VIJAYAN GOWRI,TIRUVALLUR vs. ITO, WARD-1,, TIRUVALLUR

The brief facts of the case emanating from the records are that the assessee is an individual, had not filed her return of income u/s.139 of the Act, for the A.Y.2018-19. Based on information available with the Department, it was noticed that the assessee had undertaken substantial cash transactions in her bank account maintained with Andhra Bank, involving cash deposits of Rs.72,45,800/- and cash withdrawals aggregating to Rs.3,04,77,066/-. Further, information regarding receipt of interest income subjected to deduction of tax at source u/s.194A of the Act was also available with the Department. In view of the above information, the AO formed a belief that income chargeable to tax had escaped assessment and accordingly reopened the assessment u/s.147 of the Act by issuing notice u/s.148 of the Act dated 31.03.2022. In response thereto, the assessee filed her return of income on 30.04.2022 declaring a total income of Rs.5,56,670/-. Subsequently, the case was selected for scrutiny assessment and notices u/s.143(2) and 142(1) of the Act were issued from time to time calling for various details and explanations.

During the course of assessment proceedings, the assessee submitted that she was engaged in the business of purchase and sale of paddy under the proprietary concern namely V. Gowri Traders. It was explained that the cash withdrawn from the bank account was utilized for making payments to small farmers from whom paddy was procured. The assessee also furnished certain details regarding the cash deposits and withdrawals appearing in the bank account.

On verification of the return of income filed in response to notice u/s.148 of the Act, the AO noticed that the assessee had disclosed gross receipts/turnover of Rs.2,48,50,950/-. Since the assessee had not produced complete books of account and supporting documents for verification, the AO rejected the book results u/s.145 of the Act. Thereafter, considering the nature of business carried on by the assessee, the AO proceeded to estimate the income by applying a net profit rate of 8% on the gross receipts of Rs.2,48,50,950/- and determined the business income accordingly by passing an order u/s.147 of the Act dated 09.02.2023. 7. Aggrieved by the order of the AO the assessee filed an appeal before the ld.CIT(A) on 09.03.2023. At the outset, we note that the ld.CIT(A) had given several opportunities to the assessee to substantiate the grounds of appeal filed as per para 4 of the ld.CIT(A)’s order. However, the assessee chose to be silent. Hence, the ld.CIT(A) passed the order dated 05.03.2026 by confirming the order of the AO.

Aggrieved by the order of the ld.CIT(A) the assessee is in appeal before us.

The ld.AR for the assessee submitted that the order of the ld.CIT(A) is erroneous, as the assessee has not participated in the appellate proceedings. Further, the ld.AR also raised a ground on legal issue, wherein the AO has :-5-: ITA. No:1435/Chny/2026. erroneously reopened the assessment u/s.147 of the Act after 3 years, though the additions are lessthan Rs.50.00 Lakhs. In view of the above, the ld.AR prayed for setting aside the orders of the authorities and allow the appeal of the assessee.

The ld.DR supported the orders of the authorities and submitted that the assessee is negligent in responding to the statutory notices and hence the ld.CIT(A) has rightly confirmed the order of the AO and prayed for confirming the order of the ld.CIT(A).

We have heard the rival submissions and perused the material available on record. The short issue before us is whether, in the facts and circumstances of the case, the order passed by the ld.CIT(A) confirming the assessment order without the effective participation of the assessee warrants interference. It is an undisputed fact that the assessment was completed by the AO u/s.147 r.w.s.144B of the Act by estimating the income of the assessee at 8% of the disclosed turnover after rejecting the books of account u/s.145 of the Act. It is also evident from the record that the assessee carried the matter in appeal before the ld.CIT(A). However, despite issuance of notices on various occasions, the assessee failed to effectively prosecute the appeal before the ld.CIT(A). Consequently, the ld.CIT(A) proceeded to dispose of the appeal by confirming the action of the AO.

Before us, the Ld.AR submitted that the assessee could not effectively participate in the appellate proceedings and, therefore, the grounds raised before the ld.CIT(A) remained unadjudicated on merits. It was further contended that the assessee intends to raise certain legal grounds challenging the validity of the reassessment proceedings initiated u/s.147 of the Act, including the contention that the reopening was beyond the permissible period prescribed under the Act, and that such legal grounds require adjudication after considering the relevant facts and records.

We further note that the assessee has sought to raise legal grounds touching upon the validity of the reassessment proceedings. Since such legal grounds go to the root of the matter and may require examination of facts and records which are not available before us in entirety, we are of the considered opinion that the interests of justice would be best served if the entire matter is restored to the file of the ld.CIT(A) for fresh adjudication.

Accordingly, in the interest of substantial justice and fair play, we set aside the impugned order of the ld.CIT(A) and restore the matter to his file with a direction to adjudicate the appeal afresh in accordance with law after providing adequate opportunity of being heard to the assessee. The assessee is also granted liberty to raise all legal and factual grounds available under the Act, including the grounds challenging the validity of the reassessment proceedings initiated u/s.147/148 of the Act. The ld.CIT(A) shall consider and adjudicate the same on merits by passing a speaking order. At the same time, we make it clear that the assessee shall extend full cooperation in the appellate proceedings and shall promptly furnish all details, explanations and evidences as may be called for by the ld.CIT(A). Failure to do so would entitle the appellate authority to proceed in accordance with law on the basis of the material available on record.