KALAIKAR KAFEEL AHMED,VELLORE vs. ITO, WARD-3,, VELLORE

The Assessee raised the following grounds of appeal :

The Respondent (JAO) erred in initiating or conducting inquiry u/s 148A of the Income Tax Act, 1961 failing to realize that the power to conduct proceedings u/s 148A is vested only with Faceless Assessing officer and reliance is placed in the case of Hexaware Technologies Ltd. vs. Assistant Commissioner of Income-tax [2024] 162 taxmann.com 225 (Bombay) [03- 05-2024]

The learned CIT (Appeal) ought to have remanded the matter back to the assessing officer for fresh assessment as the assessment order dated 12.12.2023 is a best judgement order passed U/s 144.

The Learned CIT(A) ought to have appreciated that the Finance Act, 2024 has amended Section 251 of the Income Tax Act, 1961 granting the Commissioner (Appeals) the power to set aside the best judgment assessments under Section 144 and remand them back to the assessing officer for a fresh assessment with effect from 01.10.2024.

The respondent ought to have appreciated that the amendment providing that a return filed in response to a notice under section 148 shall not be treated as a valid return under section 139(1) was introduced only with effect from 01.04.2022.

The respondent ought to have appreciated that the assessee had filed the return of income in response to the notice under section 148 prior to the introduction of the amendment by insertion of the second proviso to section 148.

The Respondent failed to appreciate that the return filed consequently in response to the notice under section 148 constituted a valid return under section 139(1), and therefore the Revenue ought to have estimated the profit and loss at 2% or 3% by treating the income as income from business.

The respondent failed to appreciate the fact that the assessee was engaged in the business of poultry being grain and protein supplements such as soybean oil, mineral supplements and vitamin supplements and all the transactions pertained to the business activities carried on by the assessee.

The respondent ought to have appreciated that section 69A can be invoked only where the assessee fails to satisfactorily establish the test of identifying the parties, the genuineness of the transactions, and the creditworthiness of the parties.

The respondent failed to appreciate that the transactions were carried out only through NEFT/RTGS or cheques thereby clearly establishing the identity of the parties and the creditworthiness of the transactions carried out in the course of business.”

Briefly, the facts of the case are that the appellant is an Individual engaged in the business of dealing in Poultry Feed. No regular Return of Income for the Assessment Year 2018-19 was filed by the appellant. However, based on the information that appellant had withdrawn cash of Rs.2,85,90,000/- from the Bank account maintained with Union Bank of India, the Assessing Officer formed opinion that the income got escaped assessment from tax. Accordingly, a notice u/s.148 was issued on 31.03.2022 calling upon the appellant to file the Return of Income for the Assessment Year 2018-19. The appellant neither complied with the notice u/s.148 nor to the notices issued u/s.142(1) of the Act. In the circumstances, Assessment Unit of the Department(hereinafter called ‘AO’) had proceeded with framing the best judgment assessment vide order dated 14.03.2023 passed u/s.147 r.w.s 144 read with section 144B of the Income Tax Act at a total income of Rs.2,85,90,000/-. While doing so, the Assessing Authority had made addition of Rs.2,85,90,000/- being the cash withdrawn from the bank account as the appellant had failed to explain source of the credits out of which the money was withdrawn from the bank account.

Being aggrieved by the above assessment order, the appellant preferred an appeal before ld.CIT(A), who vide impugned order confirmed the action of the Assessing Officer by passing the ex parte order.

Being aggrieved by the order of ld.CIT(A), the appellant is in appeal before us in the present appeal. It is submitted that the ld.CIT(A) ought not have confirmed the addition made by the Assessing Officer instead ought to have remitted the matter to the Assessing Officer for fresh assessment as the assessment order passed was ex parte assessment order. It is submitted that the appellant that filed the Return of Income in response to notice u/s.148 of the Act. It is further submitted that the ld.CIT(A) ought to have appreciated that the credits in the bank account are out of the business receipts of the appellant.

On the other hand, Learned Sr.DR submits that the appellant had failed to cause appearance before the Lower Authorities. The appellant had failed to produce any evidence in support of the contention that the credits in the bank account are out of business receipts of the appellant. Therefore, the order of the ld.CIT(A) is a reasoned one requires no interference by this Tribunal.

We have heard rival submissions and perused the material available on record. We find that the ld.CIT(A) dismissed the appeal of the appellant for non- prosecution without entering into the merits of the addition. The CIT(A) without dealing with the contentions of the appellant merely dismissed the appeal in limine for non-prosecution. As contemplated u/s. 250(6) of the Act the CIT(A) is required to frame points of determination followed by a detailed discussion thereupon before passing the order. It is the settled position of law that the CIT(A), even while disposing of the appeal ex-parte, he is duty bound to dispose of the appeal on merits. Reliance in this regard can be placed on the decision of the Hon'ble Bombay High Court in the case of PCIT vs. Premkumar Arjundas Luthra 279 CTR 614. The Hon’ble Bombay High Court has held in the case of Pr.CIT(Central) Vs. Premkumar Arjundas Luthra (HUF) (Bombay)/[2017] 297 CTR 614 (Bombay) as under :

Therefore, in the light of the above legal position, we are of the considered view that the matter requires to be remanded to the file of the CIT(A) with the direction to dispose of the appeal de novo on merits after affording reasonable opportunity of hearing to the assessee. All the contentions raised by the appellant are left open for consideration before the ld.CIT(Appeals).

In the result, the appeal filed by the assessee stands partly allowed for statistical purposes. Order pronounced in the open Court on 22nd July, 2026.