VINOD DEDHIA PROP. OF JAY AMBE PETROLEUM SERVICES,MUMBAI V. ITO 20(3)(1), MUMBAI

ITA 1089/MUM/2025

AI Insights

The case involves Vinod Dedhia, the proprietor of Jay Ambe Petroleum Services, who appealed against the order of the National Faceless Appeal Centre (NFAC), Delhi, which was passed under section 250 of the Income-tax Act, 1961 for the Assessment Year 2017-18. The primary contention was that the assessment order was passed on a non-existent entity and without proper jurisdictional changes acknowledged by the department. The CIT(A) set aside the original assessment order, directing a fresh assessment, which led to the current appeal. The Tribunal found that the initial proceedings were correctly initiated against the entity linked to the bank account in question, despite the entity being non-existent at the time of the assessment.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 46880 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-04-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2017-2018
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Matter Remanded
• Court: TRIBUNAL
• Department Lawyers: KAVITHA KAUSHIK
• Assessee Lawyers: MANDAR VAIDYA NITIN
• Keywords: Set aside; Opportunity of being heard; Principle of natural justice
• Section: 144; 143(3); 143(2); 250; 251; 69A

Judgement Text

"IN THE INCOME-TAX APPELLATE TRIBUNAL “F” BENCH, MUMBAI BEFORE SMT. BEENA PILLAI, JUDICIAL MEMBER & SMT. RENU JAUHRI, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.1089/MUM/2025 (निर्धारण वर्ा / Assessment Year :2017-18) Vinod Dedhia Prop. Of Jay Ambe Petroleum Services 601/C 201, Pragati Paradise Co Op HS, DR Ambedkar Road, Matunga East 400019 v/s. बिधम Income Tax Officer 20(3)(1), Mumbai Piramal Chambers, Lalbaug 400012 स्थायी लेखा सं./जीआइआर सं./PAN/GIR No: AQNPD0772F Appellant/अपीलधर्थी .. Respondent/प्रनिवधदी निर्ााररती की ओर से /Assessee by: Shri. Mandar Vaidya/ Shri Nitin Mandial Furia रधजस्व की ओर से /Revenue by: Ms. Kavitha Kaushik (SR DR) सुिवधई की िधरीख / Date of Hearing 07.04.2025 घोर्णध की िधरीख/Date of Pronouncement 08.04.2025 आदेश / O R D E R PER RENU JAUHRI [A.M.] :- This appeal is filed by the assessee against the order of the National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as “CIT(A)”] dated 27/12/2019 passed u/s. 250 of the Income-tax Act, 1961 [hereinafter referred to as “Act”] for Assessment Year [A.Y.] 2017-18. 2. The assessee has raised the following grounds of appeal: “1. Order passed on a non-existing entity: a. The Id. A.O. has erred in law and on facts in passing an assessment order u/s 144 on PAN AAAFJ0635N which belongs to a non-existent entity in spite of the fact that the Id. A.O. was intimated about the same. b. The address of the old PAN was of Mumbai and the new PAN was of Mehsana. The fact that the jurisdiction was changed from Mumbai to Mehsana shows that the Id. A.O. has acknowledged that the firm was not in existence in AY 2017-18. c. Your appellant prays that the order passed on a non-existing entity be quashed. 2. Setting Aside Appeal: a. The hon. CIT(A) has erred in law and on facts in setting aside the appeal by directing the assessment afresh. b. The hon. CIT(A) has erred in not adjudicating the technical grounds and thereby giving the assessing officer a fresh opportunity c. Your appellant prays that the order of the CIT(A) setting aside the appeal should be quashed. 3. Invalid Assessment Order u/s 144: a) The Learned Assessing Officer erred in law and in facts in passing an assessment order u/s 144. b) Assessment order u/s 144 is passed without issuing notice u/s 143(2) and thus the assessment order passed u/s 144 is invalid and void ab initio. The Joint Commissioner of Income Tax, Mehsana has mechanically given the direction u/s. 144A of the Income Tax Act, 1961 and also not providing an opportunity to the appellant as provided in section 144A of the Income Tax Act, 1961. c) The Id. A.O. has failed to comply with the procedure for change of jurisdiction as per s. 127. d) The Id. A.O. has failed to verify essential facts before passing assessment order u/s 144. e) The Id. A.O. has erred in law and on facts in not complying with the SOP issued by the CBDT and the specific instructions issued by the Joint CIT, Mehsana vide letter No. Jt.CIT/MHN/144A/F.No. 43/2019-20 dated 27.11.2019. f) The Learned Assessing Officer failed to verify the return of income of the new firm having PAN AALFJ9552B falling under his jurisdiction. g) The address of the old PAN was of Mumbai and the new PAN was of Mehsana. The fact that the jurisdiction was changed from Mumbai to Mehsana shows that the Id. A.O. has acknowledged that the firm was not in existence in AY 2017-18. In spite of this fact notices were issued and uploaded on the income tax portal of the non-existing entity only. h) The hon. CIT(A) has erred in law and on facts by setting aside the matter giving the opportunity to the Id. A.O. to rectify the mistakes made by him during assessment. i) Your appellant prays that the assessment order u/s 144 be quashed. 4. Addition u/s 69A of Rs. 72,53,000: a) The Id. A.O. erred in law and on facts in treating the amount of Rs. 72,53,000 as unexplained money u/s 69A and as a consequence erred in making an addition of Rs. 72,53,000. b) The Id. A.O. has erred in law and on facts in not making the addition under any head of income. c) The Id. A.O. has taxed the income twice for the same cash deposit in the hands of the new firm having PAN AALFJ95528 as well as old firm having PAN AAAFJ0635N which belongs to a non-existent entity. d) The hon. CIT(A) has erred in law and on facts in setting aside the matter to the Id. Α.Ο. e) Your appellant prays that the addition of Rs. 72,53,000 u/s 69A be deleted. 5. Violation of Natural Justice: a) The Id. A.O. erred in law and on facts in passing the assessment order u/s 144 in violation of the principles of natural justice. b) The Id. A.O. has erred in law and on facts in not complying with the SOP issued by the CBDT and the specific instructions issued by the Joint CIT, Mehsana vide letter No. Jt.CIT/MHN/144A/F.No. 43/2019-20 dated 27.11.2019. c) Since, the appellant did not receive any SMS alert or e-mail it was unaware of the notices being issued and therefore was unable to submit any documents. d) The CIT(A) erred in law and on facts in not adjudicating and thereby confirming the actions of the Id. A.O. in passing the assessment order in gross violation of the provisions of natural justice. e) The CIT(A) erred in law and on facts in not providing an opportunity of virtual hearing before passing the order in violation of the principles of natural justice. f) Your appellant prays that the assessment order passed in gross violation of the provisions of natural justice be quashed. 6. Prayer for leave: Your appellant prays for the leave to add, amend, alter, delete or modify any of the above grounds.” 3. Brief facts of the case are that the assessee had not filed any return of income for AY 2017-18. However, on the basis of information regarding cash deposit of Rs. 72,53,000/- in its bank account during to demonetization period, a notice u/s. 142 was issued on 04/12/2017. The assessee filed a reply dated 23/01/2018 stating that the firm M/s. Jayambe Petroleum Services (PAN: AAAFJ0635N) stood dissolved on 08/09/2012 on account of death of one partner. The business of the firm was continued as a proprietary concern of the remaining partner Shri. Bhavanji Dedhia till AY 2016-17. On 01/04/2016, he entered into a fresh partnership with Shri. Vinod Dedhia and the new partnership firm in the name of M/s. Jayambe Petroleum Services was formed under PAN: AALFJ9552B. However, bank account of the old firm continued to be used by the new firm and the change in PAN and partnership deed was not updated with the bank. It was further submitted by the assessee that the new firm is assessed with ITO, Ward 4 Mehsana. 4. In view of the assessee’s reply, the case was transferred from ITO, Mumbai to ITO Ward-4, Mehsana who issued free notice to the assessee. In the absence of any documentary evidence to support the abovementioned contentions made by the assessee, Ld. AO proceeded to pass an order u/s. 144 treating the impugned cash deposits as unexplained money u/s. 69A of the Act. The assessment was accordingly completed vide order dated 27/12/2019, at an income of Rs. 72,53,000/-. Aggrieved with the order of Ld.AO, the assessee preferred an appeal before Ld. CIT(A). The order of the Ld. AO was set aside by Ld. CIT(A) with the following observations: “7. Examination of the issue and decision: 7.1 I have carefully considered the facts and circumstances of the case and the submission of the appellant. 7.2 The appellant could not plead the case before the Assessing Officer properly and order was passed u/s 144 of the Act. Section 142(2) requires that due enquiries should be conducted to arrive at true and correct income of the taxpayer for the given year. Section 143(3) specifies that assessee should present evidence in support of the computation of taxable income in their return of income, and, may also submit any further evidence as required by the Assessing Officer. Due to the peculiar circumstances in this case, the appellant was not able to present his contentions before the Assessing Officer. Appellant, however, has now produced submissions on 23.01.2024, 22.07.2024 and on 10.12.2024 for consideration of the revenue. Hence, in the interest of substantial justice and to ensure fair play, I am of the view that appellant should be given another chance to present the case before AO with supporting documents and evidences. Accordingly, in view of the power conferred vide proviso to clause (a) of sub- section 1 of section 251 of the Act applicable w.e.f. 01/10/2024, I hereby set aside the impugned assessment order dated 27.12.2019 passed u/s 144 of the Act to the file of the AO for fresh assessment after affording reasonable opportunities to the appellant and diligently adhering to the principle of natural justice. The appellant is directed to comply with notices issued by the AO. 7.3 The AO is therefore directed to frame the assessment afresh after giving the appellant reasonable opportunity of being heard. In the result, the appeal is set aside” Aggrieved with the order of Ld. CIT(A), the assessee has filed the appeal before the Tribunal and has raised several grounds pertaining to the validity of the order passed on a non-existing entity. 5. Before us, Ld. AR has argued that instead of setting aside the order of Ld. AO for fresh adjudication, Ld. CIT(A) should have quashed the order as the firm having PAN: AAAFJ0635N is a non-existent entity and the transfer of jurisdiction from Mumbai to Mehsana shows that this fact has been duly acknowledged by the department. Ld. AR has further submitted that the return of income for AY 2017-18 and tax audit report of the new firm having PAN: AALFJ9552B were e-filed and details of bank accounts (including the impugned account with HDFC Bank) therein. These facts were submitted before the Ld. CIT(A) who has not decided the legal issues raised by the assessee. Ld. DR on the other hand vehemently supported the order of Ld. CIT(A). It has been pointed out by him that the assessee had neither informed the department nor the bank authorities about the dissolution of the old partnership firm. The PAN of the old firm was also not changed in the bank account. Hence, the department has rightly initiated the proceedings in the hands of the firm having PAN which was linked to the bank account in question. Accordingly, the Ld. CIT(A) decision to restore the matter to the Assessing Officer was justified and deserved to be upheld. 6. We have heard the rival submissions and perused the information available before us. It is clear that the entire issue was triggered by the assessee’s failure to change the PAN and partnership firm details with the bank authorities. In fact, the assessee wrongly continued to issue the bank account in the name of a non-existent entity for as long as four years. In this back drop, the initiation of proceedings with regard to cash deposited during demonetization in the hands of the entity having connected PAN cannot be faulted with. However, we note that the assessee’s submissions regarding the explanation of cash in the hands of the new firm have not been examined during the course of the assessment proceedings. We, therefore, hold that the decision of the Ld. CIT(A) to restore the matter to the Ld. AO for due verification is justified and is accordingly upheld. 7. In the result, the appeal is allowed for statistical purposes. Order pronounced in the open court on 08.04.2025. Sd/- Sd/- BEENA PILLAI RENU JAUHRI (न्यधनयक सदस्य/JUDICIAL MEMBER) (लेखधकधर सदस्य/ACCOUNTANT MEMBER) Place: म ुंबई/Mumbai दिन ुंक /Date 08.04.2025 दिव्य रमेश न ुंिग वकर/ स्टेनो आदेश की प्रनतनलनि अग्रेनित/Copy of the Order forwarded to : 1. अपीलार्थी / The Appellant 2. प्रत्यर्थी / The Respondent. 3. आयकर आयुक्त / CIT 4. विभागीय प्रविविवि, आयकर अपीलीय अविकरण DR, ITAT, Mumbai 5. गार्ड फाईल / Guard file. सत्यानित प्रनत //True Copy// आदेशािुसार/ BY ORDER, सहायक िंजीकार (Asstt. Registrar) आयकर अिीलीय अनर्करण/ ITAT, Bench, Mumbai. "