Case Law Details
Maa Chintpurni Mining Pvt Ltd Vs ITO (ITAT Ranchi)
ITAT Ranchi held that dismissal of appeal by CIT(A) on account of non-prosecution without deciding the matter on merits is unsustainable in law. Accordingly, matter remanded back for de novo adjudication.
Facts- The assessee is engaged in the business of mining and filed its return of income electronically on 29.10.2015 declaring total income at Rs.21,960/-. The case of the assessee was selected under limited scrutiny under CASS for the reason ‘large share premium received during the year’. During the assessment proceedings, the assessee failed to substantiate the nature of amount received to the tune of Rs.68,11,000/- whether it was share premium or otherwise to the satisfaction of the AO. It is further stated that the assessee did not make due compliance to notices issued from time to time. Thus, the AO framed the assessment u/s.144 of the Act assessing total income at Rs.68,32,955/- after making addition of Rs.68,11,000/- on account of unexplained cash credit u/s.68 of the Act.
CIT(A) dismissed the appeal. Being aggrieved, the present appeal is filed.
Conclusion- Held that the matter needs de novo adjudication of the grounds of appeal by the ld.CIT(A)/NFAC after taking account the reply and other supporting material as claimed by the assessee to have been filed on e-portal. Thus, the appeal has been not been decided on merits due to miscommunication between the department and the assessee. Reference is made to provisions of Section 250(6) of the 1961 Act, wherein CIT(A) is obligated to state points for determination in appeal before him, the decision thereon and the reasons for determination. He has no power to dismiss appeal of assessee on account of non-prosecution and without deciding on the merits of the case.
FULL TEXT OF THE ORDER OF ITAT RANCHI
The captioned appeal has been filed at the instance of the assessee against order u/s 250 of the Income Tax Act,1961 (hereinafter ‘the Act’) dated 21.09.2023 passed by the ld. CIT(A)/National Faceless Appeal Centre (NFAC), Delhi.
2. At the outset, on perusal of the appeal record, we found that the appeal of the assessee is time barred by 88 days. In this regard, the assessee has filed an application mentioning therein reasons for condonation of delay, which reads as under :-
Sub: Petition for Condonation of delay in filing the appeal.
That I Kushal Manek, Director of Maa Chintpurni Mining Private Limited, the petitioner, is well conversant with the facts stated below.
That the Order U/s 250 for the assessment year 2015-16 was passed by Commissioner of Income Tax (Appeal), NFAC on 21.09.2023 and issued online at Income Tax Portal. But we have not received any communication for the passing of the order either through email or telephonic messages.
That the time for filing the appeal before the Income Tax Appellate Tribunal expired on 20.11.2023. That because of non-communication of the
order passed, the same appeal could not be filed within the stipulated time.
So, we humbly request you to please condone the delay in filing the appeal and accept the same.
3. The ld. Sr. DR did not object to the above submissions of the assessee. Considering the application of the assessee, we condone the delay of 88 days in filing the present appeal and appeal of the assessee is heard on merits.
4. The assessee in its appeal has raised the following grounds :-
1. On the facts and circumstances of the case, the order passed by the Ld. Commissioner of Income-Tax (Appeals), NFAC is bad in law and facts.
2. The Learned Commissioner of Income Tax (Appeals), NFAC has erred in confirming the addition of amount credited in bank accounts treating the same as unexplained credit u/s 68.
3. The Learned Commissioner of Income Tax (Appeals), NFAC has erred in confirming the addition of an amount which was not the subject matter of Limited Scrutiny.
4. The Learned Commissioner of Income Tax (Appeals), NFAC has erred in passing the order stating that no response has been received from the appellant in-spite of our submission filed in the Income Tax Portal.
5. For that, other grounds if any would be urged at the time of the hearing.
5. Brief facts of the case are that the assessee is engaged in the business of mining and filed its return of income electronically on 29.10.2015 declaring total income at Rs.21,960/-. The case of the assessee was selected under limited scrutiny under CASS for the reason ‘large share premium received during the year’. During the assessment proceedings, the assessee failed to substantiate the nature of amount received to the tune of Rs.68,11,000/- whether it was share premium or otherwise to the satisfaction of the AO. It is further stated that the assessee did not make due compliance to notices issued from time to time. Thus, the AO framed the assessment u/s.144 of the Act assessing total income at Rs.68,32,955/- after making addition of Rs.68,11,000/- on account of unexplained cash credit u/s.68 of the Act.
5.1 Against the assessment order, the assessee preferred appeal before the ld. CIT(A). Before him, vide three grounds of appeal, the assessee contested the addition made on the ground that the AO erred in making the addition of the amount credited in the bank account as cash credit u/s 68 of the Act. Besides, he erred in making the addition which was not the subject matter of Limited scrutiny. The ld.CIT(A) in para 5.1 on page-3 of the order has narrated the noncompliant attitude of the assessee stating that despite number of notices sent through ITBA portal on several occasions, there was no response from the assessee. Therefore, he proceeded to dispose of the appeal based on materials on record. The Ld. CIT(A) dismissed the appeal of the assessee upholding the addition made by the AO.
6. Now, the assessee is in further appeal before us. Ld. AR before us filed a written submissions which reads as under :-
The Appellant had e-filed its Return of Income for A.Y. 2015-16 on 29.10,2015 disclosing a total income of Rs. 21,960/-. The case was selected under limited scrutiny under CASS for the reason ‘Large share premium received during the year’.
Notice U/s 143(2) was issued by DQT, Circle-2, Hazaribagh was complied on 03/06/2016, Subsequently the case was transferred to ITO, W-2, Ramgarh. ITO, W-2 issued notice U/s 142(1) in compliance with the notice Authorised representative appeared and submitted that no share capital was issued during the financial year and the details regarding the issue of shares and share premium, received in FY 2011-12 was submitted. The next date of the hearing was fixed for 03/11/2017 which was not complied again notice fixing the date 16/11/2017 was issued to the Authorised Representative on 13/11/2017.
Authorised representative after receipt of the notice on 13/11/2017 fixed for hearing on 16/11/2017 met with the Assessing officer on 15/11/2017 and protested with the assessing officer that the case of the assessee has been selected for limited scrutiny and as per the guidelines all the information required for verification of the applicability of sec56(2)( viib) has complied on 1/11/2017 itself in response to the notice.
However, the ITO ignored our submission and proceeded to pass the assessment order and held that During the assessment proceedings, the appellant failed to substantiate the nature of the amount received to the tune of Rs. 68,11,000/- whether it was share premium or otherwise to the satisfaction of the AO. AO passed order u/s. 143(3) on 29.12.2017 assessing to.tal income at Rs. 68,32,955/- after making disallowance of Rs. 68,11/OQO/- on account of unexplained cash credit u/s. 68. The Income Tax Officer, Ward-2(4), Ramgarh eared in making the addition of the amount which was not the subject matter of Limited Scrutiny.
Hence, the Aggrieved by this order, the appellant has instituted the appeal before CIT(A) , Ranchi. Which was subsequently transferred to NATIONAL FACELESS APPEAL CENTRE (NFAC), Delhi. C1T(A) NFAC dismissed the appeal on the ground that in order to decide this appeal in a timely manner a number of notices/communications through the ITBA portal were sent to the appellant, viz. Communications dated 25.02.2021, 17.04.2023, 01.08.2023 and 23.08.2023. However, there evidently has been no response from the appellant till date. It is pertinent to note that even during the instant appellate proceedings, the appellant had chosen to remain silent and failed to substantiate or cooperate by filing the details called for, which shows the appellant is not interested in pursuing his appeal. However, it was noted that despite several opportunities being given to the appellant, he has not responded for the reasons best known to him. CIT(A) has ignored the written submission made on the e-filing portal within the due date of time allowed. Copy of Acknowledgement enclosed. Hence, being Aggrieved by the order, the appellant has instituted the present appeal.
Written Submission
Assessee is aggrieved by the action of the AO to have expanded the assessment from ‘Limited Scrutiny’ to ‘Complete Scrutiny’ without following the procedure as laid by the CBDT Circular No. 20/2015 dated 29.12.2015; and subsequent instruction on the same dated 14.07.2016 (para 4} and circular dated 30.11.2017 (para 3). Accordingly, the AO had issued notice u/s. 143(2).of the Income-tax Act, 1961 (hereinafter referred to as the “Act”) on 08.04.2016 wherein it was clearly stated that the assessee’s case was selected by CASS (computer-aided scrutiny selection) for ‘Limited Scrutiny’ i.e. for only one issue i.e. Large share premium received during the Year (Verify applicability of Section 56 (2)(viib).
AO erred in expanding the jurisdiction to make an addition as Cash Credit U/s 68 the amount received back by the company from the group company in the bank account which was given as advance earlier and duly disclosed in the Balance sheet of the company already submitted and was not specified in the ‘Limited Scrutiny’ notice issued u/s.143(2) of the Act dated 08.04.2016.
The CBDT circular/Instruction No.20/2015 dated 29.12.2015 has laid down the procedure to be followed in case if the AO wishes to expand the scrutiny from the ‘Limited Scrutiny’ to ‘Complete Scrutiny’ which is given in para 3, which reads as under :
“a. In ‘Limited Scrutiny’ cases, the reasons/issues shall be forthwith communicated to the assessee concerned.
b. The Questionnaire under section 142(1) of the Act in ‘Limited Scrutiny’ cases shall remain confined only to the specific reasons/issues for which the case has been picked up for scrutiny. Further, the scope of enquiry shall be restricted to the ‘Limited Scrutiny’ issues.
c. These cases shall be completed expeditiously in a limited number of hearings,
d. During the course of assessment proceedings in ‘Limited Scrutiny’ cases, if it comes to the notice of the Assessing Officer that there is potential escapement of income exceeding Rs. Five lakhs (for metro charges, the monetary limit shall be Rs. Ten lakhs) requiring substantial verification on any other issue(s), then, the case may be taken up for ‘Complete Scrutiny’ with the approval of the Pr. C1T/C1T concerned. However, such approval shall be accorded by the Pr. CIT/C1T in writing after being satisfied with the merits of the issues(s) necessitating ‘Complete Scrutiny’ in that particular case. Such cases shall be monitored by the Range head concerned. The procedure indicated at points (a), (b), and (c) above shall no longer remain binding in such cases. CBDT letter bearing No. DG1T VIF/HQ SI/2017-18 dated 30.11.2017 states that the idea behind such stipulation was to enforce checks and balances upon the power of the Assessing Officer to do fishing and roving enquiries in cases selected for limited scrutiny etc. In this very letter, the CBDT has also highlighted the aspect of cryptic order sheet entries which according to the CBDT shows the irresponsible, ad hoc, and indisciplined working of an Officer of the Department. A perusal of the aforesaid instructions would show that the objective behind the issuance of these instructions is (i) to prevent the possibility of fishing and roving enquiries; (ii) to ensure maximum objectivity; and (iii) to enforce checks and balances upon the powers of an Assessing Officer.
Recently Kolkata High Court in the case of Principal Commissioner of Income-tax-5 v. Weilburger Coatings (India) (P.) Ltd. [2023] 155 taxmann.com 580 (Calcutta) held that Where AO decided an issue that was not part of the limited scrutiny for which assessment was directed to be scrutinised since AO did not abide by Instruction No. 5/2016, dated 14-072016, AO exceeded his jurisdiction and assessment order was bad in law
We rely on the various other decisions of the tribunals regarding this proposition as below:-
Late Smt. Gurbachan Kaur Vs. DCIT, ITA No. 692/JP/2019 (AY: 2014-15) order dated 05.12.2019; Mumbai Bench decision in M/s. Nitin KiUawala Vs. ITO, ITA No. 1611/M/2013 (AY: 2008-09) order dated 16.09.2015; Chandigarh bench decision in Shri Vijay Kumar Vs. ITO, ITA No. 434/Chd/2019 (AY: 2014-15) order dated 12.09.2019.
Dev Milk Foods Pvt. Ltd. Vs Add. CIT, Special Range -3 New Delhi. ITA No.6767/DeI/2019 (AY-2015-16)
ITAT Chandigarh in the case of Paya Kumari in ITA No.23/Chd/20ll, vide order dated 24.02.2011, has held that even Section 292 BB of the Act cannot save the infirmity arising from the infraction of CBDT Instructions dealing with the subject of scrutiny assessments where an assessment has been framed in direct conflict with the guidelines issued by the CBDT.
In view of the above infirmity and inconsistency with the CBDT Circulars on an overall view of the factual matrix as well as settled judicial position the additions made by the assessing officer in the assessment proceedings do not have any feet to stand and should be deleted.
ON MERIT
Addition of Rs. 68,00,000/- U/s 68
From the perusal of the Balance sheet submitted during the assessment proceeding it can be seen that the company has advanced Rs. 68,00,000/- to the sister concern in the, earlier year and the same has been returned by the group company during the year., Copy of the Audited Balance sheet and Relevant portion of 3CD report of Group company enclosed.
Various courts have held that presumption, however, strong, cannot be a substitute, nor can it take the place of evidence, and the rule of estimation is no substitute for evidence.
In view of the stated facts and corresponding evidence, your good self would appreciate the contention of the Ld. AO does not have any ledge to stand, therefore we pray to be gracious to accept the submissions made herein above and be further be pleased to delete the addition as made by the Ld. A.O. and oblige.
7. The learned AR has reiterated the grounds of appeal and the contentions made in the written submission which is reproduced above. On the other hand, ld. Sr. DR relied on the orders of the authorities below and submitted that the assessee did not bother to comply with the notices issued by the ld. CIT(A). The assessee failed to substantiate its case either before the authorities below by furnishing relevant materials either in the course of assessment or the appellate proceedings. Therefore, the ld. Sr. DR submitted that the AO has rightly made the addition u/s.68 of the Act to which the ld.CIT(A) has affirmed the same. Thus, the ld. Sr. DR prayed that the appeal of the assessee deserves to be dismissed.
8. We have carefully considered the case. While the learned CIT(A) has claimed that despite several notices issued allowing opportunity of hearing to the assessee during appellate proceedings, there was no compliance, the ld. AR on the other hand, has inter alia claimed vide written submission reproduced above that the CIT(A) ignored the written submission made on e-filing portal within the due date of time allowed. Copies of acknowledgement has been enclosed. The written submission made by the learned AR encloses pages-5 and 6 which are e-proceeding acknowledgements which are self speaking.
8.1 Evidently, it appears to us that the compliance made by the assessee through e-portal was not in the knowledge of the learned CIT(A) for some technical issue. Since the appellate proceedings were taken up by NFAC in a faceless manner, such lack of communication cannot be ruled out due to technical glitches. It is therefore, in the fitness of things that the matter needs de novo adjudication of the grounds of appeal by the ld.CIT(A)/NFAC after taking account the reply and other supporting material as claimed by the assessee to have been filed on e-portal. Thus, the appeal has been not been decided on merits due to miscommunication between the department and the assessee. Reference is made to provisions of Section 250(6) of the 1961 Act, wherein CIT(A) is obligated to state points for determination in appeal before him, the decision thereon and the reasons for determination. He has no power to dismiss appeal of assessee on account of non-prosecution and without deciding on the merits of the case.
8.2 During the hearing, the assessee expressed satisfaction with a restoration of the matter to the CIT(A) for a de novo consideration. The Revenue did not vehemently oppose this plea. Thus, in the in the interest of justice, we deemed it appropriate to allow the appeal for statistical purposes, emphasizing the need for a thorough and compliant adjudication process. The ld. CIT(A) shall give proper and adequate opportunity of being heard to the assessee in accordance with principles of natural justice in the set aside remand proceedings for de novo adjudication of the appeal of the assessee filed before him.
9. In the result, the appeal is allowed for statistical purposes.
Order pronounced in the open court on 13/08/2024.
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