H KARMALI AND CO,MUMBAI V. ASSESSING OFFICER, MUMBAI

ITA 1254/MUM/2025

AI Insights

The case involves H Karmali and Co., a partnership firm engaged in Mandap Decorations, appealing against the order of the Commissioner of Income Tax (Appeals), which upheld the additions made by the Assessing Officer under section 69C of the Income Tax Act, 1961. The additions pertained to alleged bogus business expenses amounting to Rs 1,00,00,500 and disallowed genuine business expenses of Rs 51,00,00,500 due to clerical errors and timing of expense recognition. The Tribunal noted the assessee's non-compliance during the appellate proceedings due to the ill health of their representative but decided to remand the case for a fresh hearing to ensure fair opportunity and proper adjudication.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 312375 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-04-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2021-2022
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AJIT PAL SINGH
• Assessee Lawyers: VIMAL PUNMIYA
• Keywords: Opportunity of being heard; Business expenditure; Principle of natural justice; Bogus
• Section: 143(3); 142(1); 69C; 234B; 194C

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “E” BENCH, MUMBAI BEFORE MS. KAVITHA RAJAGOPAL, JM AND SMT. RENU JAUHRI, AM ITA No. 1254/Mum/2025 (Assessment Year: 2021-22) H Karmali and Co. Shop No. 6, Sharif Mansion, 115, S.V.P. Road, Dongri, 400009 Vs. DCIT Circle 17(1) Kautilya Bhavan, Mumbai - 400051 PAN/GIR No. AABFH9983N (Appellant) : (Respondent) Assessee by : Shri. Vimal Punmiya Respondent by : Shri. Ajit Pal Singh, SR. DR. Date of Hearing : 16.04.2025 Date of Pronouncement : 30.04.2025 O R D E R Per Kavitha Rajagopal, J M: This appeal has been filed by the assessee, challenging the order of the learned Commissioner of Income Tax (Appeals) Delhi (‘ld. CIT(A)’ for short), National Faceless Appeal Centre (‘NFAC’ for short) passed u/s.250 of the Income Tax Act, 1961 (‘the Act'), pertaining to the Assessment Year (‘A.Y.’ for short) 2021-22. 2. The assessee has raised the following grounds of appeal: Having regard to the facts and circumstances of the case, Ld. CIT(Appeals) has erred in law and on facts in passing an order without giving an adequate opportunity of being heard and by not observing the principles of natural justice The Ld. AO erred in making an addition of business expenses to the tune of Rs 1,00,00,500/- as bogus expenditure under section 69C of the Income Tax Act without considering the facts & circumstances of the case. ITA No. 1254/Mum/2025 (A.Y. 2021-22) H Karmali and Co. 2 Without prejudice to the above The Ld. AO based on clerical error of smisprint of PAN No. disallowed genuine business expenses of Rs 51,00,00,500/- as bogus expenditure under section 69C of the Income Tax Act. Without prejudice to the above The Ld. AO disallowed the expenses son the ground that 80% of the labor expenses was in March 2021 without considering the fact that 70% (Approx) of sales was in March 2021. On the facts and circumstances of case and in law, Ld. Assessing officer erred in initiating penalty u/s 271AAC(1). On the facts and circumstances of case and in law, Ld. Assessing officer erred in levying interest u/s 234A, 234B and 234C of the Income Tax Act, 1961. The Ld. AO erred in passing assessment order without providing sufficient opportunity of being heard.” 3. Brief facts of the case are that the assessee is a partnership firm engaged in the business of Mandap Decorations. The assessee had filed its return of income dated 01.02.2022, declaring total income at Rs. 19,55,250/-. The assessee’s case was selected for scrutiny on the issue of large payments made u/s. 194C to persons who have not filed return of income. Notices u/s. 143(2) and 142(1) of the Act were duly issued and served upon the assessee. As the assessee failed to furnish the complete details/information as required vide statutory notices issued by the ld. AO, inspite of several opportunities, the ld. AO made addition of Rs. 1,00,00,500/- u/s. 69C of the Act, with respect of issue of payments u/s. 194C of the Act to third parties who were non-filers of ITR. The learned Assessing Officer ('ld. A.O.' for short) had passed the assessment order u/s. 143(3) r.w.s. 144B of the Act, dated 29.12.2022, determining total income at Rs. 1,19,55,750/- after making the said addition u/s. 69C of the Act. ITA No. 1254/Mum/2025 (A.Y. 2021-22) H Karmali and Co. 3 4. Aggrieved the assessee was in appeal before the first appellate authority, who vide an ex parte order dated 14.02.2025, upheld the additions made by the ld. AO on the ground that the assessee has been non-compliant and has failed to substantiate its claim. 5. The assessee is in appeal before us, challenging the impugned order of the ld. CIT(A). 6. The learned Authorised Representative (ld. AR for short) contended that the assessee could not make compliances before the ld. CIT(A) due to the reason that the Authorised Representative was suffering from ill health, which rendered him unable to adequately prepare and represent the case before the ld. CIT(A). The assessee further stated that owing to a close and long-term connection with the ld. AR and due to the sensitive nature of the matter, the assessee was unable to make alternate arrangements for representation within the given period of time. For the above reason, the assessee was non-compliant during the appellate proceedings The ld. AR contended that the assessee has got a good case on merit and prayed that the assessee be given one more opportunity to present its case before the first appellate authority. 7. The learned Departmental Representative (‘ld. DR’ for short) vehemently opposed to setting aside the issue back to the file of the ld. CIT(A) for the reason that the assessee has been given several opportunities which were not availed by it neither before the ld. CIT(A). The ld. DR relied on the orders of the lower authorities. 8. We have heard the rival submissions and perused the materials available on record. It is observed that the assessee has challenged the assessment order before the ld. CIT(A) but has been non-compliant throughout the appellate authority proceeding. ITA No. 1254/Mum/2025 (A.Y. 2021-22) H Karmali and Co. 4 9. On the above facts of the case, we are of the considered view that the assessee may be given one more opportunity to present its case before the first appellate authority by adhering to the principles of natural justice and in the interest of justice dispensation. We, therefore, remand this issue back to the file of the ld. CIT(A) for de novo adjudication. The assessee is directed to comply with the proceedings without any undue delay on its side and needless it is to say that sufficient opportunity of hearing is to be given to the assessee. 10. In the result, the appeal filed by the assessee is allowed for statistical purpose. Order pronounced in the open court on 30.04.2025 Sd/- Sd/- (RENU JAUHRI) (KAVITHA RAJAGOPAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai; Dated: 30.04.2025 Karishma J. Pawar (Stenographer) Copy of the Order forwarded to: 1. The Appellant 2. The Respondent 3. CIT- concerned 4. DR, ITAT, Mumbai 5. Guard File BY ORDER, (Dy./Asstt.Registrar) ITAT, Mumbai "