Case Law Details
Karam Chand Sweets Vs DCIT (ITAT Chandigarh)
The Income Tax Appellate Tribunal (ITAT) Chandigarh recently allowed an appeal filed by Karam Chand Sweets, setting aside an ex-parte order passed by the Commissioner of Income Tax (Appeals) (CIT(A)). The assessee, a sweet shop owner, had filed their income tax return for the assessment year 2019-20, declaring a total income of Rs. 29,82,510. A survey under Section 133A of the Income Tax Act was conducted at their business premises, during which the assessee surrendered Rs. 21,00,000 as additional income, corresponding to Rs. 27,18,500 by virtue of Section 115BBE.
During the assessment proceedings, the Assessing Officer (AO) noted that the assessee had not paid the tax on the surrendered income as claimed. Consequently, the AO assessed the income as declared and levied tax under Section 115BBE on the additional income surrendered during the survey. Aggrieved by this assessment order, the assessee filed an appeal before the CIT(A).
However, the CIT(A) dismissed the appeal, noting that the assessee failed to appear for hearings despite multiple notices. The CIT(A) concluded that the assessee was not interested in pursuing the appeal. The ITAT, upon reviewing the case, observed that both the AO’s and the CIT(A)’s orders were essentially ex-parte, meaning the assessee had not effectively presented their case at either level. The ITAT emphasized the importance of reasoned orders dealing with the core dispute.
Recognizing the lack of a hearing on merits, the ITAT decided to give the assessee one final opportunity. The ITAT set aside the CIT(A)’s order and remanded the case back to the CIT(A) for a fresh hearing. The ITAT directed the assessee to prepare their case thoroughly and appear without seeking any adjournments. The CIT(A) was instructed to pass a reasoned order, preferably within six months. The assessee’s appeal was allowed for statistical purposes, paving the way for a hearing on the merits of the case.
FULL TEXT OF THE ORDER OF ITAT CHANDIGARH
This is an appeal filed by the assessee under Section 253 of the Income Tax Act, 1961 (hereinafter referred to as Act) before this Hon’ble Tribunal. The assessee is aggrieved by the order dated 12.07.2023 passed in Appeal No.10779/2018-19/IT/CIT(A)-5/Ldh/2019-20 by ld. CIT(A) under Section 250(6) of the Act which is hereinafter referred to as the “impugned order”. The relevant assessment year is 2019-20 and the corresponding previous year period is from 01.04.2018 to 31.03.2019.
2. Factual Matrix
2.1 The assessee is engaged in the business of making and selling sweets during the year under consideration assessment year 2019-20.
2.2 That the assessee filed its return of income for the assessment year 2019-20 on 31.10.2019 declaring total income of Rs.29,82,510/-.
2.3 The return filed by the assessee was processed under Section 143(1) of the Act.
2.4 That a survey operation under Section 133A(1) of the Act was conducted on 24.10.2018 at the business premises of the assessee. During the course of survey, various documents were found and impounded. The case was manually selected for scrutiny and a notice under Section 143(2) was issued on 24.09.2020 which was served upon the assessee. Further notice under Section 142(1) of the Act was issued containing the detailed questionnaire on 26.01.2021 which was duly served upon the assessee electronically. Copy of impounded material was provided to the assessee. In response to the above notice(s) the assessee electronically uploaded his reply and submitted the requisite information/documents online through e-filing Portal, from time to time. The reply and the requisite documents filed by the assessee were duly examined.
2.5 That during the course of survey, tax amount of Rs.21,00,000/- was surrendered by the assessee which corresponded to surrender of additional income of Rs.27,18,500/- on application of provision under Section 11 5BBE of the Act. The ITR and Tax Computation showed that the assessee had failed to account for and tax the income of Rs.27,18,500/- by virtue of Section 115BBE of the Act. Thus, the assessee was called upon to show cause vide notice under Section 142(1) of the Act dated 26.01.2021 as to why the surrendered tax liability of Rs.21,00,000/- was not paid and the additional income surrendered should not be taxed under Section 115BBE of the Act.
2.6 In response to the above Show Cause Notice, the assessee furnished a reply dated 18.09.2021 that the assessee had surrendered Rs.21,00,000/- as tax in the partnership firm M/s Karam Chand Sweets for assessment year 2019-20 by surrender letter dated 24.10.2018. The assessee had duly paid tax of Rs.22,43,500/- [which includes surrender tax of Rs.21,00,000/- under Section 115BBE of the Act] and had complied with the voluntary submissions made at the time of survey. Copy of 26AS was enclosed too.
2.7 The ld. AO basis perusal of ITR, Challan credit as per ITR and Ack of ITR learnt that the assessee had not full filled tax liability as was sought to be claimed in its reply (supra) till the date of filing of return. In view of this factual position, the assessee has failed to deposit the tax as per the additional income of Rs.27,18,500/- as per the provision of Section 115BBE of the Act.
2.8 The ld. AO keeping in view the above factual position assessed the income of the assessee at Rs.29,82,510/-declared by the assessee. Tax to be charged under Section 115BBE of the Act on Rs.27,18,500/- on account of additional income surrendered during survey proceedings.
2.9 That the aforesaid assessment order of ld. AO bears No. ITBA/AST/S/143(3)/2021-22/103571/2015(1) and is dated 19.09.2021 which is passed under Section 143(3) of the Act, which is hereinafter referred to as “Impugned Assessment Order”.
2.10 That the assessee being aggrieved by the aforesaid “Impugned Assessment Order” prefers first appeal under Section 246A of the Act before ld. CIT(A) who by “impugned order” under Section 250(6) of the Act has dismissed the same. The ld. CIT(A) in sum and substance has dismissed the appeal as despite issuance of about 9 notices from 26.05.2022 to 22.06.2023 (different dates) the assessee has not appeared for hearing and therefore, it is clear that assessee is not interested in perusing his appeal and following Maxim “law assists those who are vigilant and not those who sleep over their rights” appeal was dismissed. It was also held that appeal does not mean merely filing of the appeal but rather effectively pursuing it.
2.11 The assessee being aggrieved by the impugned order has challenged the impugned order before us and has raised following grounds of appeal before us in Form 36 :
“1. That, the orders passed by the 1d. Commissioner of Income Tax (Appeal) vide orders dated 12.07.2023 is illegal uncalled for and against the law & facts.
2. That the 1 Commissioner of Income Tax (Appeal) has sustained the additions merely on conjectures and surmises without any legal basis.
3. That, the grounds of appeal raised with 1 Commissioner of Income Tax (Appeal) is as follows :-
(i) That Assessing Officer has wrongly applied rate of Income Tax as per provisions of section 115BBE of Income tax Act. 1961 on Rs. 27,18,500.00
Provisions of section 115 BBE may please be deleted & normal tax rate is to be applied on Rs.27,18,500.00.
(ii) That, the Assessing Officer has failed to appreciate the submissions made by Assessee in surrender letter at the time of survey that surrender of business income of Rs. 27,18,500.00 is subject to be taxed as normal business income subject to no penalty/prosecution.
So, the Assessment order passed by Assessing Officer calculating tax on assessed income as per section 115BBE is wrong and suo-moto calculated which is against the natural law of justice and should be set-aside.
(iii) That, the Assessing Officer has purely as per his whims and fancies deemed the surrender business income of Rs. 27,18,500.00 as unexplained investments and unexplained money as per section 69 and 69A of Income tax Act, 1961 whereas the Assessee has duly submitted the same as business income over and above the normal business income for Assessment Year 2019-20
So, the provisions of section 115BBE of Income tax Act. 1961 have been erroneously imposed by Assessing Officer while passing assessment order. Therefore, the Assessment order passed by Assessing Officer calculating tax on assessed income as per section 115BBE is illegal which is against the natural law of justice and should be set-aside.
(iv) The Assessee craves leave to argue on any other question of law or facts at the time of hearing of this appeal.”
3. Record of Hearing
3.1 The hearing in the matter took place before us on 02.01.2025 when none appeared before us for and on behalf of the assessee. The Registry placed before us an adjournment letter filed by Dinesh Sarna, counsel for the assessee wherein a request for adjournment was sought on ground that assessee is collecting information and documents necessary for appeal. The ld. DR appeared for and on behalf of the Revenue and interalia contended that at both the stages below i.e. before ld. AO and before CIT(A), the assessee has remained dormant and has not effectively pursued anything. Under these circumstances, he left it to this Tribunal to take appropriate decision in accordance with law.
4. Observations, findings and conclusions
4.1 We have examined the papers and records of the case and after carefully perusing the same we are of the considered view that almost both the orders of lower authorities are ex-parte meaning thereby that assessee despite opportunity after opportunity has not explained his case on merits . Consequently, there is no effective disposal of the case on merits especially before CIT(A). Accordingly, we set aside the impugned order and direct the assessee to put forth his case on merits before ld. CIT(A) as expeditiously as possible. This Tribunal desires disposal of the case on merits alongwith reasoned and speaking order which deals with core of the dispute between assessee and Revenue. The unspeaking/non speaking order by First Appellate Authority is dangerous trend and so also non participation in First Appellate Proceedings by the assessee. We do not want Tax Administration getting clogged by such trend.
4.2 We are of the considered view that one more final opportunity be given to the assessee so that ends of justice are met. Therefore, under these facts and circumstances, we set aside the impugned order with direction to assessee to avail only one more opportunity of hearing as and by way of last chance. The assessee is directed to prepare his case papers and before he avails the opportunity to be given by ld. CIT(A) and not to seek any adjournment. CIT(A) to pass order as expeditiously as possible preferably within six months from date of receipt of this order of the Tribunal.
5. ORDER
5.1 In the premises, we set aside the impugned order and remand the case back to the file of CIT(A) with above directions. The adjournment request made is rejected.
5.2 The appeal of the assessee is allowed for statistical purposes.
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