AVDESH JAIN,RAIPUR V. INCOME TAX OFFICER-1(2), RAIPUR

ITA 30/RPR/2024

AI Insights

The case involves Avdesh Jain, who appealed against the order of the Commissioner of Income-Tax (Appeals), National Faceless Appeal Center, Delhi, which itself arose from an order passed by the Assessing Officer (A.O) under sections 147 and 144 of the Income-tax Act, 1961, for the assessment year 2010-11. The primary contention of the assessee was the invalidity of the reassessment and the additions made, including disallowances under section 40A(3) for cash purchases, unexplained investments and expenditures under sections 69 and 60C, and undisclosed income from a truck under section 44AE. The ITAT noted procedural lapses in the issuance of notices and the handling of the appeal by the CIT(Appeals), leading to the decision to remand the case for a thorough re-evaluation.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 469795 (ITAT-RAIPUR)
• Duration Of Justice: 8 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-10-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Next Hearing Date: 28-08-2024
• Assessment Year: 2010-2011
• Appeal Filed On: 27-01-2024
• Other Referred Cases: National Thermal Power Company Ltd. Ltd. Vs. CIT, ACIT & Anr. Vs. Hotel Blue Moon, CIT Vs. Laxman Das Khandelwal, Pr. CIT Vs. S.G Portfolio (P). Ltd., Swapna Manuel Vs. ACIT, Pr. CIT Vs. Marck Biosciences Ltd., Girishbhai Nanjibhai Solanki Vs. ITO, CIT Vs. Premkumar Arjundas Luthra (HUF)
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S.L.ANURAGI
• Assessee Lawyers: SUNIL KUMAR AGRAWAL
• Keywords: Set aside; Opportunity of being heard; Business expenditure; Question of law; Unexplained expenditure; Unexplained investment; Assessment record; Deemed to accrue or arise in india
• Section: 147; 148; 143(2); 250; 251; 69C; 246A

Judgement Text

"आयकर अपीलȣय अͬधकरण Ûयायपीठ रायपुर मɅ। IN THE INCOME TAX APPELLATE TRIBUNAL, RAIPUR BENCH, RAIPUR BEFORE SHRI RAVISH SOOD, JUDICIAL MEMBER AND SHRI ARUN KHODPIA, ACCOUNTANT MEMBER आयकर अपील सं. / ITA No.30/RPR/2024 Ǔनधा[रण वष[ / Assessment Year : 2010-11 Avdesh Jain Mahesh Colony, Raipur (C.G.)-492 001 PAN: AJBPJ9986G .......अपीलाथȸ / Appellant बनाम / V/s. The Income Tax Officer-1(2), Raipur (C.G.) ……Ĥ×यथȸ / Respondent Assessee by : Shri Sunil Kumar Agrawal, CA Revenue by : Shri S. L. Anuragi, CIT-DR सुनवाई कȧ तारȣख / Date of Hearing : 28.08.2024 घोषणा कȧ तारȣख / Date of Pronouncement : 09.10.2024 2 Avdesh Jain Vs. ITO-1(2), Raipur ITA No.30/RPR/2024 आदेश / ORDER PER RAVISH SOOD, JM: The present appeal filed by the assessee is directed against the order passed by the Commissioner of Income-Tax (Appeals), National Faceless Appeal Center (NFAC), Delhi, dated 28.11.2023, which in turn arises from the order passed by the A.O under Sec. 147 r.w.s.144 of the Income-tax Act, 1961 (in short ‘the Act’) dated 22.12.2017 for the assessment year 2010-11. The assessee has assailed the impugned order on the following grounds of appeal: \"1. On the facts and circumstances of the case and in law the id CIT(A) has erred in sustaining the disallowance u/s.40A(3) at Rs.3,40,30,000 on account of cash purchases. 2. On the facts and circumstances of the case and in law the Id CIT(A) has erred in sustaining the addition of Rs.2,00,000 u/s.69 as unexplained investment. 3. On the facts and circumstances of the. case and in law the Id CIT(A) has erred in sustaining the addition of Rs.3,56,800 u/s.60C as unexplained expenditure. 4. On the facts and circumstances of the case and in law the Id CIT(A) has erred in sustaining the addition of Rs.60,000 as undisclosed income from truck u/s.44AE. 5. The appellate craves leave, to add, urge, alter, modify or withdraw any grounds before or at the time of hearing.\" Also, the assessee has raised additional grounds of appeal which reads as under: \"Additional Gr.No.1 \"1. On the facts and circumstances of the case and in law, assessment made u/s.147 dt.22-12-17 is invalid as the AO has not issued notice u/s.143(2), after filing the ROI on 3 Avdesh Jain Vs. ITO-1(2), Raipur ITA No.30/RPR/2024 26-4-17 in response to the notice issued u/s.148 dt.30-3-17 for AY 10-11; in absence of notice issued u/s.143(2), reassessment made u/s.147 would be invalid for want of valid assumption of jurisdiction and is liable to be quashed.\" Additional Gr.No.2 \"2. On the facts and circumstances of the case and in law, assessment made u/s.147 dt.22-12-17 by ITO- 4(4) is invalid as he was not having valid authority of law/ jurisdiction for framing assessment for AY10-11; in absence of order u/s.127 by PCIT; there is no order u/s.127 by PCIT for transferring the 'case' from ITO-2(2) to ITO-2(1) and thereafter to ITO-4(4); in absence of order u/s.127 by PCIT, reassessment made u/s. 147 by ITO-4(4) i.e., 'non-jurisdictional AO', would be invalid and is liable to be quashed.\" Additional Gr.No.3 \"3. On the facts and circumstances of the case and in law, addition made of Rs.3,40,30,000 on disallowance of business expenditure i.e., purchases of goods, made u/s.40A(3) is invalid, since reassessment made u/s.144 i.e., 'best judgment assessment' and resultant GP would be 93.71% on sales of Rs.3,72,37,332 (i.e., GP would increase by 91.39%) which is impossible in the line of business of the assessee; disallowance u/s.40A(3) is not permissible in the eyes of law in 'best judgment assessment' made u/s144; impugned addition is liable to be deleted.\" As the adjudication of the additional grounds involves purely a question of law which would not require looking any further beyond the facts available on record, therefore, we have no hesitation in admitting the same. Our aforesaid view that where an assessee, had raised, though for the first time an additional ground of appeal before the Tribunal, which involves purely a question of law and requires no further verification of facts, then, the same merits admission finds support from the judgment of the Hon’ble Supreme Court in the case of National Thermal Power Company Ltd. Ltd. Vs. CIT (1998) 229 ITR 383 (SC). 4 Avdesh Jain Vs. ITO-1(2), Raipur ITA No.30/RPR/2024 2. Succinctly stated, the assessee who is engaged in the business of retail trading had filed his return of income for A.Y.2010-11 on 28.09.2010, declaring an income of Rs.4,67,200/-. The A.O on the basis of certain information shared by the Investigation Wing, Raipur, initiated proceedings u/s.147 of the Act. Notice u/s. 148 of the Act, dated 30.03.2017 was issued to the assessee. 3. During the course of the assessment proceedings, the A.O observed that the assessee had opened a bank account, i.e. CA No.1470050001496, with United Bank of India, Branch : Station Road, Raipur in the name of his sole proprietary concern, viz. M/s. Balaji Traders. The A.O further observed that an amount aggregating to Rs.3,33,86,452/- received from different parties was credited in the bank account through RTGS which, thereafter, over the year was immediately withdrawn in cash. On verification, it was observed by the A.O that the assessee was engaged in the business of food grains. The A.O further observed, viz. (i) there was high turnover in the account within a very short period of time of its opening; (ii) the frequent withdrawal of large cash amounts did not appear to be normal with the scale of the assessee’s business activity; and (iii) the cash withdrawals immediately after receipt of funds through RTGS defied economic rationale. 5 Avdesh Jain Vs. ITO-1(2), Raipur ITA No.30/RPR/2024 4. Also, the A.O observed that the Investigation Wing of the department had summoned the assessee for seeking an explanation as regards the rationale of credits and cash withdrawals in his bank account. In reply, it was the claim of the assessee that he was engaged in the business of trading in commodity, i.e. Urad. Elaborating further, it was stated by him that though primarily the purchases were made through brokers but some of the purchases were made directly from the farmers. It was stated by him that the goods purchased were either directly sent to the buyers of Andhra Pradesh and Tamilnadu or kept at the godown at Amlibadar. The assessee further stated that payments received through RTGS in the bank account of his proprietary concern, viz. M/s. Balaji Traders were the sale proceeds which were immediately remitted to the broker/farmers for goods purchased from them. 5. On a perusal of the cash book that was produced by the assessee, the A.O observed that the assessee had made huge cash payments to the following parties: 6 Avdesh Jain Vs. ITO-1(2), Raipur ITA No.30/RPR/2024 The A.O further observed that the assessee had made huge cash withdrawals from his current account No.1470050001496 on different dates during the year, as under: 7 Avdesh Jain Vs. ITO-1(2), Raipur ITA No.30/RPR/2024 The A.O called upon the assessee to put forth an explanation as regards the rationale of cash withdrawals of Rs.3,40,30,000/-. Once again, the assessee stated that the amounts withdrawn were towards payments made to the farmers/brokers from whom he had made purchases of Urad. However, the assessee failed to come forth with the requisite details, viz. address or other contact details of the brokers etc. Considering the aforesaid facts, the A.O observing that the assessee had made purchases in cash, thus, disallowed the entire amount of Rs.3,40,30,000/- u/s.40A(3) of the Act. 6. Also, the A.O made an addition u/s.69 of the Act as regards the unexplained source of investment of Rs.2 lacs that was incurred by the assessee towards purchase of a truck during the year under consideration. Apart from that, the A.O observed that as the returned income of the assessee did not suffice to source the business expenditure of Rs.8.24 lacs that was incurred by him, therefore he made an addition of the deficit amount of Rs.3,56,800/- as an unexplained expenditure u/s. 69C of the Act. Also, the A.O made an addition towards deemed income of Rs.60,000/- u/s. 44AE of the Act, i.e. the income from plying of truck by the assessee. Accordingly, the A.O based on his aforesaid observations vide 8 Avdesh Jain Vs. ITO-1(2), Raipur ITA No.30/RPR/2024 his order passed u/s. 147 r.w.s. 144 of the Act, dated 22.12.2017 after, inter alia, making the aforesaid additions assessed the income of the assessee at Rs.3,51,14,000/-. 7. Aggrieved, the assessee carried the matter in appeal before the CIT(Appeals) but without success. As the assessee despite having been afforded six opportunities had except for seeking adjournments on three occasions failed to participate in the proceedings before the CIT(Appeals), therefore, the latter holding a firm conviction that the assessee was not interested in prosecuting the matter, upheld the additions made by the A.O. 8. The assessee being aggrieved with the order of the CIT(Appeals) has carried the matter in appeal before us. 9. We have heard the Ld. Authorized Representatives of both the parties, perused the orders of the lower authorities and material available on record, as well as considered the judicial pronouncements that have been pressed into service by the Ld. AR to drive home his contentions. 10. Shri Sunil Kumar Agrawal, Ld. Authorized Representative (for short ‘AR’) for the assessee at the threshold assailed the validity of the jurisdiction that was assumed by the A.O for framing the assessment vide his order u/s. 147 r.w.s. 144 of the Act, dated 22.12.2017. Elaborating On 9 Avdesh Jain Vs. ITO-1(2), Raipur ITA No.30/RPR/2024 his contention, the Ld. AR submitted that though the assessee in compliance to the notice u/s. 148 of the Act, dated 30.03.2017 had vide his reply dated 26.04.2017, Page 2 of APB had requested the A.O that his original return of income filed on 28.09.2010 may be treated as a return filed in response to notice u/s. 148 of the Act, but the A.O had thereafter, most arbitrarily proceeded with and without issuing notice u/s. 143(2) of the Act framed the assessment vide his order passed u/s. 147 r.w.s. 144 of the Act, dated 22.12.2017. It was submitted by the Ld. AR that as the A.O had grossly erred in law and facts of the case in not issuing notice u/s. 143(2) of the Act and framed the impugned assessment, therefore, the same being based on invalid assumption of jurisdiction could not sustained and was liable to be struck down on the said count itself. The Ld. AR in support of his contention that pursuant to the return of income filed by the assessee, the A.O remained under a statutory obligation to issue notice u/s. 143(2) of the Act, had relied on the judgments of the Hon’ble Apex Court in the cases of ACIT & Anr. Vs. Hotel Blue Moon [2010] 321 ITR 362 (SC) and CIT Vs. Laxman Das Khandelwal (2019) 417 ITR 325 (SC). 11. The Ld. AR further submitted that in a case where the notice u/s. 148 of the Act is issued to the assessee and the latter, thereafter, vide a letter had requested that his original return of income be treated as return filed in response to the notice u/s. 148 of the Act, then the A.O is obligated 10 Avdesh Jain Vs. ITO-1(2), Raipur ITA No.30/RPR/2024 to issue a notice u/s. 143(2) of the Act and frame the assessment, relied upon the following judicial pronouncements: (i) Pr. CIT Vs. S.G Portfolio (P). Ltd. (2023) 454 ITR 761 (Delhi) (ii) Swapna Manuel Vs. ACIT (2024) 160 taxmann.com 166 ( Mad. HC) (iii) Pr. CIT Vs. Marck Biosciences Ltd. (2019) 106 taxmann.com 399 (Gujarat) (iv) Girishbhai Nanjibhai Solanki Vs. ITO (2023) 150 taxmann.com 267 (Rajkot-Trib) The Ld. AR submitted that the Hon’ble Courts in all the aforesaid judicial pronouncements/orders, had held that where the assessee in compliance to the notice issued u/s. 148 of the Act had filed a letter (on 26.04.2017) requesting that his original return of income be treated as a return filed in response to notice u/s. 148 of the Act, the A.O thereafter was mandatorily required to issue notice u/s. 143(2) of the Act before proceeding any further and framing the assessment. 12. Per contra, the Ld. Sr. Departmental Representatives (for short ‘DR’) relied on the orders of the lower authorities. It was submitted by the Ld. DR that the A.O had validly assumed jurisdiction and framed the assessment vide his order u/s. 147 r.w.s. 144 of the Act, dated 22.12.2017. Rebutting the Ld. AR’s contention that the impugned assessment order was passed de-hors issuance of a notice u/s. 143(2) of 11 Avdesh Jain Vs. ITO-1(2), Raipur ITA No.30/RPR/2024 the Act, the Ld. DR submitted that the same was not statutorily required for framing of an assessment u/s. 147 of the Act. 13. As the assessee has assailed the validity of the jurisdiction assumed by the A.O for framing of the assessment in absence of a notice issued u/s. 143(2) of the Act, therefore, the Ld. DR was directed to produce the assessment records. The Ld. DR on the next date of hearing produced the assessment record and placed on record a report of the A.O, dated 15.04.2024 qua the challenge thrown by the assessee to the validity of the assessment in absence of a notice u/s. 143(2) of the Act, which reads as under: 12 Avdesh Jain Vs. ITO-1(2), Raipur ITA No.30/RPR/2024 14. Rebutting the A.O’s claim that the assessee in compliance to notice u/s. 148 of the Act had not filed his return of income in the prescribed form and verified in the prescribed manner, the Ld. AR had taken us 13 Avdesh Jain Vs. ITO-1(2), Raipur ITA No.30/RPR/2024 through the copy of a letter dated 02.04.2024 a/w. copy of the original return of income filed on 29.08.2010, Page 2 to 4 of APB. 15. As the claim of the A.O vide his report dated, 15.04.2024 that the assessee had not filed his return of income in response to notice u/s. 148 of the Act, thus militated against the assessee’s claim that he had as on 26.04.2017 requested the A.O i.e. ITO-2(2), Raipur to treat his original return of income filed on 28.09.2010 as a return filed in response to notice u/s. 148 of the Act, therefore, we had looked into the assessment record as was produced before us. On a perusal of the record, we find that the copy of the letter filed by the assessee before us, Page 2 to 4 of APB is available on the assessment record at Page No.22 to 35 of the said records. Also, we find that the fact that the assessee had in the course of the assessment proceedings, i.e. on 26.04.2017 vide his aforesaid letter requested the A.O to treat his original return of income filed on 28.09.2010 (acknowledgement No.162698551280910) as a return of income filed u/s. 148 of the Act, forms part of the order sheet noting on 26.04.2017, which reads as under: 14 Avdesh Jain Vs. ITO-1(2), Raipur ITA No.30/RPR/2024 16. On a perusal of the aforesaid facts, it can safely be gathered that the assessee pursuant to the notice u/s. 148 of the Act, dated 30.03.2017, had vide his letter filed on 26.04.2017, requested that his original return of income that was filed on 28.09.2010 (acknowledgement No.162698551280910) be treated as a return filed in response to the aforesaid notice. 17. Apropos the A.O’s claim that the assessee had failed to file his return of income in compliance to notice u/s. 148 of the Act, we find that the same to be factually incorrect. As the assessee had filed with the A.O on 26.04.2017 a letter requesting that his original return of income filed on 28.09.2010 may be treated as a return of income filed in response to notice 15 Avdesh Jain Vs. ITO-1(2), Raipur ITA No.30/RPR/2024 u/s. 148 of the Act, therefore, the same in our view was in itself a due compliance of the notice issued by the A.O u/s. 148 of the Act. Our aforesaid view is fortified by the judgments/orders, viz. (i) Pr. CIT Vs. S.G Portfolio (P). Ltd. (2023) 454 ITR 761 (Delhi); (ii) Swapna Manuel Vs. (Mad.(2024) 160 taxmann.com 166 ( Mad. HC); (iii) Pr. CIT Vs. Marck Biosciences Ltd. (2019) 106 taxmann.com 399 (Gujarat); and (iv) Girishbhai Nanjibhai Solanki Vs. ITO (2023) 150 taxmann.com 267 (Rajkot-Trib). 18. We have thoughtfully considered the contentions advanced by the Ld. Authorized Representatives of both the parties in the backdrop of the orders of the lower authorities. As is discernible from the order of the CIT(Appeals), it transpires that as the assessee despite having been afforded six opportunities had except for seeking adjournments on three occasions had failed to participate in the proceedings before the CIT(Appeals), therefore, the latter holding a firm conviction that the assessee was not interested in prosecuting the matter, disposed of the appeal vide an ex-parte order. On a careful perusal of the order of the CIT(Appeals), we find that he had summarily referred to the observation of the A.O and approved the same without deliberating upon the specific issues, based on which, the additions/disallowances were assailed by the assessee before him. 16 Avdesh Jain Vs. ITO-1(2), Raipur ITA No.30/RPR/2024 19. As observed by us hereinabove, the CIT(Appeals) had disposed off the appeal for non-prosecution and had failed to apply his mind to the issues which did arise from the impugned order and was assailed by the assessee before him. We are unable to persuade ourselves to accept the manner in which the appeal of the assessee had been disposed off by the CIT(Appeals). In our considered view, once an appeal is preferred before the CIT(Appeals), it becomes obligatory on his part to dispose off the same on merit and it is not open for him to summarily dismiss the appeal on account of non-prosecution of the same by the assessee. In fact, a perusal of Sec.251(1)(a) and (b), as well as the “Explanation” to Sec.251(2) of the Act reveals that the CIT(A) remains under a statutory obligation to apply his mind to all the issues which arises from the impugned order before him. As per mandate of law the CIT(Appeals) is not vested with any power to summarily dismiss the appeal for non-prosecution. The aforesaid view is fortified by the judgment of the Hon'ble High Court of Bombay in the case of CIT Vs. Premkumar Arjundas Luthra (HUF) (2017) 297 CTR 614 (Bom). In the aforementioned case the Hon’ble High Court had observed as under: \"8. From the aforesaid provisions, it is very clear once an appeal is preferred before the CIT(A), then in disposing of the appeal, he is obliged to make such further inquiry that he thinks fit or direct the AO to make further inquiry and report the result of the same to him as found in Sec. 250 of the Act. Further, Sec. 250(6) of the Act obliges the CIT(A) to dispose of an appeal in writing after stating the points for determination and then render a decision on each of the 17 Avdesh Jain Vs. ITO-1(2), Raipur ITA No.30/RPR/2024 points which arise for consideration with reasons in support. Sec. 251(1)(a) and (h) of the Act provide that while disposing of appeal the CIT(A) would have the power to confirm, reduce, enhance or annul an assessment and/or penalty. Besides Explanation to sub-s. (2) of s. 251 of the Act also makes it clear that while considering the appeal, the CIT(A) would be entitled to consider and decide any issue arising in the proceedings before him in appeal filed for its consideration, even if the issue is not raised by the appellant in its appeal before the CIT(A). Thus once an assessee files an appeal under s. 246A of the Act, it is not open to him as of right to withdraw or not press the appeal. In fact the CIT(A) is obliged to dispose of the appeal on merits. In fact w.e.f. 1st June, 2001 the power of the CIT(A) to set aside the order of the AO and restore it to the AO for passing a fresh order stands withdrawn. Therefore, it would be noticed that the powers of the CIT(A) are co-terminus with that of the AO i.e. he can do all that A.O could do. Therefore, just as it is not open to the AO to not complete the assessment by allowing the assessee to withdraw its return of income, it is not open to the assessee in appeal to withdraw and/or the CIT(A) to dismiss the appeal on account of non-prosecution of the appeal by the assessee. This is amply clear from the s. 251(1)(a) and (b) and Explanation to Sec. 251(2) of the Act which requires the CIT(A) to apply his mind to all the issues which arise from the impugned order before him whether or not the same has been raised by the appellant before him. Accordingly, the law does not empower the CIT(A) to dismiss the appeal for non-prosecution as is evident from the provisions of the Act.” 20. We, thus, not being able to persuade ourselves to subscribe to the dismissal of the appeal by the CIT(Appeals) for non-prosecution, therefore, set-aside his order with a direction to re-adjudicate the same afresh. Needless to say, the CIT(Appeals) in the course of the set-aside proceedings shall afford a reasonable opportunity of being heard to the assessee, and shall adjudicate the grounds of appeal/additional grounds of appeal as have been raised by the assessee before us. 18 Avdesh Jain Vs. ITO-1(2), Raipur ITA No.30/RPR/2024 21. As we have restored the matter to the file of the CIT(Appeals) for fresh adjudication, therefore, we refrain from adverting to and dealing with the issues that had been raised before us which, thus, are left open. 22. In the result, the appeal filed by the assessee is allowed for statistical purposes in terms of our aforesaid observations. Order pronounced in open court on 09th day of October, 2024. Sd/- Sd/- ARUN KHODPIA RAVISH SOOD (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) रायपुर/ RAIPUR ; Ǒदनांक / Dated : 09th October, 2024. ******SB, Sr. PS. आदेश कȧ ĤǓतͧलͪप अĒेͪषत / Copy of the Order forwarded to : 1. अपीलाथȸ / The Appellant. 2. Ĥ×यथȸ / The Respondent. 3. The CIT(Appeals)-1, Raipur (C.G) 4. The Pr. CIT-1, Raipur (C.G) 5. ͪवभागीय ĤǓतǓनͬध, आयकर अपीलȣय अͬधकरण,रायपुर बɅच, रायपुर / DR, ITAT, Raipur Bench, Raipur. 6. गाड[ फ़ाइल / Guard File. आदेशानुसार / BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलȣय अͬधकरण, रायपुर / ITAT, Raipur. "