,36,642 as against declared income of Rs.2,99,46,380.

5. That the assessing officer erred on facts and in law in making addition of Rs.88,1 l,84,963on account of alleged 'undisclosed profits from sale of land' in the assessment year under consideration. 6.1. That the assessing officer erred on facts and in law in not appreciating that in terms of the Memorandum of Understanding, the appellant was entitled to receive only a fixed commission on consolidation of land. 6.2. That the assessing officer erred on facts and in law in alleging that the conveyance deeds in respect of land(s) purchased by the appellant from farmers/local residents were executed at rates which were much higher than the actual consideration paid for such land. 6.3. That the assessing officer erred on facts and in law in relying upon various ex-parte documents/ material collected behind the back of the appellant, without confronting the same to the appellant.

ITA 436/CHD/2022 A.Y.2008-09 Page 3 of 19 6.4 That the assessing officer also erred on facts and in law in estimating the average cost of land at Rs.l.05 crores per acre on an arbitrary basis, without appreciating that the value of every piece/stretch of land was distinct and dependent on various factors. 6.5. Without prejudice to the above, the assessing officer failed to appreciate that addition, if at all, was to be restricted only to the 'net payments' received in the assessment year under consideration. 6.6. Without prejudice to the above, the assessing officer erred in not allowing deduction in respect of indirect expenses incurred by the appellant in connection with procurement/consolidation of land.

7. That the assessing officer erred on facts and in law in disallowing Rs.7.03 crores, being non-compete fees paid by the appellant in the assessment year under consideration, by treating the same as non-genuine and not incurred for the purpose of business.

8. That the assessing officer erred on facts and in law in disallowing 'Biana Forfeiture Expenses' of Rs. 1,74,23,151, by treating the same as non-genuine and bogus in nature. 8.1. Without prejudice to the above, the assessing officer erred in not appreciating that out of the aforesaid forfeiture expenditure, an amount of Rs.1.1 crores was recovered and duly offered to tax in the subsequent assessment year(s).

ITA 436/CHD/2022 A.Y.2008-09 Page 4 of 19 whereof, the assessee filed a copy of the original return of income. The AO completed the re-assessment proceedings, making various additions/disallowances and assessing the income of the assessee at Rs.100,29,36,642/- vide order dated 31.03.2016. By virtue of order dated 24.01.2018, the CIT(A) dismissed the assessee's appeal ex-parte qua the assessee, rejecting the assessee's application seeking adjournment. There was, however, no order passed by the CIT(A) on the merits of the case. Vide order dated 10.10.2018, passed in the Chandigarh Bench of the Tribunal remitted the matter to the file of the ld. CIT(A), for decision afresh on merits, holding as under :

“3. We have gone through the order of the CIT(A). We find that the assessee on the date of hearing i.e. 24.01.2018 had sought adjournment on the ground that the assessee wanted to inspect the records. However, the Ld. CIT(A) rejected the said application of the assessee and simultaneously dismissed the appeal of the assessee for want of prosecution. Though it is the discretion of CIT(A) either to accept or reject the adjournment application taking into consideration the facts and circumstances of the case, however, in our view, the rejection of adjournment application does not automatically result into dismissal of the appeal itself. After rejecting the application of the assessee, the Ld. CIT(A) was supposed to decide the appeal on merits. Under the circumstances, the impugned order passed by the CIT(A)

ITA 436/CHD/2022 A.Y.2008-09 Page 5 of 19 dismissing the appeal of the assessee in limine without going into the merits of the case is not sustainable in the eyes of law. The same is accordingly set aside and the matter is restored to the file of the CIT(A) to decide the appeal of the assessee on merits after giving opportunity of hearing to the assessee. It is also directed that the assessee will not seek unnecessary adjournment and will actually participate in the proceedings before the CIT(A) as and when called for.

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

5. Challenging the impugned order, the ld. Counsel for the assessee has contended that the ld. CIT(A) has erred in dismissing, in limine, the appeal of the assessee filed against the order dated 31.03.2016 passed u/s 143(3) read with Section 147 of the Act, ex-parte qua the assessee, without affording adequate opportunity of being heard and denying inspection of the assessment records, in gross violation of the principles of natural justice; and that the ld. CIT(A) has erred in dismissing the assessee's appeal in limine without adjudicating the merits of the case.

ITA 436/CHD/2022 A.Y.2008-09 Page 6 of 19 Reference has been made to the list of dates and events as furnished before us on behalf of the assessee.

6.1 The ld. DR, on the other hand, has placed strong reliance on the impugned order.

6.2 The Tribunal, it is seen, while remitting the matter to the ld. CIT(A), vide order dated 10.10.2018, passed in observed, inter-alia, that rejection of adjournment application, as ordered by the ld. CIT(A) did not automatically result into dismissal of the appeal itself, and that after rejecting the assessee's application for adjournment, the ld. CIT(A) was supposed to decide the appeal on merits, whereas the ld. CIT(A) had dismissed the appeal of the assessee in limine without going into the merits of the case, which action was not sustainable in the eye of the law. The ld. CIT(A) was, as such, directed to decide the appeal of the assessee on merits after giving opportunity of hearing to the assessee.

7.1 In the impugned order, in para 4 thereof, the ld. CIT(A) has observed that the assessee did not make any submissions before them in response to various hearing notices issued; that the assessee had been seeking adjournments for the reasons that it had requested for ITA 436/CHD/2022 A.Y.2008-09 Page 7 of 19 certain certified documents from the office of the AO, which were yet to be received; that the fact remained that the assessee had failed to furnish any document/evidence in support of the various grounds of appeal raised; and that therefore, the explanation submitted by the assessee in support of the grounds of appeal remained unsubstantiated.

In para 5 of the order, the ld. CIT(A) has observed that in the earlier order dated 24.01.2018, it had been observed by the ld. CIT(A) that the assessee had not submitted any details and had been seeking adjournments on one pretext or the other, which order had been set aside and the matter had been remitted to the ld. CIT(A), to be decided on merits on giving opportunity of hearing to the assessee; that as directed by the Tribunal, hearing notices were issued to the assessee from time to time requesting the assessee to furnish relevant details in support of the grounds of appeal; that the assessee had, however, been seeking adjournments on the same ground as mentioned in the earlier order passed by the ld. CIT(A); that the Tribunal had categorically directed the assessee not to seek unnecessary adjournments; that the assessee had sought adjournments vide letters dated 01.09.2021 and 10.01.2022, from the contents whereof, it appeared that the assessee had been seeking inspection of ITA 436/CHD/2022 A.Y.2008-09 Page 8 of 19 relevant assessment records from the office of the Assessing Officer; that the assessee was allowed inspection of records on 21.10.2021; that the assessee noted down the requirements on the same day; that subsequently, the assessee sought certified copies of the assessment records for the first time on 21.11.2021, after the gap of one month; that a second reminder was sent to the AO on 21.l2.2021; that as per the details available on record, it appeared that the assessee had sought from the office of the AO, certified copies of assessment records, without specifying such documents/records; that it appeared that the assessee for the first time sought certified copies of specific documents from the AO vide letter/mail dated 09.01.2022, i.e.,, after a gap of more than two months after taking inspection of the assessment records; that it remained inexplicable as to what had prevented the assessee not to seek certified copies of the specific documents immediately after inspection of the assessment records; that the only plausible reason that came to his [ld. CIT(A)’s] mind was that the assessee was not interested in pursuing the appeal and therefore, he was somehow delaying the finalization of the appellate proceedings; that this was very much obvious from the non relevance of such documents for the purpose of deciding the ITA 436/CHD/2022 A.Y.2008-09 Page 9 of 19 appeal; that vide its said request letter dated 09.01.2022, the assessee had sought 155 documents; that he [the ld. CIT(A)] had carefully gone through these documents and had found that these documents appeared to be either already in possession of the assessee, or had no relevance for the purpose of deciding the appeal.

7.2 The ld. CIT(A) enlisted 27 of these documents, where after the ld. CIT(A) observed that the majority of these documents were not relevant for the purpose of the appellate proceedings; that further, the assessee was already having copies of various notices issued u/s 148/143(2)/142(1)/affixture orders, etc., as the assessee had not made any such objection before the AO while raising objections to the re-opening of the assessment, or during various submissions made before the AO; that this showed that the assessee was already in possession of such documents and the only reason for seeking such documents was to further delay the finalization of the appeal.

7.3 The ld. CIT(A) further observed that as regards the certified copies of various statements, it appeared that the assessee was already in possession of such documents, since the assessee never asked for copies of such statements in ITA 436/CHD/2022 A.Y.2008-09 Page 10 of 19 the course of the assessment proceedings; that Shri Sukhbir Singh Shergil was one of the Directors of the assessee company, it was not understandable as to why the assessee could not have obtained his statements, notices/letters, etc., issued to him by the Income Tax Department, if such documents were of any relevance to the appellate proceedings; that statements of Sarv Shri Joginder Preet Singh, Raman Uppal, Jatinder Singh Dua, etc., were recorded by the Vigilance Bureau, Punjab; that the Hon'ble Punjab & Haryana High Court had directed the Vigilance Department, Punjab to investigate the affairs of three companies, namely, Fateh Softech Pvt. Ltd., Fateh Homes Pvt. Ltd., and Fateh Resorts Pvt. Ltd., and also the association of these entities with Mr. Gurnihal Singh Pirzada; that it was during such investigation that statements of the said persons were recorded by the Vigilance Bureau, Punjab; that it was also a matter of record that Shri Sukhbir Singh Shergil, Director of the assessee company was having a copy of the complete report prepared by the Vigilance Bureau, Punjab; that this was clear from the letter of Shri Sukhbir Singh Shergil, dated 23.07.2015, addressed to the CBDT, which letter had been reproduced in para 10 of the assessment order; that it had been mentioned in the said letter that “typed

ITA 436/CHD/2022 A.Y.2008-09 Page 11 of 19 copy of final Enquiry Report of vigilance enquiry No. 10/13, Chandigarh is attached”; that this made it abundantly clear that one of the Directors of the assessee company was having a final Enquiry Report of the Vigilance Bureau, Punjab, as back as in July,2015; that it was during this investigation that statement of Shri Joginder Preet Singh, Shri Raman Uppal, Shri Jatinder Singh Dua, etc., were recorded, and yet, the assessee was seeking copies of such statements from the Department in the year 2022; that this was merely a ploy to derail the appellate proceedings; that it was also important that the assessee never asked for copies of any statements in the course of the appellate proceedings; that this implied that either these statements had no or very little relevance for the purpose of the assessment proceedings, or the assessee was in possession of such statements through one of its Directors, i.e., Shri Sukhbir Singh Shergil. The ld. CIT(A) observed that it was thus, abundantly clear that the assessee had sought unnecessary adjournments and had not cooperated in the appellate proceedings; that the assessee had failed to furnish any documentary evidence in support of the various grounds of appeal and the explanations thereto, if any; that the assessee had not abided by the directions issued by the ITA 436/CHD/2022 A.Y.2008-09 Page 12 of 19 Tribunal in its order dated 10.10.2018; and that it was in the background of these observations, that the appeal was being decided. The ld. CIT(A) thereafter went on to decide the appeal.

7.4 Thus, evidently, the ld. CIT(A) had, even before entering upon the merits of the grounds of appeal raised, had held that the documents, copies of which had been sought by the assessee from the office of the Assessing Officer, on inspection of the assessment record, were either already in the possession of the assessee, or were not relevant for purposes of the adjudication of the appeal before the ld. CIT(A). At page 17 of the impugned order, it has also been held by the ld. CIT(A) that the assessee had failed to furnish any documentary evidence in support of the various grounds of appeal and the explanation thereto, if any.

7.5 From the list of dates and events as furnished on behalf of the assessee, it is seen that e-mail dated 31.08.2021 had been addressed by the assessee to the DCIT, Circle 6(1), Mohali, requesting for inspection of assessment records. Vide letter dated 01.09.2021, the assessee had written to the ld. CIT(A) that letters dated 05.01.2018 and 31.08.2021 addressed to the AO, requesting for inspection of ITA 436/CHD/2022 A.Y.2008-09 Page 13 of 19 assessment records, had not been responded to. The assessee made a request for adjournment in the matter, in the absence of assessment records. Letter dated 04.10.2021 was sent by the assessee as a reminder to the DCIT, requesting for inspection of the assessment record.

Communication dated 12.10.2021 was received by the assessee from the Income Tax Department stating that the assessee could inspect the files on 21.10.2021. On 21.10.2021, the assessee inspected the assessment record and noted down the relevant documents needed to prepare the appeal. On 22.11.2021, the assessee addressed a letter to the DCIT through e-mail and registered post, requesting for certified copies of the assessment records. Such request was also uploaded on the e-proceedings portal. Letter dated 20.12.2021 was addressed by the assessee to the DCIT vide e-mail and Registered Post, again requesting for certified copies of the assessment records. This request was also uploaded on the e-proceedings portal on 28.12.2021. On 01.01.2022, notice was issued u/s 250 of the Income Tax Act, by the NFAC requiring the assessee to furnish written submissions on or before 10.01.2022, including, inter alia, the electronically filed Form 35 containing the grounds of appeal, statement of facts and relevant assessment order.

ITA 436/CHD/2022 A.Y.2008-09 Page 14 of 19 Response dated 10.01.2022 was filed by the assessee before the NFAC, stating that relevant certified copies of the assessment records could not be retrieved for suitable preparation of the matter. The assessee also uploaded therewith, Form 35 dated 30.04.2016, Statement of Facts, Grounds of appeal and the assessment order appealed against. Reminder letters dated 24.01.2022, 07.02.2022, 21.02.2022 and 26.02.2022 were addressed by the assessee to the DCIT, vide e-mail and Registered Post, again requesting for certified copies of the assessment record. On 11.03.2022, notice u/s 250 of the Act was issued by the NFAC to the assessee, requiring the assessee to submit written submissions on or before 21.03.2022. On 13.03.2022, a reminder letter was again addressed to the DCIT vide e-mail and registered post, once again requesting for certified copies of the assessment record. On 15/16.03.2022, partial records were provided to the assessee. On 18.03.2022, an ex-parte order was passed u/s 250 read with Section 254 of the Act by the NFAC.

7.6 The above stated factual position is patent on record and is not disputed by the Department before us. Copies of ITA 436/CHD/2022 A.Y.2008-09 Page 15 of 19 all the documents referred to have been placed on record before us by way of the Paper Book filed.

9.1 Then, vide notice (supra) dated 11.03.2022, issued u/s 250 of the Act, the assessee had been required by the NFAC to submit written submissions on or before 21.03.2022. A copy of the said notice has been appended at pages 31 to 33 alongwith the assessee’s List of Dates and Events. The relevant paras 4 to 7 thereof read as follows :

“4. In support of your Grounds of Appeal and matter discussed by appellate authority in their order no dated 31/03/2016 you are requested to furnish Ground-wise written submission and response, along with supporting documentary evidence(s), if any. Further, you are also requested to provide the information/clarification/submission/documents as per annexure.

9.2 Therefore, evidently, the assessee was to file written submissions on or before 21.03.2022. However, the impugned order got to be passed, in high haste, before the expiry of the said date of 21.03.2022, i.e., on 18.03.2022, rendering the order passed by the ld. CIT(A) to be an order passed in flagrant violation of the stipulation/requirements contained in the notice dated 11.03.2022.

10. Apropos the observations of the ld. CIT(A) to the effect that the documents, the certified copies of which were sought by the assessee from the office of the Assessing Officer, were either already in the possession of the assessee, or were not relevant for the purposes of the ITA 436/CHD/2022 A.Y.2008-09 Page 17 of 19 decision of the appeal pending before the ld. CIT(A), it is trite that it is not for the ld. CIT(A), in the absence of material on record leading to such a conclusion, to hold that these documents were in possession of the assessee.

Likewise, it is not within the purview of the ld. CIT(A) to conclude that the documents were not relevant for the purposes of the decision of the appeal. It is entirely only for the assessee to consider as to whether the documentary evidence which he seeks to rely on is relevant or not. It is only after having considered the said evidence that the Court [CIT(A)] may decide as to whether it is relevant for the purposes of the decision of the appeal, or not. Shutting out the supply of certified copies of the assessment record to the assessee is nothing other than violation of the principles of natural justice, in that thereby, the assessee though legally entitled to it, has been deprived of documentary evidence available on record of the AO. The adjournments too, are not shown to have been sought as unnecessary adjournments. It is, due to the fact that the certified copies of the assessment record, as sought for by the assessee from the office of the AO, were only partially supplied to the assessee, despite the assessee having given repeated numerous reminders requesting supply of such certified

ITA 436/CHD/2022 A.Y.2008-09 Page 18 of 19 copies of the assessment record, that the adjournments (two in number) were sought.

11.1 On considering the above conspectus of the matter, the grievance of the assessee by way of Ground Nos. 1&2, is found to be justified . The order passed by the ld. CIT(A) is an order passed in violation of the principles of natural justice. It is, as such, wholly unsustainable in the eye of the law. We would have immediately quashed the order passed by the ld. CIT(A), but for the fact that in such an event, the assessment order would stand revived, causing undue detriment to the assessee. This can neither be countenanced, nor is it the purpose of the law.

11.2 Accordingly, the order under appeal is set aside and the matter is remanded to the file of the ld. CIT(A), to be decided afresh in accordance with law on affording due, adequate and effective opportunity of hearing to the assessee, by deciding the matter on merits in the light of the material to be produced by the assessee before the ld. CIT(A). Ordered accordingly.

11.3 It is clarified that the ld. CIT(A) shall pass the order expeditiously, i.e., within a period of three months from the ITA 436/CHD/2022 A.Y.2008-09 Page 19 of 19 date of receipt of this order. Since partial allowance of the request made by the assessee for certified copies of the assessment order is stated to have been made, the assessee shall list out the documents for which it has not received the certified copies applied for. These certified copies shall be supplied to the assessee immediately on application by the assessee in this regard.

Order pronounced on 01.02.2024.