AMAN ALLOYS PRIVATE LIMITED SIRHIND SIDE MANDI GOBINDGARH,PUNJAB V. THE ASSESSMENT UNIT NFAC DELHI JAO THE INCOME TAX OFFICER WARD-2, MANDIGOBINDGARH , PUNJAB

ITA 958/CHANDI/2024

AI Insights

The case involves Aman Alloys Private Limited, which appealed against the order of the CIT(A)/NFAC, Delhi, pertaining to the Assessment Year 2014-15. The AO had made substantial additions to the assessee's income, attributing them to unsubstantiated scrap purchases and interest income. The CIT(A) dismissed the appeal on merits due to the assessee's failure to respond to multiple notices, without adjudicating on the merits. The Tribunal found that the CIT(A) erred in dismissing the appeal without addressing fundamental questions regarding the AO's authority to initiate reassessment and the legality of additions, which warranted judicial scrutiny.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 107611 (ITAT-CHANDIGARH)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-04-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ROHIT SHARMA; VIRTUAL
• Assessee Lawyers: SUDHIR SEHGAL
• Keywords: Set aside; Reassessment proceedings; Principle of natural justice; Audi alteram partem; Procedural lapse

Judgement Text

"आयकर अपीलीय अिधकरण,चǷीगढ़ Ɋायपीठ “ए” , चǷीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH “A”, CHANDIGARH HEARING THROUGH: HYBRID MODE ŵी लिलत क ुमार, Ɋाियक सद˟ एवं ŵी क ृणवȶ सहाय, लेखा सद˟ BEFORE: SHRI. LALIET KUMAR, JM &SHRI. KRINWANT SAHAY, AM आयकर अपील सं./ ITA No. 958 /Chd/ 2024 िनधाŊरण वषŊ / Assessment Year : 2014-15 Aman Alloys Private Limited Sirhind Side Mandi Gobindgarh Punjab- 147301 बनाम The ITO Ward-2, Mandi Gobindgarh, Punjab ˕ायी लेखा सं./PAN NO: AABCA2335A अपीलाथŎ/Appellant ŮȑथŎ/Respondent िनधाŊįरती की ओर से/Assessee by : Shri Sudhir Sehgal, Advocate राजˢ की ओर से/ Revenue by : Shri Rohit Sharma, CIT DR, (Virtual) सुनवाई की तारीख/Date of Hearing : 07/04/2025 उदघोषणा की तारीख/Date of Pronouncement : 09/04/2025 आदेश/Order PER LALIET KUMAR, J.M: This is an appeal filed by the Assessee against the order of the Ld. CIT(A)/NFAC, Delhi dt. 09/07/2024 pertaining to Assessment Year 2014-15. 2. Briefly the facts of the case are that the Ld. AO passed an assessment order dated 04.05.2023 under Section 147/144 of the Act, making substantial additions of Rs. 27,76,01,002/-. These additions were attributed to unsubstantiated scrap purchases and interest income, which the AO treated as taxable income. The assessee, claiming unawareness of the assessment order until 27.10.2023, filed a belated appeal before the CIT(A). While the delay was condoned, the CIT(A) dismissed the appeal on merits due to the assessee’s persistent failure to respond to multiple notices issued during appellate 2 proceedings. The CIT(A) concluded that the non-compliance indicated a lack of substantive defense and dismissed all grounds raised by the assessee without adjudicating on their merits. 3. The assessee’s grounds of appeal challenge the validity of the reassessment proceedings, alleging jurisdictional errors, time-barred proceedings under Section 149, and unjustified additions. Key contentions include the AO’s alleged reliance on surmises to treat scrap purchases and interest income as taxable income, procedural lapses in issuing notices under Section 148, and mechanical approval from higher authorities. Despite these substantive legal and factual challenges, the CIT(A) refrained from examining the merits, basing its dismissal solely on procedural non-compliance. 3.1 The Ld. AR submitted that the assessee failed to appear before the lower authorities as it had suffered substantial financial losses during the Financial Years 2013–14 and 2014–15. In fact, in the Assessment Year 2015–16, the assessee claimed a loss of Rs. 5.29 crores. Furthermore, due to continuous losses, the assessee’s bank account was declared as a Non-Performing Asset (NPA), and proceedings under the SARFAESI Act, 2002 were initiated by Kotak Mahindra Bank, resulting in the attachment of the assessee’s properties on 30.11.2015. 3.2 Additionally, the electricity connection of the assessee company was disconnected by Punjab State Power Corporation Ltd. on 27.04.2015. Due to the ongoing financial distress, the accountant of the assessee company, Shri Balbir Chand, who was handling the Income Tax matters and was associated with the email ID [e-mail], also left the employment of the assessee. It was further submitted that the assessee was not aware of the developments and the passing of orders by the Ld. A.O. and the Ld. CIT(A). The Ld. AR also submitted that the notices from the Ld. CIT(A) were sent to the company's former accountant and therefore the assessee was not able to comply the notices sent to it. 3 4. On the other hand, the Ld. DR opposed the plea of the assessee and submitted that the assessee is a company and no further opportunity should be granted. However, in view of the above circumstances, the assessee prays that one more opportunity may be granted to present its case before the lower authorities. 5. We have considered the rival submissions and perused the material available on the record. We admit thesignificance of adhering to procedural timelines and the consequences of non-compliance. However, the principles of natural justice, particularly audi alteram partem, necessitate that substantive legal issues be adjudicated, especially when they pertain to jurisdictional defects such as the validity of reassessment proceedings or statutory time limits. While precedents cited by the CIT(A) support dismissal for non-prosecution, they do not absolve appellate authorities from addressing jurisdictional and legal questions that can be resolved based on existing records. In the present case, the assessee’s grounds involve fundamental questions regarding the AO’s authority to initiate reassessment and the legality of additions, which warrant judicial scrutiny. 5.1 In light of the above, we find that dismissing the appeal without addressing these critical issues results in a denial of justice.In view of the submissions made by the Ld. AR and considering the facts and circumstances of the case, including the financial hardship faced by the assessee during the relevant period, we are of the considered opinion that the assessee was prevented by sufficient cause from appearing before the lower authorities. 5.2 Accordingly, in the interest of justice, we deem it fit to set aside the impugned order of the Ld. CIT(A) and restore the matter to the file of the Ld. A.O. for denovo adjudication after affording due opportunity of hearing to the assessee. The assessee is also directed to extend full cooperation and furnish all 4 necessary details and documents as may be required for proper adjudication of the matter. It is clarified that the Ld. A.O. shall pass a speaking and reasoned order in accordance with law, after granting adequate opportunity to the assessee to present its case. The AO is further directed to re-examine the validity of the reassessment proceedings, particularly compliance with Section 148A and the time limit under Section 149. Further, the AO shall verify whether the additions for scrap purchases and interest income were based on cogent material or mere conjectures. The assessee shall be granted a final opportunity to submit documentary evidence and written submissions, followed by a reasonable hearing. 6. The appeal is accordingly allowed for statistical purposes, and the matter is restored to the file of the AO for compliance with the above directions. 7. In the result, appeal of the Assessee is allowed for statistical purposes. Order pronounced in the open Court on 09/04/2025. Sd/- Sd/- क ृणवȶ सहाय लिलत क ुमार (KRINWANT SAHAY) (LALIET KUMAR) लेखासद˟/ ACCOUNTANT MEMBER Ɋाियक सद˟/JUDICIAL MEMBER AG आदेशकीŮितिलिपअŤेिषत/ Copy of the order forwarded to : 1. अपीलाथŎ/ The Appellant 2. ŮȑथŎ/ The Respondent 3. आयकर आयुƅ/ CIT 4. िवभागीय Ůितिनिध, आयकर अपीलीय आिधकरण, चǷीगढ़/ DR, ITAT, CHANDIGARH 5. गाडŊ फाईल/ Guard File आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar "