SHRI MAHESH BAHADURBHAI AHIRE,SURAT V. INCOME TAX OFFICER, WARD - 2(3)(3), SURAT

ITA 363/SRT/2023

AI Insights

The case involves Mahesh Bahadurbhai Ahire, the proprietor of M/s Ahire Textile, who appealed against the order of the Commissioner of Income Tax (Appeals) which confirmed the additions made by the Assessing Officer under various heads including bogus unsecured loans, bogus trading expenses, and bogus interest expenses for the assessment year 2015-16. The Tribunal found that the CIT(A) had not adequately considered the assessee's submissions and had decided the appeal based solely on the assessment order due to the assessee's non-compliance with multiple notices. The Tribunal noted the assessee's non-cooperation but decided to provide another opportunity for a fair hearing, emphasizing the importance of the principles of natural justice.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 473295 (ITAT-SURAT)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-12-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2015-2016
• Other Referred Cases: CIT vs. S. N. Banerjee & Ors, 10 CTR 354 (SC), Nirmal Singh & Ors, Cr. No. 3791 of 2013, dated 01.05.2014
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAVIKANT GUPTA
• Assessee Lawyers: YOGESH B. SHAH
• Keywords: Set aside; Principle of natural justice; TDS; Bogus
• Section: 143(3); 250; 271(1)(c); 131; 37; 20

Judgement Text

" IN THE INCOME-TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND SHRI BIJAYANANDA PRUSETH, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.363/SRT/2023 Assessment Year: (2015-16) (Physical Hearing) Mahesh Bahadurbhai Ahire, 117, Radhakrishna Nagar, Navagam, Dindoli, Surat - 394210 Vs. The ITO, Ward – 2(3)(3), Surat èथायीलेखासं./जीआइआरसं./PAN/GIR No: BGPPA1515A (Appellant) (Respondent) Appellant by Shri Yogesh B. Shah, AR Respondent by Shri Ravi Kant Gupta, CIT-DR Date of Hearing 11/12/2024 Date of Pronouncement 26/12/2024 आदेश / O R D E R PER BIJAYANANDA PRUSETH, AM: This appeal by the assessee emanates from the order passed under section 250 of the Income-tax Act, 1961 (in short, ‘the Act’) dated 21.03.2023 by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [in short, ‘CIT(A)’] for the assessment year (AY) 2015-16. 2. The grounds of appeal raised by the assessee are as under: “1.0 That on the facts and in the circumstances of the case, the Ld. Commissioner of Income Tax (Appeals)-NFAC, Delhi [here-in-after referred to as Ld. CIT(Appeals)] was not justified and grossly erred by without considering the facts, evidences and information submitted by the appellant. That on the facts and in the circumstances of the case, the Ld. CIT(Appeals) was not justified and grossly erred in confirming the action of the A.O. order passed u/s. 143(3) of the IT. Act, 1961 which is incomplete and also bad on facts. 2 ITA No.363/SRT/2023/AY.2015-16 Mahesh Bahadurbhai Ahire 2.0(a) That on the facts and in the circumstances of the case, the Ld. ClT(Appeals) was not justified and grossly erred in confirming the action of the A.O. in by accepting the addition on account of bogus unsecured loans amounting to Rs.7,51,89,904/-. 2.0(b) Without prejudice to above grounds, mat on the facts and in the circumstances of the case and in law, the Ld. CIT(Appeals) was not justified and grossly erred in confirming the action of the A.O. by erred in accepting the addition on account of bogus unsecured loans in spite of considering loans and advance given by appellant during the course of assessment proceedings. 3.0(a) That on the facts and in the circumstances of the case, the Ld. ClT(Appeals) was not justified and grossly erred in confirming the action of the A.O. in by accepting the addition on account of bogus trading expenses and purchase amounting to Rs.1,51,28,524/-. 3.0(b) Without prejudice to above grounds, that on the facts and in the circumstances of the case and in law, the Ld. CIT(Appeals) was not justified and grossly erred in confirming the action of the A.O. by erred in accepting the addition on account of bogus trading expenses and purchase in spite of considering sales made by appellant 4.0(a) That on the facts and in the circumstances of the case, the Ld. CIT(Appeals) was not justified and grossly erred in confirming the action of the A.O. in by addition on account of bogus interest expenses amounting to Rs.39,50,805/-. 4.0(b) Without prejudice to above grounds, that on the facts and in the circumstances of the case and in law, the Ld. CIT(Appeals) was not justified and grossly erred in confirming the action of the AO where addition on account of interest expense in spite of considering interest earned on loans and advance. 5.0 That on the facts and in the circumstances of the case, the Ld. CIT(Appeals) was not justified and grossly erred confirming the initiating of penalty proceeding u/s. 271(1)(c) of the Act. 6.0 That the appellant craves leave to add, to amend, modify, rescind, supplement or alter any of the grounds stated here-in-above, either before or at the time of hearing of this appeal.” 3. Brief facts of the case are that assessee filed his return of income for AY.2015-16 on 22.09.2015, declaring total income at Rs.1,80,060/-. The assessee is the proprietor of M/s Ahire Textile and he derives income from 3 ITA No.363/SRT/2023/AY.2015-16 Mahesh Bahadurbhai Ahire textile trading, embroidery job work and financial activity. The case was selected for scrutiny under CASS. Various notices were issued and served upon the assessee along with questionnaire calling for various details. The Assessing Officer (in short, ‘AO’) has extracted the financial account of assessee, which is at pages 2 to 4 of the assessment order. The AO has also reproduced the statement of transaction of assessee in RBL Bank at pages 4 to 9 of his order. The AO stated that assessee had not disclosed the identity of lenders and names submitted during assessment proceedings, did not appear in balance sheet. The AO noticed that the assessee received funds from persons to whom no interest was paid; however, interest expense has been claimed showing it as loan. No TDS has been deducted on the amount claimed as expense against the loan received. The assessee failed to establish identity and creditworthiness of lenders and genuineness of the transactions. Later, a summon u/s 131 of the Act was issued to the assessee on 16.11.2017 and the assessee appeared up on 08.12.2017. In response to the query raised by the AO, the assessee attended on 08.12.2017 and filed an affidavit. In his statement on oath u/s 131(1), he stated that he does not know the name and address of the person operating his bank account; that he knew nothing about embroidery business; that he had neither purchased nor sold any textile goods; that he did not know lenders nor the persons to whom advances were made and that his income was only the TDS deducted. 4 ITA No.363/SRT/2023/AY.2015-16 Mahesh Bahadurbhai Ahire 3.1 The assessee had maintained current account No.409000094529 with RBL Bank. The assessee had received unsecured loans from various persons through RTGS or bank transfer. The assessee failed to establish identity and creditworthiness of lenders and genuineness of transactions. In absence of documentary evidence, AO made addition of Rs.7,51,89,904/- on account of unsecured loans. He also initiated penalty u/s 271(1)(c) for furnishing inaccurate particulars of income. 3.2 The AO observed that assessee had claimed Rs.86,55,350/- as direct expense and Rs.64,73,174/- towards purchase. As per statement u/s 131(1) of the Act, the assessee stated that he knows nothing about textile trading or embroidery business. The entire books of account was written to give colour to the bogus transaction of providing entry towards unsecured loan to the property developers. As no business has been carried out by assessee, the expenses claimed of Rs.86,55,350/- towards direct expenses and Rs.64,73,174/- towards purchases were disallowed u/s 37 of the Act and the AO made addition of Rs.1,51,28,524/- to the total income of the assessee. 3.3 The AO further observed that the interest expenditure claimed against unsecured loan was Rs.39,40,805/- but the assessee had not deducted TDS on the amount claimed to have been credited to the lenders account as interest. Since entire unsecured loan was added to income of assessee, the AO disallowed interest on such loans and added Rs.39,50,805/- on account of bogus interest. The AO assessed the total income of Rs.9,44,49,293/- against 5 ITA No.363/SRT/2023/AY.2015-16 Mahesh Bahadurbhai Ahire the returned income of Rs.1,80,060/-. Penalty proceedings u/s 271(1)(c) also initiated by AO. 4. Aggrieved by the order of AO, the assessee filed this appeal before the CIT(A). The finding of CIT(A), is at pages 3 to 20 of the appellate order. The CIT(A) extracted the detailed ‘Statement of Facts’ filed by appellant, which is are pages 5 to 7 of his appellate order. The CIT(A) observed that a number of notices/communications through ITBA portal were sent to the appellant on 21.12.2018, 07.01.2020, 24.12.2020, 14.02.2023 and 27.02.2023. The assessee failed to comply with the notices. Therefore, the CIT(A) has decided the appeal on the basis of the materials available on record including the assessment order. The CIT(A) relied upon the decisions of CIT vs. S. N. Banerjee & Ors, 10 CTR 354 (SC) and stated that to \"prefer an appeal\" would mean “effectively prosecuting an appeal”. The appellant had not been able to discharge the primary onus/burden statutorily and judicially cast upon him to substantiate the claims made in his appeal. The appellant had not been able to support his contention taken as per the grounds of appeal. The CIT(A) extracted the order u/s 143(3) passed by AO on 22.12.2017, which is at pages 7 to 20 of the appellate order. The CIT(A) also relied on the decision of Hon’ble Punjab & Haryana High Court, in case of Nirmal Singh & Ors, Cr. No. 3791 of 2013, dated 01.05.2014 and observed that in the absence of any reasonable, cogent and valid arguments/contentions, the 6 ITA No.363/SRT/2023/AY.2015-16 Mahesh Bahadurbhai Ahire additions/disallowance made by the AO was sustained. The CIT(A) confirmed the addition made by AO and dismissed the appeal of the assessee. 5. Aggrieved by the order of CIT(A), the assessee filed appeal before the Tribunal. The learned Authorized Representative (ld. AR) of the assessee filed a paper book and submitted that details and documents were filed before AO. He further submitted that the CIT(A) passed the order u/s 250 of the Act on 21.03.2023 without hearing the assessee in violation of the principles of natural justice. The ld. AR contended that assessee could not represent his case before CIT(A) and the order being an ex parte, stood vitiated on account of violation of principles of natural justice. The assessee could not appear before the CIT(A) due to circumstances beyond his control. Adequate opportunity of hearing was not given to the assessee; therefore, Id. AR contended that one more opportunity should be given to the assessee to plead his case before the AO. He undertakes to be vigilant and furnish explanation and details expeditiously. 6. On the other hand, learned Commissioner of Income-tax- Departmental Representative (ld. CIT-DR) of the revenue supported the order of lower authorities. He submitted that the adequate opportunities were given to the assessee during the appellate proceedings. The assessee has been negligent and non-cooperative due to which the addition were confirmed by CIT(A). However, he did not have any objection if the matter is restored to the file of CIT(A). 7 ITA No.363/SRT/2023/AY.2015-16 Mahesh Bahadurbhai Ahire 7. We have heard both the parties and perused the materials available on record. It is an undisputed fact that assessee has been totally non- cooperative during the appellate proceedings. The assessee had filed return of income declaring total income of Rs.1,80,060/-. In the assessment order u/s 143(3), the AO has added (i) the entire unsecured loan of Rs.7,51,89,904/- (ii) all direct and indirect expenses of Rs.1,51,28,524/- and (iii) interest expenses of Rs.39,50,805/-. The total addition of Rs.9,42,69,340/- was confirmed by CIT(A) based on the assessment order only and not on merits. However, we find that the CIT(A) had issued five notices which were not complied with by the assessee. Considering all these facts, we are of the view that the assessee was negligent and non-cooperative before the CIT(A). The Id. AR submitted that the non-compliance was neither deliberate nor intentional. He requested that another opportunity may be granted to the assessee to submit all the required explanations and details and plead his case on merit. We are of the view that the principles of natural justice would call for giving another opportunity of hearing to the assessee. Accordingly, we hold that the interests of justice would be met in case the CIT(A) re- adjudicates the entire issue afresh subject to payment of cost of Rs.25,000/- (Rupees twenty-five thousand only) by the assessee to the credit of the “Gujarat High Court Legal Aid Authority” within 2 weeks from receipt of this order. Subject to payment of above cost, we set aside the order of CIT(A) and remit the matter back to the file of CIT(A) for fresh adjudication in 8 ITA No.363/SRT/2023/AY.2015-16 Mahesh Bahadurbhai Ahire accordance with law after granting adequate opportunity of hearing to the assessee. The assessee is directed to be more vigilant and diligent and to furnish all the details and explanations as needed by the CIT(A) by not seeking adjournment without valid reasons. With these directions, the grounds of appeal raised by the assessee are allowed for statistical purposes. 8. In the result, appeal of the assessee is allowed for statistical purpose. Order is pronounced in the open court on 26/12/2024. Sd/- Sd/- (PAWAN SINGH) (BIJAYANANDA PRUSETH) JUDICIAL MEMBER ACCOUNTANT MEMBER Surat Ǒदनांक/ Date: 26/12/2024 SAMANTA Copy of the Order forwarded to: 1. The Assessee 2. The Respondent 3. The CIT(A) 4. CIT 5. DR/AR, ITAT, Surat 6. Guard File By Order // True Copy // Assistant Registrar/Sr. PS/PS ITAT, Surat "