PRANALI COMMODITIES PVT LTD, MUMBAI V. INCOME TAX OFFICER, WARD-15(2)(4), MUMBAI

ITA 1157/MUM/2023

AI Insights

The case involves Pranali Commodities Pvt Ltd, which appealed against the order of the National Faceless Appeal Centre, Delhi, for the assessment year 2015-16. The appeal was initially dismissed by the CIT \\u2013 A due to non-compliance by the assessee in responding to multiple notices. The assessee argued that the non-compliance was due to circumstances beyond their control, including the COVID-19 pandemic and health issues of their chartered accountant. The Tribunal found that the CIT \\u2013 A had not considered the merits of the case and had merely dismissed the appeal based on non-compliance with procedural requirements.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 125561 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-07-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: C
• Next Hearing Date: 27-06-2023
• Assessment Year: 2015-2016
• Appeal Filed On: 09-04-2023
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ABHIKSHEK P. JHUNJHUNWALA
• Keywords: Bogus
• Section: 68; 145(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, MUMBAI BEFORE SHRI PRASHANT MAHARISHI, AM AND SHRI SANDEEP SINGH KARHAIL, JM ITA No. 1157/MUM/2023 (Assessment Year 2015-16) Pranali Commodities Pvt Ltd. 16/B, Shree Arihant Co-op. Soc., Battiwadi, Bhandup Mumbai-400078 Vs. ITO Ward 15(2)(4) Tower No.6, Vashi Station Complex, Vashi Mumbai-400703 (Appellant) (Respondent) PAN No. AAECP8630L Assessee by : Shri. Abhikshek P. Jhunjhunwala, AR Revenue by : Shri. Shambhu Yadav, DR Date of hearing: 28.06.2023 Date of pronouncement : 31.07.2023 O R D E R PER PRASHANT MAHARISHI, AM: 01. This appeal is filed by Pranali commodities private limited, Mumbai (assessee/– appellant) against the appellate order passed by the National faceless appeal Centre, Delhi (the learned CIT – A) for assessment year 2015 – 16 dated 9/2/2023 wherein the appeal filed by the assessee against the assessment order dated 29/12/2017 passed under section 143 (3) by the income tax officer 15 (2) (4), Mumbai (the learned assessing officer) was dismissed for non-compliance by the assessee on 4 occasions before appellate authority. Page | 2 ITA No. 1157/MUM/2023 A.Y.2015-16 PRANALI COMMODITIES PVT. LTD. 02. Assessee has raised following grounds of appeal - “1 On facts and circumstances of the case and in law, Ld. CIT(A) erred in passing the appeal order ex-parte without allowing adequate opportunity of being heard and ought to have considered the bonafide reasons that had precluded the appellant to participate in appeal: 2 On facts and circumstances of the case and in law, Ld. CIT(A) erred in confirming the disallowance of business loss on trading in shares of 4 companies of Rs.4,08,138/-; 3. The Ld. CIT(A), before confirming the disallowance of loss in trading in shares of Rs.4,08,138/-, ought to have considered the vital facts, being; a) The exhaustive documentary evidences being Contract-cum-bills, D-mat statements, Global report, bank statements, bhav copy and confirmation of SEBI registered stock broker, etc to justify the genuineness of purchase and sale of shares is filed on record; b) The shares had been transacted, in regular course of business, on floor of stock exchange on which STT, Service Tax had been paid; c) No contrary material or cash trail is found related to appellant is brought on record and the addition had made on the basis of assumption, suspicion and flimsy reasons; Page | 3 ITA No. 1157/MUM/2023 A.Y.2015-16 PRANALI COMMODITIES PVT. LTD. d) There is no substantial increase or decrease in price of shares listed in stock exchange 4. On facts and circumstances of the case and in law, Ld. CIT(A) erred in confirming the addition u/s.68 of loan received from M/s. Dolex Commercial Pvt Ltd of Rs 30,00,000/-; 5. On facts and circumstances of the case and in law, Ld. CIT(A) erred in confirming addition u/s.68 of received from M/s. Consultants of Rs.2,00,00,000/-; 6. The Ld. CIT(A) before confirming the addition u/s.68 of unsecured loans of Rs.2,30,00,000/- (30,00,000+ 2,00,00,000), ought to have considered the vital facts, being:- a) The identity, credit-worthiness of lenders and genuineness of transactions are supported with documentary evidences being PAN, CIN Master data, Confirmations, Own bank statements, I.T. returns, Balance sheet, bank statements, etc; b) The entire sums had been received only through banking channel by A/c payee cheques/RTGS and the appellant, prior to amendment, is not required to explain the source of payer's funds c) The Ld. AO has not rejected the appellant's books of accounts u/s 145(3) and had not brought any contrary material to disprove the transactions, d) The copies of statement of 3 parties had not been provided to appellant for confrontation and Page | 4 ITA No. 1157/MUM/2023 A.Y.2015-16 PRANALI COMMODITIES PVT. LTD. opportunity of cross examination had not been allowed to the appellant.” 03. Brief facts of the case shows that the assessee is a company engaged in trading of shares. It filed its return of income on 30/9/2015 declaring a total income of Rs nil. The return of income was picked up for scrutiny. The assessment order under section 143 (3) of the act was passed by the learned assessing officer on 29/12/2017 making an addition under section 68 of ₹ 2 crores on account of unsecured loan received from strategy consultants private limited and further addition under section 68 on account of unsecured loan received from Dolex commercial private limited, ₹ 30 lakhs. The learned assessing officer made further addition of ₹ 408,138 on account of penny stock transaction. Accordingly the total income of the assessee was assessed at ₹ 230 lakhs. 04. Assessee preferred an appeal before the learned CIT – A. The learned CIT – A issued notices on 31/12/2020, 2/5/2022, 5/12/2022 and 27/1/2023 by email. As per the order of the learned CIT – A the assessee did not upload any return submission in response to the above requirement. Therefore the learned CIT – A noted that the assessee is not interested in pursuing the above appeal. Therefore he held that the appeal of the appellant is liable for dismissal. However in paragraph number 5.1.1 the learned CIT – A held that issue is were examined on the merits in the light of statement of facts and grounds of appeal and the issue raised in this appeal has rightly been Page | 5 ITA No. 1157/MUM/2023 A.Y.2015-16 PRANALI COMMODITIES PVT. LTD. considered by the learned assessing officer during the assessment proceedings which could not be contested order but during the appellate proceedings by the assessee despite several opportunities. The assessee has also failed to file any return submission in support of the grounds of appeal and therefore all the grounds of appeal are dismissed. 05. Assessee is in appeal before us. The learned authorized representative submitted a paper book containing 60 pages. Wherein an affidavit of the managing director of the assessee company was submitted. In the effort debited was noted that that notice dated 31/12/ 2020 was in covid Time. The notice dated 2/5/2022 gave the assessee time for filing of the submission of to 15 days. However with respect to the other two notices the time limit for submission was only three days. The claim in the affidavit was that that the notices were sent through email to the earlier chartered accountant who did not inform the assessee. Now assessee has engaged chartered accountant. Further his new chartered accountant also suffered serious medical illness and had to undergo coronary artery bypass surgery and therefore compliance could not be made with respect to the last two notices mentioned by the learned CIT – A. In support of affidavit, the medical certificate of the illness of the chartered accountant was also submitted. In view of the above facts, it was stated that assessee did not get proper opportunity of hearing and the opportunities granted could not be Page | 6 ITA No. 1157/MUM/2023 A.Y.2015-16 PRANALI COMMODITIES PVT. LTD. availed by the assessee because of the peculiar circumstances of the case. 06. On the merits of the case he submitted the details that the disallowance of business loss of ₹ 4,008,138 are treated as penny stock is incorrect. In support of the same be submitted the script wise stock register, trade summary and the transaction Bhav copy. It was further stated that the above loss incurred by the assessee has been considered as a profit in penny stock in addition is been made by the learned assessing officer without any reason. He further submitted that assessee is a trader in shares. And in fact assessee has incurred loss. The loss of incurred by the assessee is not proved to be false on the transactions details submitted by the assessee. 07. With respect to the addition under section 68 of the income tax act with respect to the two companies it was submitted that assessee has submitted the Ledger account, confirmation of account of the parties bank statement of the assessee bank statement of the lenders income tax return of the lending companies and audited balance sheet et cetera of the lenders. All these evidences have not been examined by the learned assessing officer independently and have confirmed the addition of ₹ 230 lakhs merely on the basis of surmises and conjunctures. 08. In view of the above facts the learned authorized representative submitted that the order of the learned CIT – A holding that the assessee is not interested in pursuing Page | 7 ITA No. 1157/MUM/2023 A.Y.2015-16 PRANALI COMMODITIES PVT. LTD. the above appeal is incorrect and even otherwise on the merits of the case the addition cannot be sustained. 09. The learned departmental representative vehemently supported the order of the learned CIT – A and submitted that when the four notices were issued to the assessee and assessee did not file any compliances, the learned CIT – A is justified in disposing of the appeal of the assessee on the merits upholding the findings of the learned assessing officer. 010. We have carefully considered the rival contention and perused the orders of the lower authorities. We find that the learned assessing officer has made the addition in the hands of the assessee on the basis of report of the DD IT (investigation), Kolkata on penny stock issue relying on the statement of some of the persons. The assessee was neither provided any of the statements nor was provided any opportunity of the cross examination. Therefore the loss claimed by the assessee of ₹ 4,008,138/– was considered as nongenuine loss and same was disallowed. Further the assessee has taken loan from two companies amounting to ₹ 230 lakhs, the learned assessing officer has made the addition under section 68 of the income tax act holding that the above companies are controlled by some entry operators. Assessee provided the information showing the identity, creditworthiness of those parties as well as the genuineness of the transaction. The learned assessing officer made the addition as same are the companies controlled by one of the entry operators who Page | 8 ITA No. 1157/MUM/2023 A.Y.2015-16 PRANALI COMMODITIES PVT. LTD. confessed in his statement that these companies are paper/bogus company and being used for providing bogus accommodation entries. When the matter reached before the learned CIT – A, he did not consider the merits of the case but as the assessee did not reply to the email sent to the assessee, he held that the assessee is not interested in pursuing the above appeal. However he did not consider the merits but merely endorsed the finding of the learned assessing officer in the assessment order. The assessee has filed an affidavit before us stating that the email address on which the notices have been sent by the learned CIT – A belonged to the old chartered accountant who did not inform the assessee about the receipt of such notices. Later on the chartered accountant engaged by the assessee underwent the bypass surgery and therefore no compliance was reported by the learned CIT – A. In support of the above contention, assessee has submitted an affidavit along with the medical reports of the new chartered accountant. It is also clear that the first notice issued by the learned CIT – A was during Covid period. Even otherwise the order of the learned CIT – A is not on the merits of the case. The learned CIT – A has decided the issue merely on the fact that the four email notices sent by him are not replied by the assessee and therefore the assessee is not interested in prosecuting the above appeals. The learned CIT – A has not considered the merits of the addition that why the learned assessing officer is correct in making the above addition. As the order of the learned CIT – A is not on the merits of the Page | 9 ITA No. 1157/MUM/2023 A.Y.2015-16 PRANALI COMMODITIES PVT. LTD. additions made by the learned assessing officer, we set- aside the whole appeal back to the file of the learned CIT – A – and direct assessee to submit the compliance of those notices within 90 days of the date of this order. After that the learned CIT – A may decide the issue on the merits of the case. In the result the ground number 1 of the appeal is allowed with above direction. 011. All other grounds on merit are not adjudicated and left open to be decided by the learned CIT – A. 012. In the result appeal of the assessee is allowed for statistical purposes. Order pronounced in the open court on 31.07. 2023. Sd/- Sd/- (SANDEEP SINGH KARHAIL) (PRASHANT MAHARISHI) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Mumbai, Dated: 31.07.2023 Sudip Sarkar, Sr.PS Copy of the Order forwarded to: 1. The Appellant 2. The Respondent. 3. The CIT(A) 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. BY ORDER, True Copy// Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Mumbai