Case Law Details
Roshan A Kudalkar Vs ITO (ITAT Pune)
Income Tax Appellate Tribunal (ITAT) Pune ruled in favor of the deceased assessee, Roshan A Kudalkar, in an appeal against an order by the Commissioner of Income Tax (Appeals) – National Faceless Appeal Centre (NFAC) for Assessment Year 2015-16. The key dispute revolved around an addition of ₹28,57,681 made by the Assessing Officer (AO) based on a perceived discrepancy in closing stock. The tribunal found that the AO had merely calculated the difference between the closing stock of two assessment years without properly considering the assessee’s audited books of accounts and financial records.
The tribunal noted that Kudalkar had run a petrol pump, and his stock was regularly monitored by the public sector company supplying fuel. The AO’s reliance on a variation in reported closing stock without any examination of sales, purchases, or audit reports was found to be arbitrary. Further, the AO had failed to cite any specific provision of the Income Tax Act under which the addition was made. ITAT Pune concluded that the assessment was not based on a valid legal footing, leading to the deletion of the addition.
A crucial aspect of the case was the delay in filing the appeal before the CIT(A)-NFAC, which was rejected without considering the reason for the delay. The assessee had been severely ill before his demise in 2021, which was cited as a valid reason for the 44-day delay. ITAT Pune held that procedural fairness required the CIT(A)-NFAC to consider this aspect before dismissing the appeal outright.
The case highlights the importance of considering factual and procedural aspects in tax assessments. The ITAT’s decision to allow the appeal ensures that arbitrary additions based on misinterpretations of closing stock are not upheld, reinforcing the need for evidence-backed assessments. The ruling was pronounced in an open court on December 30, 2024.
FULL TEXT OF THE ORDER OF ITAT PUNE
This is an appeal filed by the assessee against the order of ld. Commissioner of Income Tax(Appeals)[NFAC] for Assessment Year 2015-16 dated 19.08.2024 passed u/sec. 250 of the Income tax Act, 1961. The Assessee has raised the following grounds of appeal :
“1. On facts and circumstances prevalling in the case and as per provisions and scheme of the Act it be held that Ld. CIT(A)-NFAC erred in dismissing the appeal without intimating about his intention to dismiss appeal for delay of 46 days in filing form 35. Accordingly, the order so passed by Ld. CIT(A)-NFAC be kindly quashed and Ld. CIT(A)-NFAC be kindly directed to condone the delay and allow the Appellant to file it submission on merits and legality. Accordingly, Appellant be granted just and proper relief in this respect.
2. On facts and circumstances prevalling in the case and as per provisions and scheme of the Act it be held that Ld. CIT(A)-NFAC erred in passing the order without perusing the submissions filed before him and also before Ld. CIT(A)- 2 Kolhapur. Accordingly, the additions so upheld by Ld. CIT(A) be kindly deleted and appellant be granted just and proper relief in this respect.
3. Without prejudice to other grounds, on facts and circumstances prevailing in the case and as per provisions and scheme of the Act it be held that the addition of Rs.28,57,681/- so made by Ld. AO and that upheld by Ld. CIT(A)- NFAC is incorrect and arbitrary. Accordingly, the addition so made be kindly deleted and the Appellant be granted just and proper relief in this respect.
4. Without prejudice to other grounds, on facts and circumstances prevalling in the case and as per provisions and scheme of the Act it be held that the interest computed u/s 243A, B, C and D of the Act be kindly deleted since the same is dependent on the incorrect and invalid additions so made by Ld. AO and that upheld by Ld. CIT(A). Accordingly, the Appellant be kindly given appropriate relief in this regard.
5. The appellant prays to be allowed to add, amend, modify, rectify, delete, raise any grounds of appeal at the time of hearing.”
Submission of ld.AR :
2. Ld.AR filed a paper book. Ld.AR submitted that Assessee died on 07.03.2021.
2.1 ld.AR submitted that in this case, assessee had filed an appeal against the assessment order for A.Y.2015-16 before the ld.CIT(A) on 13th March, 2018. Ld.AR submitted that this appeal was manually filed before the ld.CIT(A).Assessee filed additional evidence before the ld.CIT(A) and also filed a petition for admission of additional evidence. Then, the ld.CIT(A)-2, Kolhapur called for a Remand Report from ITO, Ward-3, Ratnagiri. The ITO, Ward-3, Ratnagiri vide his letter dated 23.11.2019 directed the assessee to file the entire submission before the ITO, Ward-3, Ratnagiri and directed Assessee to appear before the ITO, Ward-3, Ratnagiri. Ld.AR has filed copy of the said letter at page no.2 of the paper book. Ld.AR submitted that however, erroneously ld.CIT(A) vide order dated 19.08.2024 dismissed the appeal of the assessee on account of delay in filing appeal. The ld.CIT(A) failed to consider the Remand Report filed by the Assessing Officer. Ld.CIT(A) had not granted any opportunity to the Assessee to explain the Delay of 44 days. The assessee had filed a submission with Form No.35 requesting for Condonation of Delay. Ld.AR submitted that there was a valid reason as Assessee had died in 2021, but prior to that Assessee was severely ill. Therefore, ld.CIT(A) should have condoned the delay and decided the appeal on merit.
2.2 Ld.AR submitted that the addition made by the AO is bad in law. Ld.AR took us through the assessment order and submitted that AO has merely added the difference of closing stock between earlier assessment year and the present assessment year. Ld.AR submitted that Assessee was running a petrol pump. Petrol was purchased from Public Sector Company. There is strict control of the company and company personnel check the stock of the assessee periodically. Therefore, there cannot be any difference in the stock. There is no provision under which Assessing Officer can make such an addition. Assessee’s books of accounts were audited and Audit Report was duly filed along with the Return of Income. Copy of the Audit Report and Return of Income is at page no.11 to 34 of the paper book. AO has not pointed out any defect in the books of accounts of the assessee. Therefore, ld.AR pleaded that addition made be deleted.
Submission of ld.DR :
3. DR for the Revenue relied on the order of the Assessing Officer and ld.CIT(A).
Findings & Analysis :
4. We have heard both the parties and perused the records. The deceased assessee had filed a Return of Income for A.Y.2015-16 on 31.03.2017. The deceased assessee used to run a petrol pump. The Assessing Officer in paragraph 4.2 and 4.3 of the assessment order held as under :
“4.2 As per information in possession of the department, the assessse has shown the closing stock at Rs.5,98,219/- as on 31/03/2015 and at Rs 33,55.900/- as on 31/03/2014 In this regard the assessee was special requested vide show cause letter dated 27/11/2017 to furnish the complete details of the closing stock of ast 3 years with supporting evidences and reason for low closing stock shown for year ending on 31/03/2017 as compared to the last year. The assessee was also show caused as to why the addition of Rs 28,57,681/- (Rs.35,55,900 Rs.5,98219 Rs 28,57,681/-) on account of Low closing stock should not be made
4.3 In view of the above discussion as also despite sufficient and reasonable opportunity of being heard given, the assessee had failed to comply with the statutory notices by furnishing necessary information in regard to the details of closing stock it was specifically brought to the notice of the assessee that, failure to attend will lead into finalization of the assessment ex-parte under section 144 of the Income-tax Act, 1961 by treating income to the extent of Rs.28,57,681/- account of Low closing stock as discussed in para no
4.2 above. In absence of any compliance from the assessee for furnishing any evidences in the matter, an addition of Rs. 28,57,681/-is made and added to the total income of the assessee.”
4.1 The Assessing Officer has observed that Closing Stock was as under :
As on 31.03.2015 : Rs.5,98,219/-
As on 31.03.2014 : Rs.33,55,900/-
4.2 Thereafter, Assessing Officer noted that Closing Stock as on 31.03.2017 was low as compared to earlier years. It is to be noted that exact figure of Closing Stock for 31.03.2017 or 31.03.2016 has not been mentioned by the Assessing Officer in the assessment order, whereas assessee had filed Audit Report along with the Return of Income. Then, the Assessing Officer just calculated the difference between Closing Stock as on 31.03.2015 and Closing Stock as on 31.03.2014 and then added the difference to the total income of the assessee. We specifically asked ld.DR for the Revenue to explain us, under which provision of the Income Tax Act, Assessing Officer has made impugned addition, we further asked ld.DR for the Revenue to explain us the accounting policies invoked by the Assessing Officer Ld.DR could not answer.
4.3 In this case, the Assessing Officer has not commented anything on the Audit Report. Assessing Officer has not commented anything on the sales or purchases, though Audit Report was duly filed with the Return of Income. Assessing Officer has erroneously referred to the Closing Stock of 31.03.2014 which has got nothing to do with the year under consideration. Assessing Officer has not given any basis for making such addition. In these facts and circumstances of the case, we are convinced that there is no merit in the addition of Rs.28,57,681/-. Accordingly, we direct the Assessing Officer to delete the addition of Rs.28,57,681/-. Accordingly, Ground No.3 raised by the assessee is allowed.
4.4 Since we have allowed Ground No.3 of the assessee, Ground Nos.1, 2, 4 and 5 become academic in nature, accordingly, these grounds are dismissed as unadjudicated.
5. In the result, appeal of the assessee is partly allowed.
Order pronounced in the open Court on 30th December, 2024.
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