Case Law Details
Redex Enterprise Vs ITO (ITAT Ahmedabad)
In the case of Redex Enterprise Vs Income Tax Officer, the Income Tax Appellate Tribunal (ITAT) Ahmedabad ruled in favor of the assessee by setting aside an assessment order involving a substantial addition of ₹77.47 crore under Section 69C of the Income Tax Act. The case pertains to the Assessment Year 2020–21, wherein the assessee, a partnership firm providing manpower services, had filed a return declaring income of ₹33.46 lakh. During scrutiny, the Assessing Officer (AO) questioned the genuineness of purchases from certain vendors, alleging that these suppliers either did not file income tax returns or declared significantly low turnovers. The assessee failed to fully comply with notices due to time constraints and attempted to upload a reply via the grievance portal after the deadline. Despite this, the AO proceeded with the assessment and added the entire purchase amount as unexplained expenditure without considering the assessee’s late submission.
The assessee challenged the order before the Commissioner of Income Tax (Appeals) [CIT(A)] and submitted additional evidence under Rule 46A. However, the CIT(A) dismissed the appeal without admitting these documents or obtaining a remand report from the AO. The ITAT observed that both the assessment and appellate orders were passed in violation of the principles of natural justice. The Tribunal noted that the AO ignored the assessee’s attempt to respond via the grievance portal and finalized the assessment hastily. Furthermore, the CIT(A) did not independently verify the new evidence or allow it to be examined by the AO, leading to procedural unfairness. Considering these shortcomings, the ITAT remanded the matter back to the AO for fresh adjudication with instructions to examine the additional evidence and provide the assessee a fair opportunity to present its case.
This decision underscores the importance of procedural fairness and due opportunity in tax assessments. The ITAT emphasized that assessment proceedings must adhere to the principles of natural justice, especially when large tax demands are involved. The matter will now be re-assessed by the Jurisdictional Assessing Officer, and the assessee is expected to cooperate fully by submitting all relevant documents during the de-novo proceedings.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
This appeal is filed by the assessee as against the appellate order dated 12-03-2024 passed by the Commissioner of Income Tax, (Appeals), National Faceless Appeal Centre, Delhi arising out of the assessment order passed u/s. 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) relating to the assessment year 2020-21.
2. Brief facts of the case, the appellant is a partnership firm engaged in the business of providing manpower services as per requirements of the customers at their cost and place of posting. For the assessment year 2020-21, assessee filed its return of income on 11-02-2022 declaring total income of Rs. 33,46,040/-. The return was taken for scrutiny assessment, for the reason, the assessee had made substantial purchase from suppliers either non-filers or had filed non-business ITR or reflected a substantially lower turnover in the respective ITR. The Assessing Officer issued various notices which were partly complied by the assessee. A final show cause notice issued on 07-12-2022 seeking compliance by 12-12-2022. The assessee sought adjournment till 24-12-2022 on the ground that so many details are to be furnished which are not readily available. However, the ld. Assessing Officer granted time upto 15-12-2022 as the assessment is time getting barring. The assessee sought permission by resorting to the grievance portal on 25-12-2022 to upload reply dated 21-12-2022 with acknowledgement no. 10169740. However, in the meantime time, the Assessing Officer passed the impugned assessment order on 27-12-2022 making huge addition of Rs. 77,47,69,606/- as unexplained expenditure u/s. 69C of the Act and demanded tax thereon.
3. Aggrieved against the same, the assessee filed an appeal before ld. CIT(A) and filed additional evidences under Rule 46A of the Income Tax Rules, 1962. However, the additional evidences were not taken on record by the ld. CIT(A) on the ground that the assessee has failed to file all these evidences before the Assessing Officer, in response to the show cause notice issued. Thus, the ld. CIT(A) neither calling for remand report nor entertained the additional evidences filed by the assessee and dismissed the appeal filed by the assessee observing that the purchases made by the assessee were not genuine.
4. Aggrieved against the appellate order, the assessee is in appeal before us raising following grounds of appeal:-
“1. The Ld. CIT(A) has erred in law and on facts of the case in confirming action of the Ld. AO in making addition of purchases/expenses of Rs. 77,47,69,606/-u/s. 69C of the Act.
2. The Ld. CIT(A) has erred in law and on facts of the case in disposing off the appeal in haste without waiting for the remand report called from the Ld. ΛΟ.
3. The Ld. CIT(A) has erred in law and on facts of the case in brushing aside the additional evidences filed by the Ld. AO solely on account of non-availability of remand report of the Ld. AO. The Ld. CIT(A) ought to have independently verified the additional evidences placed on record and provide his findings on the same.
4. The Ld. CIT(A) has erred in law and on facts of the case in upholding action of the Ld. AO in invoking provisions of Section 115BBE of the Act.
5. Both the lower authorities have passed the orders without properly appreciating the facts and they further erred in grossly ignoring various submissions, explanations and information submitted by the appellant from time to time which ought to have been considered before passing the impugned order. The action of the lower authorities is in clear breach of law and Principles of Natural Justice and therefore deserves to be quashed.
6. The Ld. CIT(A) has erred in law and on facts of the case in confirming action of the Ld. AO in levying interest u/s. 234A/B/C/D of the Act.
7. The Ld. CIT(A) has erred in law and on facts of the case in confirming action of the Ld. AO in initiating penalty proceedings u/s. 271AAC(1) of the Act.
8. The appellant craves leave to add, amend, alter, edit, delete, modify or change all or any of the grounds of appeal at the time of or before the hearing of the appeal.
5. Heard Ld. Sr. counsel Mr. Tushar Hemani appearing for the assessee and Mr. V Nandakumar appearing for the Revenue. The Revenue could not dispute that the assessee unable to upload the details before the Assessing Officer before 15-12-2022. Further, the grievance petition filed by the assessee was also not redressed by the Income Tax Department but the A.O. completed the assessment which is a gross violation of principles of natural justice by making high pitched assessment order. When the same materials or evidences filed by assessee before the ld. CIT(A), without assigning proper reasons Ld. CIT(A) rejected the additional evidences. The ld. CIT(A) neither looked into the additional evidences nor sought for a remand report from the Assessing Officer which is also against the principles of natural justice. Therefore, to meet the ends of justice, we deem it fit to set aside the matter back to the file of Jurisdictional Assessing Officer to look into the additional evidences filed by the assessee by giving proper opportunity of hearing to the assessee and then pass fresh assessment order in accordance with law. Needles to say, the assessee should co-operate with the Jurisdictional Assessing Officer by producing all necessary materials/details and evidences in the de-novo proceedings.
6. In the result, the orders passed by the lower authorities are hereby set aside and the appeal filed by the assessee is allowed for statistical purposes.
Order pronounced in the open court on 06-02-2025
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