NAVRATAN JEWELLERS, RAIPUR,RAIPUR V. INCOME TAX OFFICER, WARD-4(1), RAIPUR, RAIPUR

ITA 127/RPR/2025

AI Insights

The case involves Navratan Jewellers, a partnership firm engaged in trading gold and silver ornaments, which underwent a change in constitution to a proprietorship. The Income Tax Officer (ITO) reopened the assessment for the Assessment Year 2015-16 under section 148 of the Income Tax Act due to unaccounted cash deposits. The CIT(A) initially set aside the assessment order for a fresh assessment, which was contested by the assessee on grounds of improper application of law and failure to consider the merits of the case. The Tribunal, after considering the submissions and the legal provisions, decided to remand the case back to the AO for a fresh assessment, ensuring that all procedural requirements and principles of natural justice are followed.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 298994 (ITAT-RAIPUR)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-04-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2015-2016
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S.L.ANURAGI
• Assessee Lawyers: B. SUBRAMANYAM
• Keywords: Set aside; Opportunity of being heard; Corroborative evidences; Income from undisclosed sources; Period of limitation; Principle of natural justice; Time period of passing order
• Section: 147; 148; 144; 250; 251; 69A

Judgement Text

"आयकर अपीलीय अिधकरण, रायपुर Ɋायपीठ, रायपुर IN THE INCOME TAX APPELLATE TRIBUNAL RAIPUR BENCH, RAIPUR Įी पाथ[ सारथी चौधरȣ, Ɋाियक सद˟ एवं ŵी अŜण खोड़िपया, लेखा सद˟ क े समƗ । BEFORE SHRI PARTHA SARATHI CHAUDHURY, JM & SHRI ARUN KHODPIA, AM आयकर अपील सं. / ITA No: 127/RPR/2025 (िनधाŊरण वषŊ Assessment Year: 2015-16) Navratan Jewellers, Edward Road, Sadar Bazar, Raipur-492001, C.G. v s Income Tax Officer, Ward-4(1), Raipur, C.G.-492001 PAN: AAEFN5109P (अपीलाथŎ/Appellant) . . (ŮȑथŎ / Respondent) िनधाŊįरती की ओर से /Assessee by : Shri B. Subramanyam, CA राजˢ की ओर से /Revenue by : Shri S. L. Anuragi, CIT-DR सुनवाई की तारीख / Date of Hearing : 23.04.2025 घोषणा की तारीख/Date of Pronouncement : 24.04.2025 आदेश / O R D E R Per Arun Khodpia, AM: The captioned appeal is filed by the assessee is directed against the order of the Commissioner of Income Tax (Appeal), NFAC, Delhi, [in short “Ld. CIT(A)”] passed under section 250 of the Income Tax Act, 1961 (in short “the Act”), dated 30.01.2025, for the Assessment Year 2015-16, which in turn arises from the assessment order u/s 147 r.w.s. 144 r.w.s. 144B of the Act, dated 31.03.2022 passed by Income Tax Officer, National Faceless Assessment Centre, Delhi, (in short “Ld. AR”). 2 ITA No. 127/RPR/2025 Navratan Jewellers Vs. ITO, Ward-4(1), Raipur 2. The grounds of appeal raised by the assessee are as under: 1. The Ld. CIT(A) has erred in setting aside the assessment order and remanding the matter to the AO. The power under Section 251(1)(a) of the Income- tax Act, 1961, does not extend to setting aside an assessment order in the present case of the appellant. The legislative intent behind granting such power to the CIT(A), as explained in the memorandum, is to address cases where the best judgment assessments are made due to non-responsiveness to the letters/Notices issued by the Faceless Assessing Officer. In the appellant's case, this rationale is not applicable, as during the course of assessment proceedings the assessee has duly responded to the letter/notices issued by the FAQ and also attended hearing through Video Conferencing. Therefore, the order of the CIT(A) is bad in law and liable to be quashed. 2. On the facts and circumstances of the case the Ld. CIT(A) has erred in setting aside the assessment order and remanding the matter to the AO without proper adjudication on the merits of the case. The CIT(A) failed to consider the fundamental issue that the assessee-firm had undergone a change in its constitution from a partnership firm to a proprietorship concern witheffect from 01.04.2004. and was non-existent in the year under consideration. Consequently, the assessment order and notices issued in the name of the non-existent partnership firm are void ab initio and legally unsustainable. The action of the CIT(A) in remanding the matter to the AO without addressing this legal defect is unjustified and liable to be reversed. 3. On the facts and circumstances of the case, the Ld. CIT(A) has erred in setting aside the assessment order and remanding the matter to the Assessing Officer (AO) for fresh assessment, instead of deciding the case on merits. The CIT(A) failed to appreciate that the addition of Rs. 1,52,48,000/- as undisclosed income under sections 68, 69, and 69A of the Act and tax under section 115BBE was made without any proper basis and in complete disregard of the facts and evidence on record. The assessment was illegal, invalid, contrary to law, and liable to be quashed rather than remanded. The order of CIT(A) is, therefore, unsustainable and requires to be set aside. 4. The Ld. CIT(A) has failed to appreciate that the appellant partnership firm ceased to exist with effect from 01.04.2004, having been converted into a proprietorship concern as a going concern. The entire business, including all assets and liabilities, was taken over by the proprietorship concern, and all transactions, including those in the bank account, were duly recorded in the proprietary concern's books of accounts, audited, and assessed. Despite these 3 ITA No. 127/RPR/2025 Navratan Jewellers Vs. ITO, Ward-4(1), Raipur facts being placed on record, instead of annulling the assessment order as void ab initio, the CIT(A) has merely remanded the matter to the AO, which is against the settled legal position and leads to unnecessary hardship for the appellant. The remand order is, therefore, liable to be set aside. 5. On the facts and circumstances of the case, the Ld. CIT(A) has erred in remanding the case back to the AO without conclusively deciding the issues raised in the appeal. The CIT(A) failed to adjudicate upon the validity of the addition of Rs. 1,52,48,000/-, which was based on unverified details, and ignored the fact that the transactions were already accounted for in the proprietary concern's books of accounts and tax returns. By I remanding the case without any clear direction, the CIT(A) has merely prolonged the litigation, causing undue hardship to the appellant. The order of remand is, therefore, arbitrary, unjustified, and liable to be set aside. 6. The Ld. CIT(A) has erred in setting aside the Assessment order without considering that the AO had made the addition of Rs. 1,52,48,000/- arbitrarily, merely on the ground that the details were furnished at the last leg of the time- barring period and were unverifiable. The appellant had duly furnished explanations and supporting evidence, but the AO failed to examine them. Instead of acknowledging this failure and deleting the addition outright, the CIT(A) has wrongly remanded the case, leading to a violation of the principles of natural justice. The remand order is, therefore, liable to be quashed. 7. The appellant craves leave to add, urge, alter, modify or withdraw any ground/s of appeal on or before hearing of the case. 3. Concise facts of the case are that the assessee herein is a partnership firm engaged in the trading of gold and silver ornaments and utensils. The partnership firm “M/s Navratan Jewellers” (PAN No. AAEFN5109P), had formed and started its functioning effective from 01.04.2004 and thereafter converted into proprietorship firm “M/s Navratan Jewellers”, proprietor Shri Mukund Golchha (PAN No. ADCPG6340A) from 01.04.2004. Accordingly, Return of Income for the 4 ITA No. 127/RPR/2025 Navratan Jewellers Vs. ITO, Ward-4(1), Raipur year under consideration i.e., AY 2015-16 was not filed by the assessee partnership firm. As clarified by the assessee, the PAN No. in bank account of the proprietorship firm was not changed and certain transactions of cash deposit are noticed by the department, therefore, the assessment was reopened u/s 148 of the Act on 31.03.2021. In response to the notice for reopening, assessee had not filed any Return of Income as was not existing after 31.03.2004. Further, statutory notices were issued by the Ld. AO, in compliance of which the assessee firm submitted a reply on 20.01.2022, stating the facts relating to conversion of partnership firm to proprietorship firm effective from 01.04.2004 and have explained that all the transactions doubted by the Ld. AO pertains to proprietorship of Shri Mukund Golchha which are duly recorded in his books of accounts. To substantiate this contention, necessary evidence and documents are also furnished before the Ld. AO. After deliberating upon such details furnished by the assessee, Ld. AO does not find it satisfactory and have accordingly, made a disallowance of Rs. 1,52,48,000/- treating the cash deposits and other credits in the bank account as unaccounted income of the assessee covered within the meaning of section 68/69/69A of the Act. 5 ITA No. 127/RPR/2025 Navratan Jewellers Vs. ITO, Ward-4(1), Raipur 4. Aggrieved with the aforesaid addition, assessee preferred an appeal before the Ld. CIT(A), wherein the appeal of assessee is allowed by Ld. CIT(A) for statistical purposes by setting aside the assessment order for fresh assessment to the file of Ld. AO. 5. The observation of Ld. CIT(A), while deciding the appeals are culled as under: 5.0 Findings and Decision:- 5.1 The grounds of appeal mentioned hereinabove arise from the assessment completed ex-parte u/s 144 of the Income Tax Act, 1961, by the AO due to the appellant's non-compliance and failure to substantiate the information and materials available on record. The AO was constrained to proceed with the assessment in the absence of satisfactory evidence or response from the appellant, thereby justifying the additions made based on the available record. 5.2 In view of the foregoing discussions, facts, and circumstances in the present case regarding all the grounds of appeal raised by the appellant, it is clear that the matter necessitates factual verification of the facts as presented in the grounds of appeal and submissions made by the assessee, as the appellant failed to comply with the notices issued by the AO. However, several notices were issued to the appellant during the course of the appellate proceedings. In response to these notices, certain compliances were made by the appellant to justify the claim as mentioned in the grounds of appeal/statement of facts, in an attempt to counter the effect of the addition made by the AO. 6 ITA No. 127/RPR/2025 Navratan Jewellers Vs. ITO, Ward-4(1), Raipur 5.3 I have carefully perused the facts, submissions, and circumstances of the case, as well as the assessment order. It is important to note that the appellant did not submit any documents or submissions as requisitioned by the AO regarding the issues, despite being provided with ample opportunities to do so. The AO explicitly highlighted the appellant's failure to submit the required documents during the course of the assessment proceedings. Consequently, the AO completed the assessment ex-parte u/s 144 of the Act, taking into account the materials available on record and analyzing the information in respect of the assessee. Section 144 of the Act allows the AO to make an assessment to the best of their judgment when an assessee fails to comply with all terms of a notice issued by them. Due to the failure on the part of the appellant to provide the submissions/documents, the assessment was completed ex-parte u/s 144 of the Act by the AO. 5.4 In such a scenario, Section 251 of the Income Tax Act (as amended by the Finance Act, effective 1.10.2024), empowers the Commissioner (Appeals) to set aside the assessment to the file of the A.O. for a fresh assessment, provided the assessment order is made under Section 144 of the Act. The relevant provision is reproduced below: Section 251(1)(a) (as amended): “Where, in the course of an appeal, the Commissioner (Appeals) is of the opinion that the order appealed against is erroneous in so far as it is prejudicial to the interests of the appellant, the Commissioner (Appeals) may- (a) set aside the assessment and direct the A.O. to make a fresh assessment in accordance with the provisions of this Act, after giving the appellant an opportunity of being heard.\" This provision empowers the Commissioner (Appeals) to remand the case back to the A.O. for a fresh assessment if the appeal involves an 7 ITA No. 127/RPR/2025 Navratan Jewellers Vs. ITO, Ward-4(1), Raipur assessment made u/s 144 of the Income Tax Act, provided the conditions and procedure outlined in the Act are followed. “251. (1) In disposing of an appeal, the [***] [Commissioner (Appeals)] shall have the following powers- (a) in an appeal against an order of assessment, he may confirm, reduce, enhance or annul the assessment [***]: [Provided that where such appeal is against an order of assessment made u/s 144, he may set aside the assessment and refer the case back to the A.O. for making a fresh assessment;]” 5.3 Amendment by Finance (No.2) Act of 2024 The Finance act 2024 has empowered Commissioner Appeals to examine the cases where assessment order was passed u/s 144 of the Act which is an ex-parte assessment and to set aside the assessment in appropriate matters and refer the case back to the AO for making a fresh assessment. The Finance Act also proposes to make consequential amendment in section 153(3) of the Income-tax Act in order to provide the time limit for disposal of cases which are set aside by CIT(Appeals). This procedural amendment is applicable to appellate orders passed by the CIT(Appeals) on or after 01/10/2024. The memorandum has explained the need of granting power of setting aside of appeals to the CIT(A) as under: “3. It has been found that in the best judgment cases, tax payers remain non-responsive in the letters or notices issued by the Faceless A.0. However, they directly file the appeal to Commissioner (Appeals) against the relevant assessment order. 4. Considering the huge pendency of appeals and disputed tax demands at the Commissioner (Appeals) stage, it is proposed that the cases where assessment order was passed as best judgment case u/s 144 of the Act, Commissioner (Appeals) shall be empowered to set aside the assessment and refer the case back to the A.O. for making a 8 ITA No. 127/RPR/2025 Navratan Jewellers Vs. ITO, Ward-4(1), Raipur fresh assessment. Further, it is proposed to make consequential amendment in section 153(3) of the Act in order to provide the time limit for disposal of cases which are set aside by the Commissioner (Appeals). 5. This amendment will take effect from the 1st day of October, 2024. It will be applicable to appellate orders passed by the Commissioner (Appeals) on or after 01.10.2024.\" Introduction of Proviso to Sec 251(1)(a) Proviso to Section 251 1(a) has been introduced with effect from 1/10/2024 and it reads as follows – “Provided that where such appeal is against an order of assessment made u/s 144, he may set aside the assessment and refer the case back to the A.O. for making a fresh assessment.” Amendment in Sec 153(3): Insertion of the term \"section 250\" has been made with effect from 1/10/2024 in three places, including the proviso whereby the A.O. has been specified time to complete fresh assessment pursuant to setting aside of the assessment order by the CIT(Appeals) as per proviso to section 251(1)(a) of the IT Act with effect from 1/10/2024. 6. In the present case, the assessment has been completed under Section 144 of the Act, which clearly falls within the ambit of the proviso to Section 251(1)(a) of the Act. Consequently, the order passed by the AO warrants a fresh assessment, taking into consideration the grounds raised during the appellate proceedings, the contentions supported by documents, and ensuring reasonable opportunities of being heard are provided to the appellant. Therefore, in accordance with the proviso to Section 251(1)(a) of the Income Tax Act, the assessment order is hereby set aside. The AO is 9 ITA No. 127/RPR/2025 Navratan Jewellers Vs. ITO, Ward-4(1), Raipur directed to make a fresh assessment, ensuring that reasonable opportunities are provided to the appellant to be heard. The AO must adhere to all relevant rules and provisions while strictly following the principles of natural justice. The appellant must ensure that all necessary compliance is fulfilled promptly and within the timeframes specified in the notices issued by the AO. It is imperative for the appellant to make a concerted effort to submit the requisite details and evidence in support of their income tax return, as well as, regarding the transactions or claims under verification, either spontaneously or as requested by the AO. Any delays in submissions should be avoided, particularly those that could arise near the conclusion of the limitation period. 7. In view of the above, without commenting on the merits, I hereby set aside the assessment order in accordance with the proviso to Section 251(1)(a) of the Act. I direct the AO to frame a fresh assessment in compliance with the rules and timelines prescribed under Section 153(3) of the Act. This fresh assessment must be undertaken with due diligence and in accordance with the principles of natural justice, ensuring that the appellant is given sufficient opportunity to present their case. 8. The appeal, as a result, is allowed for statistical purposes. 6. At the outset, Ld. AR on behalf of the assessee submitted that setting aside the assessment order by the Ld. CIT(A) is not in accordance with the mandate of law, that the assessee had furnished all the relevant information / documents requisite to verify the impugned transactions during the assessment proceedings as well as before the Ld. CIT(A), however he had not decided the issue keeping in his consideration of such facts and documents, but have simply restored the matter back to the file of Ld. AO 10 ITA No. 127/RPR/2025 Navratan Jewellers Vs. ITO, Ward-4(1), Raipur by following the mandate of Section 251(1)(a) of the Act, whereas the impugned order framed by Ld. AO, though passed u/s 144, but all the necessary compliances were made by the assessee during the assessment proceedings and it was incumbent upon the Ld. CIT(A) to have decided the matter on merits based on material available on record. 7. It was, therefore, prayer by Ld. AR that the matter may be restored back to the file of Ld. CIT(A) for fresh adjudication on merits instead of setting it aside without taking any cognizance of the material available on record. 8. On the other hand, Ld. CIT-DR representing the revenue have stated that Ld. CIT(A) had rightly set aside the matter back to Ld. AO, as the assessment was passed u/s 144, therefore, he vehemently supported the order of Ld. CIT(A). Ld. CIT-DR further submitted that as the matter is only set aside to the file of Ld. AO, wherein the assessee has all the opportunities to explain its case, therefore, there is no prejudice caused to the assessee. Accordingly, the order of Ld. CIT(A) deserves to be upheld. 9. We have considered the rival submissions and perused the material available on record. Admittedly, during the assessment process requisite documents are submitted by the assessee, which includes the statement of 11 ITA No. 127/RPR/2025 Navratan Jewellers Vs. ITO, Ward-4(1), Raipur bank account maintained with State Bank of India, bearing account no. 30034672947 in the name of proprietorship M/s Navratan Jewellers, Proprietor Shri Mukund Golchha, whereas Ld. AO observed that the assessee has not furnished any details to explain that credit entries of Rs. 1,52,48,000/- as appears in the bank statement that the aforesaid amount has been accounted for in the books of proprietorship concern. Under such facts and circumstances, apparently, as the assessee was not show caused by the Ld. AO regarding explaining the transactions as to whether it is recorded in the books of proprietorship concern or not, in the interest of justice, the matter needs to be restored back to the file of Ld. AO or to the file of Ld. CIT(A) to re-adjudicate the same on merits. Though the Ld. CIT(Appeals) under the 1st proviso to Section 251(1) of the Act has remanded the matter back to the file of the A.O. because of best judgment assessment u/s 144 of the Act, however, the Ld. Counsel for the assessee expressed his view and submitted that for the interest of justice, it would be proper if the matter be remanded to the file of the Ld. CIT(Appeals)/ NFAC. The Ld. CIT-DR conceded to the contention of the Ld. Counsel for the assessee. In view thereof, the matter is remanded to the file of the Ld. CIT(Appeals)/NFAC. The assessee is directed to furnish relevant evidence/ submissions before the Ld. CIT(Appeals)/ NFAC, who will call for the 12 ITA No. 127/RPR/2025 Navratan Jewellers Vs. ITO, Ward-4(1), Raipur remand report, if be needed in the matter, from the Ld. AO as per Rule 46A(3) of the Act. 10. In view of aforesaid observations, the matter is restored back to the file of Ld. CIT(A) for fresh adjudication. 11. Needless to say, the assessee shall be afforded with reasonable opportunity of being heard in the set aside appellate proceedings. 12. In result, appeal of the assessee is allowed for statistical purposes, in terms of over aforesaid observations. Order pronounced in the open court on 24/04/2025. Sd/- (PARTHA SARATHI CHAUDHURY) Sd/- (ARUN KHODPIA) Ɋाियक सद˟ / JUDICIAL MEMBER लेखा सद˟ / ACCOUNTANT MEMBER रायपुर/Raipur; िदनांक Dated 24/04/2025 Vaibhav Shrivastav आदेश की Ůितिलिप अŤेिषत/Copy of the Order forwarded to : आदेशानुसार/ BY ORDER, (Senior Private Secretary) आयकर अपीलीय अिधकरण, रायपुर/ITAT, Raipur 1. अपीलाथŎ / The Appellant- Navratan Jewellers, Raipur 2. ŮȑथŎ / The Respondent- ITO, Ward-4(1), Raipur 3. The Pr. CIT, Raipur (C.G.) 4. िवभागीय Ůितिनिध, आयकर अपीलीय अिधकरण, रायपुर/ DR, ITAT, Raipur 5. गाडŊ फाईल / Guard file. // सȑािपत Ůित True copy // "