Arrow Total Solutions Pvt. Ltd., Pune V. The ITO, Ward-1(1)(3), Ahmedabad

ITA 17/AHD/2022

• Counselvise Citation: [2023] 100 COUNSELVISE.COM (IT) 4977 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 10 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 20-09-2023
• Assessment Year: 2011-2012
• Appeal Filed On: 16-01-2022
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained investment; Principle of natural justice; Set aside
• Section: 69; 148; 139; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “A” BENCH Before: Shri Annapurna Gupta, Accountant Member And Shri T.R. Senthil Kumar, Judicial Member Arro w Total Solutions Pvt. Ltd., D-201, Shreeji Vihar, Pimple, Saudagar, Pune, Maharas htra-411027 PAN: AABC T9663N (Appellant) Vs The ITO, Ward-1(1)(3), Ahmedabad (Respondent) Ass esse e R ep r es ent ed : S h ri H ard i k V or a, A. R. Re ven u e R ep r ese nt ed : M s. S au m ya P an de y Jain , S r.D. R. Date of hearing : 21-09-2023 Date of pronouncement : 30-11-2023 आदेश/ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:- This appeal is filed by the Assessee as against the appellate order dated 25.11.2021 passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, (in short referred to as “NFAC”), arising out of the assessment order passed under section 143(3) r.w.s. 147 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Year 2011-12. 2. The brief facts of the case is that the assessee is a Private Limited Company engaged in Development and Maintenance of ITA No. 17/Ahd/2022 Assessment Year 2011-12 I.T.A No. 17/Ahd/2022 A.Y. 2011-12 Page No Arrow Total Solutions Pvt. Ltd. vs. ITO 2 Critical Exchange Business Solution Software. For the Assessment Year 2011-12, the assessee has not filed its regular Return of Income under section 139 of the Act. The case was reported under Non-Filers Monitoring System (NMS). As per Annual Information Report (AIR), the assessee had purchased mutual fund units amounting to Rs.4,93,00,000/- but not filed Return of Income. Therefore the case was reopened u/s. 147 by issuing a notice dated 26.03.2018. In response, the assessee filed its Return of Income on 25.08.2018 admitting Nil income on the ground that the assessee company was “Struck Off” by the Registrar of Company (ROC), Ahmedabad on 06.08.2018 and assessee’s petition before National Company Law Tribunal (NCLT) for revival of company is pending from 06.12.2018. However the assessee’s explanation was not accepted by the A.O., Since the assessee has never intimated the Assessing Officer regarding the discontinuation of the business as required u/s.176(3) of the Act and there is no information regarding “strike off” of the assessee company by ROC and Petition filed before NCLT for revival of company. Therefore the A.O. proceeded with the reassessment. The assessee submitted it has income from mutual fund of Rs. 2,46,862/- only which is shown in its Profit & Loss account and also claimed certain expenses amounting to Rs.17,52,832/- for which no documentary evidences were produced before the A.O. Thus the A.O. made an addition of Rs.2,46,862 on investment in mutual fund. 2.1. Regarding the source of investment in mutual fund amounting to Rs.4.,93 Crs. the assessee vide its reply letter dated 18.12.2018 submitted the list of five creditors from whom this amount of I.T.A No. 17/Ahd/2022 A.Y. 2011-12 Page No Arrow Total Solutions Pvt. Ltd. vs. ITO 3 investment was made in mutual fund. When the A.O. issued notices u/s.133(6) of the Act to five creditors, only two parties confirmed about the transactions. One of the creditor namely National Multi Commodity Exchange (NMCE) clarified the amount of Rs. 2.5 crores is part of the irregular payments of Rs. 28.8 crores made to the assessee as per final order dated 23.07.2011 passed by Forward Markets Commission (FMC), the Regulator after a detailed investigation under Forward Contacts (Regulation) Act, 1952. The other confirmation submitted by the assessee, in case of other creditors were also not found satisfactorily, therefore the A.O. worked out the peak investment value at Rs.1.38 crores as unexplained investment as per the provisions of Section 69 of the Act and assessed the total income as Rs.1,40,46,860/-. 3. Aggrieved against the same, the assessee filed an appeal before National Faceless Appeal Centre, Delhi (NFAC). The assessee filed evidences on claim of expenditure on investment in mutual fund. The same were not entertained by NFAC on the sole ground that the assessee in Form No. 35 [appeal format before Ld.CIT(A)], in serial no.12, categorically stated that no documents for invoking Rule 46A. Thus the Ld. CIT(A) confirmed the addition of Rs. 2,46,862/- made on account of income from mutual fund. Similarly on the source of investment in mutual fund, Ld. CIT(A) confirmed the peak addition of Rs. 1.38 crores made by the Assessing Officer. Further Ld.CIT(A) dismissed the grounds for reopening of assessment u/s.147 of the Act. Thus the appeal filed by the Assessee was dismissed. I.T.A No. 17/Ahd/2022 A.Y. 2011-12 Page No Arrow Total Solutions Pvt. Ltd. vs. ITO 4 4. Aggrieve against the same, the assessee is in appeal before us raising the following Grounds of Appeal: 1. On the facts and circumstances of the case as well as law on the subject, the learned CIT(A) has grossly erred in confirming action of assessing officer in reopening the assessment u/s 147 of the Act in utter disregard to the fact that the notice u/s 148 was issued in the name of a company whose name was struck off from the register of companies by the Registrar of Companies and therefore the company was not in existence as it was defunct company as on the date of the issuance of notice u/s 148 and also as on the date of passing the assessment order under appeal. 2. On the facts and circumstances of the case as well as law on the subject, the learned CIT(A) has grossly erred in not appreciating that the appellant had no taxable income to offer and due to unavoidable circumstances the appellant could not filed ITR u/s 139 earlier and ITR of appellant was only filed after belated receipt of notice u/s 148 on the email id of appellant as a matter of cooperation through the authorized signatory whose email id was registered had resigned from the Appellant company in the year 2013. 3. On the facts and circumstances of the case as well as law on the subject, the learned CIT (Appeals) has grossly erred in confirming addition of Rs.1,38,00,000/- on account of unexplained investment u/s 69 of the Act made by Assessing Officer merely on the basis of reply received from third party. The learned CIT (Appeals) ought to have considered the explanations offered by the assessee for the source of investments in mutual funds and the detailed nature of dispute in respect of that third party has with the appellant and the crux an ex- parte Order dated 23.7.2011 passed by Forward Markets Commission (FMC) and various proceeding pursuant to that order pending at nascent stage. 4. On the facts and circumstances of the case as well as law on the subject, the learned CIT (Appeals) has grossly erred in confirming addition of Rs. 2,46,862/- being capital gain earned on mutual funds by ignoring expenses of Rs.17,52,832/- debited to profit and loss account. 5. On the facts and circumstances of the case as well as law on the subject, the learned CIT (Appeals) has grossly erred in confirming the action of the AO by observing that the appellant has never intimated this office regarding the discontinuation of business as required by Sec. 176(3) of the IT Act, 1961, disregarding settled legal position that omission to send intimation u/s 176(3) will not lead to the conclusion that the assessee continued to exist for the purpose of the Act as held by the Allahabad High court in the case of Gurudeo Prasad Jagannath Prasad vs. ITO [1981] 131 ITR 486. I.T.A No. 17/Ahd/2022 A.Y. 2011-12 Page No Arrow Total Solutions Pvt. Ltd. vs. ITO 5 6. On the facts and circumstances of the case as well as law on the subject, the learned CIT (Appeals) has grossly erred in disallowing the entire expenditure of Rs 17,52,832/- by arbitrarily holding that no documentary or authentic evidence had been submitted in support of the expenses while such observation of the AO is contrary to the facts and evidence on record. 7. On the facts and circumstances of the case as well as law on the subject, the learned CIT (Appeals) has erred in not accepting additional evidences filled before it. 8. On the facts and circumstances of the case as well as law on the subject, the learned CIT (Appeals) has erred in passing non speaking order without rebutting and considering submission filed before it. 9. It is therefore prayed that the above addition/disallowance made by the assessing officer may please be deleted. 5. Ld. Counsel Shri Hardik Vora appearing for the Assessee not pressed ground nos. 1 & 2 namely validity of reopening of assessment before us. Recording the same, Ground Nos. 1 & 2 raised by the Assessee are hereby dismissed. 6. Regarding merits of the case (remaining grounds of appeal), the Ld. Counsel submitted before us a Paper Book containing various documents namely ITR, Profit & Loss, Balance Sheet, Bank Statements of HDFC Bank & Vijaya Bank and reply filed u/s. 133(6) by NMCE and Neptune Overseas, the creditors and also Ledger Confirmation from other creditors. The Ld. Counsel further submitted that during the assessment proceedings because of the company name was also “Struck Off” by ROC and the proceedings were pending before NCLT, the assessee company could not produce the entire details before the Assessing Officer. When the same was filed before Ld. NFAC, also rejected quoting clause (12) of Form 35. Thus NFAC violated the Principles of Natural Justice and I.T.A No. 17/Ahd/2022 A.Y. 2011-12 Page No Arrow Total Solutions Pvt. Ltd. vs. ITO 6 pleaded the matter be set aside to the file of Assessing Officer for due consideration. 7. Per Contra, the Ld. Sr. D.R. Ms. Saumya Pandey Jain appearing for the Revenue supported the order passed by the Lower Authorities. However in the Principle of Natural Justice one more opportunity be given to the assessee to establish its case with necessary evidences. 8. We have given our thoughtful consideration and perused the materials available on record including written submissions filed by the assessee which is running to 15 pages. At page no.10 of the submissions, the assessee has clearly given details of investments and source thereon. It is further seen that the source of fund for initial investment in mutual fund and also the subsequent investment are properly explained by independent corroborative evidences such as ledger account, bank statement and also ledger account of the parties. Therefore the addition made by the Assessing Officer is not found to be correct. In fact the documentary evidences were not verified by the Ld AO and also by the Ld. CIT(A). Further Ld. CIT(A) wrongly held that the documents filed by the assessee as such as Additional documents and not entertained the same. It is seen from the paper book filed by the assessee that every source of information and details of mutual funds investments were filed by the assessee before the Ld AO itself but the same was not considered by him. Therefore in the interest of Principle of Natural Justice, we deem it fit to set aside the matter to the file of Jurisdictional Assessing Officer to verify the I.T.A No. 17/Ahd/2022 A.Y. 2011-12 Page No Arrow Total Solutions Pvt. Ltd. vs. ITO 7 documents and pass fresh assessment order in accordance with law. Needless to state, the assessee should cooperate with the JAO in submitting all the additional documents and any further documents as required by the Assessing Officer for completing the assessment. Thus the grounds filed by the assessee are allowed with the above directions. 9. In the result, the appeal filed by the Assessee is allowed for statistical purposes. Order pronounced in the open court on 30-11-2023 Sd/- Sd/- (ANNAPURNA GUPTA) (T.R. SENTHIL KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad : Dated 30/11/2023 आदेश क त ल प अ े षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपील य अ धकरण, अहमदाबाद