Protective Addition Made for Taxpayer Firm: ITAT Restores Matter to CIT(A) with One More Opportunity [Read Order]
Observing that the addition was made on a protective basis, the tribunal remitted the matter to CIT(A) with one more final opportunity to the assessee.
Addition - ITAT - Taxscan
Addition - ITAT - Taxscan
The Visakhapatnam Bench of the Income Tax Appellate Tribunal (ITAT) restored the appeal to the Commissioner of Income Tax (Appeals)[CIT(A)] with one more opportunity to the assessee citing that the addition was made on protective basis.
Kanishka F&B (assessee), filed return of income for the Assessment Year (AY) 2018-19, declaring a loss of Rs. 26,91,175. The case was selected for complete scrutiny under CASS for the reason of 'introduction of large capital or share capital in the year of incorporation'.
During the assessment proceedings, the assessee submitted that it was only the first year of the business and the firm commenced on 24/05/2017 with the partners investing Rs. 3,86,95,754 towards capital during the year.
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The Assessing Officer (AO) observed that the assessee failed to furnish the details of the balance sheet of each partner in support of their creditworthiness and the ledger account of the partners in the firm's books.
The AO invoked Section 68 of the Act and made an addition of Rs. 3,86,95,754 under Section 68 read with Section 115BBE of the Income Tax Act. Aggrieved by the AO’s order, the assessee appealed to the CIT(A) dismissed the appeal as there was no compliance from the assessee to the hearing notices issued.
Aggrieved by the CIT(A)’s order, the assessee filed an appeal before the ITAT. The assessee’s counsel submitted that the CIT(A) had passed an ex-parte order without providing a proper opportunity.
The counsel further submitted that the addition was made on a protective basis in the firm’s hands while the additions were made on a substantive basis in the hands of the partners. The counsel prayed for one more opportunity before the CIT(A).
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The Counsel for the Revenue argued that the CIT(A) had no other option but to pass an ex-parte order after providing several opportunities to which the assessee neither appeared nor responded.
The two-member bench, comprising S. Balakrishnan (Accountant Member) and Sandeep Singh Karhail (Judicial Member) observed that the main grievance of the assessee was the addition made on a protective basis.
The tribunal noted that the CIT(A) had posted the case on four occasions and was left with no option but to adjudicate ex-parte as the assessee did not appear or file any submissions.
The Tribunal decided to remit the matter back to the CIT(A) in the interest of justice. The tribunal directed the CIT(A) to consider the appeal as fresh and decide the case on merits by providing one more opportunity to the assessee.
The Tribunal also directed the assessee to cooperate in the proceedings, failing which the CIT(A) would be at liberty to pass an appropriate order. The appeal filed by the assessee was allowed for statistical purposes.
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