KINGS TRADERS,ERNAKULAM V. .ASSISTANT COMMISSIONER OF INCOME TAX , WARD 2, ALUVA, ALUVA

ITA 747/COCH/2023

AI Insights

Kings Traders, a partnership firm engaged in the sale of plywood, did not file its return of income for the Assessment Year 2017-18. The AO completed the assessment under section 144 of the Income Tax Act, 1961, treating the total deposits of Rs. 3,94,03,713 made into the firm's bank account as unexplained investments under section 69. The CIT(A)/NFAC dismissed the firm's appeal in limine due to non-condonation of delay and also on merits. The Tribunal noted that the assessee firm did not represent its case adequately at lower levels due to the business's closure and the partners' unawareness of the notices. The Tribunal found that the authorities had not considered relevant CBDT circulars regarding the verification of substantial cash deposits during the demonetization period and had not provided appropriate opportunities for the assessee to be heard.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 475580 (ITAT-COCHIN)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-12-2024
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2017-2018
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SANJIT KUMAR DAS
• Assessee Lawyers: PARVATHY AMMAL
• Keywords: Condonation of delay; Set aside; Business income; Opportunity of being heard; Unexplained investment; Non compliance
• Section: 144; 250; 69

Judgement Text

"ITANo.747/Coch/2023 Kings Traders, Ernakulam IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH: COCHIN BEFORE SHRI PRASHANT MAHARISHI, VICE PRESIDENT AND SHRI KESHAV DUBEY, JUDICIAL MEMBER ITA No. 747/Coch/2023 Assessment Year: 2017-18 Kings Traders VIII/564A, Keezhillam PO Mannoor Ernakulam 683541 Kerala PAN NO : AAOFK9701E Vs. Income Tax Officer Ward – 2, Aluva Kerala APPELLANT RESPONDENT Appellant by : Smt. Parvathy Ammal, CA Respondent by : Shri. Sanjit Kumar Das, CIT DR Date of Hearing : 04.12.2024 Date of Pronouncement : 26.12.2024 O R D E R PER KESHAV DUBEY, JUDICIAL MEMBER: This appeal at the instance of the assessee is directed against the order of ld. CIT(A)/NFAC dated 31.08.2023 vide DIN & Order No. ITBA/NFAC/S/250/2023-24/1055603262(1) for the AY 2017- 18 passed u/s 250 of the Income Tax Act, 1961 (in short “The Act”). 2. The assessee has raised the following grounds of appeal: ITANo.747/Coch/2023 Kings Traders, Ernakulam Page 2 of 7 ITANo.747/Coch/2023 Kings Traders, Ernakulam Page 3 of 7 3. Brief facts of the case are that the assessee is a partnership firm engaged in the business of sale of plywood and did not file its return of income for the A.Y. 2017-18. Due to absolute non response of the notices issued by the assessee firm, the AO completed the assessment u/s. 144 of the Act by assessing the total deposit made into the bank account amounting to Rs. 3,94,03,713/- during the FY 2016-17 as unexplained investments u/s. 69 and also invoked the provisions of sec. 115BBE of the Act. 4. Aggrieved by the assessment order passed by the AO u/s 144 of the Act, the assessee preferred an appeal before the ld. CIT(A) / NFAC. ITANo.747/Coch/2023 Kings Traders, Ernakulam Page 4 of 7 5. The ld. CIT(A) / NFAC dismissed the appeal of the assessee in limine on the ground that the assessee did not pray for condonation of delay and also mentioned “No” in column 14 of Form 35 in reply to the query “Whether there is a delay in filing appeal”. Considering the same ld. CIT(A) / NFAC was of the opinion that in terms of the provisions of sec. 249, the appeal is not maintainable and is liable to be rejected. Further, without prejudice to the above the ld. CIT(A) / NFAC also dismissed the appeal on merit as well. 6. Aggrieved by the order of the ld. CIT(A)/NFAC, the assessee has filed the present appeal before this Tribunal. 7. Before us, ld. A.R. of the assessee vehemently submitted that the assessee firm commenced the business on 25.02.2015 and stopped the business w.e.f. 03.08.2018 due to heavy losses. Further, the assessee firm had closed down the business and premises were also vacated. The partners of the firm were not aware of the issuance of any of the notices due to the above mentioned reason. It is also submitted that the partners of the firm were Sheji Paul and Shajan C T. Former was the main partner and facing great difficulties due to failure in business, distress sale of property due to huge financial liability and in completely disoriented state of mind which led to non compliance of the notices. Before us, the ld. AR of the assessee also submitted the death certificate of Sheji Paul who breathed his last on 25.04.2023. 7.1 It is also submitted that the total sales during the year of the assessee firm was Rs. 4,05,35,166/- as declared in the Kerala Value Added Tax (KVAT) returns. These proceeds have been deposited into the bank account. The assessee have been maintaining the books of account on day to day basis since the commencement of the partnership business. Further, there was ITANo.747/Coch/2023 Kings Traders, Ernakulam Page 5 of 7 delay in getting the books of account audited and audit report has been subsequently obtained. The AR of the assessee submitted that as per the audit report the net taxable income is substantially low but the AO assessed on a total income of Rs. 3,94,03,713/- is exorbitantly high. Lastly, the AR of the assessee submitted that since the assessee could not represent its case either before the AO or before the ld. CIT (A) / NFAC, one more opportunity may be granted as per the circumstances enumerated above and in the interest of justice. 8. The ld. D.R. on the other hand supported the orders of the authorities below and submitted that assessee has not availed the opportunity granted before the lower authorities and accordingly the appeal may be dismissed in limine. 9. We have heard the rival submissions and perused the materials available on record. It is an undisputed fact that the assessee firm could not represent its case before the authorities below. Further, we take a note of the fact that the only addition made by the AO is with regard to cash deposit of Rs. 3,94,03,713/- made in South Indian Bank during the FY 2016-17, out of which, an amount of Rs. 20,53,000/- has been deposited during the demonetization period. We also take a note of the fact that authorities below have not considered the CBDT circulars in order to verify the substantial cash deposit during the demonetization period. Even the AO during the assessment proceedings has not considered the relevant CBDT circulars that was issued for the purpose of verifying the demonetized cash deposit during the year under consideration. Admittedly, the order has been passed by the authorities below without considering the above circulars and without giving appropriate opportunities of being heard to the assessee. Being so, at the request of the ld. A.R of the assessee and ITANo.747/Coch/2023 Kings Traders, Ernakulam Page 6 of 7 in the interest of justice and equity, we are of the opinion that one more opportunity may be granted to the assessee to substantiate its claim. Accordingly, we set aside the entire issue in dispute to the file of AO for de-novo consideration in accordance with law. Needless to say, a reasonable opportunity of being heard must be granted to the assessee. We also direct the AO to verify the entire cash deposit made by the assessee in his bank account during the year in consideration in accordance with following circulars which are applicable to the facts of the case:- a) The 1st instruction was issued on 21/02/2017 by instruction number 03/2017. b) The 2nd instruction was issued on 03/03/2017 instruction number 4/2017. c) The 3rd instruction was in the form of a circular dated 15/11/2017 in F.No. 225/363/2017-ITA.II and the last one dated 09/08/2019 in F.no.225/145/2019-ITA.II. and decide the issue in the light of above CBDT instructions issued for dealing with demonetization. The assessee is also directed to submit all the evidences/documents/records/information for proper adjudication of the case. The assessee is also directed to update its email address, contact numbers and addresses on the Income Tax website. We clarify that in case of further defaults, the assessee shall not be entitled for any leniency. In the result, appeal filed by the assessee is partly allowed for statistical purposes. Order pronounced in the open court on 26th Dec, 2024 Sd/- (Prashant Maharishi) Vice President Sd/- (Keshav Dubey) Judicial Member Bangalore, Dated: 26th Dec, 2024. VG/SPS ITANo.747/Coch/2023 Kings Traders, Ernakulam Page 7 of 7 Copy to: 1. The Applicant 2. The Respondent 3. The CIT 4. The DR, ITAT, Bangalore. 5 Guard file By order Asst. Registrar, ITAT, Cochin. "