CARLISH HINGE,JAINTIA HILLS vs. ITO WARD-1, EAST KHASI HILLS

Error in Law and Fact: The Learned Assessing Officer (AO) erred in treating the appellant's income as taxable despite the clear exemption available under Section 10(26) of the Income Tax Act, 1961, which exempts income accruing or arising to a member of a Scheduled Tribe residing in specified areas, including Meghalaya.

Failure to Consider Constitutional Protection:

Inadvertent Error in Return Filing: That the Learned Assessing Officer erred in law and on facts in raising a demand of 20,36,531/- along with interest, solely on the basis of the return filed on 31.10.2023 (Acknowledgement No. 488680161311023), wherein the appellant had inadvertently shown taxable income of 29,12,340/- The said declaration was a bona fide mistake committed while filing the return in response to notice under Section 148 of the Income Tax Act, 1961. Since the law does not permit revision of a return filed pursuant to notice u/s 148, the appellant was unable to rectify the error. The authorities failed to appreciate that the appellant's entire income is exempt under Section 10(26) of the Act, and therefore no tax liability could arise. The demand raised is thus illegal, arbitrary, and without juri iction.

Violation of Principles of Natural Justice: The Appellant was unaware of the fact that appeal proceedings were initiated by the Income Tax Department and due to his bad health (Snake Bite), he could not reply to the notices served by the Income Tax Department. The CIT(A) dismissed the appeal without granting adequate opportunity to the appellant to present his case, despite the appellant's genuine health issues and inability to respond to notices. This constitutes a violation of natural justice.

Excessive and Unjust Demand: The demand of 20,36,531/- along with interest is illegal, arbitrary, and without juri iction, as the appellant's income is wholly exempt. The levy of tax and interest is therefore liable to be quashed."

Brief facts of the case are that for AY 2016-17, the assessee did not file the original return of income u/s 139 of the Act. The case was reopened u/s 147 of the Act based on information indicating cash deposits aggregating to ₹1,23,67,600/- in bank accounts. In response to the notice issued u/s 148 of the Act on 23.03.2023, the assessee filed the return on 31.10.2023 declaring a presumptive business income of ITA No(s). 4/GTY/2026 Assessment Year(s) 2016-17 Carlish Hinge. ₹29,12,341/-. During the assessment proceedings, the assessee claimed that the entire income accrued from the coal business in the state of Meghalaya and was exempt u/s 10(26) of the Act, being a member of the recognized Pnar Scheduled Tribe community. However, the Assessing Officer (hereinafter referred to as Ld. 'AO') observed that the assessee had voluntarily declared the income of ₹29,12,341/- in the return filed in response to the notice u/s 148 of the Act without claiming the exemption u/s 10(26) of the Act, and such exemption could not be allowed suo moto by the Department. Consequently, the Ld. AO accepted the returned income and completed the assessment u/s 143(3) r.w.s. 147 r.w.s. 144B of the Act on 22.03.2024, assessing the total income of the assessee at ₹29,12,341/-. Aggrieved with the assessment order, the assessee filed an appeal before the Ld. CIT(A) with a delay of 3 months and 9 days due to health issues, which the Ld. CIT(A) considered and condoned to admit the appeal for adjudication. During the appellate proceedings, despite the issuance of multiple notices, the assessee remained non-compliant, leading the Ld. CIT(A) to proceed ex-parte. Deciding the matter on merits, the Ld. CIT(A) observed that the Ld. AO had not made any new additions but had merely accepted the business income of ₹29,12,341/- that the assessee himself had declared in the return filed in response to the notice u/s 148 of the Act. In the absence of any submissions or supporting evidence from the assessee to contest the assessed income, the Ld. CIT(A) upheld the assessment order. Accordingly, the Ld. CIT(A) confirmed the action of the Ld. AO and dismissed the appeal of the assessee.

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

Rival contentions were heard and the submissions made have been examined. It was submitted by the Ld. AR that the assessee belongs to the Scheduled Tribe community of Meghalaya which is recognized Scheduled Tribe as specified in the Constitution (Scheduled Tribe) Union Territory Order, 1951 and the income was exempt u/s 10(26) of the Act. It was submitted that there was an inadvertent error in filing the return of income and the income was shown as taxable in place of being claimed as exempt. The certificate of belonging to the Scheduled Tribe was filed before the Ld. AO, which is mentioned at para 4.2 of the assessment order. It was stated that the assessee could not respond to the notices issued and therefore proper compliance could not be made. The Ld. AO assessed the income as shown in the return of income filed in compliance to the notice issued u/s 148 of the Act and did not allow the exemption which was inadvertently omitted to be claimed in the return of income. Before the Ld. CIT(A) the compliance to the notices issued could not be made on account of health issues and the assessee undergoing medical treatment at his native place and could not attend to the communication in this regard. The Ld. AR requested that one more opportunity may be granted so that the required relief could be claimed. In the Form No. 36 the assessee has relied upon the decision of S. Nagraj & Ors. V. State of Karnataka 1993 AIR (SC) 595. The Ld. DR relied upon the order of the Ld. CIT(A) and requested that the same may be upheld.

We have considered the submissions made, gone through the facts of the case and perused the record and the order of the Ld. CIT(A). Since there was no proper compliance before both the Ld. AO as well as before the Ld. CIT(A), in the interest of justice and fair play it was considered by the Bench that one more opportunity of being heard may ITA No(s). 4/GTY/2026 Assessment Year(s) 2016-17 Carlish Hinge. be provided. Hence, after examining the facts of the case, we deem it appropriate to set aside the order of the Ld. CIT(A) and remand the matter back to the Ld. AO for making the reassessment de novo. Needless to say, the assessee shall be given a reasonable opportunity of being heard to make any further submission it wants to make in support of the relief claimed and shall not seek unnecessary adjournments. Accordingly, the grounds taken by the assessee in this appeal are partly allowed for statistical purposes.

In the result, the appeal filed by the assessee is partly allowed for statistical purposes. Order pronounced in the open Court on 18th June, 2026. [Yogesh Kumar US] [Rakesh Mishra] Judicial Member Accountant Member Dated: 18.06.2026 Bidhan (Sr. P.S.)

CIT-

CIT(DR), Guwahati Benches, Guwahati.

Guard File. //// By order