Rajeshsingh Khadak Bahadur, , ... vs Assessee

.Rajeshsingh Khadak Bahadur, Vs Income-tax Officer, Ward -12(1), G/2, Sweta Flats, Opp. Ganga Ahmedabad. Maiya Society, Khokhra, Ahmedabad. (Appellant) (Respondent) PA No.ABMPR 6442E

Appellant by Shri Prashant B. Shah, AR Respondent by Smt. Sonia Kumar, Sr. DR

Date of hearing: 18.06.2015 Date of pronouncement: 25/06/2015

ORDER

PER Shri Rajpal Yadav, Judicial Member.

The present two appeals are directed at the instance of

assessee against the separate orders of even dated 26.12.2013

passed by the ld. CIT(A) in AY 2008-09. ITA No.615/Ahd/2014 has

arisen out of an assessment order passed under section 144 r.w.s.

147 of the Income-tax Act, 1961 (herein after the Act), dated

28.12.2011 whereas ITA No.616/Ahd/2014 has arisen from a penalty

order under section 271(1)(c) of the Act dated 13.6.2012. We heard ITA Nos.615 & 616/Ahd/2014 2 Asst. Year 2008-09

both the appeals together and deem it appropriate to dispose of them

by this common order.

2. The first common grievance of the assessee in both the

appeals is that ld. CIT(A) has erred in not condoning the delay in filing

the appeals and deciding the appeals on merits.

3. Brief facts of the case are that assessee is an individual. He is

engaged in the business of providing security services. According to

the AO assessee did not file his original return of income as required

under section 139(1) of the Act. On the basis of TDS data available

with the department it came to the notice of AO that TDS of

Rs.1,74,323/- was deducted in respect of payment of Rs.71,88,548

received by the assessee. The ld. AO had issued notice under

section 148 on 19.10.2010 which was duly served upon the

assessee. In response to the notice received under section 148

assessee had filed return on 28th July, 2011 declaring total income of

Rs.3,98,550/- under section 44AF of the Act. The assessee did not

submit any other detail and claimed that as per section 44AF the

deemed profit @ 5% is to be calculated on the gross receipt of

Rs.79,23,772/-. The ld. AO had issued notice under section 142(1) on ITA Nos.615 & 616/Ahd/2014 3 Asst. Year 2008-09

11.1.2011 but assessee did not comply with the notice. Thereafter the

AO issued 11 more notices which remained uncomplied with. Under

the compelling circumstances the ld. AO has passed the assessment

order, according to his best judgment under section 144 of the Act.

The ld. AO has determined the taxable income of the assessee at

Rs.75,87,098/-. This order has been passed on 28.12.2011. The AO

has added the gross receipts in the hands of the assessee.

4. Dissatisfied with the assessment order assessee filed an

appeal before the ld. CIT(A) on 16.8.2012. The office of the CIT(A)

confronted the assessee that his appeal is time barred by 199 days.

The assessee filed an application for condonation of delay and filed

his affidavit in support of his application.

5. The ld. A.O. has initiated penalty proceedings under section

271(1)©. He issued a show cause notice on 28.12.2011 which was

served on the assessee but since he did not comply with the notices

in the assessment proceedings, he did not comply with the notices in

the penal proceedings also. The ld. AO has imposed a penalty of

Rs.24,50,449/- in an ex parte order passed on 12th June, 2012.

Against this order, assessee has filed an appeal on 16th August, 2012 ITA Nos.615 & 616/Ahd/2014 4 Asst. Year 2008-09

i.e. along with the quantum appeal. This appeal was stated to be time

barred by 32 days. The assessee filed an application for condonation

of delay along with his affidavit.

6. The ld. first appellate authority refused to condone the delay in

both the appeals basically for the reason that conduct of the

assessee was very negligent before the AO. He did not bother to

respond to any notice from Income-tax Department. In the opinion of

the ld. CIT(A) the delay caused by the assessee was a deliberate

delay and, therefore, assessee does not deserve any leniency.

7. With the assistance of the ld. representatives we have gone

through the record carefully. The explanation of the assessee for

condonation of delay is that when he received notices from the AO,

he appointed a tax consultant namely -Mr. Subhash Singh Rajput to

attend the proceedings before the AO. The assessment order was

also supplied to him for filing an appeal. The assessee came to know

about the non-filing of the appeal only when demand notice was

served upon him and the AO has put pressure for recovery of the

demand. He also contended that being non conversant with the

Income-tax Law he availed of the services of tax-consultant but ITA Nos.615 & 616/Ahd/2014 5 Asst. Year 2008-09

somehow ld. tax consultant failed to perform the duties properly on

his behalf. He prayed for condonation of delay and adjudication of the

controversy on merit.

8. The ld. DR on the other hand contended that one can

appreciate the contention of an assessee availing services of tax

expert being not conversant with the Income-tax Laws but when the

assessee kept on receiving 12 notices in a row from the AO then at

least he should verify why proceedings are not being attended before

the AO. This conduct of the assessee reflect an arrogance not

negligence. He has no respect for the law and, therefore, equity does

not demand any sympathy for such a negligent person. She

submitted that ld. CIT(A) has rightly refused to condone the delay.

9. We have duly considered the rival contentions and gone

through the record carefully. Sub-section (3) of section 249

empowers the CIT(A) to admit an appeal after the expiry of limitation

if he is satisfied that appellant had sufficient cause for not presenting

the appeal within time limit. The expression ''sufficient cause'' has

fallen for consideration before the Hon'ble Supreme Court as well as

of Hon'ble High Courts. The Hon'ble Courts are unanimous on the ITA Nos.615 & 616/Ahd/2014 6 Asst. Year 2008-09

point that this expression to be construed liberally. The question

before us is whether assessee was actually prohibited by sufficient

reasons for not presenting the appeal or he has made a deliberate

attempt of not properly handling the income-tax proceedings. At this

stage, we would like to refer the assessment proceeding also. It is

pertinent to note that where no books of accounts are available there

sub-section (3) of section 145 contemplates that AO will pass

assessment order in the manner provided in section 144 of the IT Act.

This section reads as under :-

Section 144

144. Best judgment assessment

(1) 1 ] If any person-

(a) fails to make the return required 2 under sub- section (1) of section 139] and has not made a return or a revised return under subsection (4) or sub- section (5) of that section,] or

(b) fails to comply with all the terms of a notice issued under subsection (1) of section 142 3 or fails to comply with a direction issued under sub- section (2A) of that section], or

(c) having made a return, fails to comply with all the terms of a notice issued under sub- section (2) of section 143, the 4 Assessing] Officer, after taking into account all relevant material which the 5 Assessing] Officer has gathered, 6 shall, after giving the assessee an opportunity of being heard, make the assessment] of the total income or loss to the best of his judgment and determine the sum payable by the assessee 7 ] on the basis of such assessment: 8 Provided that such opportunity shall be given by the Assessing Officer by serving a notice calling upon the assessee to show cause, on a date and time to be specified in the notice, why the assessment should not be completed to the best of his judgment: Provided further that it shall not be necessary to give such opportunity in a case where a notice under sub- section (1) of section 142 has been issued prior to the making of an assessment under this section.] ITA Nos.615 & 616/Ahd/2014 7 Asst. Year 2008-09 (2) 9 The provisions of this section as they stood immediately before their amendment by the Direct Tax Laws (Amendment) Act, 1987 (4 of 1988 ), shall apply to and in relation to any assessment for the assessment year commencing on the 1st day of April, 1988 , or any earlier assessment year and references in this section to the other provisions of this Act shall be construed as references to those provisions as for the time being in force and applicable to the relevant assessment year.]

10. A bare perusal of this section would suggest that in order to

estimate income, ld. AO has to exercise his discretion which should

be in consonance with best of his judgment. We are conscious of the

fact that in various authoritative pronouncements, it has been

propounded that in making a best judgment assessment, the AO

must not act dishonestly or vindictively or capriciously. He must make

what he honestly believes to be a fair estimate of the proper figure of

assessment and for this purpose he must be able to take into

consideration, local knowledge, reputation of the assessee about his

business, the previous history of the assessee or the similarly

situated assessee. It is also pertinent to mention that judgment is a

faculty to decide the matter with wisdom, truly and legally. Judgment

does not depend upon the arbitrary, caprice of an adjudicator, but on

settled and invariably principles of justice. Thus, in a best judgment,

even if, there is an element of guess work, it should not be a wild one,

but shall have reasonable nexus to the available material and

circumstances of each assessee. In the light of the above, let us ITA Nos.615 & 616/Ahd/2014 8 Asst. Year 2008-09

visualize the role of the AO also. For the sake of argument, let us

assume the assessee is negligent person, would that negligence

authorize the AO to treat the gross receipts as income of the

assessee ? This action of the AO has been upheld by the CIT(A) who

appreciated the alleged conduct of the assessee of not appearing

before the AO. The quasi judicial authorities are being respected not

on account of their power to legalise the injustice on technical ground

but because, they are capable of removing injustice and is expected

to do so. The contention of the assessee is that he being a lay man

has handed over the papers to tax consultant who did not file appeals

in time. This belief is to be tested on consequential result i.e. by

making the appeal time barred what the assessee will achieve. He

cannot adopt a dilatory tactics by filing the appeal late because that

will ultimately harm him. Therefore, looking to the facts and

circumstances and the punishment in the shape of tax liability of

Rs.48,86,903/- including interest as well as penalty of more than

Rs.24 lacs, we are of the view that the punishment is disproportionate

to the ultimate negligence of the assessee. Therefore, we condone

the delay in filing the appeals before the CIT(A). ITA Nos.615 & 616/Ahd/2014 9 Asst. Year 2008-09

11. On merit CIT(A) has not adjudicated the issues, procedurally,

whenever we find any fault in a proceeding and the impugned order is

set aside then the proceedings are required to be started from that

stage, in other words, the Tribunal ought to have set aside the issues

to the file of CIT(A) for adjudication on merits but this step would only

result multiplication of the litigation. The assessment order and the

penalty order are ex parte orders. The moment, the assessee will file

any application for permission to adduce additional evidences then,

as per sub-rule -3 of Rule 46A of IT Rules, 1962, the ld. first appellate

authority will have to call for a remand report from the AO. The

second proceeding would commence at the level of AO. Therefore,

with a view to avoid multiple proceedings, we deem it appropriate to

set aside the orders of CIT(A) as well as the orders of AO and remit

the issues in quantum appeal to the file of AO for re-adjudication. As

observed earlier we do not appreciate the conduct of assessee also.

He is directed to co-operate with the AO and appear before him. He

shall file all necessary details for the assessment of his income. The

observations made by us will not impair or injure the case of AO and

will not cause any prejudice to the defence/explanation of the

assessee. The ld. AO shall provide due opportunity of hearing. ITA Nos.615 & 616/Ahd/2014 10 Asst. Year 2008-09

12. As far as penalty appeal is concerned, since we have set aside

the assessment order, there are no additions on which it can be

alleged that assessee has evaded the taxes. After passing the

assessment order, it is for the AO to assess whether penalty

proceedings are to be initiated against the assessee or not. This

factor would come out after completion of the assessment

proceedings. Therefore, the penalty appeal is allowed and the penalty

order is quashed. The AO will be at liberty to initiate or not to initiate

penalty after passing of the assessment order afresh. This appeal is

allowed for statistical purposes.

13. In the result, both the appeals are allowed for statistical

purposes.

Order pronounced in the open Court on 25/6/2015

Sd/- Sd/-

(G. D. Agarwal) (Rajpal Yadav) Vice President Judicial Member

Dated 25/6/2015

Mahata/- ITA Nos.615 & 616/Ahd/2014 11 Asst. Year 2008-09

Copy of the order forwarded to: 1. The Appellant 2. The Respondent 3. The CIT concerned 4. The CIT(A) concerned 5. The DR, ITAT, Ahmedabad 6. Guard File BY ORDER

Dy. Registrar, ITAT, Ahmedabad

1. Date of dictation: 18/06/2015

2. Date on which the typed draft is placed before the Dictating Member: 19/06/2015 other Member:

3. Date on which approved draft comes to the Sr. P. S./P.S.:

4. Date on which the fair order is placed before the Dictating Member for pronouncement: __________

5. Date on which the fair order comes back to the Sr. P.S./P.S.:

6. Date on which the file goes to the Bench Clerk:25/6/2015

7. Date on which the file goes to the Head Clerk:

8. The date on which the file goes to the Assistant Registrar for signature on the order:

9. Date of Despatch of the Order: