Dongarai Construction Company, Sangli V. Assistant Commissioner of Income Tax, Circle-2, Sangli, Sangli

ITA 457/PUN/2023

AI Insights

The case involves Dongarai Construction Company, which appealed against the order of the National Faceless Appeal Centre (NFAC) Delhi, which upheld the reopening of its assessment under section 147 and the subsequent ex-parte assessment order under section 144 read with section 147 of the Income Tax Act, 1961. The appellant contested the validity of these actions, arguing that the company had ceased operations and transferred all assets and liabilities to Dongarai Infrastructure Private Limited before the assessment year 2011-12, and thus, there was no income that escaped assessment in its case. The Tribunal found merit in the appellant's submissions and directed a re-examination of the facts by the Assessing Officer.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 137013 (ITAT-PUNE)
• Duration Of Justice: 1 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-06-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: A
• Next Hearing Date: 07-06-2023
• Assessment Year: 2011-2012
• Appeal Filed On: 19-04-2023
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: APPELLANTS BUSINESS OR ANY OTHER SOURCE HAD BEEN
• Keywords: Business income; Corroborative evidences; Set aside
• Section: 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “A” : PUNE BEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER AND DR. DIPAK P. RIPOTE, ACCOUNTANT MEMBER I.T.A.No.457/PUN./2023 Assessment Year 2011-12 Dongarai Construction Company, Kadepur Khanapur, Sangli, Maharashtra. PIN 415 305 PAN AABFD3012G vs. The ACIT, Circle-2, Sangli. Maharashtra. PIN – 415 305 (Applicant) (Respondent) For Assessee : Shri B.C. Malakar For Revenue : Shri Ramnath P Murkunde Date of Hearing : 08.06.2023 Date of Pronouncement : 19.06.2023 ORDER PER SATBEER SINGH GODARA, J.M. : This assessee’s appeal arises against the National Faceless Appeal Centre [in short “NFAC”] Delhi’s Din and Order No. ITBA/NFAC/S/250/2022-23/1050545458(1), dated 09.03.2023, involving proceedings u/s. 147 r.w.s. 144 of the Income Tax Act, 1961 (in short “the Act”). Heard both the parties. Case file perused. 2. The assessee pleads the following substantive grounds in the instant appeal : 2 I.T.A.No.457/PUN./2023 1. “On the facts and in the circumstances of the case and in law, the Ld. CIT(Appeals), National Faceless Appeal Centre (NFAC) erred in dismissing the appeal of the appellant wherein the appellant had contested the very validity of reopening of the case u/s. 147 of the I.T. Act,1961 and issuing of notice u/s.148 of the said Act by the Assessing Officer holding that there was income which had escaped assessment in the case of the appellant ignoring and without appreciating the facts that the business of appellant had been closed on 31/10/2009 due to taking over of the appellant’s concern Dongarai Construction Company (PAN : AABFD 3012G) by Dongarai Infrastructure Private Limited (PAN: AAFCP1473J) and hence there was no question of having any income of the appellant during the A.Y.2011-12 which could be said as escaped assessment. The appellate order therefore so passed confirming the re-opening of assessment by the Assessing Officer as valid being arbitrary, illegal and bad in law be set aside/quashed. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(Appeals), National Faceless Appeal Centre (NFAC) erred in dismissing the appeal of the appellant wherein the appellant had contested the very validity of reopening of the case u/s. 147 of the I.T. Act,1961 and issuing of notice u/s.148 of the said Act and consequential 3 I.T.A.No.457/PUN./2023 passing of the ex-parte assessment order u/s. 144 r.w.s.147 of the Act dated 14/12/2018 by the Assessing Officer without quashing/setting aside the assessment order as appealed for ignoring and without appreciating the submission of the appellant made with documentary evidences that on closure of the business of the appellant on 31/10/2009 due to merger of the appellant’s proprietary concern Dongarai Construction Company with the Company Dongarai Infrastructure Private Limited all the assets and liabilities of the appellant had been taken over by the said company w.e.f. 01/11/2019 and hence there was no income in the case of the appellant and any income attributable to the appellant pertaining for the year for appellant’s business or any other source had been considered in the case of the said company and therefore as there was no income of the appellant for the year under consideration (i.e. A.Y. 2011-12) and no income in the case of the case of the appellant had escaped assessment, the ex-parte re-assessment order passed u/s.144 r.w.s.147 of the Act by the Ld. Assessing Officer should have been quashed by the Ld. CIT(A) instead of dismissing the appeal of the appellant in this regard. The appellate order therefore so passed confirming the re-opening of assessment and the re-assessment order passed by the 4 I.T.A.No.457/PUN./2023 Assessing Officer as valid being arbitrary, illegal and bad in law be set - aside/quashed. 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(Appeals), National Faceless Appeal Centre (NFAC) erred in dismissing the appeal of the appellant wherein the appellant had contested the very validity of reopening of the case u/s. 147 of the I.T. Act,1961 and issuing of notice u/s.148 of the said Act and consequential passing of the ex-parte assessment order u/s. 144 r.w.s.147 of the Act dated 14/12/2018 by the Assessing Officer ignoring and without appreciating the facts that due to merger of the appellant’s proprietary concern Dongarai Construction Company with the Company Dongarai Infrastructure Private Limited from 01/11/2009 there was no income of the appellant and any income which had been attributed to the appellant due to issue of Form No. 26AS in the name of the appellant had been already considered in the computation of income and return of income filed by the company and therefore no such income for A.Y.2011-12 could be assessed by the Assessing Officer in the case of the appellant by passing any re-assessment order u/s.144 r.w.s. 147 of the Act, as allegedly done by the Assessing Officer. The appellate order therefore so passed confirming the re-opening of assessment and the re-assessment order passed by the 5 I.T.A.No.457/PUN./2023 Assessing Officer as valid being arbitrary, illegal and bad in law be set aside/quashed. 4. On the facts and in the circumstances of the case and in law, the Ld. CIT(Appeals), National Faceless Appeal Centre (NFAC) erred in confirming the addition of Rs.64,95,415/- on the basis of computation of business income at Rs.61,99,120/- and also income from other sources of Rs.2,96,205/- in the ex-parte assessment order passed u/s.144 r.w.s. 147 of the I.T.Act,i96i dated 14/12/2018 by the Ld. Assessing Officer ignoring and without appreciating the submission and contention made/raised both before the Assessing Officer and the Ld. CIT(A) along with documentary evidences about the closure of the business of the appellant on 31/10/2009 and taking over the entire business with its assets and liabilities, income and expenditure by the Company Dongarai Infrastructure Private Limited from 01/11/2009 and therefore when there was no income of the appellant for- the year under consideration (i.e.A.Y.2011-12) the addition made by the Ld. Assessing Officer totalling to Rs.64,95,415/- in the re- assessment order passed ex-parte u/s.144 r.w.s. 147 of the Act dated 14/12/2018 should have been deleted by the Ld: CIT(A). The appellate order so passed by the Ld. CIT(A) confirming the addition of Rs.64,95,415/- made by 6 I.T.A.No.457/PUN./2023 the Ld. Assessing Officer being arbitrary, illegal and bad in law be deleted. 5. The appellant craves leave to add, alter, amend, withdraw or substitute any ground or grounds of appeal or to add any new ground or grounds of appeal on or before the hearing.” 3. Learned counsel submits very fairly that he does not wish to press for the foregoing legal issue of validity of reopening. Rejected accordingly. 4. Next comes the sole substantive issue on merits relating to the correctness of the impugned addition of Rs.64,95,415/-. It emerges from perusal of the case file that the assessee’s stand all along is that it had closed it’s business way back on 31.10.2009 since taken over by M/s. Dongarai Infrastructure Private Limited with all assets and liabilities, income and expenditure and therefore, there is hardly any occasion in getting assessed for the above stated alleged business income. Learned counsel invited our attention to the assessee’s detailed paper book running into 171 pages. His case in light thereof is that both the learned lower authorities have erred in law and on facts in assessing assessee for the impugned business income. 7 I.T.A.No.457/PUN./2023 5. The Revenue has strongly supported the impugned addition in light of the CIT(A)'s detailed discussion affirming the assessment findings reading as under : 8 I.T.A.No.457/PUN./2023 6. We have given our thoughtful consideration and find prima facie merit in assessee’s submissions. A perusal of para 7.7 in the CIT(A)'s foregoing detailed discussion observes that the assessee had not filed the supporting evidence seeking to delete the impugned addition once M/s. Dongarai Infrastructure Private Limited already stood assessed qua the same. It emerges from the assessee’s duly indexed paper book that it has filed takeover agreement pages (72 to 75), dissolution deed pages (76 to 79), certificate of incorporation page (80), copies of Form 26AS of M/s. Dongarai Infrastructure Private Limited, computation, acknowledgment, audit report, balance-sheet as well as P & L A/c as on 31.03.2011. Faced with the situation, we are of the view that larger interest of justice would be met in case the learned Assessing Officer verifies all these crucial facts once again in consequential proceedings, preferably within three effective opportunities of hearing. We order accordingly. 9 I.T.A.No.457/PUN./2023 7. This assessee’s appeal is partly allowed for statistical purposes. Order pronounced in the open Court on 19.06.2023. Sd/- Sd/- [DR. DIPAK P. RIPOTE] [SATBEER SINGH GODARA] ACCOUNTANT MEMBER JUDICIAL MEMBER Pune, Dated 19 th June, 2023 VBP/- Copy to 1. The appellant 2. The respondent 3. The CCIT, Pune 4. The CIT-1, Pune 5. D.R. ITAT, Pune “A” Bench, Pune 6. Guard File. //By Order// Assistant Registrar, ITAT, Pune Benches, Pune.