ADITYA SHARAD SHAH, MUMBAI V. CIT (A), NFAC., DELHI

ITA 1017/MUM/2023

AI Insights

The case involves Aditya Sharad Shah, the appellant, who appealed against the order of the CIT(A) which upheld the reassessment and additions made by the Assessing Officer (A.O) regarding alleged client code modifications and unexplained expenditures for the Assessment Year 2010-11. The CIT(A) had dismissed the appeal ex-parte due to the appellant's non-appearance, despite multiple notices. The Tribunal found that the CIT(A) had not adequately considered the appellant's right to be heard and thus set aside the CIT(A)'s order, remitting the case for a fresh hearing.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 299897 (ITAT-MUMBAI)
• Duration Of Justice: 2 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-06-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 18-06-2023
• Assessment Year: 2010-2011
• Appeal Filed On: 28-03-2023
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ABHISEK KUMAR SINGH
• Keywords: Reopening of assessment; Unexplained expenditure; Revised return; Reason to believe
• Section: 148; 271(1)(c); 143(3); 142(1); 143(1); 250; 143(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH MUMBAI BEFORE SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA No. 1017/Mum/2023 (Assessment Year: 2010-11) Aditya Sharad Shah, 6 Madhu Parag, 69 Swastik Society, Vileparle (W), Mumbai-400056. बनाम/ Vs. CIT(A) / NFAC Mumbai-400002. ा लेखा सं./ज आइआर सं./PAN/ GIR No. : AM YPS198 7N ( /Appellant) ( / Respondent) Assessee by : None Revenue by : Mr. Abhisek Kumar Singh.DR सुनव ई क त र ख / D a t e o f H e a r i n g 19/06/2023 घोषण क त र ख /D a t e o f P r o n o u n c e m e n t 21/06/2023 आदेश / ORDER PER PAVAN KUMAR GADALE - JM: This appeal is filed by the assessee against the order of the National Faceless Appeal Centre (NFAC)/CIT(A), Delhi passed u/s 250 of the Act. The assessee has raised the following grounds of appeal: 1. The order passed by the learned Commissioner of Income Tax (Appeals), NFAC, Delhi [hereinaf ter ref erred to as 'the learned C IT(A)'] is bad in la w and on f acts. 2. Re: Order of CIT (A) passed ex-parte is b ad in law: 2.1 T he order of learned C IT (A) is bad in la w and against the princi ple of natural justice as Appellant was not provid ed suff icient opportun ity of being heard. 2 ITA No. 1 01 7/M um/ 20 2 3 Adit ya S har ad Shah, Mumbai 2.2 T he learned C IT(A) grossly erred in passing the order ex- parte on 13th February, 2023 wi thout appreciating that adjou rn men t request was f iled by the appellant on 30 th January, 2023 and add itional time was granted till 14th February, 2023 for sub mission of details. 3. Re: Reassessment is b ad in la w and void ab initio: 3.1 The learned C IT(A) erred in upholdin g the Reassessment order passed by the Assessin g Of f icer which is bad in la w and void ab initio on a ccoun t of f ollo wing grou nds: A There was no income wh ich has escaped assessment and in absence of any income escaping assessment, reassessmen t proceedings cann ot be initiated. B. The reassessment proceedings initiated are merely on the ground of 'reason to suspect' and not 'reason to b elieve' C. T he Assessing Off icer grossly erred in not providing th e oppor tuni ty to cross examine the analysis carried out by th e ADIT ( Inv.) Unit 1(3) Ahmedabad and also f ailed to provid e any details, documen ts, evidences, statemen t recorded / obtain ed from the AD IT off ice b ased on which the addi tion was made in the hands of Appellant. Th e Assessing Off icer ought to have appreciated that th e reason to believe at the time of issue of notice of reassessment must be converted in to conviction based on corroborated evidences and proof s and i t cannot just remain reason to b elieve at th e time of completion of the assessment. 4. Re: Addition of income amounting to Rs. 11,4 2,533/- on accoun t of alleged client code modif ication: 4.1 The learned CIT (A) grossly erred in upholding the addition of Rs. 11,42,533/- on account of alleged transactions of clien t code modif ication, in respect of shif ting ou t prof its amounti ng to Rs. 11,40,961/- and i n respect of shif ting in losses amounting to Rs. 1,572/- wi thou t appreciating and considering the sub missions and documents f urnish ed by the Appellant. The learned C IT(A) grossly erred in treating the alleged clien t code modif ications as well planned and con certed arrangement 3 ITA No. 1 01 7/M um/ 20 2 3 Adit ya S har ad Shah, Mumbai wi thou t providing any tangible evidence on record s and wi th out appreciating th at th e same were gen uine transactions und er th e applicable SEB I la w and was also acknowled ged by the respective exchange registered brokers. 4.3 The learned C IT(A) grossly f ailed to appreciate th at the Appel lant had sufficient brou ght f or ward losses to set off against income earned during the year under consideration. By indulging in shif ting of prof its/ losses of the said amount would not result in any ta x benef it to the Appellant 4.4 learned C IT (A)grossly erred in not providing the opportu nity to cross examine the analysis AD IT ( Inv.) Uni t 1(3) Ahmedabad and also f ailed to provide any details, documents, evidences, statement recorded / obtained f rom the brokers based on which the addition was made in the h ands of Appellant. 5. Re: Addition of income amounting to Rs. 11,425/ - on account of unexplained expenditure 5.1 The learned C IT ( A) has grossly erred in uph olding th e addition of Rs. 11,425/- made by the Assessing Officer as an adhoc 1% on th e additions made on account of alleged clien t code modif ication, based on an assumption that Appellan t must have paid the said percenta ge of commission to the b rokers in cash wi thou t any cogent evidence to prove the same. 6 Re: Brought f or ward losses of earlier year's not correc tly granted to be carried f or ward. 6.1 The learned CIT (A) grossly erred in upholding the actions of Assessing Off icer to compute the carried f or ward loss at Rs 1,36,32,162/- as against Rs. 1,6 3,86,124/- wi thout providi ng any reasons f or th e same. 7. Re: Ini ti ation of penal ty proceedings u/s 271(1)(c): 7.1 The learn ed CIT (A)grossly erred in uph olding the actions of Assessing Off icer to initia te pen alty proceedings u/s. 271(1)(c) on various grounds without providing an y reasons f or the same. 4 ITA No. 1 01 7/M um/ 20 2 3 Adit ya S har ad Shah, Mumbai 8. T he Appellan t craves leave to add to, alter, amend or wi thdra w all or an y of the f oregoing grounds of appeal a t or bef ore the hearing of this appeal. 2. The brief facts of the case are that the assessee is engaged in the business and has filed the return of income for the A.Y 2010-11 on 18.09.2010 disclosing a total income of Rs.1,01,097/- and the assessee has filed the revised return of income on 26.03.2012 disclosing same total income and the return of income was processed u/s 143(1) of the Act. Subsequently the Assessing Officer (A.O) has received information from ADIT (Inv), Ahmadabad that the survey u/s 133A of the Act was conducted at the premises of 12 brokers. After analysis of data received from NSE and the contentions of the brokers, it was found that client code modification has been used as a tool for tax evasion and the assessee was one of the beneficiary of availing the loss. 3. The AO has reason to believe that the income has escaped assessment and issued notice u/s 148 of the Act. In response to the notice, the assessee has filed reply stating that the return of income filed earlier to be treated as compliance of notice u/s 148 of the Act. The assessee has filed objections to reopening of assessment and were disposed off. Further the A.O has issued notice u/s 143(2) and 142(1) of the Act . In compliance to the notices, the Ld. AR of the assessee appeared from time to time and submitted the details. The AO has dealt on the facts with respect to client code modification, nature of the business and the modus 5 ITA No. 1 01 7/M um/ 20 2 3 Adit ya S har ad Shah, Mumbai operandi of the transactions and made addition of Rs11,42,533/- and unexplained expenditure of Rs.11,425/- U/sec69C of the Act and after setoff of brought forward loss of earlier year, the total income was determined at Rs.1,12,520/- and passed the order u/s 143(3) r.w.s 147 of the Act dated 15.12.2017. 4. Aggrieved by the order, the assessee has filed an appeal before the CIT(A), whereas the CIT(A) has considered the grounds of appeal, statement of facts and findings of the AO and has issued notices of hearing and since there was no compliance by the assessee to notices. Therefore the CIT(A) considering the information on record has confirmed the action of the A.O and dismissed the appeal. Aggrieved by the order of the CIT(A), the assessee has filed an appeal before the Hon'ble Tribunal. 5. At the time of hearing, none appeared on behalf of the assessee and the Ld.DR submitted that the assessee was not serious in perusing the appeal and the Ld.DR relied on the order of the CIT(A) 6. Heard the Ld.DR submissions and perused the material on record. Prima-facie the CIT(A) has passed the order considering the fact that there is no appearance in spite of providing adequate opportunity of hearing and the notices were issued. Therefore, the CIT(A) was of the opinion that the assessee is not interested in prosecuting the appeal and dismissed the appeal ex-parte confirming the action of the 6 ITA No. 1 01 7/M um/ 20 2 3 Adit ya S har ad Shah, Mumbai assessing officer. The Ld. CIT(A) has issued the notices of hearing referred at Page 8 Para 3. to 4.1 of the order, but there was no response and thus the Ld.CIT(A) came to a conclusion that the assessee is not interested and decided the appeal based on the information available on record. Whereas the assessee has raised grounds of appeal challenging the additions of the A.O and there could be various reasons for non appearance which cannot be overruled. Therefore, considering the principles of natural justice shall provide one more opportunity of hearing to the assessee to substantiate the case with evidences and information. Accordingly, set aside the order of the CIT(A) and remit the entire disputed issues to the file of the CIT(A) to adjudicate afresh and the assessee should be provided adequate opportunity of hearing and shall cooperate in submitting the information for early disposal of the appeal. And the grounds of appeal of the assessee are allowed for statistical purposes. 7. In the result, the appeal filed by assessee is allowed for statistical purposes. Order pronounced in the open court on 21.06.2023. Sd/- (PAVAN KUMAR GADALE) JUDICIAL MEMBER Mumbai, Dated 21/06/2023 7 ITA No. 1 01 7/M um/ 20 2 3 Adit ya S har ad Shah, Mumbai KRK, PS आदेश की ितिलिप अ ेिषत/Copy of the Order forwarded to : 1. / The Appellant 2. / The Respondent. 3. ! / The CIT(A) 4. !( ) / Concerned CIT 5. " # , ण, मु瀓बई / DR, ITAT, Mumbai 6. # $% & / Guard file. आदेशानुसार/ BY ORDER, //True Copy// 1. उप/सहायक पंजीकार ( Asst. Registrar) आयकर अपीलीय अिधकरण, मु瀓बई मु瀓बईमु瀓बई मु瀓बई / ITAT, Mumbai