SHRI LALJIBHAI NARANBHAI SORATHIYA,ANJAR KUTCH V. THE ITO WARD-1, , GANDHIDHAM

ITA 158/RJT/2024

AI Insights

The case involves Lalji Naranbhai Sorathiya, an individual engaged in construction activities, who appealed against the order of the Learned Commissioner of Income Tax (Appeals) at the National Faceless Appeal Centre, Delhi. The appeal was directed against the assessment year 2018-19, where the assessee's income was reassessed based on information flagged by a risk assessment strategy, leading to a reopening of the case. The AO had rejected the books of account under Section 145(3) of the Income Tax Act, 1961, and made additions to the income on various grounds including unexplained credits and estimated profits. The CIT(A) dismissed the appeal for non-prosecution, which led the assessee to approach the ITAT, Rajkot. The ITAT found that the assessee was not properly served with notices and thus did not have a fair opportunity to present his case, leading to the decision to remand the case back to the AO.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 472688 (ITAT-RAJKOT)
• Duration Of Justice: 7 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-11-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 09-10-2024
• Assessment Year: 2018-2019
• Appeal Filed On: 18-03-2024
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ABHIMANYU SINGH YADAV
• Keywords: Opportunity of being heard; Unexplained cash credit; Rejection of books of accounts; Principle of natural justice; TDS; FORM 26AS
• Section: 147; 148; 144; 139(1); 68; 44AB; 194C; 145(3)

Judgement Text

" आयकर अपील\tय अ धकरण,राजकोट \u0011यायपीठ, राजकोट। IN THE INCOMETAXAPPELLATE TRIBUNAL, RAJKOT BENCH: RAJKOT BEFORE DR. ARJUN LAL SAINI, ACCOUNTANT MEMBER And SHRI DINESH MOHAN SINHA, JUDICIAL MEMBER आयकर अपील सं./ITA No. 158/RJT/2024 (\u000eनधा\u0012रण वष\u0012/Assessment Year: (2018-19) Lalji Naranbhai Sorathiya, 10 Nagarpalika Shop Centre, Outside Ganga Gate, Anjar- 370110 Vs. Income Tax Officer, Ward-1, Gandhidham \u0016थायी लेखा सं./जीआइआरसं./PAN/GIR No.: AYIPS2810E (अपीलाथ\u001c/Appellant) (\u001d\u001eयथ\u001c/Respondent) \u000eनधा\u0012\u001fरती क! ओर से/Appellant by : None राज\u0016व क! ओर से/Respondent by : Shri Abhimanyu Singh Yadav, Sr. D.R. सुनवाई क! तार%ख/ Date of Hearing : 09/10/2024 घोषणा क! तार%ख/Date of Pronouncement : 08/11/2024 आदेश / O R D E R PER SHRI DINESH MOHAN SINHA, JUDICIAL MEMBER: This appeal filed by the assessee is directed against the order of Learned Commissioner of Income Tax (Appeals) [in short, “the Ld. CIT(A)”], National Faceless Appeal Centre (in short “NFAC”), Delhi order dated 08.02.2024 for assessment year 2018-19. 2. The assessee has raised the following grounds of appeal:- “1 The Ld CIT(A), NFAC has erred in law and on facts in dismissing the appeal without affording the proper opportunity of being heard and thus, against the principles of natural justice. 2 The Ld CIT(A), NFAC has erred in law and on facts in not appreciating that the reasons recorded for reopening a case cannot be substituted or improvised or changed at a later stage by the AO. 3. The Ld. CIT(A), NFAC has erred in law and on facts in upholding the reopening of the case by the AO without appreciating that the notice uls 148A(b) and the consequential order passed u/s 145A(d) on 29.03.2022 and Page | 2 ITA No. 158/RJT/2024 A Y:2018-19 notice issued u/s 148 dated on 29.03 2022 are illegal and reassessment proceedings consequent thereto needs to be quashed. 4 The Ld. CIT(A), NFAC has erred in law and on facts in upholding the rejection of books of accounts of the Appellant under Section 145(3) of the Act by the AO without pointing out any defects therein. 5. The Ld. CIT(A), NFAC has erred in law and on facts in confirming the addition of Rs 20.35,467/- made by the AO on estimated basis being 8% of the receipts as per Form 26AS as reduced by the income offered for taxation. 6 The Ld CIT(A), NFAC has erred in law and on facts in confirming the addition of Rs 61,64,000/- made by the AO u/s 68 of the Act, treating the same as unexplained credits of the Appellant. 7 The Ld. CIT(A), NFAC has erred in law and on facts in confirming the addition made by the AO on account of interest income of Rs. 1,64,180/- under the head Income from Other sources without appreciating that the Appellant has already offered the same as Income from Business and Profession. 8 The Ld CIT(A), NFAC has erred in law and on facts in not appreciating that the AO has not issued any draft assessment order which is to be preceded by a specific Show cause notice and thus, violated the mandatory provisions of Section 144B of the Act and thus, the order passed by the AO is bad in law 9 The Appellant craves leave to add, amend, delete or alter one or more grounds of appeal. 3. The assessee is engaged in the business of construction activities for A.Y. 2018-19. The assessee has filed return of income, however, the total contract receipt of the assessee was of Rs. 7,28,05,951/-. The books of account of the assessee were audited by chartered accountant and audit report u/s. 44AB and Form 3CD was filed on 30-10-2018. The case of AY 2018-19 was selected for assessment within the meaning of sec 147 read with provision and explanation of the said section and notice u/s 148 r.w.s. 151 of the Income Tax Act, 1961 was issued to the assessee. The status of the assessee is an individual. The case was re-opened on the basis of the information flagged by the risk assessment strategy that income of the assessee chargeable to tax during FY 2017-18 has escaped assessment. During FY 2017-18, the assessee has received contractual Page | 3 ITA No. 158/RJT/2024 A Y:2018-19 receipt to the tune of Rs. 7,28,05,951/- and interest receipts amounting to Rs 1,64 180/-. In addition to this, during FY 2017-18, the assessee has deposited cash of Rs. 32.16,300/- with Banking Company and withdrawn total cash of Rs. 79,60,613/- The assessee has also done motor vehicle transaction worth of Rs. 58,88,911/- and also goods transactions worth Rs. 23,935/- during the relevant assessment year as reported in TCS statement. As per record of the Act, assessee has not filed his original return of income u/s 139(1) of the Act for A.Y. 2018-19. That a number of notices were issued to the assessee. |First notice of the Act u/s. 148A(b) of the Act on 19-03-2022, then order u/s. 148A(d) on 29-03-2022 along with notice u/s. 148 was issued. Assessee filed response to notice on 28th April, 2022. The appellant follows mercantile system of account as general accounting policy and procedure. All taxes, cess etc. are routed through books of account. It is further noted that the assessee has not shown interest income of Rs. 1,64,180/- and also noticed that the turn over as per audit report Rs. 7,10,41,803/- while receipt was of Rs. 7,28,05,951/-. The assessment of the assessee was completed with under mentioned remark:- “7. Conclusion drawn: In view of the above fact, it is concluded that assessee is not able to produce the documents as requested by this office because he has shown/declared profit on incorrect and incomplete books of account. In view of the above facts it is clear that assessee's books of account is fabricated and manipulated by the assessee as per his convenience to lower the net profit of the assessee. Therefore, the books of account of the assessee is being rejected u/s 145(3) of the IT Act, 1961 and assessment is being done u/s 144 of the Act under the category of best judgement assessment. Net profit of the assessee has been calculated at 8 percent of the total turnover of the business during FY 2017-18 As per the return of income filed by the assessee in response to notice u/s 148, the nature of business of assessee is Construction and maintenance of roads, rails, bridges, tunnels, ports, harbour runways etc., Construction of water ways and water reservoirs and Site preparation works. On perusal of records, it is noted that assessee has received total contractual receipts of Rs. 7,28,05,951/- on which TDS u/s 194C was already deducted. In view of the above discussed facts, assessee's turnover is taken as Rs. 7,28,05,951/-for AY 2018-19and hence net profit of the assessee is calculated @8% of Rs. 7,28,05,951/- at Rs. 58,24,476/- instead of Rs. 37,89,009/- as declared by the assessee in his ITR filed against the notice issued u/s 148 of the Act. Page | 4 ITA No. 158/RJT/2024 A Y:2018-19 Hence. Rs 20,35,467/- (Rs 58,24,476/-- Rs. 37,89,009/ ) is added back to the income of the assessee as declared in his ITR filed against the notice issued u/s 148 of the Act, under the head \"Profits and Gains from Business and Profession. In addition to this, in the absence of any explanation by the assessee, the total interest income of Rs. 1,64,180/- is being added to the income of the assessee during AY 2018- 19 under the Head Income from other Sources\" Further, unexplained and unaccounted credit of Rs. 61,64,000/- as unsecured loan has been added in the hands of the assessee u/s 68 r.w.s 115 BBE of the Act.” 4. Against the order dated 22-03-2023 of the Ld. AO, the assessee filed an appeal before the ld. CIT(A). The ld. CIT(A) has disposed of the appeal after issuing four notices and none of the notices were replied by the appellant. The order passed at 8-2-2024 by the ld. CIT(A) with following remarks:- ’’ The appellant has raised grounds of appeal No. 1 to 8 which c hallenged amounting to Rs.83,63,647/- on account of unexplained and unaccounted credit u/s 68 r.w.s 115BBE of the IT Act and on other grounds. However no written submissions were filed in respect of Grounds of Appeal apart from plain averments made there. It is noted that the appeal of the appellant has been dismissed by me for non prosecution in para 6. In view thereof the various grounds raised in appeal have become academic in nature. Grounds of Appeal No. 1 to 8 are hereby dismissed.” 5. The assessee filed an appeal against the impugned order dated 08- 02-2024 before the ITAT, Rajkot. 6. The ld. A.R. submitted that no proper and reasonable opportunity was given to the assessee for the hearing. No notice was served on the assessee. Ld. CIT ex-parte order. It was further submitted that it was unfortunate that the order of assessment passed ex-parte by the Ld. AO. It was prayed for an opportunity may kindly be granted to present the case before the Authority. 7. The Ld. DR submitted that several opportunities were given to the assessee by the lower authorities but the assessee failed to comply. Ld. DR not supported the prayer of assessee. Page | 5 ITA No. 158/RJT/2024 A Y:2018-19 8. We have heard ld. DR and perused the materials available on record and noted that ld. CIT(A) has issued notices on t 27-11-2023, 18-11-2023, 03-01-2024 and 25-01-2024 but the assessee could not comply with them because the assessee was not aware of the notice. We further noted that the order of ld. CIT(A) does not speak about the service of notice on the assessee. The prayer of the assessee is that one more opportunity should be given to present his case before the ld. CIT(A). It is settled law that principle of natural justice and fair play requiring the affected party should be granted sufficient opportunity of being heard and contest the case. Therefore, we are of the view that in the interest of natural justice and fair play one more opportunity should be given to the assessee to present his case before the lower Authority and remit the matter back to the file of ld. Ld. AO for fresh adjudication on merit after giving an opportunity of being heard to the assessee and the assessee is further directed to make proper submission before the Ld. AO as and when required by the Ld. AO 9. In the result the appeal filed by the assessee is allowed statistical purposes. Order is pronounced on 08/11/2024 in the Open Court. Sd/-S Sd/- (DR. ARJUN LAL SAINI) (DINESH MOHAN SINHA) ACCOUNTANT MEMBER JUDICIAL MEMBER Rajkot TRUE COPY *दनांक/ Date: 08/10/2024 Copy of the Order forwarded to 1. The Assessee 2. The Respondent 3. The CIT(A) 4. Pr. CIT 5. DR/AR, ITAT, Rajkot Page | 6 ITA No. 158/RJT/2024 A Y:2018-19 6.Guard File. By Order, Assistant Registrar/Sr. PS/PS ITAT, Rajkot 1. Date of dictation 10.10.2024 2. Date on which the typed draft is placed before the Dictating Member 10.10.2024 3. Other Member… 4. Date on which the approved draft comes to the Sr.P.S./P.S…………….. 5. Date on which the fair order is placed before the Dictating Member for pronouncement…… 6. Date on which the fair order comes back to the Sr.P.S./P.S……. 7. Date on which the file goes to the Bench Clerk………………… 8. Date on which the file goes to the Head Clerk…………………………………... 9. The date on which the file goes to the Assistant Registrar for signature on the order…………………….. 10. Date of Dispatch of the Order……………… "