MAHESH RADHAKISHAN KATARIYA,PUNE vs. ASSESSING OFFICER OF FACELESS ASSESSMENT CENTER, DELHI

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “B”, PUNE

BEFORE SHRI RAMA KANTA PANDA, VICE PRESIDENT AND Ms. ASTHA CHANDRA, JUDICIAL MEMBER Assessment Year : 2020-21 Mahesh Radhakishan Katariya, Assessing Officer of Flat No. 1103, Lotus Apartment, Faceless Assessment Centre, Wanworie, Haveli, vs. East Block, Level-III, Pune R.K. Puram, Maharashtra-411040. New Delhi-110066 PAN : AJNPK3657K (Appellant) (Respondent) Assessee by : CA Kunal M. Agarwal Department by : Shri Sandeep Sathe, Jt.CIT Date of Hearing : 29-07-2026 Date of Pronouncement : 31-07-2026 O R D E R PER ASTHA CHANDRA, J.M.:

The appeal filed by the assessee is directed against the order dated 06-02-2026 of the Ld. Commissioner of Income Tax (Appeals), NFAC, Delhi [“CIT(A)/NFAC”], u/s. 250 of the Income Tax Act, 1961 (the “Act”), pertaining to Assessment Year (“AY”) 2020-21. 2. Although several grounds of appeal are raised by the assessee, all these relate to the addition(s) made by the Ld. Assessing Officer (“AO”) on account of disallowance of power and fuel expenses and addition to the business income of the assessee on account of bank credits.

loss of Rs. 49,67,557/-. The Ld.AO completed the assessment u/s. 143(3) r.w.s. 147 r.w.s. 144B of the Act at total assessed income of Rs. 85,22,320/-, vide his order dt. 27-03-2025, thereby making the following addition/disallowance: i. Disallowance of power and fuel expenses of Rs.30,56,172/-; ii. Addition to the business income of the assessee of Rs. 1,01,64,587/-

all, Chapter XIXA is geared to promotion of settlement and creation of road-blocs in reasonable compositions. It has been held in the case of PareshDhanjiChedda v. Deputy Commissioner of Income-tax (Asst.), Special Range-2, Hyderabad [2016] 73 taxmann.com 313 (Hyderabad Trib.)/[2016] 160 ITD 656 (Hyderabad Trib.)/[2017] 184 TTJ 132 (Hyderabad - Trib.) [15-07-2016] as under:- 7.2 In the case of Bharat Petroleum Corporation (P.) Ltd. (supra) and in the case of Chemipol v. Union of India [Central Excise Appeal No. 62 of 2009 dated 17.09.2009] the Hon'ble Bombay High Court relied upon various Supreme Court and High Court judgments and extracted the observations of his Lordship Chief Justice Hidaytullah in SunderlalMannalal vs. NandramdasDwarkadas (AIR 1958 MP 260) to highlight that no Court or Tribunal is supposed to continue a proceeding before it when the party who has moved it has not appeared. This observation of Justice Hidaytullah was approved by the Hon'ble Supreme Court in Dr. P. Nalla Thampy Thera v. B.L. Shankar 1984 (Supp.) SCC 631. In the case of New India Assurance Co. Ltd. v. R. Srinivasan [2000] 3 SCC 242, the Supreme Court observed that every judicial body or authority inherently possesses the power to dismiss a case in defauLd. These decisions were referred to by the ITAT, Mumbai Bench in the case of Bharat Petroleum Corpn. Ltd. v. Asstt.CIT [2014] 66 SOT 11/49 taxmann.com 397 (Mum. Trib.) wherein the Tribunal observed that the Rules do not circumscribe the jurisdiction of the Tribunal conferred by the statute and if the assessee is habitually taking adjournments, despite granting sufficient time, the assessee is responsible for the dismissal of the appeals for non-prosecution and therefore, the Tribunal cannot be found to have committed a mistake. This decision was affirmed by Hon'ble Mumbai High Court (supra). It has been held by Hon'ble Madhya Pradesh High Court in the case of Estate of Late TukojiraoHolkar v. Commissioner of Wealth-tax [1997] 223 ITR 480 (Madhya Pradesh) [11-03-1996] as under:- As held in Jamunadas v. CST [1993] 38 MPLJ 462 (MP) and the common order passed in Miscellaneous Civil Case No. 303 of 1986-B.R. Phosphate v. CST and Miscellaneous Civil Case No. 304 of 1986-B.R. Phosphate v. GST by this court on November 6, 1995, this court is not bound to answer the reference. In Jamunadas v. CST [1993] 38 MPLJ 462, it is held as under: "For the foregoing reasons, we are of the opinion that if the party at whose instance the reference is made, fails to appear at the hearing, or fails in taking steps for preparation of the paper books so as to enable hearing of the reference, this court is not bound to answer the reference. We refuse to answer the reference and also saddle the assessee with the costs of the Department quantified at Rs. 150” It has been held in the case Commissioner of Income-tax, Central Circle [2014] 42 taxmann.com 393 (Agra Trib.)/[2014] 147 ITD 166 (Agra Trib.)/[2014] 164 TTJ 134 (Agra Trib.) [31-05-2013] as under:-Shivangi Steel (P.) Ltd. v. Assistant Commissioner of Income-tax, Central circle [2014] 42 taxmann.com 393 (Agra – Trib.)/[2014] 147 ITD 166 (Agra – Trib.)/[2014] 164 TTJ 134 (Agra – Trib.) [31-05-2013] as under:- Headnotes:- Section 251, read with section 144, of the Income-tax Act, 1961 Commissioner (Appeals) Powers of [Ex parte order] Assessment year 2005-06 Despite several notices issued under sections 143(2) and 142(1),

assessee did not attend assessment proceedings, nor filed any explanation Assessing Officer, therefore, passed an ex parte assessment order under section 144 on assessee - Further assessee in spite of large number of adjournments granted by Commissioner (Appeals) did not produce any document in respect of grounds of appeal, nor made written or oral submissions before him therefore, proceeded ex parte against assessee and confirmed assessment order - Whether Commissioner (Appeals), both Commissioner (Appeals) and Assessing Officer rightly proceeded ex parte against assessee - Held, yes [Para 6) [In favour of revenue) Section 254 of the Income-tax Act, 1961 read with rule 29 of the Income Tax (Appellate Tribunal) Rules, 1963-Appellate Tribunal - Powers of (Powers to admit additional evidence) Assessment year 2005-06- Assessing Officer passed an ex parte assessment order under section 144 on assessee-Commissioner (Appeals) in absence of any co-operation from side of assessee proceeded ex parte against assessee and confirmed assessment order Against order of Commissioner (Appeals), assessee filed appeal before Tribunal - It also moved application under rule 29 of Appellate Tribunal Rules, 1963 for admission of additional evidences Whether since assessee had not made out any case that Whether, authorities below had decided case without giving sufficient opportunity to adduce evidence, requirement of rule 29 had not been satisfied Held, yes therefore, above application was liable to be rejected Held, yes [Para 7][In favour of revenue] 7. The assessee, an individual, did not file return for A.Y. 2020-21. Based on information of substantial cash deposits and bank credits, the case was reopened under section 147. Despite multiple notices, compliance was partial. The assessee claimed business receipts but failed to substantiate cash deposits and expenses. Unverified power and fuel expenses of Rs. 30,56,172/- were disallowed and unexplained bank credits of Rs. 1,01,64,587/-were added. Assessment was completed under section 143(3) r.w.s. 147 and 144B with initiation of penalty proceedings. 8. However, the case is being decided on merits and on the basis of available facts on record. On perusal of Form-35, it is seen that appellant has attached copy of assessment order u/s 147 r.w.s144B of the IT Act dated 27.03.2025. The appellant has neither attached/ uploaded any submission nor submitted evidences/ documents/ explanation in support of facts and grounds of appeal. Despite being given many opportunities appellant did not respond during appellate proceedings. The assessee remained non-compliant and non-cooperative and did not submit any reply till the end of the proceedings. 9. Ground No 1:- The assessment proceedings suffered from serious procedural irregularities as the Ld. Officer as the notice was issued to treat the income addition u/s 69A, however the income was disallowed and taxed as normal business income of the appellant. 9.1 Adjudication of Ground No. 1:-On perusal of the assessment records, it is seen that the Assessing Officer issued statutory notices and provided opportunities including video conferencing. The appellant participated during assessment proceedings but failed to substantiate the claims. Merely because the final additions were made under business income instead of section 69A does not amount to violation of natural justice. In absence of any rebuttal or evidence from the appellant during appellate proceedings, this ground is devoid of merit.

Further, reference is made to the judgement of The Hon'ble Supreme Court in the case of Canara Bank and Others v. Debasis Das and Others reported in (2003) 4 SCC 557 where Hon'ble Supreme Court has held as under: "21. How then have the principles of natural justice been interpreted in the courts and within what limits are they to be confined? Over the years by a process of judicial interpretation two rules have been evolved as representing the principles of natural justice in judicial process, including therein quasi-judicial and administrative process. They constitute the basic elements of a fair hearing, having their roots in the innate sense of man for fair play and justice which is not the preserve of any particular race or country but is shared in common by all men. The first rule is "nemojudex in causasua" or "nemodebetessejudex in propriacausasua as stated in Earl of Derby's case ((1605) 12 Co Rep 114: 77 ER 1390] that is, "no man shall be a judge in his own cause. Coke used the form "aliquis non debetessejudex in propriacausa, quia non potestessejudexet pars" (Co. Litt. 1418), that is, "no man ought to be a judge in his own case, because he cannot act as judge and at the same time be a party". The form "nemopotestessesimul actor et judex", that is, "no one can be at once suitor and judge" is also at times used. The second rule is "audialterampartem", that is, "hear the other side". At times and particularly in continental countries, the form "audietur et altera pars" is used, meaning very much the same thing. A corollary has been deduced from the above two rules and particularly the audialterampartem rule, namely "qui aliquidstatuerit, parte inauditaalteraacquum licet dixerit, haudacquumfecerit" that is, "he who shall decide anything without the other side having been heard, although he may have said what is right, will not have been what is right" [see Boswel's case [(1605) 6 Co Rep 48b: 77 ER 326] (Co Rep at p. 52-a)] or in other words, as it is now expressed, "Justice should not only be done but should manifestly be seen to be done". Whenever an order is struck down as invalid being in violation of principles of natural justice, there is no final decision of the case and fresh proceedings are left upon (sic open). All that is done is to vacate the order assailed by virtue of its inherent defect, but the proceedings are not terminated." It is held by the Hon'ble Supreme Court in the case of KapurchandShrimal v. Commissioner of Income-tax [1981] 7 Taxman 6 (SC)/[1981] 131 ITR 451 (SC)/ [1981] 24 CTR 345 (SC) as under:- 13…………….... It is, however, difficult to agree with the submission made on behalf of the assessee that the duty of the Tribunal ends with making a declaration that the assessments are illegal and it has no duty to issue any further direction. It is well known that an appellate authority has the jurisdiction as well as the duty to correct all errors in the proceedings under appeals and to issue, if necessary, appropriate directions to the authority against whose decision the appeal is preferred to dispose of the whole or any part of the matter afresh unless forbidden from doing so by the statute……………………. The Tribunal, therefore, erred in merely cancelling the assessment assessment orders or and in not issuing further directions as stated above." Further, Hon'ble Allahabad High Court in the case of Bhagwat Prasad v. Commissioner of Income-tax [1998] 97 TAXMAN 294 (ALL.) has held as under:- 23…………….. If an order passed by a statutory authority is struck down as invalid for non-compliance of statutory provisions or in not giving effect to the maxim audialterampartem, the proceedings do not come to an end. All that is done is that the order assailed by virtue of its inherent defects is vacated but the proceedings are not terminated. They will stand restored to the stage before the order was passed. This position is well- settled in law.

10.1 Adjudication of Ground No. 2:-The assessment order discusses the facts, issues involved, replies filed and reasons for additions. The order cannot be termed as non-speaking. The reasons and relevant sections where required have been mentioned. It is held by the Hon'ble Supreme Court in the case of Indure (P.) Ltd. vs. Principal Commissioner of Income-tax [2022] 142 taxmann.com 67 (SC) [01-08-2022] as under:- 7. It is settled law that 'principle of natural justice is no unruly horse and no lurking land mine' as held by Mr. Justice Krishna lyer in Chairman, Board of Mining Exam & Chief Inspector of Mines v. Ramjee [1977] 2 SCC 256. In fact, in S. Tikara v. State of M.P. AIR 1997 SC 1691, it has been held that the principles of natural justice cannot be petrified or fitted into rigid moulds. They are flexible and turn on the facts and circumstances of each case. Consequently, the questions that arise are whether there has been any unfair deal by the respondent? It is held by the Hon'ble Rajasthan High Court Court in the case of Goenka Jewellers vs. Commissioner of Income-tax I, Jaipur [2018] 100 taxmann.com 517 (Rajasthan) [30-10-2018] as under:- 10 As regards the argument of the appellant for not providing him opportunity of cross-examine Shri Praveen Jain, in the first place, the Assessing Officer himself required the appellant to produce representative of the concerned parties along with their books of account and he failed to produce them. Secondly, no such prayer was ever made by the appellant before the Assessing Officer to summon Shri Praveen Jain for his cross-examination. We may at this juncture usefully refer to the observations of the Supreme Court in Chairman, Board of Mining Examination & Chief Inspector of Mines v. Ramjee, [1977] 2 SCC 256 wherein concept of naturaljustice was succinctly summarized in the following terms: "xxxxxxxxxx Natural justice is no unruly horse, no lurking land mine, nor a judicial cure-all. If fairness is shown by the decision-maker to the man proceeded against, the form, features and the fundamentals of such essential processual propriety being conditioned by the facts and circumstances of each situation, no breach of natural justice can be complained of. Unnatural expansion of natural justice, without reference to the administrative realities and other factors of a given case, can be exasperating. We can neither be finical (sic) nor fanatical but should be flexible yet firm in this jurisdiction. No man shall be hit below the belt- that is the conscience of the matter." 11. Calcutta High Court in Hindustan Tobacco Company (supra) in somewhat similar circumstances rejected identical argument in para 34 of the judgment which reads as under. "34. If the assessee felt that cross-examining of any person was necessary for establishing its case it was incumbent upon the assessee to make such prayer before the Assessing Officer during the assessment proceeding. If a party fails to avail of the opportunity to cross-examine a person at the appropriate stage in he proceeding, the said party would be precluded from raising such issue at a latter stage of the proceeding. Therefore the belated claim of the assessee at the appellate stage that it was denied the opportunity of cross-examining witnesses in the assessment proceeding is wholly untenable in law." In view of the above discussion, Natural justice is no unruly horse, no lurking land mine, nor a judicial cure-all. It is the principle of law as laid down by the Hon'ble Supreme Court that in accepting any plea of breach of principles of natural justice, such plea

would be required to be tested on the aspect of prejudice, as observed in para 62 in case of Veena Estate (P.) Ltd. v. Commissioner of Income-tax [2024] 158 taxmann.com 341 (Bombay)/[2024] 461 ITR 483 (Bombay) [11-01-2024]. However in the present case the appellant has not shown and has not claimed what prejudice was caused to him by allegedly not mentioning the section. It is abundantly clear from the principles of law as laid down by the Supreme Court, that a technical plea of breach of principles of natural justice cannot be taken, unless a case of prejudice has been made out, and if no case of prejudice is made out, certainly a plea of breach of principles of natural justice would be a hollow plea or a plea in futility. This for the reason, that a person complaining of breach of principles of natural justice needs to show that curing such breach, would culminate the proceedings with a different consequence favourable to the assessee. It is only after considering such pleas, it would be a fair decision, rendering justice to the complainant, as observed in para 62 in case of Veena Estates (supra). It is principle of law as laid down by the Hon'ble Supreme Court in Natwar Singh v. Director of Enforcement (2010) 13 SCC 255, wherein the Supreme Court has observed that there can never be a technical plea of breach of principles of natural justice and plea would be a realistic plea which can be proved on the principle of prejudice. No specific infirmity has been pointed out by the appellant during the appellate proceedings. Hence, this ground is dismissed. 11. Ground No 3.:- The disallowance of Rs. 30,56,172 towards power expenses is patently erroneous as the Appellant had submitted all relevant MSEDCL bills and consumption records. The Ld. Officer ignored Section 37(1) which expressly allows deduction for business expenses, and the partial disallowance was made without any justification for restricting the claim only to the extent of payment proofs. The expenditure was wholly and exclusively for business purposes as evidenced by the electricity consumption pattern matching the operational period. 11.1 Adjudication of Ground No. 3:-The Assessing Officer disallowed part of the power expenses due to lack of complete payment proofs. The appellant has not furnished any additional evidence during appellate proceedings to the disallowance is upheld and this ground is rebut the findings. Therefore, the disallowance is upheld and this ground is dismissed. 12. Ground No 4.:- The addition of Rs. 1,03,33.502 Income is unsustainable as the Appellant had furnished complete bank reconciliation statements explaining the nature of each deposit and the appellant has maintained books on mercantile basis and not cash basis. The Ld. Officer disregarded the business reality where banking transactions inherently include temporary credits, reversals and non-business credit. The addition was made mechanically without establishing any nexus between the credits in the bank accounts with the sales as per books and alleged suppression of income, contrary to the settled legal positions. 12.1 Adjudication of Ground No. 4: The appellant failed to satisfactorily explain the nature of bank credits and establish their linkage with recorded business transactions. In absence of any supporting evidence during appellate proceedings, the addition made by the Assessing Officer is confirmed. This ground is dismissed. 13. Ground No 5.:-The reopening of assessment under Section 147 is legally untenable as the Ld. Officer dropped the income alleged u/s 69A

of the Income Tax Act. All cash deposits were properly reflected in audited books as business receipts, and the proviso to Section 147 specifically bars reopening when the reasons recorded. 13.1 Adjudication of Ground No. 5:-The reassessment was initiated on the basis of tangible information and the proceedings were carried out in accordance with law. No material has been brought on record to show that the reopening was invalid. It is apparent that the addition has been made in the assessment order which was the issue of the reopening. Accordingly, this ground is dismissed. 14. Ground Nos 6.:- THE APPELLANT CRAVES PERMISSION TO ADD/OR ALTER ANY OF THE ABOVE SUBMISSION AT AND/OR AFTER THE TIME OF PERSONAL HEARING. 14.1 Adjudication of Ground Nos. 6:-The appellant reserves the right to modify grounds. No additional grounds were raised during proceedings, and this ground is procedural and does not require adjudication. 15. In the result, the appeal of the appellant is dismissed.”

account of disallowance of power and fuel expenses and business income of the assessee in respect of bank credits. On appeal, the Ld.CIT(A)/NFAC dismissed the assessee‟s appeal for the reasons which we have already reproduced in the preceding paragraphs. Before us, the Ld. Counsel for the assessee has submitted that the Ld.CIT(A)/NFAC has not considered the details/documents/evidences uploaded by the assessee on the portal while passing the impugned order and has, therefore, urged that the matter may be set aside to the file of theLd.CIT(A)/NFAC for adjudication afresh on merits. Considering the totality of the facts and in the circumstances of the case, we deem it fit and proper, in the interest of justice, to set aside the impugned order of the Ld.CIT(A)/NFAC and restore the matter back to his file for adjudication afresh on merits and as per fact and law in light of the submissions already on record of the Department as well as such further submissions as may be made by the assessee during the course of the fresh proceedings. Needless to say, the assessee shall comply with the notices issued by the Ld.CIT(A)/NFAC and make his submissions before him on the appointed date without seeking any adjournment under any pretext, unless required for the sufficient cause, failing which the Ld.CIT(A)/NFAC shall be at liberty to pass appropriate order as per law. We hold and direct accordingly. The grounds raised by the assessee are accordingly allowed for statistical purposes.

आदेश की प्रतितिति अग्रेतिि/Copy of the Order is forwarded to: 1. अपील र्थी / The Appellant 2. प्रत्यर्थी / The Respondent 3. The concerned Pr.CIT, Pune 4. DR, ITAT, „B‟ Bench, Pune 5. ग र्ड फ ईल / Guard file. आदेशानुसार/ BY ORDER, ////