PER RAVISH SOOD, JM:

1. The present appeal filed by the assessee company is directed against the order passed by the Commissioner of Income Tax (Appeals)-1, Raipur dated 07.12.2018, which in turn arises from the order passed by the A.O. u/s.143(3) of the Income-tax Act, 1961 (for short ‘Act’), dated 15.12.2017 for A.Y.2015-16. The assessee has assailed the impugned order on the following grounds of appeal before us:

“GROUND NO. I

That the ex-parte Appellate Order passed by the Learned Commissioner of Income Tax (Appeals) - I, Raipur ("the Ld.CIT(A)") is highly unjustified, bad in law, without providing reasonable opportunity of being heard, against the principles of natural justice and not in accordance with the provisions of law. Further, the Ld.CIT(A) has gross erred in dismissing the appeal ex-parte without appreciating that the notice fixing the date of hearing was received by appellant after the specified date and that the request for adjournment has been diligently filed which had been neither impliedly rejected by him before passing the ex-parte appellate order nor it was mentioned that the notice conferred final opportunity. It is prayed that the Appellate Order passed under section 250 of the Income Tax Act, 1961 ("the Act") may please be cancelled/set-aside on this ground alone and the Ld.CIT(A) may please be directed to decide the appeal on merits.

GROUND NO.II

On the facts and circumstances of the case as well as in law, the Ld.CIT(A) has grossly erred in confirming the addition of Rs.7,83,43,683 made by the Learned Assessing Officer ("the Ld.AO") being alleged excess stock found during survey as a result of physical verification treating the same as an unexplained investment as per the provisions of section 69 of the Act which is highly unjustified, unwarranted, unsustainable, not proper on facts, dehors any incriminating seized material and not in accordance with the provisions of law. The Ld.CIT(A) has failed to appreciate that the physical stock verification was done adopting the crude volumetric method by tape measurement without conducting actual weighment thereof hence, the method adopted was not proper, inaccurate and incongruent. Hence, it is prayed that the addition of Rs.7,83,43,683 confirmed by the Ld.CIT(A) may please be deleted.

GROUND NO.III

3. On the facts and circumstances of the case as well as in law, the Ld.CIT(A) has grossly erred in confirming the addition of Rs.13,51,466 made by the Ld.AO being alleged stock shortage found during survey as a result of physical verification treating the same as an unaccounted sale not recorded in the books of accounts which is highly unjustified, unwarranted, unsustainable, not proper on facts, dehors any incriminating seized material and not in accordance with the provisions of law. He has failed to appreciate that the physical stock verification was done adopting the crude volumetric method by tape measurement without conducting actual weighment thereof hence, the method adopted was not proper, inaccurate and incongruent. Hence, it is prayed that the addition of Rs.13,51,466 confirmed by the Ld.CIT(A) may please be deleted.

GROUND NO.IV

4. On the facts and in the circumstances of the case as well as in law, the Ld.CIT(A) has grossly erred in not annulling the assessment order passed by the Ld.AO under section 143(3) of the Act and he ought to have held the impugned assessment order as illegal, bad in law and suffering from legal infirmities.

GROUND NO.V

5. That the Appellant craves leave to add, amend, alter or delete all or any of the grounds of cross objections at the time of hearing of the appeal.

Also, the assessee company has raised an additional ground of appeal which reads as under:

“(I) That the Assessment Order framed under section 143(3) of the Act Dated 15.12.2017 by the Ld. AO on the strength of mandatory scrutiny notice u/s.143(2) Dated 15.03.2016 and further, affirmed by the Ld. CIT(Appeals) Dated 07.12.2018 is void ab initio, invalid, illegal and bad in law in as much as the assessment case was primarily selected for 'Limited Scrutiny' under CASS circumscribed to examination & verification of seven issues and the issue relating to purported excess stock added u/s.69 of the Act and the issue relating to purported did not subject matter of the limited scrutiny hence, the Order u/s.143(3) passed in absence of mandatory previous administrative approval from the Ld. Pr.CIT as directed by the Board's Instruction in respect of Limited Scrutiny 'CASS' assessment deserves to be quashed and declared a nullity since, the Order has been passed in violation of Board's binding instructions, accordingly, the Assessment Order is bad in law & legally unsustainable hence, it is earnestly prayed that the Assessment Order passed u/s.143(3) of the Act may please be quashed and cancelled in limine.

(II) That the Assessment Order framed under section 143(3) of the Act Dated 15th December, 2017 by the Ld. AO and further, affirmed by the Ld. CIT(Appeals) Dated 7th December, 2018 is void ab initio, invalid, illegal, barred by limitation and bad in law in as much as the reference to the Ld. Transfer Pricing Officer was not in accordance with the Board's binding Instruction No.3/2016 Dtd.10.03.2016 accordingly, the time limit to pass the Order expired on 31.12.2016 hence, the extension of time limit to 31.12.2017 taking recourse to section 153 of the Act was invalid, bad in law and hence, the Assessment Order is barred by limitation & legally unsustainable hence, it is earnestly prayed that the Assessment Order passed u/s. 143(3) of the Act may please be quashed and cancelled in limine.”

2. Search and seizure proceedings u/s.132 of the Act were conducted on 11.12.2014 at the residential premises/business premises of the assessee company which is engaged in the business of manufacturing of Ferro Alloys and Generation and sale of power. The assessee company in pursuance to the notice u/s. 143(2) of the Act filed its return of income for the year under consideration, i.e, A.Y.2015-16 declaring a loss of Rs. (-)13,54,24,019/-.

3. Assessment was, thereafter, framed by the A.O vide his order passed u/s. 143(3) of the Act dated 15.12.2017, wherein, after making addition u/s. 69 of the Act towards excess stock of steam coal, ferro slag, silico manganese, dolomite, mill scale of Rs.7,83,43,683/- found at the factory premises/Visakhapatnam port a/w. an addition towards unaccounted sales of quartz and indigenous coke of Rs.13,51,466/-, the loss of the assessee company was scaled down to Rs. (-) 5,57,28,870/-.

4. Aggrieved, the assessee carried the matter in appeal before the CIT(Appeals). As is discernible from the order of first appellate authority, as the assessee company had failed to participate in the course of proceedings; therefore, its appeal was disposed off by the CIT(Appeals) on the basis of material available on record by observing, as under:

“2.2 In response to notices of hearing none attended nor any written submission was made.

I have gone through the submission of the appellant and also perused the assessment order. As per the above facts, the stock difference of Rs. 7,96,95,149/- was found at Vishakhapatnam factory as has been listed on page 9 of the assessment order. As seen at para 2.1 above the appellant took objection regarding difficulty in taking the stock of huge volume. The Ld. Ad has duly replied these objections in the assessment order. These objections have been again repeated in the grounds of appeal. Whenever any doubt was raised on behalf of the assessee during the valuation process, revaluation was carried out by the survey team. Certain objections were raised by the assessee during the assessment which should have been raised during valuation process, if the appellant was serious in arising these objections and assessee had delayed missed the opportunity for raising these at assessment stage. Whatever objection were raised during valuation process those have been taken care of.

Thus, the appellant has no plausible explanation to the difference in the stock. Therefore, the addition made by the A.O is hereby sustained.

3.0. Appeal is dismissed.”

5. The assessee company being aggrieved with the order of the CIT(Appeals) has carried the matter in appeal before us.

6. Shri Nikhilesh Begani, Ld. Authorized Representative (for short ‘AR’) for the assessee company had assailed the order passed by the CIT(Appeals) on the basis of his multi-facet contentions, viz. (i) that the CIT(Appeals) vide an ex-parte order had grossly erred in dismissing the appeal of the assessee on the basis of perverse observations; (ii) that as the A.O vide notice u/s. 143(2) dated 25.04.2016 had selected the case of the assessee company for “limited scrutiny”; therefore, the addition of the unaccounted investment/unaccounted sales made by the A.O not being an issue, for which the case of the assessee was so selected for scrutiny assessment, the additions made by him on the said count could not be sustained and were liable to be struck down for want of valid assumption of jurisdiction on his part; (iii) As Section 92BA(1) of the Act had been omitted from the statute vide the Finance Act, 2017 w.e.f. 01.04.2017, therefore, pursuant to the said omission, in absence of any saving clause the said statutory provision was to be deemed to have never existed, and, thus, as a result thereof, the extension of time limit by the A.O for framing the assessment as per Section 153B on the basis of the said impugned reference was rendered as invalid and illegal, and, thus, as a consequence thereto, the assessment order passed u/s.143(3) dated 15.12.2017 was barred by limitation, null and void, illegal and unsustainable; and (iv) that the A.O had grossly erred in making the impugned additions qua the unaccounted stock/unaccounted sales as the same were based on incorrect valuation carried out in the course of survey proceedings.

7. Elaborating on his aforesaid contentions, the Ld. AR at the threshold of hearing submitted that the CIT(Appeals) had grossly erred in law and facts of the case in dismissing the appeal of the assessee by way of an ex-parte order. It was submitted by the Ld. AR that though the CIT(Appeals) had in his order observed that the assessee company had failed to comply with the notice dated 19.11.2018 wherein it was intimated about the fixation of hearing of the appeal for 03.12.2018 but the same was based factually incorrect. Carrying his contention further, the Ld. AR submitted that as the assessee company which was based in Mumbai was in receipt of notice intimating fixation of hearing of the appeal for 03.12.2018 only as on 04.12.2018, therefore, for the said reason, there was no occasion for it to participate in the proceedings before the first appellate authority. The Ld. AR in order to fortify his aforesaid contention had drawn our attention to the tracking records of the postal department, Page 2 of APB which evidenced that the notice issued by the office of the CIT(Appeals), Raipur was received by the assessee company only on 04.12.2018. Apart from that, the Ld. AR submitted that though the aforesaid fact was brought by the assessee company to the notice of the CIT(Appeals) vide its letter dated 06.12.2018 (filed on the same date), Page 1 of APB, wherein he was requested for allowing some further time but the latter had most arbitrarily proceeded with the matter and losing sight of the aforesaid material fact had disposed off the appeal on the very next date i.e. on 07.12.2018. The Ld. AR submitted that based on the aforesaid facts the assessee company for no fault on its part had remained divested of an opportunity for prosecuting its case before the CIT(Appeals).

8. Apropos the notice dated 25.09.2018 that was issued by the office of CIT(Appeals) intimating the assessee company about fixation of the hearing of the appeal for 15.10.2018, the Ld. AR submitted that the observation of the CIT(Appeals) on the said issue were absolutely incorrect and perverse. Elaborating his contention, the Ld. AR submitted that the assessee company had on 15.10.2018 filed with the CIT(Appeals) a letter requesting for adjournment, Page 5 of APB. Backed by the aforesaid fact, the Ld. AR submitted that as the assessee company had duly complied with the aforesaid notice dated 25.09.2018 which was issued by the office of the CIT(Appeals), therefore, it was absolutely incorrect on his part in observing that the assessee had failed to comply with the same. Summing up his contentions, the Ld. AR submitted that now when the assessee company had complied with the notice issued by the office of the CIT(A), dated 25.09.2018 and had requested him for an adjournment; and was put to notice about the fixation of the appeal on the last occasion on 03.12.2018, i.e., only on 04.12.2018, therefore, there was no justification for the CIT(Appeals) to have proceeded with on the basis of perverse observations and dispose of the appeal by way of an ex-parte order for the reason that the assessee had failed to participate in the course of proceedings before him. It was, thus, submitted by the Ld. AR that the matter, in all fairness, required to be restored to the file of the CIT(Appeals) with a direction to re-adjudicate the same after affording a reasonable opportunity of being heard to the assessee.

9. Per contra, the Ld. Departmental Representative (for short ‘DR’) relied on the orders of the lower authorities. On a specific query about the claim of the Ld. AR that the appeal had been disposed off by the CIT(Appeals) without considering the application for adjournment that was filed by the assessee company, and the fact that on the last occasion, i.e., 03.12.2018 when the appeal was fixed for hearing, the notice intimating the same was in itself received by the assessee company only on the next day i.e. on 04.12.2018, the Ld. DR failed to rebut the same.

10. We have heard the ld. Authorized representatives of both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by the Ld. AR to drive home his contentions.

11. Admittedly, it is a matter of fact borne from record that on the first occasion when the appeal was fixed for hearing before the CIT(Appeals), i.e., on 15.10.2018, the assessee company had specifically vide its letter of even date that was filed with the CIT(Appeals) on the same date requested him for an adjournment, Page 5 of APB. Considering the aforesaid facts, we find that the CIT(Appeals) had wrongly observed that the assessee company had failed to comply with and participate in the course of proceedings which were fixed before him on 15.10.2018. Also, we find substance in the claim of the Ld. AR that now when the notice dated 19.11.2018 issued by the office of the CIT(Appeals) fixing the hearing of the appeal on 03.12.2018 was in itself received by the assessee company on 04.12.2018, therefore, there was no occasion for the assessee appellant to participate in the proceedings before the said first appellate authority. We find it incomprehensible that though the assessee company had vide its letter dated 06.12.2018 duly brought the aforesaid fact of having been intimated about the fixation of the appeal for 03.12.2018 only as on 04.12.2018, but the CIT(Appeals) had brushed aside the said material fact and instead of having afforded an opportunity of being heard to the assessee company had proceeded with the matter and disposed off the appeal on the very next date, i.e, on 07.12.2018.

12. Considering the aforesaid facts, we are of a strong conviction that the very manner, in which, the CIT(Appeals) had disposed off the appeal of the assessee is in clear violation of the basic principles of natural justice. It is a case where the assessee company had suffered dismissal of the appeal vide an ex-parte order without having been afforded sufficient opportunity to participate and prosecute the matter before the first appellate authority. We, thus, in terms of our aforesaid observations, restore the matter to the file of the CIT(Appeals) with a direction to re-adjudicate the same after affording a reasonable opportunity of being heard to the assessee company.

13. As we have restored the matter to the file of the CIT(Appeals), therefore, we refrain from dealing with the multi-facet contentions advanced by the Ld. AR both as regards the validity of the jurisdiction assumed by the A.O for framing assessment u/s. 143(3) dated 25.12.2017 as well as those qua the sustainability of the additions made by the A.O in the backdrop of the merits of the case, which, the assessee company shall remain at a liberty to raise before the CIT(Appeals).

14. In the result, appeal of the assessee is allowed for statistical purposes in terms of our aforesaid observations.

15. Order pronounced in open court on 11th day of January, 2024.