MALAY SHAILESHBHAI PATEL,AHMEDABAD V. THE ITO, WARD-5(3)(1), AHMEDABAD

ITA 2193/AHD/2024

AI Insights

The case involves Malay Shaileshbhai Patel, an individual engaged in trading of wheat, rice, and food items, who appealed against the order of the Commissioner of Income Tax (Appeals) at the National Faceless Appeal Centre. The original assessment for the Assessment Year 2018-19 was significantly revised, with the Assessing Officer adding a substantial amount as unexplained money under section 69A of the Income Tax Act, 1961, related to transactions in shares deemed as penny stocks. The CIT(A) dismissed the appeal in limine due to non-compliance with procedural notices, without addressing the merits of the case. The Tribunal found this dismissal to be in violation of the principles of natural justice and thus restored the case for a detailed examination on merits.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 29624 (ITAT-AHMEDABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-03-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2018-2019
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RIGNESH DAS
• Assessee Lawyers: URVASHI SHODHAN
• Keywords: Opportunity of being heard; Reassessment proceedings; Income from undisclosed sources; Principle of natural justice; Accommodation entries; Initiation of penalty proceedings; Transactions in derivatives
• Section: 147; 69A; 234B; 139(4)

Judgement Text

" आयकर अपीलीय अिधकरण, अहमदा बा द \u0012ा यपीठ “सी“, अहमदा बा द । IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, AHMEDABAD सु\u0017ी सुिच\u0019ा का \u001aले, \u0012ा ियक सद एवं \u0017ी मकरंद वसंत महा देवकर, लेखा सद क े सम\"। ] ] BEFORE MS. SUCHITRA KAMBLE, JUDICIAL MEMBER AND SHRI MAKARAND V. MAHADEOKAR, ACCOUNTANT MEMBER आयकर अपील सं /ITA No.2193/Ahd/2024 िनधा \u0010रण वष\u0010 /Assessment Year : 2018-19 Malay Shaileshbhai Patel A/14, Snehadri Apartments Shreyas Tekra, Ambawadi Ahmedabad – 380 015 बनाम/ v/s. The ITO Ward-5(3)(1) Ahmedabad \u0014थायी लेखा सं./PAN: BLOPP 9579 F अपीलाथ%/ (Appellant) &' यथ%/ (Respondent) Assessee by : Ms. Urvashi Shodhan, AR Revenue by : Shri Rignesh Das, Sr.DR सुनवाई की तारीख/Date of Hearing : 24/03/2025 घोषणा की तारीख /Date of Pronouncement: 25/03/2025 आदेश/O R D E R PER MAKARAND V. MAHADEOKAR, AM: This appeal by the assessee is directed against the order passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre [hereinafter referred to as “CIT(A)”] dated 08.11.2024 for the Assessment Year (AY) 2018-19, arising from the assessment order dated 22.03.2023 passed under section 147 r.w.s. 144B of the Income Tax Act, 1961 [hereinafter referred to as “the Act”] by the Assessing Officer [hereinafter referred to as “AO”]. ITA No.2193/Ahd/2024 Melay Shaileshbhai Patel vs. ITO Asst. Year : 2018-19 2 Facts of the Case: 2. The assessee is an individual engaged in trading of wheat, rice, and food items. For the A.Y. 2018-19, the original return of income was filed u/s. 139(4) of the Act on 28.01.2019 declaring income of Rs.3,96,590/-. Subsequently, a notice u/s 148A(b) of the Act was issued on 23.03.2022 to initiate reassessment proceedings. The AO passed the reassessment order u/s.147 r.w.s. 144B on 22.03.2023 assessing the total income at Rs.1,77,75,146/-. In the reassessment order, the AO made an addition of Rs.1,66,32,866/- u/s 69A of the Act treating the entire transaction claimed as short-term capital gain from trading in shares of Appu Marketing Ltd. (later renamed Ejecta Marketing Ltd.) as unexplained money. The AO observed that the assessee purchased 95,000 shares through Khajanchi & Gandhi Stock Broking Pvt. Ltd. for Rs.60,75,250/- and 1,47,042/- shares through Arham Share Consultants Pvt. Ltd. for Rs.1,05,57,616/- and sold them shortly thereafter at marginal gains. The AO held that the scrip of Ejecta Marketing Ltd. was a penny stock with no sound financials or genuine business activity and was earlier suspended by BSE and flagged by SEBI as a shell company. The AO relied on SEBI’s action dated 07.08.2017, various judicial precedents and the principle of human probabilities to disbelieve the genuineness of the transactions. The AO held that the assessee routed unaccounted income through accommodation entries. The AO also disallowed the assessee’s claim of short-term capital loss of Rs.5,64,910/- arising from transactions in the Futures & Options (F&O) segment for want of proper scrip-wise and date- wise details and concluded that the loss appeared to be fictitious and intended to set off against fictitious gains. Accordingly, total income was ITA No.2193/Ahd/2024 Melay Shaileshbhai Patel vs. ITO Asst. Year : 2018-19 3 assessed at Rs.1,77,75,146/- Penalty proceedings u/s 271AAC(1), 270A of the Act, and interest u/s 234A/B/C of the Act were initiated separately. 3. The assessee filed an appeal before CIT(A) and raised various legal and factual grounds. The main contention was that the AO passed the order u/s 147 r.w.s. 144B of the Act without granting adequate opportunity of being heard. It was submitted that the SCN issued on 11.03.2023 was to be replied by 16.03.2023, giving only 4 working days. A request for adjournment was also filed on 17.03.2023. However, the order was passed without considering the submissions. The assessee also contested the additions on merits, contending that the purchases were genuine, made via account payee cheques and routed through SEBI-registered brokers, and were supported by contract notes and bank statements. Despite these grounds, the Ld. CIT(A) dismissed the appeal in limine by observing that the appellant did not furnish compliance to notices dated 13.09.2024, 01.10.2024, and 26.10.2024. The Ld. CIT(A) invoked the principle “Vigilantibus et non dormientibus jura subveniunt” (The law aids those who are vigilant, not those who sleep upon their rights.) and relied on some judicial precedents to hold that the assessee failed to pursue the appeal. Consequently, the appeal was dismissed without adjudicating the grounds on merits. 4. Aggrieved by the order of CIT(A) the assessee in appeal before us raising following grounds of appeal: 1. Ld. CIT (A) (NFAC) erred in law and on facts in dismissing the appeal filed by the appellant in absence of primary response to the appeal notices. 2. Ld. CIT (A) (NFAC) erred in law and on facts in confirming huge addition of Rs.1,66,32,866/- as unexplained money u/s 69A and Rs. 5, 64, 910/-disallowance of short-term capital loss made by AO. ITA No.2193/Ahd/2024 Melay Shaileshbhai Patel vs. ITO Asst. Year : 2018-19 4 3. Ld. CIT (A) (NFAC) erred in law and on facts not considering the fact that assessment order u/s 147 r w s 144B was passed by AO without providing adequate opportunity of being heard to the appellant. 4. Ld. CIT (A) (NBAC) erred in law and on facts in not prosecuting the appeal and refraining from discussion and decision on the grounds of appeal against the provisions of law and principles of Natural Justice. 5. Levy of interest u/s 234A/ 234B & 234C of the Act is unjustified. 6. Initiation of penalty proceedings u/s 271AAC (1) of the Act for addition made u/s 69A r w s 115BBE of the Act is unjustified. 7. Initiation of penalty proceedings-u/s 270A of the Act is unjustified. The appellant craves leave to add, amend, alter, edit, delete, modify or change all or any of the grounds of appeal at the time of or before the hearing of the appeal. 5. During the course of hearing, the ld. Authorized Representative (AR) of the assessee submitted that the CIT(A) has committed an error in law by not deciding the appeal on merits, despite stating in para 4 that the “grounds of appeal are adjudicated”. It was submitted that no speaking order was passed, and the appeal was dismissed solely on the ground of non- compliance, overlooking the submissions filed by the assessee before AO. 6. The ld. DR fairly agreed that the CIT(A) has not passed a speaking order on the grounds of appeal and left the matter to the discretion of the Bench. 7. We have considered the rival submissions and perused the material on record. The undisputed fact is that the Ld. CIT(A) has dismissed the appeal without deciding the grounds on merits. Although it is stated in para 4 of the order that “the grounds of appeal are adjudicated”, there is no discussion, analysis, or decision on any of the specific grounds raised. The appellate ITA No.2193/Ahd/2024 Melay Shaileshbhai Patel vs. ITO Asst. Year : 2018-19 5 order must reflect proper application of mind and deal with the contentions raised by the appellant. It is well settled that dismissal of appeal in limine without disposal on merits, especially when serious additions are involved, causes grave prejudice and violates the principles of natural justice. 7.1. In view of the above facts and in the interest of justice, we deem it fit to restore the matter back to the file of the CIT(A) for fresh adjudication on all grounds of appeal after granting adequate opportunity of being heard to the assessee. The assessee is also directed to cooperate in the proceedings and furnish necessary submissions and evidence as required. 8. In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the Open Court on 25th March, 2025 at Ahmedabad. Sd/- Sd/- (SUCHITRA KAMBLE) JUDICIAL MEMBER (MAKARAND V. MAHADEOKAR) ACCOUNTANT MEMBER अहमदाबाद/Ahmedabad, िदनांक/Dated 25/03/2025 टी.सी.नायर, व.िन.स./T.C. NAIR, Sr. PS आदेश की #ितिलिप अ$ेिषत/Copy of the Order forwarded to : 1. अपीलाथ% / The Appellant 2. #&थ% / The Respondent. 3. संबंिधत आयकर आयु' / Concerned CIT 4. आयकर आयु' ) अपील ( / The CIT(A)-(NFAC), Delhi 5. िवभागीय #ितिनिध , आयकर अपीलीय अिधकरण , राजोकट/DR,ITAT, Ahmedabad, 6. गाड\u0010 फाईल / Guard file. आदेशानुसार/ BY ORDER, स&ािपत #ित //True Copy// सहायक पंजीकार (Asstt. Registrar) आयकर अपीलीय अिधकरण, ITAT, Ahmedabad "