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

This is assessee's appeal for assessment year 2008-09

against the order dated 18.03.2022 passed by the ld. CIT(A)

NFAC, Delhi.

appeal :

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.

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). 9. That the assessing officer erred on facts and in law in disallowing an amount of Rs.40,82,148, being interest on capital raised for business purpose, on the alleged ground that the same was not incurred wholly and exclusively for the purpose of business. 10. That the assessing officer erred on facts and in law in charging interest under section 234B of the Act.

assessee, a Private Limited Company, is engaged in the

business of providing services in the field of real estate and

management consultancy. For the year under consideration,

i.e., assessment year 2008-09, the assessee filed return of

income declaring income of Rs.2,99,46,380/-. The return

was processed u/s 143(1) of the Income Tax Act. Notice u/s

148 of the Act was issued on 25.03.2015, in response

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 ITA No.450/CHD/2018, 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.

ld. CIT(A) on 18.03.2022, dismissing the appeal of the

assessee.

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 ITA

No.450/CHD/2018, 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.

assessee and not disputed on behalf of the Department, the

order dated 18.03.2022, passed ex-parte qua the assessee, is

a non-est order, in as much as it was passed on 18.03.2022,

which was a Public Holiday, since the festival of Holi fell on

18.03.2022 and as such, 18.03.2022 was not a working day.

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.

ITA 436/CHD/2022 A.Y.2008-09 Page 16 of 19 ensuring your safety. Therefore, you may furnish the above written submission(s) and documents electronically in 'E-proceedings' facility through your account in e-Filing Website ( www.incometaxindiaefiling.gov.in) on or before 21/03/2022 at 03:51 PM. 6. In case the submissions are made through your authorised representative, scanned copy of duly authorised Vakalatnama be uploaded simultaneously.

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.

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.

and 2, the remaining grounds raised by the assessee are not

required to be gone into at this stage, nor was anything else

argued before us.

treated as allowed.

Order pronounced on 01.02.2024.

Sd/- Sd/-

(VIKRAM SINGH YADAV) (A.D.JAIN ) VICE PRESIDENT ACCOUNTANTMEMBER “Poonam” आदेश क� �ितिलिप अ�ेिषत/ Copy of the order forwarded to : 1. अपीलाथ�/ The Appellant 2.��यथ�/ The Respondent 3.आयकर आयु�/ CIT 4.िवभागीय �ितिनिध, आयकर अपीलीय आिधकरण, च�डीगढ़ / DR, ITAT, CHANDIGARH 5.गाड� फाईल/ Guard File आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar