Case Law Details
Super Sonic Impex Vs ITO (ITAT Surat)
Conclusion: Since the deadline of three days for submission of all relevant records of assessee’s accounts was unfair and such unfair deadline was indeed a violation of natural justice principles, therefore, the order of CIT(A) was set aside and the matter was restored back to the file of AO for verification of the impugned issue and to pass a speaking order after affording sufficient opportunity of being heard to assessee.
Held: Assessee filed its return of income for the 2018-19 AY declaring a total of ₹12,33,640 and assessee’s case was selected for limited scrutiny on the issues of “imports and exports”, and various notices were issued and served upon assessee. AO observed that the assessee had made an import purchase amounting to ₹3.2 Crores. Assessee replied to the notice by submitting an excel sheet that showed import purchases amounting to ₹3.9 Crores. AO gave the assessee 3 days to respond to the draft assessment, which assessee failed. AO observed the difference as unexplained expenditure under Section 69C and added it to the assessee’s total income and finalised the assessment under section 143(3) after making a total addition of ₹1 Crore to the total income of the assessee. It was held that assessee was given only 3 days’ time to furnish required details before AO. Hence, assessee could not submit the details. The order was thus against the principles of natural justice. Before CIT(A), assessee had filed various details. CIT(A) had discussed the order of the AO and details filed by assessee and partly allowed the appeal of assessee. Assessee requested for one more opportunity in the interests of justice and fair play. Since assessee could not plead his case properly before the AO, therefore, one more opportunity should be given to assessee to plead his case before AO. It is settled law that principles of natural justice and fair play require that the affected party was granted sufficient opportunity of being heard to contest his case. Therefore, without delving deeper into the merits of the case, in the interest of justice, the order of CIT(A) was set aside and the matter was restored back to the file of AO for verification of the impugned issue and to pass a speaking order after affording sufficient opportunity of being heard to assessee.
FULL TEXT OF THE ORDER OF ITAT SURAT
This appeal by the assessee emanates from the order passed under section 250 of the Income-tax Act, 1961 (in short, ‘the Act’) dated 22.02.2024 by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [in short, ‘CIT(A)’] for the assessment year (AY) 2018-19.
2. The grounds of appeal raised by the assessee are as under:
“1. On the facts and in the circumstances of the case as well as law on the subject, the Assessing Officer has erred in giving only a time of 3 days to file the reply against the draft assessment order which is against the principle of natural justice and hence the assessment/s 143(3) r.w.s. 144B is liable to be quashed.
2. On the facts and circumstances as well as law on the subject, the Assessing Officer has erred in making addition of Rs.1,06,10,561/- u/s 69C on account of unexplained expenditure.
3. Without prejudice to the above grounds, the addition pertains to business expenditure and hence section 115BBE is not applicable.
4. It is therefore prayed that above addition made by the Assessing Officer may please be deleted.
5. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of hearing of the appeal.”
3. Brief facts of the case are that assessee filed its return of income for AY.2018-19 on 28.09.2019, declaring total income of Rs.12,33,640/-. The case of the assessee was selected for limited scrutiny on the issues of “imports and exports”. Various notices were issued and served upon the assessee. The AO observed that assessee had made import purchases amounting to Rs.3,27,63,878/-, but in reply to notice of AO, the assessee had furnished the details of import purchases in excel sheet on 23.03.2021, totalling to Rs.3,91,08,538/-. The AO issued a show cause notice dated 20.04.2021 along with draft assessment order and asked the assessee to furnish reply within 3 days, i.e., on 23.04.2021. The assessee failed to respond to the said notice issued by AO. Thus, the AO treated the difference of Rs.63,44,660/-[Rs.3,91,08,538/- (–) Rs.3,27,63,878/-], as unexplained expenditure u/s 69C of the Act and added to the total income of the assessee. The AO also observed that the assessee had debited Rs.62,59,295/- as customs duty. The assessee had furnished details of customs duty in excel sheet at Rs.1,05,25,196/- on 23.03.2021. The AO disallowed difference between the two, i.e., Rs.42,65,901/-[Rs.1,05,25,196 (-) Rs.62,59,295] u/s 69C of the Act and added to the total income of the assessee. Hence, AO finalized the assessment u/s 143(3) r.w.s. 144B of the Act after making total addition of Rs.1,06,10,561/- to the total income of the assessee.
4. Aggrieved by the order of AO, the assessee filed this appeal before the CIT(A). The CIT(A) extracted the submission of assessee, are at pages 3 to 15 of his appellate order. The CIT(A) observed that addition of Rs.63,44,660/- was made because the import purchases as per profit loss account were at Rs.3,27,63,878/- whereas as per details furnished by the appellant, the import purchases were at Rs.3,91,08,538/-. Therefore, a difference of Rs.63,44,660/-was treated as unexplained expenditure in import purchases. The CIT(A) has deleted the addition of Rs.63,44,660/- made by AO. Regarding the addition of Rs.42,65,901/-, he observed that appellant had debited custom duty of Rs.62,59,295/- but as per the details submitted in excel form, it was Rs.1,05,25,196/-. He further stated that the difference of Rs.42,65,901/- was not reconciled by the appellant during assessment proceedings. However, he also found from the submission of the appellant that assessee submitted the details of Rs.62,59,296/- only and did not explain as to why the custom expenses as per books and as per excel sheet is Rs.1,05,25,196/-. Therefore, the CIT(A) confirmed the addition of Rs.42,65,901/- and partly allowed the appeal.
5. Aggrieved by the order of CIT(A), the assessee filed appeal before the Tribunal. The Learned Authorized (Ld. AR) of the assessee submitted that the AO had given only a time of 3 days to file the reply against the draft assessment order and without waiting for the reply of assessee, the AO passed an order u/s 143(3) r.w.s. 144B of the Act which is against the principle of natural justice. He submitted that a paper book and filed an excel sheet but could not explain the entries properly. The Ld. AR of the assessee requested to set aside the order of CIT(A) or in the alternative, restore the issue back to the file of AO for verification and fresh assessment.
6. On the other hand, Learned Senior Departmental Representative (Ld. Sr. DR) for the revenue submitted that assessee was negligent and non-cooperative during the assessment proceedings. However, he would have no objection if the issue is set aside to AO for verification.
7. We have heard both the parties and perused the materials available on record. It is an undisputed fact that the assessee was given only 3 days’ time to furnish required details before AO. Hence, assessee could not submit the details. The order was thus against the principles of natural justice. Before CIT(A), assessee had filed various details. The CIT(A) has discussed the order of the AO and details filed by assessee and partly allowed the appeal of assessee. The Ld. AR requested for one more opportunity in the interests of justice and fair play. The Ld. Sr. DR has also no objection if the matter is set aside to AO for verification. We find that assessee could not plead his case properly before the AO. We are of the view that one more opportunity should be given to the assessee to plead his case before the AO. It is settled law that principles of natural justice and fair play require that the affected party is granted sufficient opportunity of being heard to contest his case. Therefore, without delving deeper into the merits of the case, in the interest of justice, we set aside the order of CIT(A) and restore the matter back to the file of AO for verification of the impugned issue and to pass a speaking order after affording sufficient opportunity of being heard to the assessee. The assessee is also directed to furnish explanation and submit the relevant details and documents before the AO without taking adjournment without valid reasons. For statistical purposes, the appeal of the assessee is treated as allowed.
8. In the result, appeal of the assessee is allowed for statistical purpose.
Order is pronounced in the open court on 27/11/2024.
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