Case Law Details
ITO Vs Bharat Auto Tech Private Limited (ITAT Hyderabad)
Introduction: In the realm of income tax disputes, the recent case between the Income Tax Officer (ITO) and Bharat Auto Tech Private Limited, as adjudicated by the Income Tax Appellate Tribunal (ITAT) in Hyderabad, stands out as a complex and significant legal battle. At the heart of the matter is the order issued by the Commissioner of Income Tax (Appeals) [CIT(A)], National Faceless Appeal Centre (NFAC), Delhi, dated 22nd March 2023. The appeal filed by the Revenue challenges this order, which invoked proceedings under section 144 r.w.s. 142(1) of the Income Tax Act, 1961.
Detailed Analysis:
1. Background and Timeline: The appeal filed by the Revenue faced a significant hurdle—being barred by limitation due to a 40-day delay. To proceed, a condonation petition was submitted, citing reasons for the delay. Despite this delay, the ITAT deemed it appropriate to admit the appeal for a comprehensive hearing.
2. Grounds Raised by Revenue: The core grievances of the Revenue were outlined in two crucial grounds:
- First Ground: The CIT(A) was alleged to have erred in restricting the addition to Rs.6,34,54,590/-. This decision was particularly contested due to the assessee company’s failure to explain the source and purpose of credits in bank accounts during the assessment proceedings.
- Second Ground: Further contention arose as the CIT(A) limited the addition to Rs.6,34,54,590/- despite the assessee company declaring a turnover of Rs. 17,62,60,218/-, while the total credits in bank accounts, as per the assessee’s submissions during the appeal proceedings, amounted to Rs.26,84,68,274/-.
3. Assessment Proceedings: The roots of the case delve into the filing of the return of income for A.Y.2018-19 by the assessee company on 14th October 2018, declaring a total income of Rs.16,77,160/-. The case was then selected for scrutiny under the Computer-Assisted Scrutiny Selection (CASS). The Assessing Officer discovered cash deposits of Rs.14,35,22,960/-, triggering a series of notices and letters to the assessee.
Penalty proceedings were initiated due to the failure to comply with notices issued u/s 142(1). Notices were also sent to Axis Bank Ltd and HDFC Bank Ltd u/s 133(6) on 9th February 2021, with no responses received. Subsequently, a show cause notice u/s 144 of the Act was issued when the assessee failed to provide a satisfactory explanation for the nature and source of credits amounting to Rs.39,05,06,143/- in their bank accounts. The Assessing Officer, deeming the amount as undisclosed and unexplained income, added it to the total income under Section 68, r.w.s. 115BBE of the Income Tax Act, 1961, culminating in the assessment order on 13th May 2021.
4. Appeal and Partial Relief: Feeling aggrieved by the Assessing Officer’s decision, the assessee filed an appeal that was subsequently migrated to the CIT(A), NFAC, Delhi. The CIT(A) granted partial relief to the assessee, leading to the present appeal by the Revenue before the ITAT.
5. Arguments and Counterarguments: In the subsequent proceedings before the ITAT, the Revenue contended that the CIT(A)’s order lacked substance, as it did not sufficiently discuss the remand report, and the deletion of major additions was done without proper justification. The Revenue argued that the order was cryptic, non-speaking, and perfunctory.
On the contrary, the assessee’s representative emphasized that the appeal filed by the Revenue was initially barred by limitation. Additionally, it was pointed out that the CIT(A) had, in para 6.4 of the order, provided background information justifying the deletion of the major addition. The assessee had submitted detailed and elaborate evidence supporting the deletion before the CIT(A), which formed the basis for calling the remand report.
6. Tribunal’s Decision and Observations: Upon careful consideration, the ITAT found merit in the Revenue’s argument regarding the inadequacies of the CIT(A)’s order. Notably, the ITAT observed that the CIT(A) failed to follow the procedural requirements outlined under section 250(6) of the Act. According to this section, the CIT(A) is obligated to state the points for determination, the decision on those points, and the reasons for the decision. The ITAT noted the vague and unsubstantiated finding by the CIT(A) in Para 6.5 of the order, where no reasons were provided for deleting the additions that were the subject matter of the appeal.
7. Decision and Directions of the ITAT: In light of the observed procedural lapses, the ITAT decided to remand the matter back to the file of the CIT(A) for fresh adjudication. The emphasis was placed on affording the assessee due opportunity of hearing in accordance with the law. The ITAT directed the assessee to appear before the CIT(A) on the date of hearing and to submit all relevant documents and evidence in support of its case. The ITAT clarified that if the assessee failed to provide necessary documents, the CIT(A) was instructed to decide the matter in accordance with the law.
8. Analysis of Delay Condonation: In addressing the issue of the delayed appeal, the ITAT scrutinized the reasons provided in the condonation petition. The delay was attributed to technical glitches and procedural lapses, and the ITAT, after careful consideration, deemed the explanations sufficient. This led to the decision to condone the delay and remand the matter back to the Assessing Officer.
Conclusion: In the final analysis, the ITAT’s decision to remand the case for fresh adjudication underscores the importance of adherence to procedural norms and the need for detailed, reasoned orders in income tax assessment proceedings. The case highlights the delicate balance between the rights of the taxpayer and the responsibilities of the tax authorities. As the appeal moves back to the CIT(A), the onus is on them to provide a comprehensive and justified decision, considering the intricacies of the case and the arguments presented by both parties.
FULL TEXT OF THE ORDER OF ITAT HYDERABAD
This appeal is filed by the Revenue feeling aggrieved by the order of Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi dt.22.03.2023 invoking proceedings under section 144 r.w.s. 142(1) of the Income Tax Act, 1961 (in short, “the Act”).
2. The appeal filed by the Revenue is barred by limitation by 40 days. It has moved a condonation petition explaining reasons thereof. We have heard both the parties on this preliminary issue. Having regard to the reasons given in the petition, we condone the delay and admit the appeal for hearing.
3. The grounds raised by the Revenue read as under :
“1. The Ld. CIT(A) erred in restricting the addition to Rs.6,34,54,590/-, when the assessee company failed to explain the source and purpose of credits in bank accounts during the assessment proceedings.
2. The Ld. CIT(A) in restricting the addition to Rs.6,34,54,590/-particularly when the assessee company declared a turnover of Rs. 17,62,60,218/- only whereas the total credits in bank accounts as per assesseee submissions during the course of appeal proceedings for the F.Y. 2017-18 was Rs.26,84,68,274/-
4. The brief facts of the case are that assessee company filed its return of income for A.Y.2018-19 on 14/10/2018 declaring total income of Rs.16,77,160/-. The return was processed u/s 143(1) and the case was selected for scrutiny under CASS. Notice u/s 143(2) was issued on 22/09/2019 and the same was served on the assessee. In this case, Assessing Officer noticed that assessee company has made cash deposits with various banks at Rs.14,35,22,960/-. Hence, Assessing Officer issued various notices/letters to the assessee. Thereafter issued penalty proceeding for failure to comply with notices issued u/s 142(1) dated 24/12/2021 u/s 274 rws 272A(1)(d) dated 04/02/2021 by the assessee. Assessing Officer also issued notice u/s 133(6) to Axis Bank Ltd and HDFC Bank Ltd on 09/02/2021 however, got no reply from the said banks. As no reply was received from the assessee, show cause notice u/s 144 of the Act dated 05/04/2021 was issued.
4.1 Finally, as the assessee has not substantiate substantiated the source of credits of Rs. 39,05,06,143/- in his bank account with documentary evidence, Assessing Officer opined that assessee has no explanation to offer regarding nature and source of credits of Rs.39,05,06,143/- in his bank accounts. Therefore, he treated the said amount as undisclosed and unexplained income of the assessee and added it to the total income under Section 68, r.w.s. 115BBE of the Income Tax Act,1961, for the year under consideration. Thus, Assessing Officer completed the assessment u/s 144 r.w. 144B of the Act and passed assessment order on 13.05.2021.
5. Feeling aggrieved with the order of Assessing Officer, assessee filed appeal and thereafter, it was migrated to the ld. CIT(A), NFAC, Delhi, who granted partial relief to the assessee.
6. Aggrieved with the order of ld. CIT(A), Revenue is now in appeal before us.
7. Before us, Ld. D.R. submitted that Tribunal in the case of assessee in ITA No.213/Hyd/2023 for A.Y.2018-19 has remanded back the matter to the file of ld. CIT(A) with a direction to decide the issue afresh pertaining to cash deposits of Rs.6,34,54,590/-. Ld. DR contended that Assessing Officer had made an addition of Rs.39,21,83,300/- and as against the above said amount, the ld. CIT(A) has restricted the addition to Rs.6,34,54,590/-. The above said issue of Rs.6,34,54,590/- has been sent back to the ld. CIT(A) for fresh adjudication for the remaining amount.
7.1. It was submitted by the ld. DR that the order passed by the ld. CIT(A) was cryptic, non-speaking and perfunctory order as the ld. CIT(A) was conspicuously not discussed the remand report and he has not made any comments either agree or disagree with the remand report in his order. It was submitted that the ld. CIT(A) has vaguely and unscrupulously granted the partial relief to the assessee and without any reason has deleted the major additions. It was submitted that the order passed by the ld. CIT(A) is without any basis and is therefore required to be set aside.
8. Per contra, the ld.AR firstly submitted that the appeal filed by the Revenue is barred by limitation and during the course of appellate proceedings in ITA No.213/Hyd/2023, the Tribunal has pointed that whether the revenue has preferred the appeal against the deletion made by the ld. CIT(A) or not. To the pointed query, the ld. DR had mentioned that no such appeal has been filed by the Revenue. However, quite contrary to the above, the Revenue has preferred appeal after a delay which was condoned. On merit, it was submitted that the ld. CIT(A) before deleting the major addition in para 6.4 of his order had given background for the same, however, the remand report of the Assessing Officer is self-speaking. Ld. A.R. further submitted that based on remand report, the ld. CIT(A) has deleted the addition. It was submitted that the assessee had filed detailed elaborate evidence in support of deletion of addition before the ld. CIT(A) and based on that, the remand report was called for, which forms the basis of deletion of the addition by the ld. CIT(A).
9. We have heard the rival submissions and perused the material on record. In the present case, impugned order was received in the office of PCIT-4, Hyderabad on 06.06.2023. Thereafter, the PCIT has mentioned the last date for filing of appeal was 05.08.2023. However, the letter was communicated on 23.08.2023. Based on the above said application, another application for condonation was filed wherein it was mentioned that due to technical glitches and procedural lapses, there was a delay in filing the appeal and the delay in filing the appeal may be condoned. We have heard the rival submissions and perused the material on record on this issue. We are of the opinion that the delay is well explained and therefore, we deem it appropriate to remand back the matter to the file of Assessing Officer.
10. Coming back to the merits of the case, admittedly, the ld. CIT(A) in Para 6.5 has merely given a vague and unsubstantiate and cryptic finding on the issue. No reasons were provided by the ld. CIT(A) for deleting the additions which are the subject matter of the appeal. In our view, it is the duty of the ld. CIT(A) to adjudicate the grounds raised by the assessee in appeal and further, it is also the duty of the ld. CIT(A) to dispose of the appeal while passing the order and in the order of the ld. CIT(A), as per the mandate provisions u/s 250(6) of the Act, he has to state the points for determination and the decision thereon and the reasons for the said decision. In the present case, ld. CIT(A) has failed to follow the procedure as contemplated under section 250(6) of the Act and has not given reasons much less the plausible reasons for deleting the addition. In view of the above, we are of the opinion that the matter should be remanded back to the file of ld. CIT(A) for fresh adjudication. Hence, we remand back the matter to the file of Ld. CIT(A) with a direction for passing a detailed speaking order after affording due opportunity of hearing to the assessee in accordance with law. Further, the assessee is directed to appear before the Ld. CIT(A) on the date of hearing fixed by the Ld. CIT(A) and shall file all the documents / evidence in support of its case. In case, the assessee failed to file any documents in support of its case, Ld .CIT(A) shall decide the matter in accordance with the law. Accordingly, the appeal of assessee is allowed for statistical purposes.
11. In the result, the appeal of the Revenue is allowed for statistical purposes.
Order pronounced in the Open Court on 17th October, 2023.
