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Facts
The assessee appealed against the CIT(A)'s order upholding the disallowance of Rs. 59,91,122/- for business loss. The original assessment order u/s 143(3) disallowed the loss due to lack of supporting evidence, despite multiple opportunities given to the assessee.
Held
The Tribunal noted that the assessee had indicated 'No' for email communication in Form No. 35, leading to non-receipt of notices from the CIT(A). In the interest of justice, the Tribunal set aside the CIT(A)'s order and restored the matter for fresh adjudication, allowing the assessee due opportunity.
Key Issues
Whether the CIT(A) erred in upholding the disallowance of business loss due to non-compliance with notices, when the assessee claimed non-receipt due to opting out of email communication.
Sections Cited
143(3), 142(1), 50C, 271(1)(c)
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Income Tax Appellate Tribunal, MUMBAI BENCH “H (SMC
Before: SHRI OM PRAKASH KANT & SHRI RAHUL CHAUDHARY
ORDER
PER OM PRAKASH KANT, AM
This appeal by the assessee is directed against order dated 11.04.2025 passed by the Ld. Commissioner of Income-tax (Appeals) – National Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for assessment year 2014-15, raising following grounds:
1. Ground1. That the assessment order u/s 143(3) of the Income Tax Act, 1961 ("the Act") dated 30.11.2016 passed by the Assessing Officer ("AO") and the additions/disallowances made therein are illegal, bad in law and without jurisdiction.
Ground2-The CIT (A) NFAC has erred in law and in facts in The CIT (A) NFAC has erred in law and in facts in The CIT (A) NFAC has erred in law and in facts in confirming the assessment order p confirming the assessment order passed by the AO assessing the assed by the AO assessing the total income of Rs.3063670/ total income of Rs.3063670/- as against returned loss of as against returned loss of Rs.3226437/ Rs.3226437/-. Ground3-That the Commissioner of Income Tax (Appeals) That the Commissioner of Income Tax (Appeals) ("CIT(A)") That the Commissioner of Income Tax (Appeals) have grossly erred on facts and in law in passing the orders have grossly erred on facts and in law in passing the orders have grossly erred on facts and in law in passing the orders without giving a sufficient a without giving a sufficient and reasonable opportunity to the nd reasonable opportunity to the assessee to be heard. The orders have been passed in violation of assessee to be heard. The orders have been passed in violation of assessee to be heard. The orders have been passed in violation of principles of natural justice. principles of natural justice. Ground4-That, on the facts and circumstances of the case, the That, on the facts and circumstances of the case, the That, on the facts and circumstances of the case, the CIT(A) has erred in law and on facts in upholding the assessment CIT(A) has erred in law and on facts in upholding the assessment CIT(A) has erred in law and on facts in upholding the assessment order u/s 143(3) of the Act and the additions/disallowances made order u/s 143(3) of the Act and the additions/disallowances made order u/s 143(3) of the Act and the additions/disallowances made therein. Ground5-That on the facts and circumstances of the case and law That on the facts and circumstances of the case and law That on the facts and circumstances of the case and law The Learned commissioner of Income tax (Appeals) has erred up The Learned commissioner of Income tax (Appeals) has erred up The Learned commissioner of Income tax (Appeals) has erred up holding the Addition made by the Ld. Assessing office holding the Addition made by the Ld. Assessing office holding the Addition made by the Ld. Assessing office erred in making addition on account of business loss, under the head of making addition on account of business loss, under the head of making addition on account of business loss, under the head of business & profession, which is contrary to rules of reasonableness business & profession, which is contrary to rules of reasonableness business & profession, which is contrary to rules of reasonableness in approach and betrays a prejudiced mind. amounting to Rs. in approach and betrays a prejudiced mind. amounting to Rs. in approach and betrays a prejudiced mind. amounting to Rs. 5991122/- Ground6-That on the facts and circumstances of That on the facts and circumstances of the case and law the case and law The Learned commissioner of Income tax (Appeals) has erred up The Learned commissioner of Income tax (Appeals) has erred up The Learned commissioner of Income tax (Appeals) has erred up holding the Addition made by the Ld. Assessing office erred in holding the Addition made by the Ld. Assessing office erred in holding the Addition made by the Ld. Assessing office erred in making addition on account of under section 50C which is contrary making addition on account of under section 50C which is contrary making addition on account of under section 50C which is contrary to rules of reasonableness in approach and betr to rules of reasonableness in approach and betrays a prejudiced ays a prejudiced mind. amounting to Rs. 299010/ mind. amounting to Rs. 299010/- Ground7-All of the above grounds of appeal are without prejudice All of the above grounds of appeal are without prejudice All of the above grounds of appeal are without prejudice and are mutually exclusive and are mutually exclusive to each other.
2. We have heard rival submissions of the parties and perused We have heard rival submissions of the parties and perused We have heard rival submissions of the parties and perused It is noted that the learned CIT(A) the relevant materials on record. the relevant materials on record. It is noted that the learned CIT(A) has proceeded to dispose of the appeal ex has proceeded to dispose of the appeal ex-parte qua the assessee parte qua the assessee and upheld the disallowance made by the Assessing Officer (AO) to and upheld the disallowance made by the Assessing Officer (AO) to and upheld the disallowance made by the Assessing Officer (AO) to the tune of ₹59,91,122/ , representing business loss, on the ground 59,91,122/-, representing business loss, on the ground that multiple notices that multiple notices issued during the course of appellate issued during the course of appellate proceedings via e-mail were not complied with. mail were not complied with. The relevant mail were not complied with. observation of the Ld. CIT(A) is reproduced as under: observation of the Ld. CIT(A) is reproduced as under: observation of the Ld. CIT(A) is reproduced as under:
“5.0 Decision on grounds of appeal and reasons thereof: “5.0 Decision on grounds of appeal and reasons thereof: “5.0 Decision on grounds of appeal and reasons thereof:- The only ground raised in the present appeal i only ground raised in the present appeal is against addition of s against addition of Rs. 59,91,122/ Rs. 59,91,122/- on account of Business loss. 5.1 The Ld. AO discussed the impugned addition in Para 5.1 The Ld. AO discussed the impugned addition in Para 5.1 The Ld. AO discussed the impugned addition in Para-5 of the assessment order dated 30.11.2016 passed u/s 143(3) of the assessment order dated 30.11.2016 passed u/s 143(3) of the assessment order dated 30.11.2016 passed u/s 143(3) of the Act. The relevant portion is reproduced as under: the Act. The relevant portion is reproduced as under: the Act. The relevant portion is reproduced as under:
5. On verificati
5. On verification of the details filed it is noted that the on of the details filed it is noted that the assessee has debited a sum of Rs. 59,91,122/ assessee has debited a sum of Rs. 59,91,122/ assessee has debited a sum of Rs. 59,91,122/- as "Other Income Loss" under the head Cost of sales. The assessee vide Income Loss" under the head Cost of sales. The assessee vide Income Loss" under the head Cost of sales. The assessee vide notice u/s 142(1) 17.10.2016 and subsequently vide order notice u/s 142(1) 17.10.2016 and subsequently vide order notice u/s 142(1) 17.10.2016 and subsequently vide order Sheet noting dated 28.10.2016, was sp Sheet noting dated 28.10.2016, was specifically asked to file ecifically asked to file the details of "Other income Loss". The assessee vide its letter the details of "Other income Loss". The assessee vide its letter the details of "Other income Loss". The assessee vide its letter dated 24.10.2016 submitted as under: dated 24.10.2016 submitted as under:- "Company has incurred Losses of Rs. 59,91,122/ "Company has incurred Losses of Rs. 59,91,122/ "Company has incurred Losses of Rs. 59,91,122/- for trading of specified item of textiles goods. of specified item of textiles goods. 5.2 Except for the above mentio 5.2 Except for the above mentioned statement, no supporting ned statement, no supporting evidentiary details have been filed. No details what so ever, in evidentiary details have been filed. No details what so ever, in evidentiary details have been filed. No details what so ever, in respect respect respect of of of such such such trading trading trading was was was filed filed filed despite despite despite sufficient sufficient sufficient opportunities been given to the assessee. No sale bill, no opportunities been given to the assessee. No sale bill, no opportunities been given to the assessee. No sale bill, no purchase bills, no details of payment made or rece purchase bills, no details of payment made or rece purchase bills, no details of payment made or received for such sale or purchase was brought on record. In the absence such sale or purchase was brought on record. In the absence such sale or purchase was brought on record. In the absence of evidence, the claim of the such loss is not admissible. of evidence, the claim of the such loss is not admissible. of evidence, the claim of the such loss is not admissible. 5.3 In order to follow law of natural justice, one more 5.3 In order to follow law of natural justice, one more 5.3 In order to follow law of natural justice, one more opportunity was granted to the assessee and a show cause opportunity was granted to the assessee and a show cause opportunity was granted to the assessee and a show cause was issued to t was issued to the assessee vide order sheet looting dated he assessee vide order sheet looting dated 28.10.2016 28.10.2016 28.10.2016 whereby the assessee was granted final whereby the assessee whereby the assessee was was granted final granted final opportunity to submit details/evidence in respect of Other opportunity to submit details/evidence in respect of Other opportunity to submit details/evidence in respect of Other income Loss. The AR was also asked to explain as to why income Loss. The AR was also asked to explain as to why income Loss. The AR was also asked to explain as to why such loss be not disallowed and added to the tot such loss be not disallowed and added to the tot such loss be not disallowed and added to the total income of the in the absence of the details/evidence. The assessee was the in the absence of the details/evidence. The assessee was the in the absence of the details/evidence. The assessee was granted time upto 04.11.2016, but to no avail, neither granted time upto 04.11.2016, but to no avail, neither granted time upto 04.11.2016, but to no avail, neither anybody attended nor any written submission was filed. In anybody attended nor any written submission was filed. In anybody attended nor any written submission was filed. In fact no details have been filed as desired in respect of such fact no details have been filed as desired in respect of such fact no details have been filed as desired in respect of such claim till the date of this order. ill the date of this order.
“5.4 Section 143(2) puts the first onus on the assessee to “5.4 Section 143(2) puts the first onus on the assessee to “5.4 Section 143(2) puts the first onus on the assessee to substantiate its claims in its return of income i.e. if any claim substantiate its claims in its return of income i.e. if any claim substantiate its claims in its return of income i.e. if any claim is made in the return of income, the thus to substantiate such is made in the return of income, the thus to substantiate such is made in the return of income, the thus to substantiate such claim lies with the assessee. This onus claim lies with the assessee. This onus has not been has not been discharged at all. Therefore, the claim of such "Other income discharged at all. Therefore, the claim of such "Other income discharged at all. Therefore, the claim of such "Other income Loss" of Rs. 59,91,122/ Loss" of Rs. 59,91,122/- is thus disallowed and added back is thus disallowed and added back to the total income of the assessee. Penalty proceedings u/s to the total income of the assessee. Penalty proceedings u/s to the total income of the assessee. Penalty proceedings u/s 271(1)(c) is initiated separately for furnishing of inaccurat 271(1)(c) is initiated separately for furnishing of inaccurat 271(1)(c) is initiated separately for furnishing of inaccurate particulars of income. particulars of income. 5.2 I have carefully gone through the grounds of appeal, facts 5.2 I have carefully gone through the grounds of appeal, facts 5.2 I have carefully gone through the grounds of appeal, facts of the case and assessment order passed by the AO. On of the case and assessment order passed by the AO. On of the case and assessment order passed by the AO. On perusal of records and assessment order, it seems that perusal of records and assessment order, it seems that perusal of records and assessment order, it seems that appellant has miserably failed to submit the details of "Ot appellant has miserably failed to submit the details of "Ot appellant has miserably failed to submit the details of "Other Income Loss" amounting to Rs. 59,91,122/ Income Loss" amounting to Rs. 59,91,122/- during the course during the course of assessment proceedings in spite of giving various of assessment proceedings in spite of giving various of assessment proceedings in spite of giving various opportunities. Assessee vide notice u/s 142(1) 17.10.2016 opportunities. Assessee vide notice u/s 142(1) 17.10.2016 opportunities. Assessee vide notice u/s 142(1) 17.10.2016 and subsequently vide order Sheet noting dated 28.10.2016, and subsequently vide order Sheet noting dated 28.10.2016, and subsequently vide order Sheet noting dated 28.10.2016, was specifically asked was specifically asked to file the details of "Other income to file the details of "Other income Loss". However, appellant have not submitted any supporting Loss". However, appellant have not submitted any supporting Loss". However, appellant have not submitted any supporting evidences or details in respect of such trading loss. No sale evidences or details in respect of such trading loss. No sale evidences or details in respect of such trading loss. No sale bill, no purchase bills, no details of payment made or received bill, no purchase bills, no details of payment made or received bill, no purchase bills, no details of payment made or received for such sale or purchase was br for such sale or purchase was brought on record. Therefore, ought on record. Therefore, AO has disallowed the claim of the appellant under the head AO has disallowed the claim of the appellant under the head AO has disallowed the claim of the appellant under the head of "Other income Loss" and made the impugned addition. of "Other income Loss" and made the impugned addition. of "Other income Loss" and made the impugned addition. 5.3 Primary onus lies with the assessee to substantiate its 5.3 Primary onus lies with the assessee to substantiate its 5.3 Primary onus lies with the assessee to substantiate its claim made in his statement of income in respect of b claim made in his statement of income in respect of b claim made in his statement of income in respect of business loss or expenses. As discussed above, appellant failed to loss or expenses. As discussed above, appellant failed to loss or expenses. As discussed above, appellant failed to submit the details of "Other Income Loss" either before the AO submit the details of "Other Income Loss" either before the AO submit the details of "Other Income Loss" either before the AO during course of assessment proceedings or appellate during course of assessment proceedings or appellate during course of assessment proceedings or appellate proceedings in spite of getting several opportunities. Therefore, proceedings in spite of getting several opportunities. Therefore, proceedings in spite of getting several opportunities. Therefore, appellant has miserably failed to discharge the onus and t has miserably failed to discharge the onus and t has miserably failed to discharge the onus and substantiate its claim made in his statement of income in substantiate its claim made in his statement of income in substantiate its claim made in his statement of income in respect of business loss. As mentioned above, appellant was respect of business loss. As mentioned above, appellant was respect of business loss. As mentioned above, appellant was non co-operative all along the appellate proceedings as well operative all along the appellate proceedings as well operative all along the appellate proceedings as well and no submission or any doc and no submission or any documents were filed during the uments were filed during the course of appellate proceedings to substantiate its ground of course of appellate proceedings to substantiate its ground of course of appellate proceedings to substantiate its ground of appeal and rebut the finding of the AO. appeal and rebut the finding of the AO. 5.4 Hence, in view of the elaborate discussion/analysis and 5.4 Hence, in view of the elaborate discussion/analysis and 5.4 Hence, in view of the elaborate discussion/analysis and conclusion of the A.O. in the Assessment order, and in conclusion of the A.O. in the Assessment order, and in conclusion of the A.O. in the Assessment order, and in absence of any response received from the appellant, I find no any response received from the appellant, I find no any response received from the appellant, I find no reason to interfere in the finding of the A.O. Thus, the addition reason to interfere in the finding of the A.O. Thus, the addition reason to interfere in the finding of the A.O. Thus, the addition of Rs. 59,91,122/ of Rs. 59,91,122/- on account of Business loss is upheld. on account of Business loss is upheld. Thus, Ground of appeal on this issue Thus, Ground of appeal on this issue is dismissed.” dismissed.” 2.1 However, before us, the However, before us, the learned counsel for the assessee learned counsel for the assessee submitted that the appeal had been filed in physical form during submitted that the appeal had been filed in physical form during submitted that the appeal had been filed in physical form during the financial year 2017 the financial year 2017–18, and in the relevant column of Form No. 18, and in the relevant column of Form No. 35—meant for providing e meant for providing e-mail details for communication mail details for communication—the assessee had indicated “No”. C assessee had indicated “No”. Consequently, the notices issued by onsequently, the notices issued by the learned CIT(A) via e the learned CIT(A) via e-mail did not come to the knowledge of the mail did not come to the knowledge of the assessee and, therefore, could not be complied with. assessee and, therefore, could not be complied with.
2.2 In view of the explanation furnished by the assessee regarding In view of the explanation furnished by the assessee regarding In view of the explanation furnished by the assessee regarding the non-receipt of notices, and in receipt of notices, and in the interest of justice, we consider the interest of justice, we consider it appropriate to set aside the order passed by the learned CIT(A) it appropriate to set aside the order passed by the learned CIT(A) it appropriate to set aside the order passed by the learned CIT(A) and restore the matter to his file for adjudication afresh, after and restore the matter to his file for adjudication afresh, after and restore the matter to his file for adjudication afresh, after affording due opportunity to the assessee. The assessee is directed affording due opportunity to the assessee. The assessee is directed affording due opportunity to the assessee. The assessee is directed to ensure strict compliance with the modalities of communication compliance with the modalities of communication compliance with the modalities of communication prescribed under the Faceless Appeal Scheme, including monitoring prescribed under the Faceless Appeal Scheme, including monitoring prescribed under the Faceless Appeal Scheme, including monitoring of notices issued through the Income Tax Portal. of notices issued through the Income Tax Portal. The ground No. 3 The ground No. 3 of the appeal of the assessee is accordingly allowed. of the appeal of the assessee is accordingly allowed.
2.3 Since we have already restored the appeal to the file of the Ld. Since we have already restored the appeal to the file of the Ld. Since we have already restored the appeal to the file of the Ld. CIT(A) for deciding afresh, the other grounds raised on merit are CIT(A) for deciding afresh, the other grounds raised on merit are CIT(A) for deciding afresh, the other grounds raised on merit are rendered academic and we are not required to be adjudicate upon rendered academic and we are not required to be adjudicate upon rendered academic and we are not required to be adjudicate upon and same are dismissed as infructuous. and same are dismissed as infructuous.
In the result, the In the result, the appeal of the assessee is allowed for appeal of the assessee is allowed for statistical purposes. statistical purposes.
Order pronounced in the open Court on 30 nounced in the open Court on 30/07/2025. /07/2025.