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Facts
The assessee, an individual in iron/steel trading and movie production, filed a return showing a substantial loss. Following a search on a related entity, loose sheets were found, leading to the centralization of the assessee's case and an addition of Rs. 1.40 crores by the AO for concealed income from movie distribution rights under Section 153C. The CIT(A) subsequently dismissed the assessee's appeal for non-prosecution, upholding the AO's addition.
Held
The Tribunal observed that both the AO's assessment and the CIT(A)'s appellate order were ex-parte. It held that the CIT(A) erred by dismissing the appeal for non-prosecution instead of deciding it on merits based on the available records. The Tribunal set aside the CIT(A)'s order and remanded the matter back to the Assessing Officer for de-novo reconsideration, granting the assessee a fresh opportunity of hearing, subject to a nominal cost of Rs. 5000/- for negligence.
Key Issues
1. Whether the addition of Rs. 1.40 crores to income under Section 153C, based on seized material, was justified. 2. Whether the CIT(A) was justified in dismissing the appeal for non-prosecution without deciding it on merits and without providing adequate opportunity of hearing to the assessee.
Sections Cited
143(3), 144B, 127, 153C, 143(2), 142(1), 144
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, HYDERABAD “B” BENCH: HYDERABAD
Before: SHRI VIJAY PAL RAO & SHRI MANJUNATHA G
ORDER PER MANJUNATHA G. : The above appeal has been filed by the assessee against the order of the learned CIT(A), Hyderabad-11, Hyderabad, relating to the assessment year 2018-2019.
Brief facts of the case are that, the assessee is an individual and engaged in the business of Iron and Steel trading and also Movie Production, filed his return of 2 ITA.No.761/Hyd./2025 income for the assessment year 2018-2019 on 31.10.2018 by admitting total loss of Rs.(-)6,71,00,603/-. Subsequently, scrutiny assessment was completed u/sec.143(3) r.w.s. 144B of the Income Tax Act [in short “the Act”] on 14.06.2021 and the loss reduced to Rs.(-)1,32,90,940/-. Consequent to search and seizure operation conducted on 28.01.2021 in the case of Sri V V Bala Krishna Rao (HUF), Prop. Usha Pictures and Financiers, Eluru, the case of the assessee was centralized to DCIT, Central Circle 1(3), Hyderabad, vide order u/s. 127 dated 22.03.2022 of Pr. CIT-1 Hyderabad. During the course of search and seizure operation in the case of Sri V. V. Bala Krishna Rao, Prop: Usha Pictures and Financiers, certain loose sheets were found at the Office premise of Sri V. V. Bala Krishna Rao, Raja Ram Mohan Rai Street, Powerpet, Eluru and seized vide Annxure-UPF/RP/EL-50. The said loose sheets contains letter of understanding, cash transactions etc. The seized material will have a bearing on determination of the income of the assessee. Therefore, the Assessing Officer after recording satisfaction note, as per the amended
3 ITA.No.761/Hyd./2025 provisions of section 153C of the IT Act, 1961, a notice u/sec.153C was issued to the assessee on 30.06.2022 through ITBA portal. Further, the Assessing Officer also issued notice u/sec.153C. In response, the assessee has filed his return of income on 04.11.2022 by admitting total loss of (-) Rs.6,71,00,603/-. Therafter, the Assessing Officer issued notices u/sec.143(2) and u/sec.142(1) of the Act on various dates calling for information. In response, the assesse has submitted the called for information. The Assessing Officer after examining the submissions of the assessee, issued notice u/sec.142(1) of the Act dated 13.01.2023, requiring the assessee to furnish copies of ledger account in respect of transactions along with bank account statements and cash book and also to furnish whether the transactions are admitted in the P & L A/c or not and also to provide relevant schedule along with break- up of revenue. In response, the assessee has furnished only ledger account of Usha Pictures maintained in his books of accounts for the period 01.04.2017 to 31.03.2018. The Assessing Officer after examining the ledger copy of the 4 ITA.No.761/Hyd./2025 assessee noted that, the assessee has admitted an amount of Rs.1 crore [Rs.20,00,000/- through JKotak Mahebndra Bank on 24.07.2017 + Rs.58,42,000/- through Kotak Mahendra Bank on 09.08.2017 + Rs.21,58,000/- Journal entry] for distribution movie rights of Jaya Janaki Nayaka- JJN, but, as per the letter of understanding dated 10l.08.2017 [Annx’UPF/RP/EL-50-page nos.165 to 168], the total consideration received was at Rs.2.40 crores. Therefore, the Assessing Officer noted that, the assessee has concealed income of Rs.1.40 crores in the form of cash received towards distribution rights for the movie ‘Jaya Janaki Nayaka [‘JJN’]. He, accordingly, made addition on account of movie distribution rights ‘Jaya Janaki Nayaka’ amounting to Rs.1,40,00,000/- and assessed the income of the assessee at Rs.7,09,060/- vide order dated 30.03.2023 passed u/sec.153C r.w.s.144 of the Income Tax Act, 1961.
Aggrieved by the order of the learned CIT(A), the assessee preferred appeal before the learned CIT(A). Before the learned CIT(A), during the course of appellate proceedings, the learned CIT(A) has issued notices on 5
5 ITA.No.761/Hyd./2025 occasions. However, there were no response from the assessee. Therefore, the learned CIT(A), in absence of any explanation from the assessee to substantiate his case, dismissed the appeal of the assessee for non-prosecution and sustained the addition made by the Assessing Officer.
Aggrieved by the order of the learned CIT(A), the assessee is now, in appeal before the Tribunal.
Sri T. Chaitanya Kumar, Advocate-Learned Counsel for the Assessee submitted that, the Assessing Officer has passed ex-parte order. Before the learned CIT(A), despite of various notices, the assessee could not respond due to the circumstances beyond his control. The learned CIT(A) dismissed the appeal of the assessee for non- prosecution and not decided the appeal on merits basing on the material available on record. Therefore, he submitted that, the assessee has not been provided with sufficient opportunity of hearing by both the lower authorities. He, therefore, pleaded that one more opportunity of hearing may please be provided to the assessee to substantiate his case in the interest of substantial justice.
6 ITA.No.761/Hyd./2025 6. Dr. Narendra Kumar Naik, learned CIT-DR for the Revenue, on the other hand, supporting the order of the learned CIT(A) submitted that, the assessee failed to substantiate his case during the course of assessment proceedings with respect to addition of Rs.1.40 crores made by the Assessing Officer on account of sale of movie Jaya Janaki Nayaka. He submitted that, the total consideration received by the assessee was at Rs.2.40 crores as per the letter of understanding dated 10.08.2017 which is evident from the order of the Assessing Officer at para-7.4 and 7.5 of the order. Further, during the course of appellate proceedings before the learned CIT(A) also, the assessee did not file his submissions to substantiate his case. 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. 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 7 ITA.No.761/Hyd./2025 appellate proceedings before the learned CIT(A), despite issue of notices on several occasions, the assessee has not explained reasons for non-appearance and according to the assessee, due to certain reasons beyond the control of the assessee, he could not file relevant details before the learned CIT(A). We find that, although, the assessee has not filed any details before the learned CIT(A) in response to notices, but, it is the duty of the learned CIT(A) to decide the appeal on merits on the basis of material available on record. In the present case, the learned CIT(A) dismissed the appeal of the assessee for non-prosecution. However, not decide the appeal on merits. Since, the assessment proceedings before the Assessing Officer is also ex-parte and the assessee did not get any opportunity before the learned CIT(A) to represent his case, in our considered view, the matter needs to be set-aside to the file of Assessing Officer for reconsideration. Thus, we set-aside the order of the learned CIT(A) and restore the issue back to the file of Assessing Officer for reconsideration. The Assessing Officer is directed to reconsider the issue de-novo, after providing one more
8 ITA.No.761/Hyd./2025 opportunity of hearing to the assessee. Needless to say, the shall furnish relevant details as and when the case is posted for hearing. Further, we direct the assessee to pay nominal cost of Rs.5000/- for showing negligence before the lower authorities and the said costs as directed above, shall be paid to State Legal Aid Authority, Hon’ble High Court for the State of Telangana and furnish relevant evidence to the Registry within 15 days from the date of the order.
In the result, appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open Court on 10.09.2025.