OMAIR TALHA MOHTESHAM ,MANGALORE vs. ITO WARD- 1(1), MANGALORE

The impugned order is opposed to law and facts of the case insofar as it is prejudicial to the interest of the Appellant.

The action of Ld. NFAC in summarily dismissing the appeal on a pre-set mind for alleged "non-prosecution" is untenable, erroneous and bad in law, and in doing so

Without prejudice to Ground No. 2, the Appellant objects to the action of the Ld. NFAC / AO in sustaining various additions and disallowances made by the Assessing Officer in the assessment order, the particulars whereof are as under –

The Assessee, an individual engaged in the wholesale and retail sale of steel as a proprietor, filed the return of income on 31 December 2023, declaring a total income of ₹45,02,140. The return was selected for scrutiny due to the low net profit shown, and a notice under section 143(2) of the Act was issued on 19 June 2024. The scrutiny proceedings culminated in an assessment order dated 17 February 2025, passed under section 143(3) read with section 144B of the Income-tax Act, 1961.

The Assessing Officer noted that the profit and loss account reported sales of ₹42,12,76,694, whereas the Goods and Services Tax return reflected turnover of ₹42,26,27,431. The resulting difference of ₹13,50,737 was added to the Assessee’s income. The Assessing Officer also noted loading and unloading charges of ₹2,78,965 in the profit and loss account and ₹12,65,040 in the return of income, and disallowed 20% of the aggregate expenditure of ₹15,44,005. Further, the Assessing Officer observed that the Assessee had debited a trade discount of ₹9,83,648 to the profit and loss account, although such discount represented a reduction in the sale price and should have been adjusted against net sales, and therefore proposed its disallowance. Business promotion expenditure of ₹1,51,840 was treated as capital expenditure and disallowed. Commission expenditure of ₹5,67,545 was also questioned for want of supporting evidence. In addition, the Assessee was required to explain the source of a gift of ₹15,00,000 received from his mother and to show cause why it should not be added to his income. 05. The Assessee failed to furnish information in response to the show-cause notice. In the absence of compliance, the Assessing Officer made the additions and disallowances referred to above, aggregating ₹48,62,581, and assessed the total income at ₹93,64,721 by order dated 17 February 2025 passed under section 143(3) read with section 144B of the Income- tax Act, 1961. 06. Aggrieved by the assessment order, the Assessee appealed to the learned CIT(A). Notices were issued on 4 July 2025 and 6 August 2025, but no submissions were filed; on 22 August 2025, the Assessee sought an adjournment. By appellate order dated 2 September 2025, the learned CIT(A) upheld the Assessing Officer’s action, observing that the Assessee had neither rebutted the findings in the assessment order nor shown an intention to prosecute the appeal. Accordingly, the appeal was dismissed.

Aggrieved by the assessment and appellate orders, the Assessee is in appeal before us. The learned counsel filed a 146-page paper book containing written submissions on all issues, a reconciliation of the turnover reported in the Goods and Services Tax return with the books of account, copies of the financial statements, the GSTR-9 annual return for the relevant assessment year, and an extract of the purchase account. The written submissions state that the difference of ₹13,50,737 between the turnover reported in the profit and loss account and the GST return was fully reconciled and that the related addition was therefore unwarranted. It was further submitted that the other disallowances were made on an ad hoc basis or by incorrectly treating revenue expenditure debited to the profit and loss account as capital expenditure. As regards the sum of ₹15,00,000, it was submitted that the amount was a gift received from the Assessee’s mother and, being a gift from a relative, could not be added to the Assessee’s income. We heard Shri Deepak Gunashekhar, Chartered Accountant and authorised representative of the Assessee. 08. Shri Pradeep S., Additional Commissioner of Income Tax and learned Senior Departmental Representative, strongly contended that the Assessee had failed to cooperate before both the Assessing Officer and the learned CIT(A). He therefore submitted that the Assessee was not entitled to any relief and that the additions made by the Assessing Officer should be confirmed. 09. We have carefully considered the rival submissions and perused the orders of the lower authorities. The Assessing Officer passed the assessment order ex parte because the Assessee did not respond to the show-cause notice. The learned CIT(A) also dismissed the appeal on the ground that the Assessee did not intend to prosecute it, thereby confirming the Assessing Officer’s action. It is therefore apparent that the Assessee was not heard by either authority. Further, although the Assessee sought an adjournment on the last date, the request was neither expressly accepted nor rejected, and the appellate order was passed immediately thereafter. The learned CIT(A) ought to have fixed another date of hearing, while cautioning the Assessee that the appeal would otherwise be decided on the available material. Moreover, since the assessment order was passed ex parte, the learned CIT(A) could have exercised the available powers to obtain the relevant material or make the necessary enquiries, but did not do so. 10. In view of these facts, the Assessee was not afforded an effective opportunity of hearing before either the Assessing Officer or the learned CIT(A). The Assessee has now filed a 146-page paper book addressing the issues on which the additions were made. The claim that the gift received from the Assessee’s mother was from a relative also requires examination, including verification of the gift itself. Accordingly, we restore the entire appeal to the file of the Assessing Officer. The Assessee shall file the same paper book, together with any further information it wishes to rely upon, within 90 days from the date of receipt of this order. The Assessing Officer shall examine the material and decide the issues in accordance with law after granting the Assessee an adequate opportunity of hearing. All grounds of appeal are allowed for statistical purposes in the above terms. 11. In the result, the Assessee’s appeal is allowed for statistical purposes. Order pronounced in the open court on 23rd October, 2026.