RUPESHKUMAR HITENDRAKUMAR KHATRI,SURAT vs. ITO, WARD 2(3)(4), SURAT

The background facts leading to these appeals are such that the assessee-individual, engaged in the business of polished diamonds, filed his return of income of AY 2021-22 declaring a total income of Rs. 36,36,480/-. The case of assessee was selected for scrutiny and the Ld. AO issued notices u/s 143(2)/142(1) which remained uncompiled by assessee. The AO also issued notices u/s 133(6) to certain parties from whom the assessee made purchase transactions during the year, however those parties also did not respond to AO’s notices. Ultimately, the Ld. AO treated the total purchases of Rs. 27,17,12,187/- made by assessee from those parties as having been made from grey market and estimated gross-profit at 3% as against profit of 0.35% declared by assessee; made addition of Rs. 72,00,373/- on account of gross-profit and thereby completed assessment through assessment-order dated 27.12.2022 u/s 144 assessing total income at Rs. 1,08,36,853/-. Further, vide penalty-order dated 29.05.2023, the Ld. AO also imposed a penalty of Rs. 54,48,860/- u/s 270A qua the impugned addition of Rs. 72,00,373/-. Aggrieved, the assessee carried matters in respective appeals before Ld. CIT(A). However, the Ld. CIT(A)

Since these appeals are inter-related, they were heard together and are being disposed of by this common order for the sake of convenience, brevity and clarity. We firstly start with Quantum-Appeal and thereafter take up Penalty-Appeal.

Ld. AR for assessee submitted that the Ld. CIT(A) passed ex-parte order dismissing assessee’s first appeal and merely approving the order of Ld. AO, although due to non-prosecution by assessee on the dates of hearing, but the order passed by Ld. CIT(A) is against the mandate of section 250(6) which provides: “The order of the Commissioner (Appeals) disposing of the appeal shall be in writing and shall state the points for determination, the decision thereon and the reason for the decision”. It is further submitted that the non-prosecution by assessee was due to bona fide reason as the Ld. CIT(A), while conducting first-appeal, has sent notices of hearing to e-mail address: tanvicorporation@gmail.com although the assessee has specifically mentioned email address: acc.tally83@gmail.com in the space provided in Form No. 35. Therefore, due to non-service of notices at proper email address, the assessee could not attend hearings fixed by Ld. CIT(A), which has led to the passing of ex-parte order by Ld. CIT(A).

Ld. AR went ahead to demonstrate that the assessment-order passed by Ld. AO is also ex-parte due to lack of submissions but the same had occurred for the reason that the assessee was not able to collect and file confirmations from concerned parties at that time which is also evident from the fact that the Ld. AO also issued notices u/s 133(6) directly to the parties but they did not give any response to AO’s notices. However, the assessee has already collected all relevant details and documents and ready to make an effective representation before Ld. AO. Ld. AR, therefore, prayed that in the interest of justice, one more opportunity be given to assessee by way of restoring this matter at the level of Ld. AO. He acknowledged that the assessee shall definitely make a proper and effective representation before Ld. AO.

The Ld. DR for revenue, though not opposing the prayer of the assessee for restoration, submitted that the assessee had remained non- compliant during the assessment proceedings as well as proceedings of first- appeal, which constrained the lower authorities to pass ex-parte orders. It was, therefore, submitted that while restoring the matter, appropriate directions may be issued to ensure strict compliance by the assessee.

In view of above submissions of parties; having regard to the principle of natural justice and also bearing in mind that no prejudice would be caused to revenue if the present matter is restored at the level of Ld. AO, we restore this matter to the file of Ld. AO for adjudication afresh, at the risk and responsibility of assessee. The Ld. AO shall give necessary opportunity of hearing to assessee and pass an appropriate order uninfluenced by his earlier order. The assessee is also directed to remain vigilant and ensure participation in the hearings as may be fixed by Ld. AO without seeking unnecessary adjournments failing which the Ld. AO shall be at liberty to proceed in accordance with law. Ordered accordingly.

This appeal involves penalty u/s 270A which is dependent on the outcome of Quantum-Appeal. Since we have already remanded Quantum- Appeal to Ld. AO, this matter is also remanded to Ld. AO for adjudication afresh after considering outcome of Quantum-Appeal and also considering submissions of assessee.

Resultantly, both of these appeals are allowed for statistical purposes.