Learning from reported chain of judgments - in action of assessee or his representatives and non-cooperation with tax authority must be avoided. Prompt compliance is always good.

Chain of related judgments:

M/s. Jajodia Finance Limited Versus Principal Commissioner of Income Tax (Central) -2, Kolkata. - 2026 (7) TMI 1826 - SC Order

Principal Commissioner of Income Tax Central 2 Kolkata Versus M/s. Jajodia Finance Limited - 2025 (7) TMI 2053 - CALCUTTA HIGH COURT

Jajodia Finance Limited Versus Income Tax Officer, Ward-9 (3), Kolkata - 2024 (3) TMI 102 - ITAT KOLKATA

Earlier article

In action on part of assessee can be costly in assessment and penalty proceedings- learning from recent ruling.

Learning from a recent judgment of the Supreme Court No responses, nonappearance, non cooperation and avoiding authorities can be costly. This is equally important in other type of proceedings also.

And there are many articles for learning from reported judgments. In these articles various aspects have been discussed including inter alia:

1. duties of assessee in course of assessment and appeal proceedings, In the case under study in those articles the assessee did not perform his duties by not appearing, and avoiding authorities causing adverse inference and orders against assessee mainly due to such omissions.
2. Stage of filing of Return of income and assessment stage are foundations to proceedings and full sincerity and honesty must be shown.
3. related facts known to assessee to be brought on record,as far as possible.
4. to show genuineness to the satisfaction of Ld. AO about books of account and other related documents,evidences
5. some provisions of Indian Evidence Act including S.106 relating to facts in knowledge of assessee to be established by him.
6. If Ld. AO has informed about his intended reliance of evidence gathered by him then to ask copy of the same and opportunity to cross examine witness relied on or proposed to be relied on by Ld. AO.
7. In case there was any noncompliance, or lacking in submissions before Ld.AO before assessment was completed, attempt should be made to bring on record the same through rectification petition before Ld. AO and also before ld. CIT(A).
8. In case a 'shown cause notice' (SCN) has been issued by Ld. AO then it should also be properly replied. If relevant documents were submitted earlier then also a reply to SCN is important and relevant documents can be referred and / or resubmitted even at cost of repetition.
9. Various provisions about addition and penalty e.g. S.68 and 271.1.c of Income tax Act and judgment reported e.g. M/s. Aggarwal Financers, Ladwa Versus Commissioner of Income Tax, Karnal and another - 2011 (4) TMI 59 - PUNJAB AND HARYANA HIGH COURT  were discussed.
10. Facts found by Tribunal were not challenged as wrong and perverse, hence order of Tribunal was final so far facts are concerned. Importance of challenging facts and perversity was discussed.
11. It has been emphasized that noncompliance and non-cooperation always go against assessee.

Recent judgment of Supreme Court and related judgments of High Court:

These also reinforces the importance of timely actions on part of assessee for compliance, co-operation, production of evidences, proving facts before the Ld. AO and /or CIT(A) .

The stage of assessment is very important and quick compliances of requisitions and SCN issued by Ld. AO goes a long way in building confidence and avoiding doubts and suspicion. If something is missed before Ld. AO, the same should be supplied during first appeal and copy of the same should also be submitted to Ld. AO with request to submit his comments to ld. CIT(A). Though it is true that Ld. AO will not reply to assessee and he will act only if Ld. CIT(A) invites comments of Ld. AO popularly called remand report. Submissions of new or additional evidence before CIT(A) with copy to ld. AO is likely to build confidence and repair damages caused due to non-production of some important evidence before Ld. AO. Reasons for non-submission before Ld. AO should also be briefed to prove genuineness and to avoid calling it 'after thought' .

Case of Jajodia Finance (SC, HC, Tribunal) supra:

In view of author, in this case assessee failed to satisfactorily discharge his duties and by not appearing and not responding properly faced addition of share trading loss before ld. AO. Assessee did not respond at all to the show cause notice issued by Ld. AO. This caused addition by way of loss in trading of shares in private companies. On appeal the addition was confirmed by CIT(A), because assessee did not participate in proceeding though several opportunities were allowed.

Therefore, there was inaction of assessee at important stages of show cause notice issued by ld. AO and non appearance before CIT(A).

However, in second appeal honourable Tribunal allowed appeal of assessee on technical aspects of addition having been made merely on doubts and suspicion of Ld. AO and just based on report of investigation wing of Department at Delhi and without making independent enquiry. Tribunal also accepted retraction of statement made by a director of assessee company, although retraction was after long time from date of statement.

Though in a way it can be said that when suspicion of Ld. AO and non application of mind was apparent, appeal was allowed for these reasons and Tribunal did not felt need to go into documents and nature of transactions.

In view of author, for the reason that assessee did not respond at all to the show cause notice issued by Ld. AO and did not appear at all before the ld. CIT (A), the honourable Tribunal, as a final fact finding authority ought to have either perused all relevant documents and legality of transactions before passing order either way

or Tribunal could have restored the matter to Ld. CIT(A) to pass afresh order after allowing opportunity of hearing to assessee and Ld. AO both on the issues raised in SCN issued by Ld. AO to assessee.

Revenue preferred appeal before honourable Calcutta High Court and it was allowed in favour of revenue, for the reason of perversity.

On reading of the order of High Court we find that:

1. In compliance with the notices served on assessee the authorised representative of the assessee appeared before ld. AO from time to time and explained the return and submitted the details called for.
2. The ld. AO after perusal of documents submitted and other information in his knowledge (particularly report of investigation wing) issued a detailed show-cause notice (SCN) to assessee, which was served on the assessee setting out all the relevant particulars and the assessee company was informed that the information shows that the assessee company does not have any real business activity and the loss shown from trading in shares is bogus.
3. The assessee was directed to show-cause as to why the share trading loss of Rs. 1,97,94,148/- should not be disallowed as bogus loss.
4. Sufficient time was also granted to the assessee to respond to the show-cause notice.
5. The assessee though received the show-cause notice did not submit any reply .
6. Therefore, the Assessing Officer proceeded and completed the assessment and made addition by disallowing loss claimed.
7. From paragraph 4.1 of the order of CIT(A) it is noted that assessee did not participate in the proceedings and despite several opportunities granted by the appellate authority, the assessee did not appear before the first appellate authority.
8. Therefore, the first appeal filed by assessee was dismissed by Ld. CIT(A).

1. The conduct of the assessee before the Assessing Officer ( particularly after SCN was served) as well as before the appellate authority would clearly show that they were avoiding the proceedings despite knowing the consequences.
2. In such a factual background the appellate authority considered all the grounds raised by the assessee and dismissed the appeal.
3. The assessee filed an appeal before the Tribunal which was allowed.
4. The revenue being aggrieved filed appeal before honourable Calcutta High Court. The High Court allowed appeal of revenue.

The reasoning for allowing the appeal of revenue by High Court is analysed belowby highlighting paragraph 8 on wards of the judgment of honorable High Court:

'8. At the very outset, we need to point out that the order passed by the Tribunal is absolutely perverse and calls for interference. We support such conclusion with the following reasons :

9. The Tribunal has rendered a finding that the assessee has filed evidences before the Assessing Officer as called for during the course of assessment proceedings. This is an absolutely factually incorrect statement since the response of the assessee was to the statutory notices issued under Section 143(2) and 142(1) of the Act. After the assessee responded and furnished details, a show-cause notice was issued proposing to treat the share trading loss as a bogus loss. Admittedly, the assessee could not substantiate with documents that the share trading loss was a genuine loss. The assessee did not appear before the Assessing Officer. Therefore, this aspect of the matter has been lost sight of by the learned Tribunal. Apart from that, the learned Tribunal has stated that the statement given by the director on 22.3.2016 has been retracted by filing an affidavit.

10. Admittedly, the alleged retraction is beyond the period of two years, that too after the assessment was completed by order dated 16.l2.2016. Therefore, the Tribunal ought to have taken note of the legal position and rejected such retraction as an afterthought.

11. Even assuming that the learned Tribunal wanted to examine the retraction then the learned Tribunal should have gone into the facts and found as to whether the retraction was a valid retraction. No such exercise was done by the learned Tribunal rendering the impugned order as totally erroneous. That apart, the learned Tribunal has stated that the assessee has not been given an opportunity of cross-examination.There is nothing on record to indicate that the assessee made such a request for cross-examination.

12. Therefore, we are at a loss to understand as to how the learned Tribunal could have accorded to such a finding which is contrary to facts. Thus, the impugned order being perverse and outcome of non-application of mind, without appreciating the factual background and the non-cooperative attitude of the assessee requires to be set aside.

13. Accordingly, the appeal filed by the revenue is allowed. The impugned order is set aside and the order passed by the Assessing Officer dated 16.12.2016 as affirmed by the CIT(A) dated 24.4.2023 are restored. Consequently, the substantial questions of law are answered in favour of the revenue.'

Un quote- observations of author:

With due respect, author feels that honourable judges of High Court have also acted in a prejudiced manner because of following reasons:

1. The Court has so held at the outset and then given reasoning - this means the mind about prejudice was already made.
2. There is no date of retracement given in order of ITAT and HC .

In order of ITAT as well as in High Court we do not find any part of statement recorded and retracement of the same.

1. As per assessment order itself the suspicion of Ld. AO is apparent and loudly clear. It is also clear that Ld. AO did not made any enquiry and merely relied on investigation report.
2. Any part of investigation report is also not given in order of Tribunal and order of HC.
3. However, the ld. Assessing Officer has not done any inquiry and has merely harped on the statement of Shri Rajesh Kumar Surana recorded on 18.06.2013 ( this is not correct as noted in order of HC it is 22.03.2016.

Observation of author - so far observations and facts recorded by Tribunal it can be said that those facts recorded are correct.

However, as discussed earlier tribunal being final fact finding authority either should have examined all documents and recorded a finding or could have restored the matter to the Ld. CIT(A).

Therefore, to avoid miscarriage of justice, in view of author this was a fit case for the restoration of issues to ld. CIT(A). Tribunal having not done so, it was proper for the High Court to remit the matter to the Ld. CIT (A) for deciding matter afresh after providing reasonable opportunity to the assessee and ld. AO both.

Order of the Supreme Court:

We find that in this case before the Supreme Court three counsels of assessee / petitioner appeared and there was no one on behalf of revenue.

With due respect, author feels that the honourable Supreme Court has passed summarily order and dismissed the SLP of assessee.

This can be observed from the order reproduced below with high lights added:

'ORDER

1. Delay condoned.

2. Having heard the learned counsel appearing for the petitioner and having gone through the materials available on record, we do not find any good ground to interfere with the impugned order passed by the High Court.

3. The Special Leave Petition is, accordingly, dismissed.

4. Pending application(s), if any, shall stand disposed of.'

With due respect, author feels that at least summary of submissions and prayer made by lD. Counsels could be given in judgment and reasons for dismissal could be summarised.

Simply stating that ' we do not find any good ground to interfere with the impugned order passed by the High Court'

Is not a reasoned order.

How, readers of judgment can have any idea about reasons for dismissal? Like wise how the order can be considered if a further appeal or review petition is filed by assessee.

The practice of issuing summary orders like the case in hand and also practice of dismissing appeal with statement like ' we are not inclined to interfere ... is not good and goes against finality of law.

Particularly so when we find that honourable High Court has also not passed a speaking order on all grounds and has not mentioned any of submissions made by counsels during hearing. The High Court also did not discuss judgments relied on by Tribunal in its concluding part of order in paragraph 5 which is reproduced below:

': .....The case of the assessee finds support from the High Court's decisions in the cases of KAILASHBEN MANHARLAL CHOKSHI Versus COMMISSIONER OF INCOME-TAX - 2008 (9) TMI 525 - GUJARAT HIGH COURT, M/s. Shree Ganesh Trading Co. Versus Commissioner of Income Tax, Dhanbad - 2013 (1) TMI 397 - JHARKHAND HIGH COURT  and INCOME-TAX OFFICER Versus VIJAY KUMAR KESAR - 2009 (8) TMI 675 - CHHATTISGARH HIGH COURT. Consequently we set aside the order of ld. CIT(Appeals) and direct the ld. Assessing Officer to delete the addition on account of rejection of loss.'

Observation of author on the case in hand

1. In this case it is seemingly admitted position that the assessee did not respond to the show cause notice may be because he was advised that all relevant documents have already been submitted against earlier requisitions issued by ld. AO therefore, it will be duplication to submit again.
2. It is also seemingly admitted position that assessee did not participate inn first appeal proceeding.
3. There may be good reasons for failure and omissions on part of assessee, but it has not been mentioned or brought to notice of Tribunal onwards. However, assessee being a body corporate dependent on human agencies, has suffered due to omissions, mistakes, and latches on part of human agencies.
4. Trading and investment in shares of private companies is not prohibited although some restrictions are imposed. Dealing within such restrictions is allowed and there cannot be any question about legality of the same.
5. Shares of Private companies are not listed so it has no readily available market price. However, people can negotiate price based on financial statements and future prospects of company.
6. Since shares are not listed, strictly speaking, rule of spot delivery and payment is not applicable. Therefore, parties can negotiate terms and conditions about execution of contract.
7. For assessee it seems to be regular course of business hence nothing was unusual for assessee. Therefore, it seems to be a case of usual business for assessee, hence due care or seriousness was not shown by assessee in reply to SCN. Though it was not proper. At least before the CIT(A) compliance should have been made when a demand was already existing.
8. Assessee is a body corporate, functions through Juman agencies. It is likely that Authorised representative was appointed but he did not perform his duties diligently and management was not aware of non-compliance. However, for this reason at least after assessment was framed, demand was raised, there should have been promptness and all efforts should have been made for rectifying past omissions.
9. Before the Tribunal as an alternative and before the High Court and / or the Supreme Court prayer could have been made to remit the matter to ld. CIT(A) / AO as discussed by author. It is not describable on reading of judgments, whether such a request was made or not?
10. Now assessee can make a review petition before the Supreme Court, for recalling of order and fresh opportunities before the Supreme Court and prayer to remit the matter back to Ld. CIT(A) with directions to decide appeal afresh after providing reasonable opportunity of hearing to assessee and ld AO both.
11. In view of facts hopefully the Supreme Court will be sympathetic and may remit back the matter to any of lower Court / Tribunal or authority as honourable judges find proper after hearing counsels of assessee company.

If this is not done then there will remain gross in justice to the company assessee wholly dependent on human agents engaged for looking after different work of company.