JORAM LELI,ITANAGAR, ARUNACHAL PRADESH vs. ITO, WARD-1, NORTH LAKHIMPUR

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ITA 91/GTY/2026Status: DisposedITAT Guwahati02 June 2026AY 2020-216 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal noted the assessee's failure to provide sufficient documentary evidence but, considering the beneficial nature of Section 10(26) and the business being licensed by the State, granted one final opportunity. The matter was restored to the AO for de novo assessment.

What were the facts?

The assessee claimed exemption under Section 10(26) of the Income Tax Act for income earned in Arunachal Pradesh. The Assessing Officer added cash deposits and liquor purchases as unexplained income due to lack of documentation. The CIT(A) upheld the additions, dismissing the assessee's appeal.

What were the issues?

Whether the assessee's income from businesses in Arunachal Pradesh is eligible for exemption under Section 10(26) despite a lack of documentary evidence, and whether additions under Sections 69A and 69C were justified.

Which sections of the Income-tax Act were involved?

Section 10(26),Section 69A,Section 69C,Section 115BBE,Section 143(3),Section 144B,Section 250,Section 271B

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, GUWAHATI ‘DB’ BENCH AT KOLKATA

Before: SHRI SONJOY SARMA & SHRI RAKESH MISHRA

PER RAKESH MISHRA, ACCOUNTANT MEMBER:

This appeal filed by the assessee is against the order of the Commissioner of Income Tax (Appeals)-NFAC, Delhi [hereinafter referred to as Ld. 'CIT(A)'] passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for AY 2020-21 dated 26.12.2025. 2. The assessee is in appeal before the Tribunal raising the following grounds of appeal:

“1. For that the learned CIT(Appeal) ought to have hold that the order of assessment dated 22.09.2022 passed by learned Assessing Officer, Assessment Unit, Income Tax Department (AO) under section 143(3) r.w.s. 144B of the Income-tax Act, 1961 (Act) for the Assessment Year 2020-21 is bad in law, facts and procedure. 2. i) For that on the facts and circumstances of the case, the ld. CIT(A) has erred in not holding that the ld. AO was not justified in arbitrarily adding Rs.

Assessment Year(s) 2020-21 91,61,000/- to the income of the assessee by invoking provisions of section 69A of the Act. ii) For that the ld. CIT(A) ought to have hold that the ld. AO after accepting commission income of Rs. 1,74,268/- received from BSNL as not includible in total income of the assessee in view of section 10(26) of the Act, was not justified in arbitrarily ignoring the related turnover thereof and separately adding Rs. 91,61,000/- to the income of the assessee by invoking provisions of section 69A of the Act. iii) For that the ld. CIT(A) ought to have hold that the impugned addition of Rs. 91,61,000/- being aggregate amount of cash deposits made during the entire year by the ld. AO by invoking provisions of section 69A of the Act is beyond the ambit of the said section and is bad in law. 3. i) For that on the facts and circumstances of the case, the ld. CIT(A) has erred in not holding that the ld. AO was not justified in arbitrarily adding Rs. 12,87,64,166/- to the income of the assessee by invoking provisions of section 69C of the Act. ii) For that the ld. CIT(A) ought to have hold that the ld. AO after accepting the fact that during the year under consideration, the assessee was engaged in running a Bonded Warehouse of Liquor in the State of Arunachal Pradesh and sales of which during the entire year amounted to Rs. 12,87,64,166/- which itself explains the source of purchases for the said IMFL Bonded Warehouse, was not justified in still thereafter most arbitrarily adding the impugned amount by invoking provisions of section 69C of the Act. iii) For that the ld. CIT(A) ought to have hold that the ld. AO himself has subsequently accepted vide order dated 15.02.2023 passed under section 271B of the Act that the assessee has no income which is assessable under the head 'Profits and Gains of Business or Profession' in view of provisions of section 10(26) of the Act, the ld. AO was not justified in arbitrarily drawing an adverse inference against the assessee for filing return in Form ITR-2 or for not maintaining regular books of account and in consequently, adding Rs. 12,87,64,166/- to the income of the assessee by invoking provisions of section 69C of the Act. iv) For that the ld. CIT(A) ought to have hold that the impugned addition of Rs. 12,87,64,166/- made by the ld. AO by invoking provisions of section 69C of the Act being beyond the ambit of the said section, the same is bad in law and untenable.

4.

For that on the facts and circumstances of the case, the ld. CIT(A) ought to have held that the ld. AO after accepting the fact that the entire income of the ITA No(s). 91/GTY/2026 Assessment Year(s) 2020-21 assessee from his various businesses were not to be included in computation of Total Income in view of the section 10(26) of the Act was not justified in arbitrarily adding the amount involved in the transactions of the said businesses by invoking provisions of section 69A and 69C of the Act.

5.

For that the ld. CIT(A) has erred in passing the impugned order arbitrarily and ignoring and without dealing with the various submissions of the assessee and materials furnished by the assessee in gross violation of the principles of natural justice and fair-play. For that the impugned appellate order having been passed in a casual manner and without due application of mind, the same is bad in law.

6.

For that the ld. CIT(A) was not justified in passing the impugned order in gross violation of principles of natural justice and in utter disregard to the mandate of the law, without allowing any opportunity of personal hearing despite the specific request made by the assessee and thus, the impugned order is bad in law and untenable.

7.

For that the appellant craves leave of your honour to take additional ground or grounds of appeal and/or to modify or resign any ground(s) of appeal before or at the time of hearing.”

3.

Brief facts of the case are that the assessee filed his return of income for AY 2020-21 on 28.09.2020 declaring a total income of ₹NIL, showing a gross income of ₹12,87,64,166/- under the head "Income from Other Sources" and claiming an equal deduction u/s 57 of the Act by asserting an exemption u/s 10(26) of the Act as a Scheduled Tribe resident of Arunachal Pradesh. The case was selected for limited scrutiny to verify deductions from income from other sources and cash deposits. During the assessment proceedings, the Assessing Officer (hereinafter referred to as Ld. 'AO') noted that the assessee, engaged in the retail and distribution of alcoholic beverages, failed to maintain books of accounts, did not furnish an audit report, and failed to provide documentary evidence such as cash flow statements or details of purchases and sales to prove that his income accrued entirely within the specified area. Consequently, the Ld. AO treated cash deposits of ₹91,61,000/- as unexplained money u/s 69A of the Act and the liquor purchases of ₹12,87,64,166/- as ITA No(s). 91/GTY/2026 Assessment Year(s) 2020-21 unexplained expenditure u/s 69C of the Act, leading to a total assessed income of ₹13,79,25,166/- taxed u/s 115BBE of the Act in the assessment order dated 22.09.2022 passed u/s 143(3) r.w.s. 144B of the Act. Aggrieved with the assessment order, the assessee filed an appeal before the Ld. CIT(A) who observed that while the assessee established his Scheduled Tribe status, he completely failed to fulfil the other mandatory conditions for exemption u/s 10(26) of the Act, namely proving residence in the specified area for the relevant year and demonstrating that the entire income accrued from sources within Arunachal Pradesh. Afet noting the complete absence of books of accounts, purchase invoices, sales registers, or any other corroborative evidence to establish the nexus of the claimed income, the Ld. CIT(A) held that the burden of proof lay entirely on the assessee, which he failed to discharge despite multiple opportunities. Consequently, the Ld. CIT(A) held that the Ld. AO was fully justified in invoking the deeming provisions to treat the unsubstantiated cash deposits and large liquor purchase expenses as unexplained income taxed at special rates. Accordingly, the Ld. CIT(A) confirmed the action of the Ld. AO and dismissed the appeal of the assessee.

4.

Aggrieved with the order of the Ld. CIT(A), the assessee has filed the appeal before the Tribunal.

5.

The assessee sought adjournment but since there was no justification for seeking the adjournment, therefore, the same is rejected. None appeared on behalf of the assessee and the case was heard with the assistance of the Ld. DR. The Ld. DR relied upon the order of the Ld. CIT(A) and requested that the same may be upheld.

6.

Aggrieved with the order of the Ld. CIT(A), the assessee is in appeal before the Tribunal. None appeared on behalf of the assessee. We have ITA No(s). 91/GTY/2026 Assessment Year(s) 2020-21 heard the Ld. DR and perused the material on record. It is observed that the assessee claims exemption u/s 10(26) of the Act on the ground of being a member of a Scheduled Tribe residing in Arunachal Pradesh. Although the assessee failed to produce sufficient documentary evidence before the lower authorities to establish the geographical nexus of the income, considering the beneficial nature of the exemption u/s 10(26) of the Act and the fact that the assessee is operating a business licensed by the State Government of Arunachal Pradesh, we are of the considered view that the assessee deserves one final opportunity to substantiate his claim.

7.

Therefore, in the interest of justice and fair play, the order of the Ld. CIT(A) is set aside and the matter is restored to the file of the Ld. AO for de novo assessment. The assessee is directed to fully cooperate with the Ld. AO and produce requisite documents, including books of account, invoices, cash flow statements, and relevant permits etc., to prove that the income arose wholly within the specified area. The Ld. AO shall afford a reasonable opportunity of being heard to the assessee before passing the fresh order.

8.

In the result, the appeal filed by the assessee is partly allowed for statistical purposes. Order pronounced in the open Court on 2nd June, 2026. [Sonjoy Sarma] [Rakesh Mishra] Judicial Member Accountant Member Dated: 02.06.2026 Bidhan (Sr. P.S.)

Assessment Year(s) 2020-21 Copy of the order forwarded to:

1.

Joram Leli, Sonam Teli Complex, Itanagar, Arunachal Pradesh, 791111. 2. ITO, Ward-1, Income Tax Office, Bora Complex, North Lakhimpur, Assam, 787001. 3. CIT(A)-NFAC, Delhi.

4.

CIT-

5.

CIT(DR), Guwahati Benches, Guwahati.

6.

Guard File. //// By order

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