Wp/10914/2021 Of Shivsu Canadian Clear Waters Ltd v. Income Tax Officer

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED : 29.11.2021 CORAM THE HONOURABLE MR.JUSTICE C.SARAVANAN W.P.No.10914 of 2021&W.M.P.Nos. 11548 & 11546 of 2021(Through Video Conferencing) Shivsu Canadian Clear Waters Ltd.No.6B2 II FloorParivakkam Road, Leelavathy NagarSennerkuppam, PoonamalleeChennai- 600 056.Rep.by its Authorized SignatoryN.Shanmugam ...Petitioner Income Tax Officer,Corporate Ward 6(2),Wanapathy Block No.121, MG Road, Nungambakkam, Chennai - 600 034. ...Respondent Prayer: Petition filed under Article 226 of the Constitution ofIndia to issue a Writ of Certiorarified Mandamus, calling forthe entire records of the Respondent contained in impugnedassessment order dated 31.03.2021 bearing ITBA/COM/F/17/2020-21/1032087645(1) for AY 2014-15 for PAN: and quashingthe same as arbitrary, unjust and unlawful, and to consequentlydirect the respondent to provide the petitioner with anopportunity of hearing before passing an assessment order denovo for AY 2014-15, in terms of the directions of the learnedIncome Tax Appellate Tribunal issued through its order dated23.12.2019. The petitioner has challenged the impugned Assessmentorder dated 31.03.2021 for the Assessment Year 2014-15. Theaforesaid order has been passed pursuant to an order of remanddated 23.12.2019 of the Income Tax Appellate Tribunal. https://hcservices.ecourts.gov.in/hcservices/ 2.The case of the petitioner is that the Tribunal by theaforesaid order had specifically directed the Assessing Officerto compute the assessable credits in terms of the observationsin paragraph 6 of the aforesaid order which reads as under:- "6.We heard the rival submissions and consideredcarefully. It is clear from the above that theassessee is in the business of manufacturing ofwater treatment plants. It has shown in its currentliabilities advances received from its customers atRs.6,46,53,183/- and hence AO required the assesseeto furnish the name and address of the persons fromwhom such advances were received. When it failed,the AO required it to furnish confirmation from thepersons from whom it received such advances. On itsfurther failure, the AO treated them as a boguscredit and assessed them. On the appeal, theassessee contended before the ID CIT(A), that theywere genuine credits and identity can be proved.Therefore, the ID CIT(A) forwarded the assessee'ssubmissions to the AO for a re-examination by givingan opportunity to the assessee to prove thegenuineness of those credits. The AO has observedin the remand report, that the assessee did notdischarge the primary onus of furnishingconfirmation letter pertaining to those credits.The A O's conclusion in the remand report briefly isthat there were 294 parties and the assessee gavegave addresses only in respect of 129 parties, inrespect of whom the AO issued notice u/s.133(6)seeking their confirmation. Out of 129 noticessent, 52 notices returned unserved and response wasreceived only in respect of 26 parties. Out of 26parties, only 15 parties confirmed those credits and11 parties denied the credits as claimed by theappellant, 51 parties did not respond at all. Insuch facts circumstances, the id CIT(A) held that itis clear that the assessee's claim that all thosecredits were genuine is not acceptable. When theremand report was forwarded to the assessee, the ARargued that at least the confirmation of creditsmade by the 15 parties should be deleted.Therefore, the Id CIT(A) directed the AO to deletethe addition of credits in respect of those 15parties, who have confirmed the credit, atRs.1,60,57,680/- and sustained the remainingaddition. Since the impugned sum being credits inthe assessee's books of account, it is settled lawthat the assessee must satisfy three conditionsnamely, (1) identity of the creditor, (2)genuineness of the transaction and (3) credit worthiness of thecreditor. Once this is established its onus evenafter the first appellate authority gave anopportunity. Therefore, the addition sustained isupheld subject to the following further finding. Wefind merit in the assessee's submission that theaddition on such cases cannot be made during thisassessment year to the extent there are openingbalances in those creditors. Therefore, we directthe AO to compute the assessable creditsaccordingly, after giving an effective opportunityto the assessee. In the result the assessee'sappeal is treated as partly allowed to the aboveextent." 3.The learned counsel for the petitioner submits that thoughthe aforesaid order was passed on 23.12.2019, there was noresponse from the respondent calling upon the petitioner tofurnish the details and that a notice of hearing was issued tothe petitioner on 11.03.2021, fixing the date of hearing on15.03.2021. It is submitted that the petitioner had receivedthe aforesaid letter on 16.03.2021 and therefore, the petitionersent a representation dated 17.03.2021 and sought for fifteendays time for responding to the notice. It is furthersubmitted that instead of granting fifteen days as sought for bythe petitioner, the respondent issued a another notice dated23.03.2021 and called upon the petitioner to respond on orbefore 26.03.2021 and thereafter passed the impugned order dated31.03.2021. 4.The learned counsel for the petitioner further submitsthat this is a fit case for quashing the impugned order byremitting the case back to the respondent to pass a freshAssessment order in line with the observations of the tribunalin its order dated 23.12.2019. 5.Defending the impugned order, the learned Junior StandingCounsel for the respondent submits that the petitioner did notfurnish the records though the order was passed by the Tribunalon 23.12.2019. Even otherwise, various notices which were sentto the petitioner through Registered post which were also sentto the petitioner by way of e-mail and therefore its is notcorrect to the petitioner to state that the petitioner did notreceive the notice in time. 6.The learned Junior Standing Counsel for the respondentfurther submits that since the Assessment is of the year 2014-15and the Assessment could have got time barred and since thepetitioner had failed to co-operate with the respondent, therespondent was constrained to pass an order on 31.03.2021 based on the available records. He therefore submits that thepetitioner should be directed to work out the remedy before theAppellate Commissioner and therefore this writ petition isliable to be dismissed by directing the petitioner to approachthe Appellate Commissioner. 7.Heard the learned counsel for the petitioner and thelearned Junior Standing Counsel appearing for the respondent andperused the order passed passed by the Tribunal on 23.12.2019for the Assessment Year 2014-15 and the communication exchangedbetween the parties herein starting from 21.02.2020 and noticedated 11.03.2021. 8.Though the petitioner has not been neither diligent norco-operated with the respondent, the fact indicate that therespondent started the proceedings only on 11.03.2021 aboutnineteen(19) days prior to the expiry of limitation forcompleting the Assessment. It is evident that the respondentwas constrained to proceed with the Assessment in order toensure that the Assessment does not time barred. However, inthe process there is a violation of principles of naturaljustice as time given to the petitioner by the respondent wasnot sufficient to reply and file documents. 8.Though the petitioner has not been neither diligent norco-operated with the respondent, the fact indicate that therespondent started the proceedings only on 11.03.2021 aboutnineteen(19) days prior to the expiry of limitation forcompleting the Assessment. It is evident that the respondentwas constrained to proceed with the Assessment in order toensure that the Assessment does not time barred. However, inthe process there is a violation of principles of naturaljustice as time given to the petitioner by the respondent wasnot sufficient to reply and file documents. 9.Considering the same, the impugned order is quashed andthe case is remitted back to the respondent to pass a freshspeaking order in accordance with law and on merits within aperiod of sixty five days from the date of receipt of a copy ofthis order. Needless to state, that the petitioner is directedto file a reply/representation if any, within a period of thirtydays from the date of receipt of a copy of this order.Thereafter, the respondent shall pass an order within a periodprescribed above, if required, the petitioner is requested forpersonal hearing or through video conferencing. 10.Accordingly, this writ petition stands disposed of withthe above observations. No costs. Consequently connectedmiscellaneous petitions are closed. Sd/- Assistant Registrar(CS III) //True Copy// Sub Assistant Registrar jas To The Income Tax Officer,Corporate Ward 6 (2),Wanapathy Block No.121,MG Road, NungambakkamChennai - 600 034. +1cc to Mr.Suhrith Parthasarathy, Advocate, S.R.No.62255 +1cc to Mr.A.P.Srinivas, Senior Standing Counsel(IT), S.R.No.62403 GPL(CO)RGA(05/01/2022) W.P.No.10914 of 2021 and W.M.P.Nos.11548 & 11546 of 2021