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Facts
The assessee, who passed away during the pandemic, failed to file a return of income and respond to notices for AY 2017-18. The Assessing Officer (AO) made ex-parte additions based on information about deposited Specified Bank Notes (SBNs) and estimated business income. The assessee claimed he was medically incapacitated during assessment proceedings.
Held
The Tribunal noted the assessee's medical condition and subsequent demise, which prevented him from properly presenting his case. Citing a Supreme Court decision, the Tribunal set aside the lower authorities' orders and restored the case to the AO for a de novo assessment, allowing the assessee to present evidence.
Key Issues
Whether the ex-parte assessment order and penalty were justified when the assessee was medically incapacitated and unable to represent himself, and whether the lower authorities provided proper opportunity for defense.
Sections Cited
144, 271B, 271AAC(1), 69A, 271B
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Income Tax Appellate Tribunal, ‘A’ BENCH: CHENNAI
Before: SHRI ABY T. VARKEY & SHRI S.R.RAGHUNATHA
आदेश / O R D E R PER ABY T. VARKEY, JM: These are appeals preferred by the assessee against the order of the Learned Commissioner of Income Tax (Appeals)/NFAC, (hereinafter referred to as “the Ld.CIT(A)”), Delhi, dated 19.02.2024 & 12.06.2024 for the Assessment Year (hereinafter referred to as "AY”) 2017-18 against the quantum appeal/penalty levied u/s.271B of the Income Tax Act, 1961 to 342/Chny/2024 (AY 2017-18) Voorakarai Kasturi Jayaram (Late) :: 2 ::
(hereinafter referred to as "the Act”) [i.e. for non-filing of Audit Report] & u/s.271AAC(1) of the Act.
At the outset, the Ld.AR of the assessee brought to our notice that the assessment order in this case has been passed on 22.10.2019 u/s.144 of the Act [i.e. best judgment assessment/ex parte order] and thereafter, the AO has passed the penalty orders also ex parte and further brought to our notice that the assessee expired during Covid-19 pandemic [on 18.05.2021] and therefore, the legal heirs couldn’t pursue the appeals which have resulted in the Ld.CIT(A) also passing the impugned orders ex parte qua assessee. Therefore, he prayed for one more opportunity may be granted to the assessee.
Per contra, the Ld.DR doesn’t want us to give one more innings to the assessee.
Aggrieved, the assessee is in appeals before this Tribunal.
Having heard both the parties and after perusing the records, we note that the deceased assessee didn’t file return of income (RoI) for AY 2017-18 and the AO received information that the assessee has deposited Specified Bank Notes (SBNs) during the demonetization period which prompted him to issue statutory notices asking the assessee about the source of SBNs; and in this regard, the AO notes that the assessee failed to 342/Chny/2024 (AY 2017-18) Voorakarai Kasturi Jayaram (Late) :: 3 ::
to respond to his four (4) notices, therefore, he passed assessment order u/s.144 of the Act by making (i) addition of Rs.14,31,000/- u/s.69A of the Act being the SBNs deposited during demonetization period; and further taking note that the assessee had also deposited cash of Rs.2,92,02,000/- [other than SBNs in his HDFC Bank A/c], the AO estimated (ii) the business income @ 8% i.e. Rs.23,36,160/- and passed the assessment order u/s.144 of the Act on 22.10.2019. The assessee is noted to have filed appeals in the year 2019, which appeals got migrated to NFAC and the Ld.CIT(A) notes that even though several opportunities were given, other than asking for adjournment, the assessee didn’t file any documents to substantiate the grounds of appeal raised before him. The Ld.CIT(A) noted from the contents of the written submissions that assessee had suffered stroke in 2015 for which he was undergoing treatment and was admitted in M/s.Kuppusamy Naidu Hospital and Ramakrishna Mission Hospital, Coimbatore, between July to September, 2019 and was undergoing treatment in ICU due to blockage of blood vessels in brain and was not able to speak which also affected his mobility. In such circumstances, according to the assessee, he couldn’t participate during the assessment proceedings and therefore, the AO passed the best judgment assessment u/s.144 of the Act making the two (2) additions. According to the assessee, the amount deposited during demonetization i.e. SBNs of Rs.14,31,000/- was his business receipts and to 342/Chny/2024 (AY 2017-18) Voorakarai Kasturi Jayaram (Late) therefore, assailed the action of the AO making addition u/s.69A of the Act. Further, the assessee contended that estimation of business income @ 8% of the balance cash deposits/turnover to be excessive on the higher side. Be that as it may, we note that the assessee claims to be suffering from severe diabetic which resulted in stroke and later was admitted in Hospital/ICU, during the time when the AO passed the assessment order; and during the appellate proceedings, the assessee is noted to have expired on 18.05.2021. The main grievance of the assessee is that since he was in the ICU of the Hospital the assessment order was passed, denying him proper opportunity before the AO when the assessment order was passed. Therefore, relying on the decision of the Hon’ble Supreme Court in the case of TIN Box Co. v. CIT reported in [2001] 249 ITR 216 (SC), we set aside the impugned order of the Ld.CIT(A) and restore the assessment back to the file of the AO with a direction to pass de novo assessment after hearing the assessee. The Ld.AR, Shri S. Senthil Kumar, Advocate, has undertaken to present/file all the relevant documents to substantiate the source of SBNs deposited during demonetization period and also evidences to show that the assessee’s business income was less than 8%. The AO to pass the assessment order after giving proper opportunity to the assessee in accordance to law. to 342/Chny/2024 (AY 2017-18) Voorakarai Kasturi Jayaram (Late) :: 5 ::
6. Coming next to the penalty appeals, we are of the view that since the quantum assessment has been restored back to the file of the AO, he may decide the same after de novo assessment has been passed as directed supra after hearing the assessee. Therefore, we set aside the impugned appellate order passed by the Ld.CIT(A) and the AO may initiate penalty proceedings as per law after assessment order has been framed.
In the result, appeals filed by the assessee are allowed for statistical purposes.
Order pronounced on the 26th day of May, 2025, in Chennai.