ITAT Chandigarh Orders Fresh CIT(A) Hearing in Section 68–69C Reassessment, Directs Assessee to Plant 300 Trees
1. Background of the Dispute
The Income Tax Appellate Tribunal, Chandigarh Bench, in the case of Spray Engineering Devices Ltd. Vs ITO (ITAT Chandigarh), has remanded an appeal back to the CIT(A) for a fresh decision on merits, despite the assessee’s earlier non-response to appellate notices. At the same time, the Tribunal has imposed an environmental compliance condition requiring the assessee to plant and maintain 300 native trees.
The controversy relates to reassessment proceedings under Section 147 for Assessment Year 2013-14, where the Assessing Officer (AO) treated share-sale receipts as unexplained cash credits under Section 68 and further made a related addition under Section 69C towards alleged commission for accommodation entries. The appeal before the Tribunal arose from the order dated 14.03.2024 passed by the CIT(A), National Faceless Appeal Centre, Delhi upholding the reassessment without detailed discussion on the specific grounds.
The Chandigarh ITAT has held that mere non-compliance with hearing notices does not absolve the first appellate authority from its obligation to adjudicate each ground with reasons based on the material on record, particularly where jurisdictional issues and substantive additions are under challenge.
2. Facts of the Case and Reassessment Proceedings
2.1 Return and Original Scrutiny Assessment
- The assessee, a company engaged in manufacturing and engineering activities, filed its return of income for AY 2013-14 on 30.09.2013 declaring a loss of
Rs. 9,50,80,496. - The assessment was originally completed under
Section 143(3)on 29.02.2016, determining the assessed income at Nil.
2.2 Information From Investigation Wing and Reopening Under Section 147
Subsequently, the AO received information from the Investigation Wing regarding the activities of Shri Pradeep Kumar Jindal, who was stated to be engaged in providing accommodation entries through multiple front or non-descript entities.
On the basis of this information, and after recording reasons, the AO issued a notice under Section 148 on 31.03.2021. In response, the assessee filed a return on 30.04.2021 reiterating the earlier declared loss of Rs. 9,50,80,496.
2.3 Additions Under Section 68 and Section 69C
During the reassessment proceedings under Section 147 read with Section 144 and Section 144B, the AO scrutinised a transaction involving:
- Sale of 14,75,000 equity shares of M/s Spray Engineering Sugars Limited
- Stated sale consideration:
Rs. 3,50,00,000 - Purchaser: Shri Prithi Paul Singh Sethi
Relying upon the Investigation Wing’s material regarding accommodation entries linked to Shri Pradeep Kumar Jindal, the AO concluded that the consideration of Rs. 3,50,00,000 represented unexplained cash credits. The following additions were made:
Rs. 3,50,00,000treated as unexplained cash credit underSection 68Rs. 8,75,000(i.e., 2.5% ofRs. 3,50,00,000) treated as unexplained expenditure underSection 69C, allegedly towards commission for arranging accommodation entries
Accordingly, the reassessment order dated 31.03.2022 determined the total income at Rs. 3,58,75,000.
3. Grounds Raised Before the CIT(A)
Aggrieved by the reassessment, the assessee approached the CIT(A) and raised multiple, distinct grounds, including:
Challenge to jurisdiction under
Section 147andSection 148- The assessee argued that the notice under
Section 148was issued beyond four years from the end of the relevant assessment year. - It was stressed that the original assessment had already been completed under
Section 143(3)and that all primary facts and material particulars were fully and truly disclosed at that stage.
- The assessee argued that the notice under
Dispute on the addition under
Section 68read withSection 115BBE- The assessee contested the characterization of the share-sale proceeds as unexplained cash credits.
Objection to the consequential
Section 69Caddition- The alleged 2.5% commission toward accommodation entries was challenged as not arising from actual expenditure incurred by the assessee.