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Facts
The assessee, an individual and taxi driver, failed to file his return of income for AY 2010-11. Based on AIR/CIB information, the AO initiated assessment proceedings, completed ex-parte additions under Section 144 r.w.s. 147, including income from speculative business and unexplained cash deposits. The FAA upheld these additions.
Held
The Tribunal condoned the delay in filing the appeal due to medical emergencies. Considering the assessment was ex-parte and evidence was not fully presented, the Tribunal restored the issues to the AO for fresh consideration, directing the assessee to produce evidence and the AO to provide a hearing opportunity.
Key Issues
Whether the ex-parte assessment and additions made by the AO are justifiable, especially when the assessee claims lack of proper notice and the transaction was speculative in nature with a net loss.
Sections Cited
250, 148, 142(1), 144, 147, 69A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘B’ (SMC
Before: SHRI GEORGE GEORGE K
आदेश/ O R D E R
This appeal filed by the assessee is directed against the order of the Commissioner of Income Tax (Appeal), National Faceless Appeal Centre (NFAC), Delhi dated 17.02.2025 passed under section 250 of the Income Tax Act, 1961 (hereinafter called ‘the Act’). The relevant Assessment Year is 2010-11.
There is a delay of 134 days in filing this appeal. The assessee in the written submission has stated the reasons for belated filing of 2 -: this appeal. It is submitted that the delay occurred solely due to unavoidable medical emergencies. It is submitted that assessee has suffered severe head injuries on account of accident and during the same time, his wife was diagnosed with serious heart condition requiring prolonged treatment and care. The assessee has placed on record, copies of the medical report/certificate. On perusal of the reason stated for the delay in filing this appeal, I’m satisfied that there is reasonable cause and no latches can be attributed to the assessee. Accordingly, the delay of 134 days is condoned and I, proceed to dispose off the case on merits.
Brief facts of the case are as follows: The assessee is an individual. For the assessment year 2010-11, he had not filed his return of income. Based on AIR/CIB information that assessee had made cash deposits and also made share transactions in multi- commodity exchange, notice u/s.148 of the Act was issued on 31.03.2017. During the course of assessment proceedings, assessee did not reply to several notices issued u/s.142(1) of the Act and also show-cause notice proposing ex-parte assessment. Therefore, assessment was completed u/s.144 r.w.s.147 of the Act on 10.12.2019 making the following additions:- i. Rs.20,80,726/- as income from speculative business (based on 0.25% of contract value Rs.83.22 crore)
Aggrieved by the assessment completed, assessee filed appeal before the First Appellate Authority (FAA). The FAA vide the impugned order dated 17.02.2025 upheld all the additions made by the AO.
Aggrieved by the order of the FAA, assessee has filed the present appeal before the Tribunal. The assessment has filed a paper- book enclosing therein bank statements, trading statement of shares, turnover calculated, the list of unsecured creditors, copy of RC book, etc. The Ld.AR submitted that assessee is educated only up to 10th standard and is taxi driver. It was stated that assessee become a LIC agent in the year 2003 and was earning small and irregular commission income. It was submitted that to supplement assessee’s income, he began trading in Futures & Options (F&O) through a registered broker M/s. R K Global Shares & Securities Ltd. As regards the addition made on speculative business i.e., F&O, the Ld.AR stated that the AO has wrongly estimated the income by taking 0.25% of the notional contract value of Rs.83.22 crores. It was submitted that the derivative transaction as per the ICAI Guidance Note is to be based on absolute profit & loss and not on inflated notional values. The actual F&O 4 -: turnover was only Rs.1,25,779.70 and infact, assessee had suffered a net loss of Rs.6,23,030.12. It was submitted that the FAA without taking note the accounts of brokers statement and turn over computation (according to the assessee submitted before the FAA), had decided the issue against the assessee. Therefore, it was contended that the speculative transaction being a loss of Rs.6,23,030/-, the AO and FAA has erroneously estimated the profits at Rs.20,80,726/-.
As regards the addition of cash deposit of Rs.11,86,700/-, it was submitted that the same is out of personal savings and small unsecured cash borrowings from friends and relatives, which was specifically to meet the margin requirements for F&O trading. It was stated that the amount that was borrowed has a direct nexus with the amount transferred to the stock broker for F&O margins and the trading activities. Hence, it was prayed the additions made by the AO may be deleted.
The Ld.DR strongly relied on the orders of the AO and the FAA.
I have heard rival submissions and perused the material available on record. It is claimed that assessee has studied only up to 10th standard and is working as a taxi driver at present. The assessment was completed ex-parte on account of assessee’s non- 5 -: compliance to the notices issued u/s.142(1) of the Act and show-cause notice. It is stated by the Ld.AR that all notices were delivered in the assessee’s native Pollachi address, which was received by the assessee’s aged parents who never understood the legal significance nor communicated to the assessee. It was submitted that assessee being an individual of limited education and without professional assistance had not complied with the notice issued by the AO.
The major addition that was made by the AO is with reference to sum of Rs.20,80,726/- as income from speculative business. The AO estimated income at 0.25% on the total contract value of Rs.83.22 crores. On trading in F&O through a registered broker for a short period only the net margins need to be paid. The assessee had submitted a broker statement and turnover computation for the F&O transactions. On perusal of the same, assessee had shown net loss at Rs.6,23,030.12 instead of net income, Rs.20,80,726/- estimated by the AO. The assessee’s futures turnover accounts to Rs.1,25,779.71 calculated in accordance with ICAI Guidance Notes. Therefore, the notional contract value of Rs.83.22 crores may not be justifiable.
As regard the addition of Rs.11,86,700/- u/s.69A of the Act, it is the claim of the assessee that these are past personal savings and small unsecured cash borrowings from friends and relatives to meet the 6 -: requirement for F&O trading’s. On the facts on record since the assessment was ex-parte and full evidence/details were not provided even before the FAA, in the interest of justice and equity, the matter needs fresh consideration by the AO. Accordingly, the issues raised in this appeal are restored to the files of the AO. The assessee is directed to produce the necessary evidences in support of his case as regards the additions made. The AO is directed to afford a reasonable opportunity of hearing to the assessee before a decision is taken on the matter. It is ordered accordingly.
In the result, the appeal filed by the assessee is allowed for statistical purposes.