KALU SK.,SODEPUR vs. ITO, WARD 3(1),, MALDA

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 2017-18 dated 01.12.2025. 2. The assessee is in appeal before the Tribunal raising the following grounds of appeal: "I) FOR THAT, That, the petitioner/assessee states and submits that the purported assessment order dated 16/03/2025 and the demand notice thereof as passed and/or issued by the assessing authority and the appellate order dated 01/12/2025 as passed by the Commissioner of Income Tax (Appeals) are bad, illegal, arbitrary, violative to the Constitutional and statutory mandates, without application of any mind and basis as such and in excess and/or without any juri iction and therefore, the said assessment order and demand notice dated 16/03/2025 as passed and/or issued by the assessing authority and the appellate order dated 01/12/2025 as passed by the Commissioner of Income Tax (Appeals) are liable to be modified and/or annulled and/or quashed and/or set aside. II) FOR THAT, your petitioner states and submits that it is evident from the fact that the purchases were made from marginal, illiterate, crop sharing farmers, residing in rural/agricultural areas, who are not maintaining formal records, PAN or banking facilities due to their socio-economic condition. Thus, furnishing of complete details of such farmers/ suppliers of crops, like PAN, addresses and confirmations from them was not at all feasible and practicable under such socio-economic structure of such farmers community. Moreover, it is further apparent that such transactions were related to agricultural produce, directly produced from the agriculturists and hence, such transactions are clearly outside the purview of TDS under the Income Tax Act. Thus, no deduction of TDS was required under Section 194C of the Income Tax Act and/or under any other provisions of the said Act. Furthermore, the payments to such farmers were made in cash out of mere commercial necessity and practical difficulty, as all such farmers are not conversant with banking system and insist on immediate cash payment only, due to their livelihood constraints and upon perusal of the law, it would be apparent that such exception, i.e. payment in cash is as well covered under the Rule 6DD of the Income Tax Rules, 1962. Whereas, in amidst of all such odds, the facts of the case clearly suggest that all purchases were duly recorded in the books of accounts and same were utilised in the course of business, which is evident from the corresponding records of sales and the same is duly accepted by the assessing authority as well. Under such facts and circumstances, disallowance of purchase to the extent of 20% is based on mere suspicion and assumption, cannot be allowed to be sustained in the eyes of law and therefore, the said assessment order dated 16/03/2025 and the demand notice thereof is liable to be quashed and/or set aside. III) FOR THAT, your petitioner states and submits that as and when the authority decided to prejudice the petitioner by way of adding 20% of its purchase to its income, with an allegation of bogus purchase, it was incumbent upon the assessing authority to bring enough materials on record, which would able to substantiate its allegation that such purchases were bogus and were not received by the petitioner. But, instead of acting in such manner, out of mere surmise and conjecture, the authority disallowed the 20% claim of purchases of the petitioner. Whereas, while disallowing such claim of the petitioner, the burden of proof that the transactions were not genuine were wholly lying upon the assessing authority and thus, while assessing the petitioner, by way of not acting in such manner, the assessing authority acted in a most arbitrary, whimsical and unjustified manner, in gross violation of the provisions of Section 40A(3), read with Rule 6DD and therefore, the said assessment order dated 16/03/2025 alongwith the demand notice thereof are liable to be struck down for the sake of justice, equity and good conscience. IV) FOR THAT, your petitioner states and submits that the authority disallowed 20% of the purchase on the ground of payment in cash and non- production of details of farmers, without even verifying the ground reality of the case. Whereas, while deciding the case of Attar Singh Gurmukh Singh versus ITO (1991) 191, 667 (SC), the Hon'ble Apex Court held that the terms of Section 40A(3) were not absolute. Consideration of business expediency and other factors were not excluded. Genuine and bonafide transactions were not taken out of the sweep of the Section. It is open to the assessee to furnish to the satisfaction of the assessing officer the circumstances under which the payment in the manner prescribed in Section 40A(3) was not practicable or would have caused genuine difficulties to the pay. Thereafter the Hon'ble Allahabad High Court as well adopted the same view while delivering the judgment in the case of CIT versus Raja Pal Automobiles, (2010), 320 ITR 185 (All). Whereas, while passing the assessment order, the assessing authority failed to perceive the situation under which such payments were made in cash to the poor and illiterate farmers for the purchases of crops and thereby, the authority passed a most cryptic order in gross disobedience of the judicial observation in that regard. Such an assessment order, which is pass in gross disobedience of judicial observation, cannot be allowed to have any legal feet to stand upon and therefore, the said assessment order dated 16/03/2025 is liable to be quashed and/or set aside. Copies of judgment in the case of Attar Singh Gurmukh Singh versus ITR (1991) 191, 667 (SC), as delivered by the Hon'ble Apex Court and the judgment in the case of CIT versus Raja Pal Automobiles, (2010), 320 ITR 185 (All) as delivered by the Hon'ble Allahabad High Court are all annexed hereto and Marked= "M". V) FOR THAT, your petitioner states and submits that the cash amounting to Rs. 2,80,210, so deposited was not fresh income and/or unaccounted receipts, but redeposit of cash earlier withdrawn from the bank for business and personal purpose of the petitioner. From the record also it is very much apparent that withdrawal and subsequent cash deposits were duly recorded in the regular books of accounts and were the part of regular cash flow cycle of the business. From such record also it would be evident that cash withdrawals were made to meet business and personal expenses of the petitioner, which were either partly paid in cash or not immediately incurred, resulting in redeposit of such unused portion of cash into the bank account. The petitioner as well made complete endeavor to demonstrate of such fact to the assessing authority by way of presenting its cash book. However, the authority made up its mind to add such of cash deposit to the ITA No(s). 520/KOL/2026 Assessment Year(s) 2017-18 income of the petitioner and therefore, without even adducing any material evidence in favour of its allegation, out of mere surmise and conjecture, the authority added such cash deposit of Rs. 2,80,210/- to the income of your petitioner. Such action of the authority, which is mere outcome of its surmise and conjecture, cannot be allowed to have any legal eyes and therefore, the said assessment order dated 16/03/2025 and the demand notice thereof are liable to be quashed and/or set aside. VI) FOR THAT, your petitioner states and submits that while deciding the case of Smt. Vinatha Madhusudan Reddy v The Assistant Commissioner of Income Tax, Circle 3(2)(1), Bangalore, the ITAT Bangalore Bench held that where the source of funds out of which deposit of cash was made in the bank account was explained by the assessee, such deposit would not be added to the income of the assessee. However, in this present case, the petitioner explained as to how, such Rs. 2,80,210/- was deposited in the bank, but inspite of the fact, in a most arbitrary manner, the authority refused to consider such contention of the petitioner and added the said cash deposit of Rs. 2,80,210/- to the income of the petitioner in gross violation of such order of ITAT as referred hereinabove. Such an action, which was ventured by the authority in gross violation of a judicial order is liable to be declared bad in the eyes of law and therefore, the said assessment order dated 16/03/2025 is liable to be declared void ab initio. Copy of the said order in the case of Smt. Vinatha Madhusudan Reddy v The Assistant Commissioner of Income Tax, Circle 3(2)(1), Bangalore, as passed by the ITAT Bangalore Bench is annexed hereto and Marked= "N". VII) FOR THAT, your petitioner states and submits that accordingly, the imposition of interest is as well bad in the eyes of law and therefore, such imposition of interest is as well liable to be quashed and/or set aside. VIII) FOR THAT, your petitioner/assessee states and submits that upon perusal of the whole proceedings, it would be evident that the authority acted in gross violation of Article 265, Article, 300A, read with Article 14, Article 19(1)(g) and Article 21 of the Constitution of India and therefore, the said assessment order dated 16/03/2025 and the demand notice thereof are liable to be quashed and/or set aside. IX) FOR THAT, the assessee/petitioner states and submits that it is the admitted position of the case is that the petitioner/assessee has come from a very poor financial back ground, which prevented him to become literate as for the sustenance of the petitioner and his family, the assessee was forced to take up financial activities right from its childhood instead of pursuing studies and because of such reason, without the help of any right person, it is not possible for the petitioner to comply all the statutory requirements as per the provisions of law. Hence, nonavailability of right person, who would assist the petitioner to proceed as per law within the prescribed limitation period, can be considered as a sufficient cause for delay under such circumstances. However, while rejecting the appeal on limitation ground, the appellate authority failed to perceive such of socio- economic condition of the petitioner and thereby, without any application of mind rejected the appeal summarily in a most arbitrary and whimsical manner. Such an order, which was passed summarily without any application of mind and without affording effective opportunity of being heard, cannot be allowed to be sustained in the eyes of law and therefore, the said appellate order dated 01/12/2025 is liable to b quashed and/or ser aside. X) FOR THAT, your petitioner/assessee states and submits that the learned Commissioner (Appeals) erred in law and on facts by dismissing the appeal in limine (at the threshold) on the grounds of limitation without affording the appellant a reasonable opportunity of being heard. This action violates the fundamental principle of audi alteram partem and therefore, the said appellate order dated 01/12/2025 is liable to be quashed and/or set aside. XI) FOR THAT, your petitioner states and submits that according to the provisions of Section 250(1) & (2) of the IT Act, it is mandatory to afford opportunity of hearing before passing an adverse order. Whereas in the instant case, the appellate authority failed to comply with the statutory mandate of Section 250(1) of the Income Tax Act, 1961, which requires the Commissioner to fix a day and place for the hearing of the appeal and give notice to the appellant. A decision on condonation of delay is a judicial exercise that cannot be performed ex-parte and therefore, the said order dated 01/12/2025 as passed by the Commissioner (Appeals) is liable to be declared void ab initio. XII) FOR THAT, your petitioner/assessee states and submits that the appellate authority erred in not properly exercising its discretionary power under Section 249(3) of the IT Act to condone the delay. By rejecting the appeal without a hearing on the ground of delay, the authority failed to evaluate whether there was "sufficient cause" for the delay, a determination that requires interaction with the appellant to understand the factual circumstances. Such an appellate order, which is having a complete adverse effect on the assessee, passed without following the mandate of Section 249 of the IT Act, cannot be allowed to be sustained in the eyes of law and therefore, the said appellate order dated 01/12/2025 as passed by the Commissioner (Appeals) is liable to be struck down for the sake of justice, equity and fair play.

XIII) FOR THAT, your petitioner/assessee states and submits that the rejection on purely technical grounds (limitation) without a hearing defeats the ends of substantial justice. As held by the Supreme Court in Collector Land Acquisition vs. Mst. Katiji, the approach towards condonation of delay should be liberal and justice-oriented rather than pedantic. Whereas, in instant case, instead of opting such liberal and justice-oriented approach, while rejecting the appeal, the appellate authority preferred a slipshod approach to prejudice the petitioner and thereby, the appellate authority acted in gross violation of law as settled by the Hon'ble Apex Court in that regard. Such an order, which is passed in violation of a judicial order, cannot be allowed to have any legal feet to stand upon and therefore, the said appellate order dated 01/12/2025 is liable to be quashed and/or set aside. Katiji as delivered by the Hon'ble Supreme Court is annexed hereto and Marked= "O". XIV) FOR THAT, your petitioner/assessee states and submits that the order dated 01/12/2025 is contrary to the settled law. In case of Accost Media LLP vs. DCIT, it has been reaffirmed that where an adverse decision (like dismissing an appeal) is contemplated, a personal hearing is mandatory even if not specifically requested. Such an order, which is passed in violation such settled law, is liable to be declared bad in the eyes of law and therefore, the said order dated 01/12/2025 is liable to be quashed and/ or set aside. XV) FOR THAT, your assessee/petitioner craves leave to modify and/or adduce and or rescind any ground / grounds and/or to produce further evidence / documents before or at the time of the appeal proceeding."

Copy of the order forwarded to: