LEELA ENTERPRISES ,MUMBAI V. ITO WARD 41(2)(3), MUMBAI

ITA 776/MUM/2025

AI Insights

Leela Enterprises appealed against the order of the CIT(A), which had dismissed their earlier appeal due to a two-day delay in filing without considering the merits of the case. The original assessment was reopened by the Assessing Officer (AO) under section 148 of the Income Tax Act, 1961, alleging that certain construction and electrical fitting expenses claimed by the assessee had escaped assessment. The Tribunal found that the assessee should be given another opportunity to present its case with necessary documentary evidence to substantiate their claims. The Tribunal emphasized adherence to the principles of natural justice in their decision.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 312792 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHEKHAR L. GAJBHIYE
• Assessee Lawyers: HASMUKH RAVARIA
• Keywords: Reopening of assessment; Principle of natural justice; Assessment record; Reason to believe
• Section: 147; 148; 143(3); 142(1)

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, MUMBAI BEFORE MS. KAVITHA RAJAGOPAL, JM AND SMT. RENU JAUHRI, AM ITA No. 776/Mum/2025 (Assessment Year: 2014-15) Leela Enterprises Mam Mension, Sane Guruji Nagar, V. B. Phadke Marg, Mulund (East) – 400081. Vs. ITO Ward 41(2)(3), Mumbai Kautilya Bhavan, Mumbai – 400051. PAN/GIR No. AADFL0489P (Appellant) : (Respondent) Assessee by : Shri. Hasmukh Ravaria Respondent by : Shri. Shekhar L. Gajbhiye CIT DR. Date of Hearing : 23.04.2025 Date of Pronouncement : 29.04.2025 O R D E R Per Kavitha Rajagopal, J M: This appeal has been filed by the assessee, challenging the order of the learned Commissioner of Income Tax (Appeals) Delhi (‘ld. CIT(A)’ for short), National Faceless Appeal Centre (‘NFAC’ for short) passed u/s.250 of the Income Tax Act, 1961 (‘the Act'), pertaining to the Assessment Year (‘A.Y.’ for short) 2014-15. 2. The assessee has raised the following grounds of appeal: “1. On the facts of the case and in Law, order passed u/s 147 r.w.s 144B is bad-in-law both in respect of re-opening of assessment u/s 147 and in passing final order, as A.O had neither any information nor any cogent evidence to show escapement of income due to the fact that A.O has shown basis of forming reason to believe stating that he has credible details in the form of computation sheet and assessment records submitted by assessee, which means reason for re-opening is mere change in opinion. 2. On the facts of the case and in law reopening is bad in law, as there was no information/evidence to show the escapement of income and also due to the fact that the ITA No. 776/Mum/2025 (A.Y. 2014-15) Leela Enterprises 2 original assessment u/s 143(3) was completed by the then A.O on 22/12/2016, thus, the reopening is beyond 4 years of original assessment and assessee had disclosed all the material facts fully and truly and there was no omission in this respect on the part of the assessee. 3. On the facts of the case and in law, Ld. A.O is not justified in not considering the final reply filed by the assessee stating that, the reply was only enclosure of the old reply made against proposed reopening u/s 148. 4. On the facts of the case and in law, A.O was not justified in ignoring the final reply of the assessee which contained binding decisions also, thus, he violated principle of natural justice 5. On the facts of the case and in law, 'Ld. A.O was not justified in making additions of expenses to the tune of Rs. 1,21,07,583/-, though the assessee had submitted all the details in the matter, which was not considered.” 3. Brief facts of the case are that the assessee is a firm in the name and style as M/s. Leela Enterprises. The assessee had filed its return of income dated 22.12.2016, declaring total income at Rs. 1,66,02,574/-. The ld. AO observed from the assessee’s Profit and Loss account that the assessee had claimed a business loss of Rs. 45,66,274/-. It is also noticed from the assessee’s computation sheet that the assessee had deducted a sum of Rs. 1,09,18,664 towards construction expenses, and Rs. 1,88,919/- towards Electrical fitting expenses aggregating to Rs. 1,11,07,583/- stating that these expenses are admissible u/s. 40(a) of the Act and computed taxable income at a loss of Rs. 1,11,07,583/- which according to the learned Assessing Officer ('ld. A.O.' for short) has escaped assessment. The assessee’s case was selected for scrutiny and assessment order u/s. 143(3) was passed on 22.12.2016. Subsequent to this, the assessee’s case was reopened vide notice u/s. 148 of the Act, dated 30.07.2022, but the assessee has failed to comply with the same. Subsequent statutory notices u/s. 142(1) were also issued and served upon the assessee. The learned Assessing Officer (ld. A.O. for short) then passed ITA No. 776/Mum/2025 (A.Y. 2014-15) Leela Enterprises 3 the assessment order dated 19.05.2023, u/s. 147 r.w.s. 144B of the Act, determining total loss at Rs. -54,94,991/-, after making an addition of Rs. 1,11,07,583/-. 4. Aggrieved the assessee was in appeal before the first appellate authority, challenging the assessment order. 5. The ld. CIT(A) vide order dated 30.12.2024, dismissed the appeal filed by the assessee on the ground that the assessee has not provided any plausible explanation with supporting documentary evidence for the delay of 2 days in filing the appeal before the first appellate authority without getting into the merits of the case. 6. The assessee is in appeal before us, challenging the impugned order of the ld. CIT(A). 7. We have heard the rival submissions and perused the materials available on record. It is observed that the assessee has filed the appeal before the first appellate authority with a delay of 2 days for which the learned Authorised Representative (‘ld. AR’ for short) contends that, was due to the reason of health issue. The same was not accepted by the ld. CIT(A) stating that the assessee has failed to submit the documentary evidence to show that the concerned person had health issues during the said period. The ld. CIT(A) has also not decided the issue on the merits of the case for the above-mentioned reason. 8. The ld. DR on the other hand controverted the said fact and stated that the assessee has been non-compliant before both the lower authorities. The ld. DR relied on the order of the lower authorities. 9. In the above facts of the case, we are of the considered opinion that the assessee may be given one more opportunity to present its case before the ld. CIT(A) by furnishing the documentary evidence proposed to be filed by the assessee in order to substantiate ITA No. 776/Mum/2025 (A.Y. 2014-15) Leela Enterprises 4 its claim. The ld. CIT(A) is directed to condone the delay in filing the appeal and to decide the issue denovo based on the submission of the assessee and on the merits of the case. We therefore remand all these issues back to the file of the ld. CIT(A) by adhering to the principles of natural justice and in the interest of justice dispensation. 10. In the result, the appeal filed by the assessee is allowed for statistical purpose. Order pronounced in the open court on 29.04.2025 Sd/- Sd/- (RENU JAUHRI) (KAVITHA RAJAGOPAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai; Dated: 29.04.2025 Karishma J. Pawar (Stenographer) Copy of the Order forwarded to: 1. The Appellant 2. The Respondent 3. CIT- concerned 4. DR, ITAT, Mumbai 5. Guard File BY ORDER, (Dy./Asstt.Registrar) ITAT, Mumbai "