ANKUSHKUMAR MADHUBHAI NAKRANI,SURAT V. ACIT, CENTRAL CIRCLE-2, SURAT

ITA 538/SRT/2024

AI Insights

The case involves two appeals by Ankushkumar Madhubhai Nakrani against the orders of the Commissioner of Income-tax (Appeals) - 4, Surat, which confirmed the additions made by the Assessing Officer under various heads such as unexplained sundry creditors, unexplained capital, and unexplained cash credits for the assessment year 2012-13. The appeals were initially dismissed by the CIT(A) due to a significant delay in filing, attributed to the assessee's engagement with proceedings by the Directorate of Revenue Intelligence (DRI) and the Central Bureau of Investigation (CBI). The Tribunal found that the delay was caused by circumstances beyond the assessee's control and thus warranted a fresh opportunity for the assessee to present his case.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 39092 (ITAT-SURAT)
• Duration Of Justice: 5 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-10-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Next Hearing Date: 08-10-2024
• Assessment Year: 2012-2013
• Appeal Filed On: 09-05-2024
• Laws Referred To: Income-tax Act
• Result in Favour of: Matter Remanded
• Court: TRIBUNAL
• Department Lawyers: MUKESH JAIN
• Assessee Lawyers: P. M. JAGASHETH
• Keywords: Set aside; Opportunity of being heard; Unexplained cash credit; Principle of natural justice
• Section: 143(3); 142(1); 143(2); 250; 271(1)(c)

Judgement Text

" आयकर अपीलीय अिधकरण, सूरत Æयायपीठ, सूरत IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND SHRI BIJAYANANDA PRUSETH, ACCOUNTANT MEMBER आयकर अपील सं./ITA Nos.537 & 538/SRT/2024 (िनधाªरण वषª /Assessment Year: 2012-13) (Physical Hearing) Ankushkumar Madhubhai Nakrani, 34, Mani Nagar Society, Near Saraswati School, A. J. Road, Fulpada, Surat – 395008 बनाम Vs. Asstt. Commissioner of Income-tax, Central Circle – 2, Surat, Room No.504, 5th Floor, Aaykar Bhawan, Majura Gate, Surat-395001 èथायीलेखासं./जीआइआरसं./PAN/GIR No.: AFIPN3686G (अपीलाथȸ/Appellant) (Ĥ×यथȸ /Respondent) िनधाŊįरती की ओर से /Appellant by Shri P. M. Jagasheth, CA राजˢ की ओर से /Respondent by Shri Mukesh Jain, Sr. DR अपील पंजीकरण/Appeal instituted on 09/05/2024 सुनवाई की तारीख/Date of Hearing 08/10/2024 उद ्घोषणा की तारीख/Date of Pronouncement 28/10/2024 आदेश / O R D E R PER BIJAYANANDA PRUSETH, AM: These two appeals by the assessee emanate from the separate order passed under section 250 of the Income-tax Act [in short, ‘the Act’] of the Commissioner of Income-tax (Appeals) - 4, Surat [in short, ‘the CIT(A)’], both dated 20.03.2024 for the assessment year (AY) 2012-13. Hence, with the consent of the parties, both the appeals are clubbed and heard together and are decided by the consolidated order for sake of convenience and brevity. 2. The grounds of appeal raised by the assessee (ITA No. 537/SRT/2024) are as follow: 2 ITA Nos.537 & 538/SRT/2024 Ankushkumar Madhubhai Makrani “1. On the facts and in the circumstances of the case as well as the law on the subject, the learned Commissioner of the Income Tax (Appeals) has erred in confirming the action of the Assessing Officer in making addition of Rs.37,71,727/- on account of alleged unexplained sundry creditors. 2. On the facts and in the circumstances of the case as well as the law on the subject, the learned Commissioner of the Income Tax (Appeals) has erred in confirming the action of the Assessing Officer in making addition of Rs.12,79,104/- on account of alleged unexplained capital introduced. 3. On the facts and in the circumstances of the case as well as the law on the subject, the learned Commissioner of the Income Tax (Appeals) has erred in confirming the action of the Assessing Officer in making addition of Rs.27,58,750/- on account of alleged unexplained cash credits. 4. On the facts and in the circumstances of the case as well as the law on the subject, the learned Commissioner of the Income Tax (Appeals) has erred in not considering the reason of delay in filing appeal and delay filing the appeal has not condoned. 5. On the facts and in the circumstances of the case as well as the law on the subject, the learned Commissioner of the Income Tax (Appeals) has not offered adequate opportunities to hear the case and passed ex-parte order and hence the case may please be set aside and restored back to the CIT(A) or AO. 6. On the facts and in the circumstances of the case as well as the law on the subject, the learned Commissioner of the Income Tax (Appeals) has erred in confirming the action of the Assessing Officer in initiating penalty proceedings u/s.271AAC of the Income tax Act, 1961. 7. It is therefore prayed that the above addition may please be deleted as learned members of the tribunal may deem it proper. 8. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of the hearing of the appeal.” 3. The grounds of appeal raised by the assessee (ITA No. 538/SRT/2024) are as follow: “1. On the facts and in the circumstances of the case as well as the law on the subject, the learned Assessing Officer has erred in initiating penalty proceedings u/s.271(1)(c) of the Income tax Act, 1961. 2. On the facts and in the circumstances of the case as well as the law on the subject, the learned Commissioner of the Income Tax (Appeals) has erred in confirming the action of the Assessing Officer in levying Penalty of Rs.24,13,160/- u/s.271(1)(c) of the Income Tax Act, 1961. 3 ITA Nos.537 & 538/SRT/2024 Ankushkumar Madhubhai Makrani 3. On the facts and in the circumstances of the case as well as the law on the subject, the learned Commissioner of the Income Tax (Appeals) has erred in not considering the reason of delay in filing appeal and delay filing the appeal has not condoned. 4. On the facts and in the circumstances of the case as well as the law on the subject, the learned Commissioner of the Income Tax (Appeals) has not offered adequate opportunities to hear the case and passed ex-parte order and hence the case may please be set aside and restored back to the CIT(A) or AO. 4. It is therefore prayed that the above addition may please be deleted as learned members of the tribunal may deem it proper. 5. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of the hearing of the appeal.” 4. The facts of the case in brief are that the assessee filed return of income for AY 2012-13 declaring total income of Rs.11,27,210/- on 28.09.2012. The case was selected for scrutiny. Notice u/s 143(2) of the Act was issued on 11.08.2013 and served upon the assessee on 16.08.2013. Various notices and questionnaires were issued to the assessee u/s 143(2) and 142(1) of the Act. The assessee was engaged in the business of trading of embroidery machines, spares and embroidery job work. The assessee showed gross profit of Rs.38,76,728/- on the turnover of Rs.11,68,52,725/- at the rate of 3.32% during the year. The Assessing Officer (in short, ‘the AO’) noticed that assessee had shown sundry creditors outstanding as on 31.03.2012 at Rs.37,71,727/-. The assessee also introduced capital of Rs.12,79,104/-. The assessee failed to provide any explanation or requisite details. The assessee had also deposited cash of Rs.27,58,750/-. The AO issued show cause notice on 05.03.2015 and hearing was fixed on 12.03.2015. Since the assessee failed to furnish the source of these cash deposits, AO added the same and also initiated penalty 4 ITA Nos.537 & 538/SRT/2024 Ankushkumar Madhubhai Makrani proceedings u/s 271(1)(c) of the Act. In the result, the AO completed the assessment u/s 143(3) of the Act on 31.03.2015 and determining total income at Rs.89,36,791/-. The AO made three additions i.e., (i) addition of Rs.37,71,727/- on account of unexplained sundry creditors, (ii) addition of Rs.12,79,104/- on account of unexplained capital and (iii) addition of Rs.27,58,750/- on account of unexplained cash credit. The AO also initiated penalty proceedings u/s 271(1)(c) of the Act for furnishing of inaccurate particulars of income. 5. Aggrieved, the assessee filed appeal before the Ld. CIT(A) which was delayed by 456 days. Despite of issuance of eleven notices by Ld. CIT(A), the assessee did not respond to the notices. The details are given in a tabular form in para 5 of the appellate order. Thereafter, Ld. CIT(A) observed that assessee was not interested in pursuing the appeal. Accordingly, he proceeded to decide the appeal based on material available on record. The Ld. CIT(A) has stated that there was delay of 456 days in filing the appeal. The reasons for delay was stated to be due to reasons beyond control of the assessee. It was submitted that the Directorate of Revenue Intelligence conducted search at his premises in the year 2013 and the proceedings continued for several months. Thereafter, the CBI conducted enquiry in case of the assessee in the year 2014 and detail information was called for from time to time. Due to these enquiries, the assessee was required to frequently visit their offices and was under mental stress. During this period, assessment order was passed and due to mental 5 ITA Nos.537 & 538/SRT/2024 Ankushkumar Madhubhai Makrani pressure, the assessee was not able to handle the appeal issues. The assessee had submitted that assessment orders and penalty orders to his counsel Shri Hiteshbhai Domadiya who did not prepare to appeal papers. Subsequently, he expressed inability to represent the case and accordingly a new chartered accountant namely Shri Sapnesh Sheth, was approached who filed the appeals. Due to these reasons, appeal delayed which was not intentional. 6. The CIT(A) was not satisfied with the reasons for delay in filing the appeal. He observed that the reason stated by the assessee was without any merit. As per Section 249(2) of the Act, the appeal should be presented within the 30 days of service of the notice of the demand. The Ld. CIT(A) may admit belated appeal if sufficient cause is shown by the applicant. In case of the assessee, no sufficient cause was given for delay of 456 days in filing the appeal. Thereafter, the CIT(A) has referred to various decisions of the Hon’ble Courts and observed that appellant must demonstrate that there was sufficient cause which obstructed his action to file appeal beyond the prescribed time limit. He stated that the delay was directly the result of deliberate inaction by the appellant. Hence, the appeal was dismissed without any discussion on merits or on any other aspect. 7. Aggrieved by the order of CIT(A), the assessee filed appeal before this Tribunal. The Learned Authorized Representative (Ld. AR) of the assessee filed a paper book and contended that the assessee could not file appeal before the CIT(A) on time because of prosecution by Directorate of Revenue Intelligent and 6 ITA Nos.537 & 538/SRT/2024 Ankushkumar Madhubhai Makrani CBI. He submitted that the DRI conducted a search on 26.04.2013 at his premises. He was summoned by DRI on 14.06.2013. Subsequently, the CBI searched him on 05.12.2013. The final report of CBI was made on 31.12.2014. The assessment order was passed on 31.03.2015. In view of the searches and various proceedings by the DRI and CBI, the assessee was under tremendous mental stress. The work assigned to his earlier counsel was not completed by him and he had to change the counsel and who filed appeal before CIT(A) after delay of 456 days. The Ld. AR submitted that delay was neither deliberate nor intentional. The Ld. AR prayed that the assessee could not appear before the CIT(A) due to circumstances beyond his control. Therefore, Ld. AR contended that in the interest of justice, one more opportunity should be given to the assessee to plead his case on merit before the CIT(A). 8. On the other hand, Learned Senior Departmental Representative (Ld. Sr. DR) submitted that assessee was negligent in filing appeal before the CIT(A). He was also negligent in properly representing his case before the CIT(A). Hence, appeal of the assessee should be dismissed. 9. We have heard rival submission of both the parties and perused record. The CIT(A) dismissed the appeal of the assessee without discussing on merits or on any other aspect because the delay in filing appeal was not condoned. The reasons for not filing the appeal in time has been explained by the assessee in his submission before the CIT(A). The same has been extracted by CIT(A) at para 6 of the appellate order. The same reasons have been canvassed before us. The 7 ITA Nos.537 & 538/SRT/2024 Ankushkumar Madhubhai Makrani submission of the Ld. AR has already been mentioned in the preceding paragraph. In the paper book, the Ld. AR has submitted the panchnama dated 26.04.2013 by the Intelligence Officer, AZU (Camp – Surat), summons by DRI, seizure of documents, final report before the Hon’ble CBI Court etc. to support the contention that the appellant was engaged in various proceedings initiated against him by the DRI and CBI. The original counsel of the appellant also did not take up the appellate matter and the appellant had to engage a new counsel who filed the appeal. In view of the facts narrated above, we are of the considered view that there was sufficient cause for not filing the appeal before CIT(A). 9.1 We find that assessee could not plead his case properly before the CIT(A) due to circumstances beyond his control. The CIT(A) has not admitted the appeal due to delay in filing of appeal as well as non-compliance by the assessee before him. The Ld. AR requested that one more opportunity of hearing may be given to present his case properly in the interest of justice and fair play. Considering the peculiar facts and circumstances of the case, we are of the view that one more opportunity should be given to the assessee to plead his case. It is settled law that principles of natural justice and fair play require that the affected party is granted ‘sufficient opportunity’ of being heard to contest his case. Therefore, without delving deeper into the merits of the case, in the interest of justice, we set aside the order of Ld. CIT(A) and restore the matter back to the file of AO for fresh adjudication and to pass a speaking order 8 ITA Nos.537 & 538/SRT/2024 Ankushkumar Madhubhai Makrani after affording reasonable opportunity of being heard to the assessee. The assessee is also directed to be more vigilant and furnish explanation and submit relevant details / documents before AO without seeking adjournments bereft of valid reasons. For statistical purposes, the appeal of the assessee is treated as allowed. 10. In the result, assessee’s appeal is allowed for statistical purposes. ITA No.538/SRT/2024 11. Since we have remitted the appeal against quantum assessment back to the file of AO in ITA No. 537/SRT/2024 to decide it afresh, therefore, order of CIT(A) against penalty u/s 271(1)(c) of the Act does not require adjudication. The Assessing Officer is given liberty to initiate penalty proceedings in accordance with law if the facts so warrant in the de novo proceedings. In the result, the appeal is also allowed for statistical purposes. 12. In combined result, both appeals of the assessee are allowed for statistical purposes. Order pronounced on 28/10/2024 in the open court. Sd/- Sd/- (PAWAN SINGH) (BIJAYANANDA PRUSETH) Æयाियक सदÖय/ Judicial Member लेखा सदÖय/ Accountant Member Surat Ǒदनांक/ Date: 28 /10/2024 सूरत /Surat Ǒदनांक/ Date: 28/10/2024 Dkp Outsourcing Sr.P.S* 9 ITA Nos.537 & 538/SRT/2024 Ankushkumar Madhubhai Makrani आदेश कì ÿितिलिप अúेिषत/ Copy of the order forwarded to :  अपीलाथê/ The Appellant  ÿÂयथê/ The Respondent  आयकर आयुĉ/ CIT  आयकर आयुĉ (अपील)/ The CIT(A)  िवभागीय ÿितिनिध, आयकर अपीलीय आिधकरण, सूरत/ DR, ITAT, SURAT  गाडª फाईल/ Guard File // True Copy // By order/आदेश से, सहायक पंजीकार आयकर अपीलȣय अͬधकरण, सूरत "