RANGOLI INTERNATIONAL PVT. LTD.,DELHI V. DCIT, CIRCLE 19(1), DEHLI

ITA 1277/DEL/2024

AI Insights

The case involves Rangoli International Pvt Ltd, which appealed against the orders of the National Faceless Assessment Centre (NFAC), Delhi, for the assessment years 2014-15, 2015-16, and 2017-18. The appeals were consolidated due to common issues across the years. The primary grievance was the ex parte assessment confirming a substantial income, contrary to the losses claimed by the assessee. The Tribunal noted the absence of necessary documents due to a CBI seizure and criticized the lower authorities for not providing a fair opportunity to the assessee to present its case. The Tribunal directed a re-assessment, considering the principles of natural justice.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 470692 (ITAT-DELHI)
• Duration Of Justice: 6 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-10-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 16-10-2024
• Assessment Year: 2014-2015
• Appeal Filed On: 21-03-2024
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJEEV KAUSHAL
• Assessee Lawyers: PRANAV YADAV
• Keywords: Opportunity of being heard; Document seized; Principle of natural justice
• Section: 147; 144

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI ‘F’ BENCH, NEW DELHI BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER, AND SHRI NAVEEN CHANDRA, ACCOUNTANT MEMBER ITA No. 1277/DEL/2024[A.Y 2014-15] ITA No. 1278/DEL/2024[A.Y 2015-16] ITA No. 1279/DEL/2024[A.Y 2017-18] Rangoli International Pvt Ltd Vs. The Dy.C.I.T 15G, 9th Floor, Hansalaya Building Circle - 19(1) Barakhamba, New Delhi Delhi PAN: AACCI 9974 L (Applicant) (Respondent) Assessee By : Shri Pranav Yadav, Adv Department By : Shri Sanjeev Kaushal, CIT-DR Date of Hearing : 16.10.2024 Date of Pronouncement : 18.10.2024 ORDER PER NAVEEN CHANDRA, ACCOUNTANT MEMBER:- The above captioned three separate appeals by the same assessee are preferred against three separate orders of the NFAC, Delhi dated 12.12.2023 pertaining to A.Ys. 2014-15, 2015-16 and 2017- 18 respectively. 2 2. Since these three appeals were heard together and involve common issues, they are disposed of by this common order for the sake of convenience and brevity, though the quantum may differ. ITA No. 1277/DEL/2024 3. Though the assessee has raised as many as 9 grounds of appeal, however, the sum and substance of the solitary grievance of the assessee is that the ld. CIT(A) erred in confirming the ex parte assessment u/s 147 r.w.s. 144 at an income of Rs. 48,22,12,120/- instead of loss incurred by the assessee. 4. The representatives of both the sides were heard at length, the case records carefully perused. 5. Briefly stated, the facts of the case are that the assessee is engaged in the business of textiles and handloom. The data available with the department showed huge transactions made by the assessee company. As the assessee did not file return of income for the F.Y. 3 2013-14 relevant to A.Y 2014-15, the AO issued notice u/s 148. Statutory notices were issued and served upon the assessee. 6. In response, the assessee filed its reply explaining that the bank securities and fraud cell division of the CBI has conducted search operations in September 2014 and seized most of the documents relating to company’s financial transactions such as export invoices, bills and vouchers, computer hard disks, etc. The assessing officer further issued notice seeking explanations which were rejected by the Assessing Officer with the observation that the reply filed cannot be accepted as the same is without any documentary evidence. 7. Thereafter, a show cause notices were issued to the assessee seeking explanation as why income should not be estimated at a percentage of gross profit as in comparable cases. The assessee objected to the estimation of net profit based on comparable, relying on the financials of two listed companies which had declared loss from a similar business operations. The Assessing Officer rejected the objection of the assessee observing that it is not possible to verify the correctness of income/profit so computed without valid audited accounts, bills and vouchers and bank statements and rejected the net 4 profit offered by the assessee. Accordingly, the Assessing Officer estimated a gross profit @ 6.5% of the gross turnover and made addition of Rs. 48,22,12,120/-on 29.03.2022. Penalty proceedings were separately initiated u/s 271(1)(c), 271(1)(b) and 271A of the Act. 8. Facts and circumstances are identical in A.Ys 2015-16 and are mutatis mutandis, with only variation in the figures. ITA No. 1279/DEL/2024 [A.Y 2017-18] 9. For the AY 2017-18, the facts are slightly different to the extent that the assessing officer, in absence of any return of income and any compliance from the assessee, made an addition of Rs 1,64,83,144/- as unexplained cash deposit found in the bank account of the assessee. The assessing officer, however, considered an amount of Rs 61,49,856/- out of total deposit of Rs.2,26,33,000/-, as normal cash sales of the business. 10. Aggrieved, the assessee went in appeal before the ld. CIT(A) who also dismissed the appeal exparte for AY 2014-15 and AY 2015-16.The 5 CIT(A), for AY 2017-18, dismissed the appeal on account of delay in filing appeal. 11. Now the further aggrieved assessee is in appeal before us. 12. Before us, the ld. counsel for the assessee reiterated what has been stated before the lower authorities and strongly contended that provisions of the Act ought to have been properly construed and calculating the profit of the assessee by applying gross profit ratio on gross turnover of the assessee is not justified. 13. The ld. counsel for the assessee further contended that the Assessing Officer estimated the net profit based on the comparable cases in same line of business without considering other companies which have negative net profit ratio even though they are large companies. The Assessing Officer has accepted some part of the information/working which is totally incorrect and unfair. Further, it was submitted that the assessing officer for AY 2017-18, without pointing out any discrepancies, considered a substantial part of deposit as unexplained cash deposit while he allowed part of cash deposit as regular sales. Thus, the ld. counsel for the assessee prayed for setting 6 aside the issue to the file of the Assessing officer for all the impugned AYs. 14. Per contra, the ld. DR relied upon the orders of the authorities below. 15. We have heard the rival submissions and have perused the relevant material on record. It is an accepted fact that the assessee did not provide the necessary documents and information sought by the Assessing Officer. It is also a fact that the explanation of the assessee that the failure is on account of seizure of documents and computer hard disks by the CBI, remains uncontroverted. Further, the contention of the ld. counsel for the assessee that the ld. CIT(A) passed the order without providing proper opportunity of being heard and not adjudicating the grounds of appeal on merit, has considerable force. The assessee had pleaded with the CIT(A) for permission to file all necessary documents which could not be filed before the AO, did not find favour with the CIT(A).Further, we find that the assessing officer for AY 2017-18, did not allude to any rationale while allowing part of cash deposit as regular sales and balance as unexplained. 7 16. Having considered the rival submissions, we are of the considered opinion that in the interest of natural justice and fair play, the issue calculation of income correctly should be restored to the file of the Assessing Officer. The assessee is directed to make effort to procure necessary documents/evidence from the concerned authorities and to furnish them before the assessing officer for verification and the Assessing Officer is directed to examine the same and decide the issue as per the provisions of law after affording reasonable and sufficient opportunity of being heard to the assessee. 17. In the result, all the three appeals in ITA Nos. 1277, 1278 and 1279/DEL/2014 are allowed for statistical purpose. The order is pronounced in the open court on 18.10.2024. Sd/- Sd/- [KUL BHARAT] [NAVEEN CHANDRA] JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 18th OCTOBER, 2024. VL/ 8 Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) Asst. Registrar, 5. DR ITAT, New Delhi Date of dictation Date on which the typed draft is placed before the dictating Member Date on which the typed draft is placed before the Other Member Date on which the approved draft comes to the Sr.PS/PS Date on which the fair order is placed before the Dictating Member for pronouncement Date on which the fair order comes back to the Sr.PS/PS Date on which the final order is uploaded on the website of ITAT Date on which the file goes to the Bench Clerk Date on which the file goes to the Head Clerk The date on which the file goes to the Assistant Registrar for signature on the order Date of dispatch of the Order "