M/S SHIVANG CARPETS PVT. LTD.,,BHADOHI vs. DY. CIT, RANGE - 01, VARANASI

This appeal, filed by assessee, being is directed against an appellate order dated 04.09.2019 in Appeal No.10476/CIT(A) / VNS/2016-17/269 passed by learned Commissioner of Income Tax (Appeal), Varanasi(hereinafter called "theCIT(A)"),for assessment year(ay):2014-15, the appellate proceedingshad arisen before learned CIT(A) from assessment order ITA No.245/Vns/2019 Assessment Year: 2014-15 Shivang Carpets Private Limited dated 18.11.2016 passed by learned Deputy Commissioner of Income- tax(hereinafter called the “AO”), Circle-1, Varanasi, U.P. , u/s. 143(3) of the Income- tax Act, 1961 (hereinafter called "the Act") foray: 2014-15 .We have heard both the partiesin Open Court through physical hearing mode.

The brief facts of the case are that the assessee is engaged in the trading ,manufacturing and exports of carpets. The case of the assessee was selected by Revenue for framing scrutiny assessment u/s 143(3) read with Section 143(2) of the 1961 Act, which culminated into an assessment order dated 18.11.2016 passed by AO u/s. 143(3) of the 1961 Act , wherein additions to the income of the assessee to the tune of Rs.1,75,00,000/- were made by the AO owing to purchase payable remaining un-verifiable. The assessee failed to produce books of accounts before the AO during assessment proceedings, and submitted that all its books of accounts were burnt in blaze due to short circuit on 13th and 14th August, 2016 . The assessee was asked by the AO to furnish details of purchase payable, did not furnish any details before the AO. The AO even confronted the assessee that the purchase payable to the tune of Rs. 73.06 crores is not totally acceptable , but the assessee did not submitted any details and express its helplessness to produce any details of purchase payable , which led AO to make additions to the tune of Rs. 1,50,00,000/- by making disallowance out of purchase payable . While making computation of total assessed income in assessment order, the AO made additions to the returned loss , of Rs. 1,75,00,000/- on account of disallowance of purchase payable. This assessment order was challenged by assessee by filing first appeal before ld. CIT(A) , who was pleased to dismiss the appeal filed by the assessee, vide appellate order dated 04.09.2019. While dismissing the appeal of the assessee, the ld. CIT(A) passed an ex-parte order as none appeared on behalf of the assesse, while the ld. CIT(A) stated in its appellate order that as many as eleven Assessment Year: 2014-15 Shivang Carpets Private Limited opportunities of hearings were granted to the assessee, but the assessee either filed adjournment applications or did not attended the hearings on the date fixed for hearing, The ld. CIT(A) was pleasedto pass its appellate order on 04.09.2019 dismissing the appeal of the assessee. However , the ld. CIT(A) corrected the mistake made by the AO and sustained the additions to the tune of Rs. 1,50,00,000/- instead of Rs. 1,75,00,000/- as erroneously made by the AO.

Aggrieved by the aforesaid appellate order passed by ld. CIT(A), the assessee has now come in appeal before theIncome Tax Appellate Tribunal, Varanasi (hereinafter called “ the tribunal”) . The appeal was heard by Division Bench of the tribunal in Open Court through physical hearing mode. The contentions were raised by both the parties before the Bench.

We have heard both the rival parties and perused the material on record. The brief facts of the case are that the assessee is engaged in the trading, manufacturing and exports of carpets. The case of the assessee was selected by Revenue for framing scrutiny assessment u/s 143(3) read with Section 143(2) of the 1961 Act, which culminated into an assessment order dated 18.11.2016 passed by the AO u/s. 143(3) of the 1961 Act , wherein additions to the income of the assessee to the tune of Rs.1,75,00,000/- were made by the AO owing to purchase payable remaining un-verifiable. The assessee failed to produce books of accounts before the AO,and submitted before the AO that all its books of accounts were burnt in blaze due to short circuit on 13th and 14th August, 2016 . The assessee was asked by the AO to furnish details of purchase payable, but the assessee did not furnish any details before the AO. The AO even confronted the assessee that the purchase payable to the tune of Rs. 73.06 crores is not totally acceptable , but the assessee did not submitted any details and express its helplessness to produce any details of purchase payable , which led AO to make additions to the tune of Rs. 3 Assessment Year: 2014-15 Shivang Carpets Private Limited 1,50,00,000/- by disallowing out of purchase payable . While making computation of total assessed income in assessment order, the AO made additions to the returned loss , of Rs. 1,75,00,000/- on account of disallowance of purchase payable. We have observed that ld. CIT(A) has dismissed the appeal of the assesseewithout discussing on merits of the additions as were made by the AO on account of disallowance of purchase payable to the tune of Rs. 1,50,00,000/- ( error committed by the AO by making addition to the tune of Rs. 1,75,00,000/- to returned loss, was corrected by ld. CIT(A) ) which stood added to the income of the assesseeby the AO, and the appeal of the assesseestood dismissed in limineex- parte by ld.CIT(A) without passing a reasoned and speaking order on merits of the issue involved in the appeal.We have also observed that as many as eleven notices were issued by ld. CIT(A) fixing date of hearing , but the assessee either sought adjournment or did not attended the proceedings before ld. CIT(A). We have observed that ld. CIT(A) dismissed the appeal of the assessee ex-parte in limine without discussing the issues on merits which were raised by the assessee in its appeal filed before ld. CIT(A). The reference is drawn to provision of Section 250(6) of the Act ,whereby it is incumbent upon ld. CIT(A) to decide the appeal on merits , after recording his reason for the decision arrived on the issues raised by the assessee in its appeal , but the appellate order in the instant case was passed by ld. CIT(A) ex-parte in limine without discussing the issues on merits, which makes this order unsustainable in the eyes of law. The assessee is equally responsible for its woes as the assessee has to be vigilant after filing its appeal. Despite being granted as many as eleven opportunities of hearing by ld. CIT(A) during the course of appellate proceedings , the assessee did not either attend hearing or merely sought adjournments. Thus, the assessee is equally responsible for its woes. Thus keeping in view the entire facts and circumstances of the case as ITA No.245/Vns/2019 Assessment Year: 2014-15 Shivang Carpets Private Limited discussed above and in fairness to both the parties with a view to grant justice, we are inclined to set aside the appellate order dated 04.09.2019 passed by ld. CIT(A) and restore the matter back to the file of ld. CIT(A) for fresh adjudication of theassessee’sappeal filed before ld. CIT(A), on merits in accordance with law. Needless to say that ld. CIT(A) will give proper and adequate opportunity of hearing to the assessee in set aside remand proceeding in accordance with the principle of natural justice and in accordance with law.The ld. CIT(A) is directed to pass reasoned and speaking order, while denovo adjudicating the appeal of the assessee. The evidences /explanations submitted by the assessee shall be admitted by ld. CIT(A) in accordance with law and be adjudicated on merits in accordance with law. Needless to say that ld. CIT(A) has powers co-terminus with the powers of the AO. The appeal of the assessee is allowed for statistical purposes. We order accordingly.

In the result, appeal of the assessee in for ay: 2014- 15is allowed for statistical purposes. Order pronounced on21/04/2022at Varanasi, U.P.