LATE KAILASH CHANDRA AGRAWAL L/H ANKUSH AGRAWAL, MAHASAMUND,MAHASAMUND V. .INCOME TAX OFFICER, MAHASAMUND, MAHASAMUND

ITA 502/RPR/2024

AI Insights

The case involves an appeal by the legal heir of the late Kailash Chandra Agrawal against the order of the Commissioner of Income-Tax (Appeals), which sustained an addition of Rs. 45,75,500 to the assessee's income for the assessment year 2014-15. The addition was made on account of alleged bogus purchases. The ITAT found procedural lapses in the CIT(Appeals)'s handling of the case, particularly the failure to implead the legal heir after the assessee's death and to consider the submissions made by the legal heir. Consequently, the ITAT remanded the case for fresh assessment.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 35716 (ITAT-RAIPUR)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2014-2015
• Other Referred Cases: K.M. Nagaraj v. Deputy Commissioner of Income Tax, Central Circle 1(1), Bangalore, N.K Industries Ltd. v. Deputy commissioner of Income-tax, Indian Woollen Carpet Factory v. ITAT, Vijay Proteins Ltd.
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRIYANKA PATEL
• Assessee Lawyers: PRAFULLA PENDSE
• Keywords: Opportunity of being heard; Unexplained expenditure; Peak credit; Bogus purchase; Principle of natural justice; Accommodation entries; Wrong claim; Bogus
• Section: 147; 148; 153A; 68; 69; 69C; 153C

Judgement Text

"आयकर अपीलȣय अͬधकरण Ûयायपीठ रायपुर मɅ। IN THE INCOME TAX APPELLATE TRIBUNAL, RAIPUR BENCH, RAIPUR BEFORE SHRI RAVISH SOOD, JUDICIAL MEMBER AND SHRI ARUN KHODPIA, ACCOUNTANT MEMBER आयकर अपील सं. / ITA No.502/RPR/2024 Ǔनधा[रण वष[ / Assessment Year : 2014-15 Late Kailash Chandra Agrawal Through Legal Heir Ankush Agrawal, Kailash Chand Agrawal Rice Mill, Sunsunia, Bagbahara, Mahasamund (C.G.)-493 445 PAN: ACJPA2610H .......अपीलाथȸ / Appellant बनाम / V/s. The Income Tax Officer Mahasamund (C.G.) ……Ĥ×यथȸ / Respondent Assessee by : Shri Prafulla Pendse, CA Revenue by : Dr. Priyanka Patel, Sr. DR सुनवाई कȧ तारȣख / Date of Hearing : 17.12.2024 घोषणा कȧ तारȣख / Date of Pronouncement : 19.12.2024 2 Late Kailash Chandra Agrawal, Through Legal Heir Ankush Agrawal Vs. ITO, Mahasamund ITA No. 502/RPR/2024 आदेश / ORDER PER RAVISH SOOD, JM: The present appeal filed by the assessee (through legal heirs) is directed against the order passed by the Commissioner of Income-Tax (Appeals), National Faceless Appeal Center (NFAC), Delhi, dated 13.09.2024, which in turn arises from the order passed by the A.O under Sec.147 r.w.s. 144B of the Income-tax Act, 1961 (in short ‘the Act’) dated 22.03.2022 for the assessment year 2014-15. The assessee has assailed the impugned order on the following grounds of appeal before us: “1. That the order of Ld. CIT(A) is bad in law as well as on facts and the entire additions of Rs.45,75,500/- sustained by the Ld. CIT(A) are bad in law and accordingly liable to be deleted. 2. In the facts and circumstances of the case, the Ld. CIT(A) has grossly erred in confirming the action of Ld. AO in making addition of Rs.45,75,500/- without mentioning the section under which disallowance has been made under the provisions of income tax act, 1961. 3. The learned CIT(A) erred in sustaining the disallowance of Rs.45,75,500/- made on account of bogus purchases without appreciating the fact that the disallowance was made mechanically without appreciating the evidences furnished by the assessee and also without rejecting the books of account. 4. Without prejudice to Ground No.1,2 & 3 above and in the facts and circumstances of the case, the Ld. CIT(A) erred in not appreciating the fact that based on the judicial dictum at best only a percentage of the alleged bogus purchases could have been disallowed and not the entire sum of Rs.45,75,500/- 5. That the Ld. CIT(A) has grossly erred in passing the order against the deceased person, who had expired on 16.02.2023 and that too without bringing Legal Representative (LR) on record, as such, the order as passed by the Ld. CIT (A) is non- 3 Late Kailash Chandra Agrawal, Through Legal Heir Ankush Agrawal Vs. ITO, Mahasamund ITA No. 502/RPR/2024 est and therefore be quashed, more so when the LR was registered on income tax portal on 07.09.2023. 6. On the facts and circumstances of the case, the order of the Ld. CIT(A) is bad in Law, having been passed in a mechanical manner without following the principles of natural justice, without providing adequate opportunity of being heard, without providing the copies of reasons recorded for issuing notice u/s 147, without providing copies of statements of third parties and also without providing cross examination of those parties. 7. The above grounds are independent and without prejudice to one and another. 8. The appellant craves leave to urge, add, amend, alter, enlarge, modify, substitute, delete or withdraw any of the ground or ground and to adduce fresh evidence at the time of hearing of the appeal.” 2. Shri Prafulla Pendse, Ld. Authorized Representative (for short `AR') for the assessee on being queried about the delay of 15 days involved in filing of the appeal as pointed out by the registry, submitted that pursuant to the amendment made available on the statute to Section 253(3) of the Act, vide the Finance (No.2) Act, 2024 w.e.f. 01.10.2024, the present appeal had been filed well within the stipulated time period. The Ld. AR referring to the aforesaid amendment submitted that the assessee/revenue is vested with the statutory right w.e.f.01.10.2024 to file an appeal within two months from the end of the month in which the order sought to be appealed against is communicated to the assessee or to the Pr. Commissioner or Commissioner as the case may be. The Ld. AR submitted that as the present appeal is filed on 28.11.2024 i.e. subsequent to the cut off date of 01.10.2024, therefore, 4 Late Kailash Chandra Agrawal, Through Legal Heir Ankush Agrawal Vs. ITO, Mahasamund ITA No. 502/RPR/2024 the same had been filed well within the stipulated time period contemplated in the post-amended Section 253(3) of the Act. 3. Dr. Priyanka Patel, Ld. Sr. Departmental Representative (for short DR) fairly submitted that no delay is involved in filing of the present appeal. 4. I have given thoughtful consideration to the contentions advanced by the Ld. Authorized Representatives of both the parties, and concur with the Ld. AR that pursuant to the post-amended provisions made available on the statute vide the Finance (No.2) Act, 2024 w.e.f. 01.10.2024, the present appeal has been filed by the assessee well within the stipulated time period. 5. Succinctly stated, the assessee (since deceased) who was engaged in the business of rice milling had e-filed his return of income for A.Y.2014-15 on 28.11.2014, declaring an income of Rs.6,87,920/-. The A.O based on information that the assessee had obtained bogus purchase bills from M/s. Maa Sharda Process i.e. a tainted party, initiated proceedings u/s. 147 of the Act. Notice u/s. 148 of the Act dated 30.03.2021 was issued to the assessee. In compliance, the assessee filed his return of income fort the subject year i.e AY 2041-15 on 01.07.2021 declaring an income of Rs.6,87,920/-. 6. During the course of the assessment proceedings, the A.O called upon the assessee to put forth his explanation substantiating the authenticity of 5 Late Kailash Chandra Agrawal, Through Legal Heir Ankush Agrawal Vs. ITO, Mahasamund ITA No. 502/RPR/2024 the purchases of Rs.45,75,500/- that was claimed to have been made from M/s. Maa Sarada Process. As the assessee failed to substantiate the authenticity of the subject purchase transactions, therefore, the A.O made an addition of Rs.45,75,500/-. Accordingly, the A.O vide his order passed u/s.147 r.w.s. 144B of the Act, dated 22.03.2022 after making the aforesaid addition determined the income of the assessee at Rs.52,63,420/-. 7. Aggrieved, the assessee carried the matter in appeal before the CIT(Appeals) but without success. For the sake of clarity, the observations of the CIT(Appeals) are culled out as under: “Findings and Decision: Ground No 1 7. This ground is related to Assessment order being bad in law as well as on facts of the case. This ground of appeal is general in nature. The issues raised in this ground is covered by other grounds of this appeal which are specific in nature. Therefore, this ground of appeal does not require separate adjudication. Ground No 2: 8.1 In this ground of appeal, the appellant has contested that the AO has made the addition without mentioning the section and requested to delete the same. However, as noticed from the assessment order, the AO has discussed the entire facts of the case in detail along with the modus of M/s. Maa Sharda Process from which the appellant has availed the accommodation entries. In this regard, reference is invited in the case of K.M. Nagaraj v. Deputy Commissioner of Income Tax, Central Circle 1(1), Bangalore in IT Appeal No. 758 OF 2017 order dated 19.12.2019 wherein it was decided that mere mentioning of incorrect section can not vitiate the assessment proceeding. Relevant portion of the same is re-produced as under: 6 Late Kailash Chandra Agrawal, Through Legal Heir Ankush Agrawal Vs. ITO, Mahasamund ITA No. 502/RPR/2024 “...9. At the cost of repetition when the notice dated 1-6-2010 is perused it would establish though heading is under section 153A of the Act, DCIT has categorically stated in the said notice that he proposes to assess the appellant's income under section 153C of the Act. Juxtaposing the contents of the notice dated 1-6-2010 with the satisfaction note, it is clear that notice is not one under section 153- A of the Act, but one under section 153-C of the Act. The copy of said notice has been received by the appellant and appellant having full knowledge of the fact that Deputy Commissioner of Income-tax has proposed to assess/reassess the appellant's income under section 153C of the Act. Therefore, appellant cannot now be allowed to contend by taking hyper-technical defence to state that notice received is one under nomenclature of section 153-A of the Act to invalidate the entre assessment proceedings and said contention also cannot be entertained as provision of section 153C is specifically mentioned in the notice. Hence, we are of the view that notice issued under section 153C is proper and valid. Mere fact that heading indicates that it is one issued under section 153A of the Act cannot vitiate the assessment proceedings. 8.2 In the instant case, appellant was well communicated to the issue on which the AO was proposing the disallowance of bogus purchases being unexplained expenditure. Therefore, considering the facts of the case and the above mentioned judicial pronouncement, the appellant's contention can not be accepted and accordingly this ground of appeal is hereby dismissed. Ground No 3: 11.1 This ground of appeal filed by the appellant is in regard to not allowing proper opportunity. During the course of the appellate proceeding, the AO allowed more than sufficient opportunities to submit the called details. Finally AO issued show cause notice/draft assessment order on 14.03.2022 fixing the hearing on 17.03.2022 to submit the called details. However the appellant has claimed that adjournment letter was filed before the AD seeking time till 23.03.2022 for which AO did not put any reply. Further the AO passed the final assessment order on 22.03.2022. However, It shall also be noted that the issue on which scrutiny assessment initiated was the same on which addition was made by the AO. In response to the draft assessment order, the appellant was required to submit the 7 Late Kailash Chandra Agrawal, Through Legal Heir Ankush Agrawal Vs. ITO, Mahasamund ITA No. 502/RPR/2024 documentary evidence for transportation of goods such as bilty and toll receipts. However, till date the appellant has not submitted those details. The appellant was well aware of the issue on hand and should have filed those details either at the time of filing of appeal or during the appellate proceeding. Which clearly shows that the appellant doesn't have the documentary evidence in support of the claim. 11.2 Further the appellant has also stated that he wasn't allowed the opportunity to cross-examine Mr. Rakesh Sharma as based on his statement the addition was proposed by the AO. However as checked with the details available, the appellant had not raised any such request during the assessment proceeding. 11.3 Therefore, considering the above discussion, the appellant's contention in this regard is not acceptable. Accordingly, this ground of appeal is hereby dismissed. Ground No 4: 12. In this ground of appeal, the appellant has contested that the AO did not consider the details submitted by the appellant at the time of passing of order and the entire addition was revolving around the statement of Mr. Rakesh Sharma. However as checked with the assessment order, the addition was made as the appellant failed to produce the crucial documents to prove the genuineness of the transaction such as transportation details, toll receipts etc. statement of Mr. Rakesh Sharma simply shows a direction to verify the suspicious transactions and not the sole reason to make the addition. Therefore, this ground of appeal is not acceptable and accordingly this ground of appeal is hereby dismissed. Ground no 5 & 6: 13.1 In these grounds of appeal, the appellant has claimed to restrict the addition made by the AO to a reasonable amount to avoid double taxation. During the course of the appellate proceeding, the appellant has claimed that transaction were genuine and to be at least restricted on the reasonable basis. However, as noticed from the assessment order, the appellant has failed to prove the genuineness of the transaction. Even during the course of the appellate 8 Late Kailash Chandra Agrawal, Through Legal Heir Ankush Agrawal Vs. ITO, Mahasamund ITA No. 502/RPR/2024 proceeding, the appellant has no submitted any corroborating Evidence which can support the Appellant's claim. 13.2 Further in regard to the appellant’s contention that the amount should be restricted to a reasonable basis, it shall be noted that the transaction involved is determined as Bogus purchase and restricting the addition on percentage basis or any other measure will not do justice to the facts of the case, In this regard, reference is invited on the Hon'ble High Court Of Gujarat's decision in the case of N.K Industries Ltd. v. Deputy commissioner of Income-tax Tax Appeal Nos. 240 TO 242. 260 & 261 OF 2003 June 20, 2016 wherein if was decided that the restricting the disallowance on percentage basis in the case of bogus transaction in not correct. Relevant portion of the same is re-produced as under: 5. Mr. M.R. Bhatt, learned Senior Counsel appearing with Mrs. Mauna Bhatt, learned advocate for the revenue submitted that the Tribunal has erred in law and on facts in restricting the addition on account of bogus purchases to 25% ie. Ra. 3 crores out of the addition of Rs.11.99 crores made by the Assessing Officer. The Tribunal has decided the issue regarding bogus purchases relying on the decision of the Rajasthan High court in the case of Indian Woollen Carpet Factory v. ITAT [2003] 260 ITR 658/2002] 125 Taxman 763 wherein it has been held that addition under section 68 or 69 of the Act is tenable in the case of peak credit in the accounts of bogus suppliers. He submitted that the quantum of such peak credit and retention of the addition has been decided by the Tribunal at 25% of the total bogus purchases on the basis of its earlier decision in the case of Vijay Proteins Ltd. (supra) 6. The Tribunal in the case of Vijay Proteins Ltd. (supra) has observed that it would be just and proper to direct the Assessing Officer to restrict the addition in respect of the undisclosed income relating to the purchases to 25% of the total purchases. The sad decision was confirmed by this Court as wet On consideration of the matter, we find that the facts of the present case are identical to those of Ms. Indian Woollen Carpet Factory (supra) or Vijay Proteins Ltd (supra) in the present case the Tribunal has categorically observed that the assessee had shown bogus purchases amounting to Rs. 2.92.93.288 and taxing only 25% of these bogus claim goes against the principles of Sections 68 and 69C of the income Tax Act. The entire purchases shown on the basis of fictitious invoices have been 9 Late Kailash Chandra Agrawal, Through Legal Heir Ankush Agrawal Vs. ITO, Mahasamund ITA No. 502/RPR/2024 debited in the trading account since the transaction has been found to be bogus. The Tribunal having once come a categorical finding that the amount of Rs. 2,92,93,288 represented alleged purchases from bogus suppliers & was not incumbent on it to restrict the disallowance to only Rs. 73.23.322/- 13.3 In view of the above discussion & on the fact that the appellant has failed to submit corroborating documentary evidence in support of the claim even at the time of appellate proceeding & relying upon the above mentioned Judicial Pronouncement, it is ascertained that the addition made by the AD is justified and as per the provisions of the Income Tax Act. Therefore, the appellant's contention in this regard can not be accepted and these grounds of appeal are hereby dismissed. Ground No 7: 14. This ground of appeal is in regard to o request made by the appellant that relief which the Honorable Court may deem fit be granted to the appellant. The decision has already been made in the above mentioned therefore no separate adjudication is required in this case Ground No 8: 15. his ground of appeal is in regard to allow, leave to urge, add, amend, alter, enlarge, modify, substitute, delete any of the ground/ grounds and to adduce fresh evidence at the time of hearing of appeal, however no other ground has been urged at the time of appeal hearing nor altered any grounds of appeal, hence no separate adjudication is required for this ground of appeal. 16. In the result, the Appellant's appeal for the AY 2014-15 is hereby dismissed.” 8. The assessee being aggrieved with the order of the CIT(Appeals) has carried the matter in appeal before us. 9. We have heard the Ld. Authorized Representative of both the parties, perused the orders of the lower authorities and the material available on 10 Late Kailash Chandra Agrawal, Through Legal Heir Ankush Agrawal Vs. ITO, Mahasamund ITA No. 502/RPR/2024 record, as well as considered the judicial pronouncements that have been pressed into service by the Ld. AR to drive home his contentions. 10. Shri Prafulla Pendse, Ld. AR for the assessee, at the threshold, submitted that the order passed by the CIT(Appeals) dated 13.09.2024 is not sustainable in the eyes of law. Elaborating on his contention, the Ld. AR submitted that as the assessee, viz. Shri. Kailash Chandra Agrawal had expired on 16.02.2023, therefore, the order passed by the CIT(Appeals) in his name i.e without impleading his legal heir has no existence in the eyes of law. The Ld.AR submitted that the legal heir of the deceased assessee had brought the fact about the death of the assessee by uploading the requisite details on the e-portal on 06.09.2023, Page 9 of APB. It was submitted by the Ld.AR that though the fact of the assessee’s death was brought to the notice of the CIT(Appeals) but the latter had without considering the same passed the order in the name of assessee (since deceased). The Ld.AR submitted that the matter in all fairness requires to be restored to the file of the CIT(Appeals) with a direction to dispose of the same afresh after impleading/bringing on record the legal heir of the assessee (since deceased). Apart from that, the Ld.AR submitted that the submissions that were filed in the course of the proceedings before the CIT(Appeals) had not been considered by him. The Ld. AR to fortify his aforesaid claim had taken us through the acknowledgement of e-proceedings, Page 25 of APB a/w. 11 Late Kailash Chandra Agrawal, Through Legal Heir Ankush Agrawal Vs. ITO, Mahasamund ITA No. 502/RPR/2024 annexures which revealed that submissions/attachments were filed by the assessee in the course of the appellate proceedings with the CIT(Appeals). 11. Dr. Priyanka Patel, Ld. Sr. Departmental Representative (for short ‘DR’) in the backdrop of the aforesaid facts did not object to the seeking of the restoring the matter to the file of the CIT(Appeals). 12. Ostensibly, the legal heir of the assessee (since deceased), viz. Late Shri Kailash Chandra Agrawal had in the course of the appellate proceedings, brought the fact about the death of the assessee to the notice of the CIT(Appeals), Page 9 of APB. However, we find that the CIT(Appeals) despite having been intimated about the fact that the assessee had expired failed to implead his legal heir and passed the order in the name of the deceased assessee, viz. Shri. Kailash Chandra Agrawal. 13. As stated by the Ld. AR, and rightly so, as per the settled principle of law, no order can be passed against a dead person, and thus, any proceedings taken against the deceased assessee shall be continued against the legal representative from the stage at which it stood on the date of the death of the deceased. Our aforesaid view is supported by the mandate of law as per section 159(2) of the Act, which reads as under: “159. (1) Where a person dies, his legal representative shall be liable to pay any sum which the deceased would have been liable to pay if he had not died, in the like manner and to the same extent as the deceased. 12 Late Kailash Chandra Agrawal, Through Legal Heir Ankush Agrawal Vs. ITO, Mahasamund ITA No. 502/RPR/2024 (2) For the purpose of making an assessment (including an assessment, reassessment or recomputation under section-147) of the income of the deceased and for the purpose of levying any sum in the hands of the legal representative in accordance with the provisions of sub-section (1),— (a) any proceeding taken against the deceased before his death shall be deemed to have been taken against the legal representative and may be continued against the legal representative from the stage at which it stood on the date of the death of the deceased; (b) any proceeding which could have been taken against the deceased if he had survived, may be taken against the legal representative; and (c) all the provisions of this Act shall apply accordingly. (3) The legal representative of the deceased shall, for the purposes of this Act, be deemed to be an assessee. (4) Every legal representative shall be personally liable for any tax payable by him in his capacity as legal representative if, while his liability for tax remains undischarged, he creates a charge on or disposes of or parts with any assets of the estate of the deceased, which are in, or may come into, his possession, but such liability shall be limited to the value of the asset so charged, disposed of or parted with. (5) The provisions of sub-section (2) of section-161, section- 162 and section-167, shall, so far as may be and to the extent to which they are not inconsistent with the provisions of this section, apply in relation to a legal representative. (6) The liability of a legal representative under this section shall, subject to the provisions of sub-section (4) and sub-section (5), be limited to the extent to which the estate is capable of meeting the liability.” In a case where an assessee dies pending any assessment proceedings, the provisions of Section 159 of the Act get attracted. Accordingly, it is incumbent on the A.O to ensure compliance with sub-section (2) of Section 159 before any order is passed. The aforesaid view is supported by the 13 Late Kailash Chandra Agrawal, Through Legal Heir Ankush Agrawal Vs. ITO, Mahasamund ITA No. 502/RPR/2024 judgment of the Hon’ble High Court of Madhya Pradesh in the case of Commissioner of Income Tax Vs. Dalumal Shyamumal (2005) 276 ITR 62 (MP). The Hon’ble High Court had observed that as the A.O had framed the assessment in the name of the assessee (since deceased), therefore, assessment so framed was a nullity. However, the Hon’ble High Court was of the view that once the assessment order was held to be nullity, then the Tribunal should have given a consequential direction as contemplated u/s. 159 of the Act to the A.O so that proper assessment order could be passed. For the sake of clarity, the observations of the Hon’ble High Court are culled out as under: “In our opinion, the Tribunal while deciding the appeal ought to have taken note of section 159 ibid and should have accordingly, remanded the case to assessing officer for ensuring compliance of section 159 for passing appropriate orders of assessment after due notice to legal representative of deceased assessee. Indeed, once the assessment order is held to be a nullity then in such event consequential direction as contemplated under section 159 of the Act should have been given to assessing officer so that proper assessment order could be passed.” As the facts involved in the present case before us on the first principle remain the same as were there before the Hon’ble High Court in the case of Commissioner of Income Tax Vs. Dalumal Shyamumal (supra), therefore, we respectfully follow the same. We, thus, based on our aforesaid observations and the judgment of the Hon’ble High Court of Madhya Pradesh in the case of Commissioner of Income Tax Vs. Dalumal Shyamumal (supra), 14 Late Kailash Chandra Agrawal, Through Legal Heir Ankush Agrawal Vs. ITO, Mahasamund ITA No. 502/RPR/2024 hold the order passed by the CIT(Appeals), dated 13.09.2024 as nullity, and remand the matter to his file for ensuring compliance with Section 159(2) of the Act for passing an appropriate order after validly putting to notice the legal representative/representatives of the deceased assessee. The CIT(Appeals) is also directed to consider the submissions that were filed by the assessee before him on 14.08.2024. 14. In the result, appeal of the assessee is allowed for statistical purposes in terms of our afores. aid observations. Order pronounced in open court on 19th day of December, 2024. Sd/- Sd/- ARUN KHODPIA RAVISH SOOD (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) रायपुर/ RAIPUR ; Ǒदनांक / Dated : 19th December, 2024. **SB, Sr. PS आदेश कȧ ĤǓतͧलͪप अĒेͪषत / Copy of the Order forwarded to : 1. अपीलाथȸ / The Appellant. 2. Ĥ×यथȸ / The Respondent. 3. The CIT(Appeals)-1, Raipur (C.G.) 4. The Pr. CIT, Raipur-1 (C.G) 5. ͪवभागीय ĤǓतǓनͬध, आयकर अपीलȣय अͬधकरण, रायपुर बɅच, रायपुर / DR, ITAT, Raipur Bench, Raipur. 6. गाड[ फ़ाइल / Guard File. आदेशानुसार / BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलȣय अͬधकरण, रायपुर / ITAT, Raipur. "