ANNAPURNA GUPTA, A.M. :-The appeal filed by the assessee is directed against the order of learned Commissioner of Income Tax (Appeals), Shimla dated 14.3.2013 relating to assessment year 2009-10.
2. The assessee has raised several grounds in the present appeal, both legal and on merits challenging the jurisdiction of the Assessing Officer to assess as also challenging addition made on merit.
3. We shall first be dealing with legal ground raised by the assessee in ground No.3, which reads as under :
"3. That on the facts and circumstances of the case the Learned CIT (A) Shimla has erred in law and facts in upholding the order of the learned AO on jurisdiction to assess the appellant as the appellant firm was regularly being assessed at New Delhi till last year."
4. Brief facts relating to the issue are that the assessee e-filed its return for the impugned assessment year declaring loss of Rs.8,43,807/- on 30.9.2009. Thereafter the case of the assessee was selected for scrutiny through CASS by the ITO, Ward-1, Solan and notice under section 143(2) of the Income Tax Act, 1961 (in short 'the Act') was issued and served on the assessee on 14.9.2010. In response to the same, the assessee filed a letter dated 23.9.2010 stating that it was assessed with Range 24, C.R. Building, New Delhi. Thereafter another notice was issued to the assessee under section 142(1) asking to file hard copy of the e-filed return of the year, complete certified copy of Audit Report in Form Nos.3CD, 10CCB, Balance Sheet manufacturing and trading-cum- profit and loss account alongwith its annexures and certified copy of partnership deed. The assessee in response to the same again informed the Assessing Officer that the assessee is assessed in New Delhi. Another notice was issued under section 142(1) dated 19.8.2011 to which the assessee responded in identical manner. Another notice under sections 142(1) and 143(2) of the Act was issued to which the assessee did not respond.Ultimately a show cause notice was served upon the partner of the assessee on 13.12.2011 which is reproduced at page 2 of the assessment order, which again went un-responded and unattended. Finally, assessment under section 144 of the Act was framed by the Assessing Officer by making addition on account of net profit estimated @ 5% on the total turnover of the assessee of Rs.8,99,54,512/- making an addition of Rs.44,97,725/- and making an addition on account of capital introduced in the accounts of the partners, the source of which remained unexplained amounting to Rs.16,73,640/-. Thus, the total income of the assessee was assessed at Rs.61,71,365/-.
5. The matter was carried in appeal before the Ld. CIT (Appeals) where the assessee raised an additional ground challenging the jurisdiction of the Assessing Officer to assess the assessee and submitted during appellate proceedings that being regularly assessed in Delhi, the ITO, Solan had no jurisdiction to frame assessment on the assessee. The Ld. CIT (Appeals) rejected the assessee's contentions and held that the territorial jurisdiction of the assessee lay with the ITO, Solan only since both as per the partnership deed, which was registered in Solan and mentioned the firm's address at Solan,as well as the partner's address of Solan and also the PAN which lay with the ITO, Solan, the jurisdiction lay with the ITO, Solan. The Ld. CIT (Appeals) also found that no other address was given by the assessee. The relevant findings of the Ld. CIT (Appeals) are as under :
"4. The rival submissions have been carefully considered w.r.t.
the facts of the case, the case laws relied upon and the relevant assessment records. It is noted from the perusal of the Partnership deed submitted by the appellant that the same was got registered with the Sub-Registrar, Solan. In the Partnership Deed the address of the firm as well as that of the partners, namely Sh. Vivek Bhalla, Ms. Anjali Bhalla, Sh. Hardev Raj Bhalla and Ms. Neelam Bhalla has been given as Village Ranguwal, Tehsil Nalagarh, Distt.- Solan. Nowhere does the said Partnership Deed mention any other place of business of the Firm or of the partners. Thus the Partnership Deed makes it amply clear that the Firm was having its principal place of business at Nalagarh. It is further noted that the PAN of the appellant is also with the ITO, Baddi. Thus both in terms of PAN as well as its principal place of business, the territorial jurisdiction over the firm vested with the ITO, Baddi. Merely unilaterally putting some address of Delhi in its income tax return does not validly result in the change of the assessee's jurisdiction. It is pertinent to note that under the existing policy of the Income Tax Deptt., only very few returns are selected for scrutiny assessment.
And even the said selection for scrutiny takes place through CASS. Thus the selection for scrutiny is PAN based and is not based en the address(es) mentioned by the assessee in its income tax return. Hence it is obvious that the case of the appellant could never have been picked up for scrutiny assessment by any officer at Delhi as its PAN belonged to the ITO, Baddi jurisdiction. Accordingly there is found no strength in the repeated arguments of the appellant that it was regularly being assessed at New Delhi. In fact, it is prima-facie clear that the appellant had adopted a very clever strategy to avoid the scrutiny assessment in its case. While it challenged the jurisdiction of the ITO, Baddi on the ground that it was filing its return of income in Delhi, it ensured immunity from selection for scrutiny assessment by retaining its PAN belonging to ITO, Baddi jurisdiction. Thus it is clear that the appellant deliberately raised questions about the jurisdiction of the ITO, Baddi/ITO, Solan (who was authorized to assess the cases of Baddi) and avoided joining the assessment proceedings despite a number of notices issued by the A.O. which were duly served upon the appellant. The details: of all such notices are mentioned at length in the assessment order. There is thus found no strength in Ground No. 2 raised by the appellant that it was not afforded any opportunity of being heard. As is evident from the assessment order, the appellant was provided opportunities vide notices dated 14.09.2010, 19.08.2011 and 13.12.2011. So much so that even a detailed show cause notice was issued and served on the assesses or 13.12.2011 for the purposes of section 144 of the Act through which it was made absolutely clear to the appellant that the assessment would be completed ex-parte u/s 144 of the Act in case of non-compliance by the appellant. Through the said notice, the A.O. also provided the details of the proposed assessment to the assesses. He also duly dismissed the contention of the assessee regarding the jurisdiction raised by it in response to the earlier two notices of the A. O. Through the said letter dated 13.12.2011, the A.O. made it dear to the appellant "It is also brought to your notice that selection for scrutiny is PAN based and your Pan is lying with the Office of the Income-Tax Officer, Baddi (H.P.) therefore, the case can not be selected at two places. Further this fact has been confirmed by the Asst. Commissioner of Income-Tax, Circle, 24. New Delhi when contacted and he informed that case for the assessment year 2009-10 is not under scrutiny with that office. Simply mentioning the address of Delhi in the e-filed return does not lead to conclusion that the jurisdiction over your case vests with Circle, 24, New Delhi. Since you have failed to furnish the requisite information as already called for vide above mentioned Notices, I am compelled to complete the best judgment assessment as provided under section 144of the IT Act, 1961 with the following observations.
4.1 In view of the facts discussed above, it cannot be said that the A.O. has completed the assessment ex-parte without providing an opportunity of hearing to the assesses. In fact, it is the assessee who squandered all the opportunities granted by the A.O. by raising a bogey of jurisdiction and by completely ignoring the A.O.'s final show cause notice. It is further pertinent to note that the appellant moved an application during the course of appellate proceedings for admission of additional evidence under Rule 46A of the I.T. Rules, 1962. The said application of the appellant alongwith the documents furnished was referred to the A.O. for examination and report. Accordingly the A.O. provided a fresh opportunity to the appellant vide his office letter dated 04.10.2012 duly served on the assessee on 08.10.2012, and again vide letter dated 11.10.2012 duly served on the assessee on 13.10.2012. But, surprisingly enough, no compliance was made by the assessee to any of the given notices of the A.O. This .again establishes beyond doubt that the appellant is just not interested in pursuing the income tax proceedings and is trying to seek relief on flimsy grounds without seriously discharging the onus that lies at its door to prove the authenticity and genuineness of its accounts and activities. Hence ground No. 2 taken by the appellant is rejected. The additional ground of appeal taken by the appellant also stands rejected, as the assessing officer had the legally valid jurisdiction to assess the appellant's case. No assessment of the appellant's case was ever made at Delhi. The appellant has only been trying to hoodwink the Income Tax Authorities by furnishing some address of Delhi in its income tax returns and by filing its income tax returns in Delhi just in order to avoid any scrutiny of its activities and income. On the given facts, the A.O. was fully justified in exercising his jurisdiction over the appellant's case and in proceeding with the assessment proceedings after due notices to the appellant."
6. Before us, the Ld. counsel for the assessee reiterated the submissions made before the CIT(A) and stated that the jurisdiction assumed by the ITO, Solan was wrong since the assessee had all along been assessed in Delhi. The Ld. counsel for the assessee drew our attention to following documents forming the part of the Paper Book as evidence of the same.
i) ITR-V filed for assessment year 2009-10 with Delhi address.
ii) Form Nos.3CB and 10CD filed for assessment year 2009-10 at Delhi address.
iii) ITR-V filed for assessment year 2008-09 with Delhi address.
iv) ITR-V filed for assessment year 2007-08 with Delhi address
v) Notice of demand and assessment order for assessment year 2003-04 issued at Delhi address
vi) CIT (Appeals)-X, New Delhi order dated 16.2.2007 for assessment year 2003-
vii CIT (Appeals)-X,New Delhi rectification order dated 13.7.2007 for assessment year 2003-04
viii) I.T.A.T., Delhi Bench-B for assessment year 2003-04
ix) Delhi High Court order for assessment year 2003-04.
Ld Counsel for the assessee also stated that since the issue related to transfer of case from one AO to another of different jurisdiction the procedure prescribed u/s 127 of the Act,should have been followed and accordingly an order for transfer of case should have been passed by the concerned authority, before the AO at Solan assumed jurisdiction,failing which the order passed by him was invalid.Ld Counsel relied upon the decision of the Delhi High Court in the case of Sunworld Infrastructure Pvt. Ltd vs ITO,24(3),New Delhi in W.P(C) 1741/2015 & CM No.3112/2015 dt.05-03-2015. Ld Counsel for the assessee also stated that the assessee had objected to the jurisdiction of the ITO,Solan within the time prescribed u/s 124(3) and therefore the ITO,Solan should have referred the matter to the higher authorities as prescribed u/s 124(4) instead of suo moto deciding the issue by rejecting the assessees contentions.For this reason also, Ld.Counsel stated, that the jurisdiction assumed by the ITO,Solan was bad and the order passed by him should be set aside.
7. The Ld. DR, on the other hand, relied upon the order of the CIT (Appeals).
8. We have heard the learned representatives of both the parties, perused the findings of the authorities below and considered the material available on record. We find no infirmity in the order of the Ld. CIT (Appeals) in rejecting the assessee's contention and holding that the jurisdiction to frame assessment of the assessee lay with the ITO, Solan only and not the ITO Delhi and thus the assessment framed by the ITO,Solan was in order. The issue before us pertaining to jurisdiction of the Assessing Officer and the same being spelt out in section 124 of the Act, it is pertinent to reproduce the same for a better understanding of the issue in hand. Sub-section (1) to section 124 of the Act states as follows :
"124(1) Where by virtue of any direction or order issued under sub- section (1) or sub- section (2) of section 120, the Assessing Officer has been vested with jurisdiction over any area, within the limits of such area, he shall have jurisdiction-
(a) in respect of any person carrying on a business or profession, if the place at which he carries on his business or profession is situate within the area, or where his business or profession is carried on in more places than one, if the principal place of his business or profession is situate within the area, and
(b) in respect of any other person residing within the area."
9. A bare perusal of the above would reveal that in respect of a person carrying on business or profession the jurisdiction lies with the Assessing Officer of the place where the business or profession is carried on or if the business or profession is carried on in more than one place, then it lies with the Assessing Officer of the place where the principal place of business or profession is situated. In the present case, the facts before us demonstrate that the assessee was carrying on business or profession at one place only, which undisputedly is in Solan. The Ld. CIT (Appeals) has given a finding of fact that the partnership deed was got registered with Sub Registrar, Solan. In the partnership deed, the address of the firm as well as that of the partners, namely Shri Vivek Bhalla, Smt.Anjali Bhalla, Shri Har Dev Raj Bhalla and Mrs.Neelam Bhallla has been given as village Ranguwal, Tehsil Nalagarh, District Solan. No other place of business of the firm or the partners is mentioned in the partnership deed. A perusal of the partnership deed filed before us confirms the above fact, wherein at Clause 2 it is stated that the unit shall be set up at Nalagarh or any other place which the parties may from time to time determine and the partners have put their signatures giving address at village Ranguwal,Tehsil Nalagarh,Solan.
Even PAN of the assessee lies with ITO, Baddi .Further even the assessee has not disputed the above facts. Thus, by virtue of sub section (1) to section 124 of the Act,the territorial jurisdiction undisputedly lay with the ITO,Solan and the Ld. CIT (Appeals) has rightly held so. The Ld. counsel for the assessee has not demonstrated before us as to how the jurisdiction, in the backdrop of the above facts, did not lie with the ITO, Solan, despite repeated opportunities given. The entire thrust of the arguments of the Ld. counsel for the assessee was that it was consistently filing returns at Delhi and was being assessed there. This argument has no legs to stand on. The assessee has not stated as to why it was filing its returns at Delhi. It is not the assessee's case, nor has it been demonstrated before us that it had its head office or any place of business in Delhi. Specific query was raised by the Bench in this regard but nothing was forthcoming from the Ld. counsel for the assessee as to what was the basis of filing its return in Delhi. Merely because the assessee gives address of Delhi and files return there, the territorial jurisdiction is not conferred on the Assessing Officer located in Delhi. In as much as the place of carrying on business was located at Solan,by virtue of conferment of jurisdiction over the area,the ITO,Solan had the requisite jurisdiction to complete the assessment of the assessee firm. We, therefore, have no hesitation in upholding the order of the Ld. CIT (Appeals) on this issue. The contention of the Ld. counsel for the assessee that it had objected to the jurisdiction of the ITO, Solan well within time prescribed under section 124(3) of the Act and in view of the same the issue of jurisdiction ought to have been referred to the higher authorities as prescribed under section 124(4) of the Act, failing which the order passed by the ITO, Solan becomes invalid, we find has no merit. In the first place we find that the letters filed by the assessee only informed the Assessing Officer that the assessee files its return in Delhi.The letters do not say that the assessee has objection to assessment proceedings being conducted by ITO,Solan.Time and again ,repeatedly the assessee is only informing the AO that its return is filed in Delhi.The assessees communication to the AO is as under;
" We bring to your kind notice that we are already being assessed under the Income Tax Act,1961 with the Dy. Commisioner of Income Tax, Range 24, New Delhi since inception"
The letters do not mention as to how the ITO, Delhi has jurisdiction over the assessee and not the ITO, Solan. The letters are, therefore, mere information being imparted to the Assessing Officer and cannot be termed as objection. The Assessing Officer, we find had also clarified to the assessee as to how the jurisdiction lies with him which argument was not countered or controverted by the assessee before the Assessing Officer. Clearly, therefore, there was no valid objection filed by the assessee before the Assessing Officer and in the absence of the same, the assessee cannot now challenge the jurisdiction in appellate proceedings,in view of the clear provisions of section 124 (3) of the Act, which prescribed objection to be filed within the stipulated time of 30 days of receipt of notice. Even otherwise, it is clear that the territorial jurisdiction lies with the ITO, Solan only and no question, therefore, arises whether he had jurisdiction to assess the assessee and, therefore, also the provisions of section 124(2) and (3) or sub-section (4),which prescribe the procedure for dealing with "question" relating to jurisdiction of AO's, do not become applicable at all since they are applicable only when a "question" relating to jurisdiction arises.
Further we find no merit in the argument of the Ld.Counsel for the assessee that the issue related to transfer of jurisdiction and hence required order to be passed by the requisite authority as per the provisions of section 127 of the Act. As stated above, in the present case the jurisdiction has been established categorically as lying with the ITO,Solan and the issue is definitely not of transfer of case from Delhi to Solan,since that could be the case only if the ITO at Delhi had valid jurisdiction which for some reason was being transferred to ITO,Solan.That being not the case, the provisions of section 127 we find do not apply in the present case and the argument of the Ld.Counsel as also the reliance placed by it on the decision of the Delhi High Court on the issue of transfer of jurisdiction,needs to be rejected.
We may add that the Hon'ble Allahabad High Court in the case of Hindustan Transport Co. vs. IAC (1991) 189 ITR 326 (All) dealt with the various provisions of the Act dealing with the jurisdiction of AO as prescribed u/s 124- 127 ,and stated that these sections have been enacted as a measure of administrative convenience and the concept of jurisdiction cannot be imported in them so as to invalidate the resultant action on account of defect in the exercise of fuction .The Hon'ble High Court held as follows:
"the material questions requiring consideration, are- (i) What is the nature of the power of transfer conferred by the Act ? and
(ii) How the Act itself views a defect of the nature involved in the present case ?
8. To arrive at an answer to these questions, a few provisions of the Act prescribing the IT authorities and their jurisdiction will require consideration.
9. Chapter XIII of the Act contains the relevant information. Its main heading is "IT authorities". The Chapter is divided into four parts "A", "B", "C" and "D". These parts have the heading"Appointment and Control", "Jurisdiction", "Powers" and "Disclosure of Information". Part "A" contains ss. 116 to 119, Part "B" contains ss. 120 to 130A, Part "C" contains ss. 131 to 136 and Part "D" contains s. 138, s. 137 having been omitted w.e.f. April 1, 1964.
10. Sec. 116 mentions the IT authorities. The authorities mentioned are (i) CBDT,
(ii) Directors of Inspection, (iii) CIT, CIT (A) and Addl. CIT, (iv) Asstt. CIT who may be either AAC or IAC, (v) ITOs ; and, (vi) Inspectors of Income-tax.
11. At the apex is the CBDT constituted under the Central Boards of Revenue Act, 1963 (Act 54 of 1963), and at the bottom is the Inspector. Sec. 118 deals with the control of IT authorities. It provides who is subordinate to whom. Under s. 119, the Board is competent to issue orders, instructions and directions to the IT authorities and the latter are enjoined to follow them.
12. Part "B", as already stated, bears the title "Jurisdiction". Secs. 120, 121, 121A and 122, falling in this part, prescribe that the Directors of Inspection, CIT, CIT (A) and AAC shall perform such functions as may be assigned to them by the Board. As would appear from the language of these sections, the assignment may be with reference to the (1) areas, (2) persons or classes of persons, (3) incomes or classes of income, and (4) cases or classes of cases.
13. Secs. 123, 124,125, 128 deal with the assignment of work by the CIT to IACs, ITOs and IT Inspectors. This assignment may also be with reference to (i) areas, (ii) persons or classes of persons, (iii) incomes or classes of income, or (iv) cases or classes of cases. Under s. 125A, the CIT is competent to confer concurrent jurisdiction upon ITO and IACs. This assignment may also be on the same basis of area, etc. When concurrent jurisdiction is conferred upon an ITO and an IAC, the ITO shall perform such functions as are assigned to him by the IAC. In the end, a generalpower of assignment of functions is conferred upon the Board under s. 126. When power is exercised under this provision, the assignments made under the sections mentioned hereinbefore are nullified and stand substituted by the assignment made under s. 126.
14. Sec. 127 also, falling under Chapter XIII, deals with transfer of cases. Under sub-s. (i), the power to transfer cases is conferred upon the Commissionerand the Board. In cases not covered by the "proviso", the power of transfer is to be exercised after giving the assessee a reasonable opportunity of being heard. An opportunity is to be given wherever it is possible to do so. Reasons are also required to be given for transferring cases. This is the position where the case is transferred outside the "same city, locality or place". The proviso covers a situation where the offices of the transferee officers are situate in the same city, locality or place. In ther words, it covers local transfers. In such transfers, neither is opportunity of hearing required to be given to the assessee nor are reasons required to be recorded. In the case on hand also, the transfer was local.
15. We may now turn back to s. 124 and consider two of its sub- sections, viz., (4) and (5). Under sub-s. (4), a question relating to the jurisdiction of an ITO is to be decided by the CIT and a question relating to the jurisdiction of Commissioner is to be decided by the concerned Commissioner by the Board. Sub-s. (5) provides the limit of time up to which objection on jurisdiction may be raised. Under cl. (a), where the assessee has filed a return of income, the objection on jurisdiction must be raised within one month of the filing of the return or before the assessment is completed, whichever is earlier. Thus sub-s. (5) places an embargo against raising of the plea of jurisdiction after the assessment has been completed. In the case in hand, the petitioner had filed a return of income and, therefore, his case will be covered by cl. (a) of sub-s. (5) of s. 124.
16. A survey of the above provisions of the Act highlights the following situations. After creating the various IT authorities, the Act does not prescribe their respective jurisdiction or functions. Any case can be dealt with by any IT authority with the possible exception of the Board, Accordingly, the various IT authorities are of co- ordinate jurisdiction. What function or functions, which authority or officer, shall perform is left to be decided either by the Board or by the CIT. On what principles the Board and the Commissionerwill allocate the functions is not indicated in the Act. The principle is, however, apparent from the nature of the enactment. The Act has been enacted with a view to collect revenue. Income-tax is the main source of revenue for the State. It is through revenue that the machinery of the State is run. It is desirable that the tax should be collected as early as possible. Collection of tax is preceded by assessment thereof. It is consequently desirable that the assessment proceedings should be completed expeditiously but expeditious disposal of an assessment does not mean that the assessee may be put to unwarranted harassment or prejudice. Therefore, the Board and the Commissioner shall take into account the convenience of the assessee also. It is with this purpose in view that it has been provided in sub-s. (1) of s. 127 that, whenever possible, an opportunity of hearing may be given to the assessee while transferring a case from one place to another. Since the assessee does not suffer any inconvenience or prejudice if a case is transferred locally, no such opportunity has been prescribed. From these provisions it is obvious that the Board and the Commissioner will exercise the power of allocation of functions to various authorities or officers in the exigency of tax collection with due regard to the convenience of the assessee. In other words, the allocation is a measure of administrative convenience. In such a situation, the concept of jurisdiction cannot be imported and, certainly, not in the sense of invalidating the resultant action on account of the defect in the exercise of functions.
17. Being an enactment aimed at collecting revenue, the legislature did not intend collection of revenue to be bogged down on account of technical plea of jurisdiction. It has; therefore, prescribed the limit up to which the plea of jurisdiction may be raised. As provided in s. 124(5)(a), the right is lost as soon as the assessment has been completed. Even where the right is exercised before the assessment is completed, the question is to be decided by the CIT by the Board. Courts do not come into the picture.
18. From the above provisions of the Act, it is apparent that the Act does not treat the allocation of functions to various authorities or officers as one of substance. It treats the matter as one of procedure and a defect of procedure does not invalidate the end action. The answer to the first question, therefore, is that the power is administrative and procedural and is to be exercised in the interest of exigencies of tax collection and the answer to the second question is that, under the Act, a defect arising from allocation of functions is a mere irregularity which does not affect the resultant action."
(emphasis supplied by us)
10. In view of the above, we hold that the ITO, Solan had correctly assumed the jurisdiction to assess the assessee and ground No.3 raised by the assessee challenging the same is, therefore, dismissed.
11. Ground No.1 raised by the assessee reads as under :
"1. That on the facts and in the circumstances of the case the Learned CIT (A) Shimla has erred in law and facts in upholding the ex-parte order, thereby not affording an opportunity of being heard to the appellant."
12. In the above ground, the assessee has challenged the action of the Ld. CIT (Appeals) in upholding the ex-parte order passed by the Assessing
Officer without afforded any opportunity of being heard to the assessee. As per the facts narrated in ground No.3 above, the assessee did not respond to various notices sent to it by the Assessing Officer and merely kept filing letters stating that it was assessed in Delhi. On account of non-cooperation of the assessee the Assessing Officer finally issued a show cause notice on 13-12-2011-, which again remained unresponded. Thereafter the Assessing Officer framed ex-parte assessment order under section 144 of the Act. The assessee challenged the passing of the ex-parte order before the Ld. CIT (Appeals), which was dismissed by the Ld. CIT (Appeals) by stating that enough opportunities were given to the assessee. The relevant findings of the Ld. CIT (Appeals) are reproduced in ground No.3 above at paras 4 and 4.1 of the CIT (Appeals)'s order.
13. Before us, the Ld. counsel for the assessee stated that adequate opportunity was not given to the assessee and the ex-parte order passed was bad in law.
14. The Ld. DR, on the other hand, relied upon the order of the Ld. CIT (Appeals) and stated that the Ld. CIT (Appeals) has passed a detailed and well-reasoned order on the issue giving categorical finding of number of opportunities given to the assessee, which remained un- responded and, therefore, ex-parte order passed was justified.
15. We have heard both the parties and find no merit in ground raised by the assessee. We agree with the Ld. DR that the Ld. CIT (Appeals) has specifically mentioned number of opportunities afforded to the assessee vide notice dated 14.9.2010, 19.8.2011 and 13.12.2011 all of which remained un-responded. A detailed show cause notice was also issued to the assessee and served on 13.12.2011 before the passing of the ex- parte order and it was made absolutely clear to theassessee that the assessment would be completed ex-parte in case of non-compliance of the same. The Ld. CIT (Appeals), we find, has rightly held that it is the assessee who squandered the opportunities granted by the Assessing Officer by raising the issue of jurisdiction and ignoring even Assessing Officer's final show cause notice. Further, we find that even during the appellate proceedings where the assessee submitted additional evidences, the same were admitted by the Ld. CIT (Appeals) and remanded to the Assessing Officer for examination and report and when again fresh opportunity was given to the assessee by the Assessing Officer in remand proceedings, no compliance was made by the assessee to any of the notices. Thus, it is clear that the assessee was not interested in pursuing the proceedings at all and is raising the issue of denial of opportunity of hearing just for the sake of it. This ground of appeal of the assessee is, therefore, also dismissed.
16. Ground No.;2 raised by the assessee reads as under :
"2. That on the facts and in the circumstances of the case the Learned CIT(A) Shimla has erred in law and facts in upholding the addition of Rs.61,71,365/- in the total income of the assessee/ appellant for the referred year merely on estimation/ assumption basis, without any comparison with any other manufacturer whereas the actual facts of the case were completely ignored."
17. The above ground raised by the assessee is against the action of the Ld. CIT (Appeals) in upholding the addition made to the income of the assessee on account of estimation of net profit and the capital introduced in the partners' account, which remained un- explained.
18. Brief facts relating to the issue are that during the assessment proceedings when the earlier notices were not complied with by the assessee, the Assessing Officer issued a show cause notice dated 13.12.29011 regarding the proposed assessment in the case of the assessee, the relevant portion of which reads as under :
"In the return of income generated from system, it has been noticed that you have declared gross turnover of Rs.8,99,54,5l2/-, and net loss amounting to Rs.8,43,807/- has been declared. Since neither you have furnished any information, nor produced any documentary evidence in support of your claim, therefore, net income is proposed to be determined at Rs.44,97,725/- by applying flat rate of 5% on total sales of Rs.8,99,54,312/- ................. "
19. The same remained un-complied with and the Assessing Officer thereafter proceeded to frame an ex- parte order and made addition on account of net profit b applying a rate of 5% on the total sales making an addition of Rs.44,97,725/-. Further, the Assessing Officer noticed that the partners had made addition in their capital account amounting to Rs.16,73,640/-, which was also added back to the income of the assessee in the absence of any documentary evidence in support of the same. Thus a total addition of Rs.61,71,365/- was made to the income of the assessee. During the appellate proceedings, the assessee filed evidences in the form of partnership deed, income tax returns, audit report, income tax returns of partners and also copy of bank account of one of the partners Shri Vikas Bhalla, which were admitted by the CIT (Appeals) and sent to the Assessing Officer for his report. The assessee did not participate in the remand proceedings also and, therefore, the Assessing Officer accordingly, sent his report in support of the addition made. The same was confronted to the assessee, after which the Ld. CIT (Appeals) upheld the addition made.
20. Before us, the Ld. counsel for the assessee stated that the addition made on account of estimation of net profit @ 5% had no basis and, therefore, the same ought to be rejected for this reason alone. As for the addition made on account of introduction of capital in the partners' account, the Ld. counsel for the assessee referred to the copy of the bank account of one of the partners showing two transfer entries of Rs.68 lacs and Rs.1,90,000/- to assessee's firm and the Income tax return of one of the partners Sh.Vikas Bhalla and stated that the addition made to the capital account is duly explained as having been sourced from the partners' bank accounts and, therefore, there was no reason to upheld the same.
21. The Ld. DR, on the other hand, relied upon the order of the Ld. CIT (Appeals) and stated that the addition made on account of estimation of net profit was correct, since the assessee had remained non-cooperative throughout entire proceedings before him and even during remand proceedings and had further not furnished any basis which could be termed as reasonable or comparable for estimating the net profit of the assessee. As far as the addition made on account of introduction in the capital account of the partner, the Ld. DR contended that the source having remained unexplained the addition made in the hands of the assessee firm was correct.
22. We have heard both the parties. We shall first deal with the addition made on account of estimation of net profit. It is established from the facts narrated above that the assessee throughout the entire proceedings before the Assessing Officer and even during the remand proceedings before the Assessing Officer did not cooperate even when a show cause notice was issued to him and it was clearly confronted to him that the proposed addition on account of estimation of net profit @ 5% of the turnover was to be made. With the assessee not cooperating in the matter and furnishing any reasonable basis for estimating the net profit or even producing books of account to justify his book results despite repeated opportunities given to the assessee, the Assessing Officer was left with no option but to adopt an estimate for determining the net profit of the assessee. In such situation, we find no infirmity in the order of the Assessing Officer estimating net profit @ 5% since the same was specifically confronted to the assessee both at the assessment stage and even during the appellate proceedings in remand proceedings, and if the assessee had any objection to the same or found the same to be unreasonable, the assessee should have given some explanation. Even before us, we find that despite opportunity given to the Ld. counsel for the assessee ,it has not been demonstrated, with comparable instances, as to how the net profit rate of 5% estimated by the Assessing Officer was incorrect . In the backdrop of non- cooperative and unresponsive attitude of the assessee at all stages, the only inference which can only be drawn is that the assessee has nothing to say about 5% net profit rate adopted and the same was, therefore, correct and not unreasonable. If the assessee had some material or some basis to dislodge this belief or this rate adopted by the Assessing Officer, it could have produced the same atleast before us, which has not been done. The assessee cannot adopt the attitude of non-cooperation all along when the onus lies on the assessee to prove that the profit returned by it is correct. The assessee cannot shift the onus on the Revenue after not cooperating throughout the proceedings and then stating that there has to be some basis with the Assessing Officer to adopt a net profit rate. It is a highly unreasonable and illogical argument given by the assessee which cannot be accepted and the addition made on account of net profit rate amounting to Rs.44,97,725/- is, therefore, upheld.
23. As far as the addition made on account of introduction of capital of the partners, the fact is thatt he AO treated the difference between the opening and closing balance of capital account ,amounting to Rs.16,73,640/- as unexplained and made addition of the same to the income of the assessee firm.During appellate proceedings the assessee furnished copy of Income Tax return of one of the partners,Sh, Vikas Bhalla and a copy of his Bank account showing two entries transferring Rs.68 lacs and RS.1,90,000/- to the assessee firm.Since the capital introduced is adequately explained by the aforestated documents as having been introduced by one of the partners himself from his bank account, we see no reason for making any addition on account of unexplained credit in the hands of the assessee. Therefore we delete the addition made on account of introduction of capital in the partner account amounting to Rs.16,73,640/-. In view of the above, ground No.2 raised by the assessee is partly allowed.
24. In the result, the appeal of the assessee is partly allowed.