COMPACT AGENCIES PVT. LTD.,KOLKATA V. DCIT/ACIT, CIRCLE 3(1), KOLKATA

ITA 200/KOL/2025

AI Insights

The case involves Compact Agencies Pvt. Ltd., which appealed against the order of the National Faceless Appeal Centre (CIT(A)) for the assessment year 2017-18. The primary issues in the appeal were the additions made under sections 69, 14A, and 69C of the Income Tax Act. The assessee argued that the additions were unjustified and not supported by adequate reasoning or consideration of the documents provided. The Tribunal found procedural lapses in the CIT(A)'s handling of the case, particularly the lack of a show-cause notice and insufficient examination of the assessee's documents, leading to the decision to remand the case for a thorough re-examination.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 361018 (ITAT-KOLKATA)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-05-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Assessment Year: 2017-2018
• Laws Referred To: Income Tax Act
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Set aside; Opportunity of being heard; Unexplained expenditure; Principle of natural justice; Earning of tax free income; Rule 8D
• Section: 143(3); 142(1); 69; 69C; 14A

Judgement Text

" आयकर अपीलȣय अͬधकरण, कोलकाता पीठ, कोलकाता IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH KOLKATA Before Shri Rajesh Kumar, Accountant Member and Shri Sonjoy Sarma, Judicial Member I.T.A. No.200/Kol/2025 Assessment Year: 2017-18 Compact Agencies Pvt. Ltd……………………………………...….……….Appellant Room No.1A, 20B, West Bengal, East India House, BBD Bag, West Bengal-700069. [PAN: AADCC6607K] vs. DCIT/ACIT, Circle-3(1), Kolkata.….....................……........……...…..…..Respondent Appearances by: Shri Manish Tiwari, FCA, appeared on behalf of the assessee. Shri Raja Sengupta, CIT, DR, appeared on behalf of the Revenue. Date of concluding the hearing : May 15, 2025 Date of pronouncing the order : May 21, 2025 ORDER Per Sonjoy Sarma, Judicial Member: This appeal of the assessee for the assessment year 2017-18 is directed against the order dated 19.08.2024 passed by the National Faceless Appeal Centre [hereinafter referred to as ‘the ‘ld. CIT(A)’]. 2. At the outset, it is noted that there is a delay of 88 days in filing the instant appeal before the Tribunal. The assessee has submitted an application for condonation of such delay explaining reasons for the delay. We, after perusing the petition made in the application, satisfy that there were bona fide and sufficient reasons for such delay. We, therefore, condone the delay and admit this appeal for adjudication. 3. Brief facts of the case are that the assessee company filed its return of income for the assessment year 2017-18 by declaring total income as Nil. Subsequently, the case of the assessee was selected for I.T.A. No.200/Kol/2025 Assessment Year: 2017-18 Compact Agencies Pvt. Ltd 2 limited scrutiny under CASS followed by issuing of notices u/s 142(1) and 143(2) of the Act to the assessee and the assessee complied to the notices. During the assessment proceedings, the assessee submitted was engaged in the business of giving loans and advances on the earning interest income. The Assessing Officer observed that the assessee has made investment in unquoted shares during the relevant assessment year and alleged that the source of the investment was not proved. Accordingly, an amount of Rs.7,47,00,000/- was added to the total income of the assessee u/s 69 of the Act. The Assessing Officer also disallowed a sum of Rs.1,88,254/- u/s 14A r.w.r 8D of the Act. Although the assessee had not earned any exempt income during the year under consideration, the assessment was completed u/s 143(3) of the Act. 4. Aggrieved by the above order, the assessee preferred an appeal before the ld. CIT(A). During the appellate proceedings, the assessee partially complied with the notices issued by the ld. CIT(A) but could not effectively explain the source of the investment. Regarding the disallowance u/s 14A, the ld. CIT(A) sustained the addition so made by the Assessing Officer and while doing so, the ld. CIT(A) without issuing show-cause notice u/s 251(2) of the Act enhanced the income of the assessee by 3,52,22,603/- as unexplained expenditure u/s 69C of the Act. 5. Dissatisfied with the above order, the assessee preferred appeal before this Tribunal raising various issues involved in the appeal. However, the primary contention of the ld. AR is that the addition of Rs.7,47,00,000/- u/s 69 r.w.s. 115BBE of the Act is not justified and contrary to the law as the assessee submitted sufficient documents in order to substantiate the claim and the ld. CIT(A) confirmed the addition without considering the documents furnished by the assessee . The ld. AR stated that the disallowance u/s 14A amounting to Rs.1,88,254/- is I.T.A. No.200/Kol/2025 Assessment Year: 2017-18 Compact Agencies Pvt. Ltd 3 also bad in law as the ld. CIT(A) confirmed the addition without considering the fact that the assessee had not earned any exempt income during the relevant assessment year and the addition u/s 14A cannot be made without having any exempt income earned. The ld. AR also stated that the issue of enhancement of income at Rs.3,52,22,603/- as unexplained expenditure u/s 69C by the ld. CIT(A), is also bad in law and not justified as the ld. CIT(A) failed to issue any statutory show- cause notice while making the adjustment which is necessary u/s 251(2) of the Act, therefore, it is violation of principles of natural justice and also contrary to the law. The ld. AR in this context submitted that since the assessee did not get proper opportunity to represent its case and even if no show-cause notice was issued to the assessee in making the enhancement of income, therefore, another opportunity may be given to the assessee to substantiate its claim properly and the entire issue may be remanded back to the file of the Assessing Officer. 6. On the other hand, the ld. DR supported the orders of the authorities below. 7. We, after hearing the rival submissions and perusing the materials available on record, find that in the present case, while passing the impugned order, the ld. CIT(A) confirmed the addition of Rs.7,47,00,000/- u/s 69 r.w.s. 115BBE of the Act without fully examining the supporting documents and explanations offered by the assessee before him and similarly, while making the disallowance u/s 14A r.w. Rule 8D amounting to Rs.1,88,254/-, the ld. CIT(A) simply upheld the addition despite admitting the fact that the assessee has not earned any exempt income during the relevant assessment year, which is contrary to the settled proposition of law. We additionally note that the enhancement of income at Rs.3,52,22,603/- as unexplained expenditure u/s 69C by the ld. CIT(A), is not justified as the ld. CIT(A) failed to issue I.T.A. No.200/Kol/2025 Assessment Year: 2017-18 Compact Agencies Pvt. Ltd 4 any statutory show-cause notice u/s 251(2) of the Act while making the adjustment, which is clearly a violation of principles of nature justice. We also note that the assessee was deprived of proper opportunity to explain or rebut the proposed enhancement of income rendering the action unsustainable in the eyes of law. In view of the above and in the interests of justice and fair play, we feel it necessary to remand the whole issue to the file of the Assessing Officer. Therefore, we set aside the impugned order of the ld. CIT(A) and restore the entire matter to the file of the Assessing Officer with a direction to re-examine the case of the assessee on merits after affording reasonable opportunity of being heard to the assessee. The assessee is directed to strictly comply with the notices which will be issued by the Assessing Officer and furnish requisite documents as and when asked for without any fail and thereafter, the Assessing Officer will pass a speaking order in accordance with law on the basis of materials available on record. 8. In terms of the above, the appeal of the assessee is allowed for statistical purposes. Kolkata, the 21st May, 2025. Sd/- Sd/- [Rajesh Kumar] [Sonjoy Sarma] लेखा सदèय/Accountant Member ÛयाǓयक सदèय/Judicial Member Dated: 21.05.2025. RS Copy of the order forwarded to: 1. Appellant - 2. Respondent - 3. CIT(A)- 4. CIT- , 5. CIT(DR), I.T.A. No.200/Kol/2025 Assessment Year: 2017-18 Compact Agencies Pvt. Ltd 5 //True copy// By order Assistant Registrar, Kolkata Benches "