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Facts
The assessee, a firm, deposited cash during the demonetization period, leading to an addition of Rs. 51,14,000 as unexplained investment by the Assessing Officer. The assessee appealed to the CIT(A), who dismissed the appeal for non-prosecution as the assessee failed to respond to hearing notices.
Held
The ITAT held that the CIT(A) erred by dismissing the appeal for non-prosecution without deciding the issue on merits, especially when the assessee had furnished some details to the AO. The matter was remanded back to the CIT(A) for reconsideration and a de novo hearing, providing the assessee another opportunity to present its case.
Key Issues
Whether the CIT(A) was justified in dismissing the appeal for non-prosecution without considering the material on record and deciding the case on merits.
Sections Cited
143(1), 143(2), 142(1), 143(3), 250, 68
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, HYDERABAD “A” BENCH: HYDERABAD
Before: SHRI MANJUNATHA G & SHRI RAVISH SOOD
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD “A” BENCH: HYDERABAD BEFORE SHRI MANJUNATHA G, ACCOUNTANT MEMBER AND SHRI RAVISH SOOD, JUDICIAL MEMBER ITA.No.1133/Hyd./2025 Assessment Year 2017-2018 MB Akkaiah and The ACIT, Company, Circle-7(1), MIRYALAGUDA vs. Hyderabad. PIN – 508 207. Telangana. Telangana. PAN AADFM0039Q (Appellant) (Respondent) For Assessee : -None- For Revenue : Sri Madan Mohan Meena, Sr. AR Date of Hearing : 08.09.2025 Date of Pronouncement : 10.09.2025 ORDER PER MANJUNATHA G. :
The above appeal has been filed by the assessee against the Order dated 08.05.2025 of the learned CIT(A)- National Faceless Appeal Centre [in short “NFAC], Delhi, relating to the assessment year 2017-2018.
Brief facts of the case are that, the assessee viz., M/s. MB Akkaiah & Company is a Firm engaged in the 2 ITA.No.1133/Hyd./2025 business of wholesale dealer of fertilizers. The assessee has filed its return of income for the assessment year 2017-2018 on 30.10.2017 admitting total income of Rs.41.25,970/-. The return was processed u/sec.143(1) of the Income Tax Act, 1961 [in short “the Act”] and subsequently, the case was selected for Complete Scrutiny under CASS. The Assessing Officer issued notice u/sec.143(2) of the Act on 27.09.2018 which was served upon the assessee. Further, during the course of assessment proceedings, the Assessing Officer has also issued notices u/sec.142(1) of the Act calling for information. In response to the notices issued, the assessee has filed replies and submitted the information required for completion of the assessment. During the course of assessment proceedings, the Assessing Officer noted that, the case of the assessee has been selected for complete scrutiny on two issues i.e., (i) Large value cash deposit during demonetization period reported and (ii) the quantitative details of principal items of goods traded or raw material as well as finished goods not submitted. The Assessing Officer noted that, as per the database, the 3 ITA.No.1133/Hyd./2025 assessee had deposited huge amount of cash during the demonetization period in the bank accounts held by it. In order to verify the nature and sources of the cash deposit, the assessee was asked to furnish the details of all the cash deposits during the demonetization period, puchases and sales made during the financial year 2016-2017 relevant to assessment year 2017-2018 under consideration. The Assessing Officer called for Bank account statements, Cash book, VAT returns, TDS details, daily cash balancing for the period 01.11.2016 to 08.11.2019, details of unsecured loans, their confirmations and IT particulars, introduction of capital by the partners etc. In response to the notices issued, the assessee furnished the bank account statement for the relevant period and stated that, "As per the bank statement of the assessee (SBI Bank a/c No. 00000062006628642) the total cash deposit during demonetization period is totaling to Rs. 18,17,500/- only and which are not specified bank notes. During entire demonetization period including transfers, cheque deposits and cash deposits assessee total credits in bank account is 4 ITA.No.1133/Hyd./2025 Rs.2,03,42,476/- only”. The Assessing Officer noted that, the assessee has neither furnished any explanation regarding the sources of the cash deposits nor furnished a Certificate from the bank regarding the denomination of the cash deposited. Further, Cash book has also not been furnished. Thus, in the absence of the aforesaid information, the assessee could not substantiate his claim. In view of the above, the Assessing Officer noted that, the amount of Rs.51,14,000/- deposited in the bank account during the demonetization period is treated as unexplained investment and added to the total income of the assessee vide order dated 25.12.2019 passed u/sec.143(3) of the Income Tax Act, 1961.
Aggrieved by the assessment order, the assessee preferred appeal before the learned CIT(A). Before the learned CIT(A), the learned CIT(A) has issued notice of hearing u/sec.250 of the Act on 7 occasions i.e., on 06.08.2020, 02.01.2021, 04.11.2022, 30.01.2024, 08.03.2024, 09.10.2024 and 07.03.2025 for furnishing submissions and evidences in support of grounds of appeal.
5 ITA.No.1133/Hyd./2025 However, appellant did not respond to any of the said notices except for making adjournment request on 23.10.2024. Therefore, the learned CIT(A) in absence of explanation filed by the assessee along with supporting documentary evidences to substantiate it’s case and by following the Judgment of Hon’ble Supreme Court in the case of CIT vs., BN Bhattacharjee and another 10 CTR 354 (SC) and also the decision of Hon’ble Delhi High Court in the case of CIT vs., Multiplan (India) Pvt. Ltd., 38 ITD 320 (Del.) has dismissed the appeal of the assessee firm for non- prosecution.
Aggrieved by the order of the learned CIT(A), the assessee is now, in appeal before the Tribunal.
None appeared on behalf of the assessee nor filed any petition seeking for adjournment. We, therefore, proceed to decide the appeal on merits, after hearing the Learned Sr. AR for the Revenue.
Sri Madan Mohan Meena, learned Sr. AR for the Revenue, on the other hand, supporting the order of the 6 ITA.No.1133/Hyd./2025 learned CIT(A) submitted that, the assessee failed to substantiate his case during the course of assessment proceedings, despite providing 7 opportunities. Therefore, in absence of any submissions from the side of the assessee, the learned CIT(A) has rightly sustained the addition made by the Assessing Officer and dismissed the appeal of the assessee for non-prosecution. He, therefore, submitted that, the order of the learned CIT(A) should be upheld.
We have heard both the parties, perused the material on record and gone through the orders of the authorities below. We find that, during the course of assessment proceedings the assessee firm had furnished certain information in response to the notices issued by the Assessing Officer which is evident from para-3 of the order. However, the Assessing Officer without considering the same made the impugned addition of Rs.51,14,000/- as unexplained investment u/sec.68 of the Act. During the course of appellate proceedings before the learned CIT(A), despite issue of notices on several occasions, the assessee has not explained reasons for non-appearance, which is 7 ITA.No.1133/Hyd./2025 evident from para-6 of the order. Therefore, the learned CIT(A) dismissed the appeal of the assessee for non- prosecution by following the decision of Hon’ble Supreme Court in the case of CIT vs., BN Bhattacharjee and another 10 CTR 354 (SC) and also the decision of Hon’ble Delhi High Court in the case of CIT vs., Multiplan (India) Pvt. Ltd., 38 ITD 320 (Del.). It is well established as per law by the decisions of various Courts and Tribunals that, even in a case of non-prosecution by an appellant or respondent, the appeal should be disposed of or decided on merits on the basis of material available on record. In the present, although, the assessee has furnished relevant details before the Assessing Officer in respect of the impugned addition and the learned CIT(A) without even considering the said information has disposed of the appeal of the assessee for non-prosecution. Since the learned CIT(A) has not decided the issue on merits and disposed of the appeal for non- prosecution, in our considered view, the matter needs to be set-aside to the file of learned CIT(A) for reconsideration. Thus, we set-aside the order of the learned CIT(A) and 8 ITA.No.1133/Hyd./2025 restore the issue back to the file of learned CIT(A) for reconsideration. The learned CIT(A) is directed to reconsider the issue de novo, after providing one more opportunity of hearing to the assessee. Needless to say, the assessee shall furnish relevant details as and when the case is posted for hearing.
In the result, appeal of the assessee is allowed for statistical purposes.