M/s. Maral Overseas Limited vs Dy Commissioner Of Income Tax, Central Circle-31, New Delhi

PER RAJ KUMAR CHAUHAN (J.M.):

The appeal preferred by the assessee /appellant against the order of Learned Pr. Commissioner of Income Tax (Appeals)-31, New Delhi [hereinafter referred to as the “CIT(A)”], passed under section 250 of the Income Tax Act, 1961 [hereinafter referred to as “the Act”] dated 03.10.2025 for the A.Y. 2011-12 wherein the addition made in the assessment order dated 30.12.2018 were confirmed on the ground that the assessee has failed to respond to the notices issued during the appeal before the Ld. CIT(A).

The facts in brief, as culled out from the order of the authorities below are that the appellant/assessee is a limited company engaged in the business of manufacturing, trading and export of Yarn, and fabric and a garments. The appellant filed its original return of income u/s 139(1) for the year under consideration on 29^th September, 2011 declaring a total income of Rs, 9,15,29,534/- which was set off against the brought forward losses. The adjusted book profit u/s 115JB of the Act was worked out to be nil and the appellant has claimed a refund of Rs. 3,31,350/- on account of TDS deducted. The regular assessment was thus completed u/s 143(3) of the Act on 29.03.2014 by making addition of Rs. 4,65,41,278/- by the ACIT/DCIT, Indore, which was challenged by the appellant by filing appeal before the Ld. CIT(A) and the same is stated to be pending. In the meantime, search and seizure operations u/s 132 of the Act were carried out on the appellant group on 4^th August 2016, however, no incriminating documents were found in the case of the appellant during the search. However, the notices u/s 153A of the Act for A.Y. 2011-12 to A.Y. 2016-17 were issued on 12.02.2018 and the assessee filed return on 18.06.2018 under section 153A of the Act declaring total income of Rs. 2,99,05,038/- which was set off against the brought forward losses. The appellant has claimed deduction of Rs. 6,16,24,496/- in the return filed u/s 153A of the Act on account of interest subsidy under TUF scheme, same being in the capital receipt, which was credited to the profit and loss account and was earlier offered for taxation. However, the assessment completed for A.Y. 2011-12 u/s 153A r.w.s. 143(3) of the Act by making various additions extracted below as under:

Against the said additions, the assessee filed appeal before the Ld. CIT(A) which was dismissed on the ground that despite 21 opportunities given to the assessee. No response was filed and no one attended the proceeding before the First Appellate Authority. Both the additions were confirmed by upholding the assessment order.

Aggrieved by the impugned order, the assessee is in appeal before us and has raised following grounds of appeal:

We have heard the Ld. DR on behalf of the Revenue. As, no one appeared on the argument on behalf of the assessee/appellant. During the argument, we are noticed that the ground no. 1.1 to 1.2 are legal grounds wherein the appellant has challenged the impugned order on the ground that proper opportunity of hearing has not been granted and principle of natural justice has not been followed. Further, the Ld. CIT(A) has not adjudicated the issue raised in the appeal in terms of Section 250(6) of the Act and has passed the impugned order in a mechanical manner.

We have considered the submission and examined the record. We are unable to agree with the arguments of the ld. DR with regard to affording effective opportunity of hearing because in para no. 7 of the impugned order, it is simply stated “during the course of appellate proceedings, several notices were issued on various dates” as under:

Similarly, in para No. 7, it is observed that, in view of the persistent non-compliance with the notices issued to the appellant, it is presumed that appellant is not interested in pursuing this appeal. These observations of the Ld. CIT(A), in our opinion, merely show that the notices were issued; however they do not establish that the said notices were ever received by the assessee or were duly served upon the assessee.

Section 250 sub section 2(a) of "the Act" provides as under:

It is evident from the provision of Section 250 sub section2 (a) of the Act that the opportunity of hearing to be given is not a formality but an effective hearing is sine qua non for the purpose of upholding the principal of natural justice. Admittedly there is no proof on record that the notices sent 21 times was duly served upon the assessee or has been received by the assessee. Therefore, we find force in the grounds raised by the assessee in that regard and therefore conclude that the opportunity of effective hearing as requirement of Section 250 sub section 2(a) of the Act, has not been granted to the assessee, accordingly ground No. 1 raised in the appeal is accordingly allowed in favour of the assessee. Similarly, on perusal of the impugned order with regard to the ground no. 2 raised, we are convinced that the Ld. CIT(A) has not followed the provisions as laid down in section 250(6) of the Act as the impugned order suffers from lack of reasons and adjudication has not been done after determining the point of determination as is requirement of the said provision of Section 250 sub section (6) of "the Act" which provides as under:

We have noticed that two new additions were made by the Ld. AO after filing of the Income Tax Return u/s 153A of the Act for the concerned year. The first addition relates to subsidiary of Rs. 6,16,24,496/- on account of TUFS subsidy. Before the Ld. CIT(A), various submissions as noted on page 41 to 43 from point no. 1 to 9 were made by the assessee making a request to delete the said addition. Ld. CIT(A) has disposed of the said submissions in two lines extracted below as under:

It is thus evident from the above extracts of the impugned order that the Ld. CIT(A) has not followed the principle of laid down u/s 250(6) of the Act with respect to Rs. 1,16,24,496/-. Similarly, we have noticed that the second addition upheld with regard to the bogus purchases to the tune of Rs. 32,95,491/- and the submission of the assessee has been disposed almost in the same manner and the reasons given therein are not sufficient so as to have considered the submission made by the assessee. For these reasons, we find force in the ground no. 2 raised and conclude that the Ld. CIT(A) while passing the impugned order has not followed the provision of Section 250(6) of the Act. For these reasons, the impugned order is not sustainable as the same suffers from lack of effective opportunity of hearing and non-following the required procedure for deciding the appeal on merit. In these facts and circumstances justice shall be met by restoring matter to the file of Ld. CIT(A) for deciding the same afresh by giving effective opportunity of hearing to the assessee/appellant. The appellant/assessee is directed to present its case within the period of 60 days from this order without any fail on their part.

In the result, the appeal of the assessee is accordingly allowed as above terms for statistical purposes.