MANJINDER SINGH DHILLON & HARDEEP SINGH DHILLON & CO,CHANDIGARH vs. ITO WARD 5(5) , CHANDIGARH

आयकर अपीलीय अिधकरण,च�ीगढ़ �ायपीठ “बी” , च�ीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH “B”, CHANDIGARH HEARING THROUGH: HYBRID MODE �ी लिलत कुमार, �ाियक सद� एवं �ी मनोज कुमार अ�वाल, लेखा सद� BEFORE: SHRI. LALIET KUMAR, JM & SHRI. MANOJ KUMAR AGGARWAL, AM आयकर अपील सं./ ITA No. 568 /Chd/ 2026 िनधा�रण वष� / Assessment Year : 2022-23 Manjinder Singh Dhillon & बनाम The ITO Hardeep Singh & Co. Ward 5(5) SCO 210, Sector 24-D, Chandigarh- 160023 �ायी लेखा सं./PAN NO: ABIFM2839E अपीलाथ�/Appellant ��थ�/Respondent िनधा�रती की ओर से/Assessee by : Shri Rakesh Dubey, Advocate and Shri Sanjeev Kumar Saini, Advocate राज� की ओर से/ Revenue by : Dr. Ranjit Kaur, Addl. CIT, Sr. DR (Virtual Mode) सुनवाई की तारीख/Date of Hearing : 02/07/2026 उदघोषणा की तारीख/Date of Pronouncement : 20/07/2026 आदेश/Order PER LALIET KUMAR, J.M: This is an appeal filed by the Assessee against the order of the Ld. CIT(A)/ NFAC, Delhi dt. 25/11/2025 for the Assessment Year 2022-23.

2 with supporting documents and explanation during the course of assessment proceedings before the Assessing Officer. 4. That Ld. CI T (A) NFAC failed to consider the papers as filed before the Ld. A.O. and Learned Assessing Officer issued a show-cause notice dated 04.03.2024, which was duly replied to by the assessee along with necessary details; however, the Assessing Officer failed to issue a Draft Assessment Order as mandated under section 144B of the Income Tax Act, 1961, which is mandatory under the Faceless Assessment Scheme. 5. That both the Learned Assessing Officer as well as the Learned CIT(A), NFAC failed to adjudicate the issue regarding non-compliance of section 144B of the Income Tax Act. 6. That the Learned Authorities below failed to consider that the assessment order passed without issuance and service of a Draft Assessment Order under section 144B is invalid and illegal as well as CIT (A) failed to consider the same. 7. That the assessment order passed without following the mandatory procedure prescribed under section 144B of the Income Tax Act, 1961 is void ab initio and non-est in the eyes of law and Ld. CIT (A) also failed to consider the said issue. 8. That the assessee’s accountant, namely Purshotam Dass who was handling the accounts and Income Tax matter including filing of the appeal before NFAC had taken leave due to serious illness and subsequently left the job. 9. That after the accountant left the job, the assessee approached their Chartered Accountant in March 2026, who upon checking the Income Tax e- proceeding portal found that the CIT(A) order had been passed on 25.11.2025. A copy of the order was then downloaded and provided to the assessee with advice to file an appeal before the Hon’ble ITAT. 10. That the Learned CIT (A) NFAC erred in confirming the addition of Rs. 1,78,91,734/-, which deserves to be deleted in full, as the same is unjustified, arbitrary and contrary to the facts and evidences on record. 11. That due to the sudden leaving of accountant the assessee could not effectively pursue the appeal proceedings before NFCA and thus lost the opportunity of effective representation, which was beyond the control of the assessee and resulted in violation of the principles of natural justice. 12. That the assessee craves leave to add, alter, amend, modify or withdraw any of the grounds of appeal at or before the time of hearing.

3 Selection (CASS) system on the specific ground of "Low income from TCS receipts - Liquor". During the course of assessment proceedings, notices under section 143(2) and section 142(1) were issued to the assessee. Although the assessee filed a written reply along with certain basic breakdowns of accounts, month-wise purchases, and a list of suppliers, the Assessing Officer observed that the specific item-wise confirmations, copies of ledger accounts, and detailed verifications for sundry creditors were conspicuously missing. 3.1 The Assessing Officer, upon examining Schedule ‘C’ of the balance sheet, found that the assessee had outstanding sundry creditors amounting to Rs. 1,69,33,900/-. Despite being given specific opportunities through a statutory notice under section 142(1) and a subsequent Show Cause Notice dated March 4, 2024, the assessee merely provided a list of suppliers with PAN and addresses but completely failed to furnish any external confirmation letters or ledger copies to establish the identity, creditworthiness, and genuine nature of these liabilities. Consequently, the Assessing Officer concluded that the assessee failed to discharge its primary onus of proof. The entire amount of Rs. 1,69,33,900/- was treated as unexplained/non-genuine liability and added back to the income of the assessee. Furthermore, on examining the Trading and Profit & Loss Account, the Assessing Officer noted that the assessee claimed a sum of Rs. 47,89,169/- across various expense heads, including travelling, electricity, water, rent, bank charges, and general expenses. Finding these expenses to be unverified and personal in nature due to the absence of supporting primary documentary evidences such as bills and vouchers, the Assessing Officer made an ad-hoc disallowance of 20%, resulting in an addition of Rs. 9,57,834/-. The assessment was thus finalized under section 143(3) read with section 144B of the Act on a total taxable income of Rs. 2,26,12,330/-. 4. Aggrieved by the additions made in the assessment order, the assessee preferred an appeal before the Ld. CIT(A). During the appellate proceedings, the Ld. CIT(A) issued multiple statutory notices under section 250 of the Income-tax Act, 1961, on 13/08/2025, 09/10/2025, 04/11/2025, and

4 17/11/2025, to provide ample opportunities to the appellant to substantiate its claims. The CIT(A) observed that the appellant did not bother to file any written submissions, statement of facts, documentary proof, or supporting judicial precedents, but merely sought repeated adjournments. Relying on various authoritative legal principles enunciated by the Apex Court and High Courts—including CIT vs B.N. Bhattacharya and New India Assurance vs Srinivasan—the CIT(A) noted that while a tribunal or quasi-judicial body possesses the inherent power to dismiss for non-prosecution, the appeal must be judiciously evaluated on the basis of the material available on record. 4.1 On merits, the CIT(A) held that the ultimate burden of proof to sustain an allowance, deduction, or exemption lies squarely upon the claimant. Since the appellant persistently absented itself from the proceedings and chose not to produce any supporting information or address the categorical queries regarding the sundry creditors and unverified personal expenses, the CIT(A) found absolutely no reason or legal justification to perturb the well- reasoned and detailed findings of fact recorded by the Assessing Officer. Holding that the appellant had failed to effectively pursue its appeal or discharge its initial onus, the CIT(A) confirmed the entire addition of Rs. 1,78,91,734/- (consisting of Rs. 1,69,33,900/- on account of non-genuine liabilities and Rs. 9,57,834/- for unverified expenses) and dismissed the appeal. 5. Against the order of the Ld. CIT(A) the Assessee preferred an appeal before the Tribunal.

5 6.1 On merits, the Ld. AR submitted that the addition of Rs.1,69,33,900/- on account of outstanding sundry creditors is wholly unsustainable. It was contended that the impugned liabilities represent trade creditors arising in the normal course of the assessee's retail liquor business. The Assessing Officer has nowhere disputed the purchases effected from the said parties, nor has he rejected the books of account maintained by the assessee. It was argued that once the purchases have been accepted, the corresponding trade liabilities cannot be treated as unexplained merely because confirmation letters could not be furnished during the assessment proceedings.

6.2 The Ld. AR further submitted that complete particulars of the creditors, including their names, addresses and PAN details, had already been furnished before the Assessing Officer. He submitted that these very creditors had been appearing in the books of account in the preceding years and neither their identity nor the quantum of transactions had ever been disputed by the Department in the past. It was further contended that the outstanding balances were subsequently discharged through normal banking channels, thereby fully establishing the genuineness of the liabilities. According to him, in the absence of any material brought on record by the Revenue to establish that the liabilities were fictitious or non-existent, the addition merely for want of confirmations is legally untenable.

6.3 Coming to the ad hoc disallowance of Rs.9,57,834/-, the Ld. AR submitted that the Assessing Officer had disallowed 20% of the business expenditure without pointing out any specific defect or identifying any particular expenditure as being non-business in nature. He submitted that a substantial portion of the expenditure comprised rent paid for the liquor vending premises. The Revenue has nowhere disputed that the assessee was carrying on the liquor vending business from the said rented premises, nor has it disputed that the rental payments were made through banking channels. Likewise, the expenditure on electricity, travelling, bank charges and other administrative expenses was incurred wholly and exclusively for the purposes of the business and was duly recorded in the books of account. It was,

6 therefore, argued that an ad hoc disallowance without rejection of books of account or without any adverse material is arbitrary and contrary to settled principles of law.

6.4 Without prejudice to the above submissions on merits, the Ld. AR also raised a legal objection contending that the assessment framed under section 143(3) read with section 144B was invalid inasmuch as the mandatory procedure prescribed under section 144B, particularly relating to issuance of a Draft Assessment Order, had not been complied with. According to him, the non-compliance with the mandatory procedure vitiated the assessment proceedings.

6.5 In view of the aforesaid submissions, the Ld. AR prayed that both the additions sustained by the Ld. CIT(A) deserve to be deleted in toto.

8.1 The assessee has challenged the additions of (i) Rs.1,69,33,900/- on account of outstanding trade creditors and (ii) Rs.9,57,834/- being ad hoc disallowance of business expenditure. The principal grievance of the assessee is that the additions have been sustained without appreciating the true nature of the liabilities and the documentary evidence available on record.

8.2 At the outset, we find from the assessment order itself that the Assessing Officer has accepted that the assessee is a partnership firm engaged in the business of retail liquor vends in Chandigarh and that the scrutiny was confined to the issue of "Low income from TCS receipts – Liquor." During the assessment proceedings, the assessee had furnished details of suppliers, names, addresses, PANs, month-wise purchases, bank accounts, quantitative details and other business particulars. The Assessing Officer, however, proceeded to make the impugned additions primarily on the ground that

7 external confirmations and ledger confirmations of sundry creditors were not furnished.

8.3 The Ld. AR submitted that the assessee was prevented by sufficient cause from effectively placing the complete documentary evidence before the lower authorities and that all relevant material, including confirmations, bank statements evidencing subsequent payments, and supporting documents, is available and can be produced if one more opportunity is granted. It was, therefore, prayed that the matter may be restored to the file of the Ld. CIT(A) for fresh adjudication. The Ld. DR, while supporting the orders of the lower authorities, fairly submitted that if the matter is restored, the assessee should be directed to fully cooperate in the appellate proceedings.

8.4 Having considered the rival submissions, we are of the considered view that the interest of substantial justice would be met if the matter is restored to the file of the Ld. CIT(A) for fresh adjudication. We find that the impugned appellate order has been passed ex parte and the issues relating to the genuineness of the outstanding trade creditors as well as the allowability of business expenditure have not been examined in the light of the complete documentary evidence which the assessee now seeks to produce. Since the additions involve appreciation of factual material, the same deserve to be reconsidered after affording adequate opportunity to the assessee.

8.5 At the same time, we cannot lose sight of the fact that the present remand has become necessary primarily because of the failure of the assessee to diligently pursue the appellate proceedings before the Ld. CIT(A). The assessee is expected to prosecute its appeal with due care and promptness. Unnecessary adjournments and non-appearance result in avoidable consumption of judicial time and delay in disposal of litigation. Therefore, while restoring the matter, we deem it appropriate to impose costs so as to balance the equities.

8 8.6 Accordingly, in the interest of justice, we set aside the impugned order of the Ld. CIT(A) and restore the entire matter to his file for deciding the appeal afresh, in accordance with law, after affording reasonable and effective opportunity of being heard to the assessee. The assessee shall be at liberty to file all documentary evidence, confirmations, bank statements, books of account and any other material in support of its claim, and the Ld. CIT(A) shall consider the same objectively and pass a reasoned and speaking order without being influenced by the observations made in the earlier appellate order.

8.7 However, this restoration shall be subject to the condition that the assessee shall deposit costs of Rs.10,000/- (Rupees Ten Thousand only) with the Poor Patient Welfare Fund/Relief Fund, PGIMER, Chandigarh, within 30 days from the receipt of this order and shall furnish the proof of such deposit before the Ld. CIT(A) at the time of hearing. In the event of failure to deposit the aforesaid costs within the stipulated period, the benefit of this remand order shall not be available, unless the Ld. CIT(A), for sufficient cause shown, extends the time for compliance.

8.8 The assessee is also directed to extend full cooperation in the appellate proceedings and shall not seek unnecessary adjournments. It is made clear that in case the assessee fails to appear or does not cooperate despite adequate opportunities, the Ld. CIT(A) shall be at liberty to decide the appeal on the basis of the material available on record and in accordance with law.

8.9 Since we are restoring the matter to the file of the Ld. CIT(A) for fresh adjudication, all issues on merits, including the addition on account of outstanding trade creditors and the ad hoc disallowance of business expenditure, are kept open and are left to be decided afresh by the Ld. CIT(A). Likewise, the legal ground relating to the alleged non-compliance with the provisions of section 144B of the Act is also left open to be urged

9 before the Ld. CIT(A), if so advised. Accordingly, the appeal of the assessee is allowed for statistical purposes.

Order pronounced on 20/07/2026

Sd/- Sd/- मनोज कुमार अ�वाल लिलत कुमार (MANOJ KUMAR AGGARWAL) (LALIET KUMAR) लेखा सद�/ ACCOUNTANT MEMBER �ाियक सद� /JUDICIAL MEMBER AG आदेश की �ितिलिप अ�ेिषत/ Copy of the order forwarded to : 1. अपीलाथ�/ The Appellant 2. ��थ�/ The Respondent 3. आयकर आयु�/ CIT 4. आयकर आयु� (अपील)/ The CIT(A) 5. िवभागीय �ितिनिध, आयकर अपीलीय आिधकरण, च�ीगढ़/ DR, ITAT, CHANDIGARH 6. गाड� फाईल/ Guard File

BY ORDER, ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL KENDRIYA SADAN, SECTOR-9A CHANDIGARH