ADARSH MEDICAL HALL,HYDERABAD vs. ITO., WARD-7(1), HYDERABAD

The brief facts of the case are that on the basis of data analytics and information gathered during the phase of online verification under ‘Operation Clean Money’, the Income Tax Department gathered a list of assessees, who had deposited substantial cash in bank accounts during the demonetization period, but have not filed income tax return for the A.Y.2017- 18. The data revealed that the assessee had deposited cash in its bank accounts during the demonetization period, but not filed the return of income for the A.Y.2017-18. Therefore, notice u/s 142(1) of the Income Tax Act, 1961 (“the Act”) dated 13.03.2018 was served on the assessee. The assessee neither furnished any return of income nor explained the sources for the cash deposit. Therefore, the AO passed an order u/s 144 of the Act and determined the total income of the assessee at Rs.28,55,477/- by making additions towards the cash deposits u/s 69A of the Act.

Aggrieved by the assessment order, the assessee preferred an appeal before the Ld.CIT(A). During the appellate proceedings, the Ld.CIT(A) observed that the assessee failed to satisfy the provisions of section 249(4)(b) of the Act, therefore, notices were issued on 20.12.2023 and 26.12.2023 to comply with relevant provisions of the Act. However, the assessee did not comply with the above notices and failed to furnish any reply to the deficiency letters issued by the Ld.CIT(A). Therefore, the Ld.CIT(A) dismissed the appeal filed by the assessee in- limine in terms of section 249(4)(b) of the Act for non-payment of admitted tax or an amount equal to the amount of advance tax which was payable by him.

Aggrieved by the order of the Ld.CIT(A), the assessee is now in appeal before the Tribunal.

The Ld.Counsel for the assessee, Shri Mohan Kumar, Advocate submitted that the assessment proceedings before the AO was ex-parte. The assessee neither appeared nor furnished any details. The Ld.CIT(A) dismissed the appeal filed by the assessee in-limine on the ground of deficiency in the appeal filed by the assessee, without providing reasonable opportunity of hearing to the assessee. Therefore, the matter may be remanded to the file of the Ld.CIT(A) to give another opportunity of hearing to the assessee, to explain its case and file relevant details to satisfy the provisions of section 249(4)(b) of the Act.

The Ld.Sr.AR, Shri Ashutosh Pradhan, on the other hand, submitted that the assessee is not cooperative at all in the proceedings, which is evident from the ex-parte assessment order passed by the AO and the ex-parte appellate order passed by the Ld.CIT(A). The appeal filed by the assessee before the Ld.CIT(A) was defective and the same has been brought to the notice of the assessee by issuing deficiency letters, but the assessee did not file any response. Therefore, the Ld.CIT(A) has rightly dismissed the appeal filed by the assessee in terms of section 249(4)(b) of the Act and thus, the order of the Ld.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. Admittedly, the proceedings before the AO are ex-parte. The assessee neither furnished return of income nor appeared and explained the source for the cash deposited into the bank account during the demonetization period. Before the Ld.CIT(A), the assessee has filed defective appeal and the same has been communicated to the assessee by issuing deficiency letters on two occasions. The assessee neither appeared nor rectified mistakes notified in the notices issued by the Ld.CIT(A). Therefore, the Ld.CIT(A) dismissed the appeal filed by the assessee in terms of section 249(4)(b) of the Act on the ground that on or before filing the present appeal, the appellant has failed to make the requisite payment of the amount equal to the amount of advance tax which was payable by him. It is the case of the assessee that the AO has made additions towards total credit in the bank account and the income of the assessee for the year under consideration does not exceed the maximum amount which is liable to tax and thus the assessee is not required to make payment of advance tax. In our considered view, whether the assessee is liable to make an amount equal to the amount of advance tax payable by him needs to be established in light of relevant evidences including books of accounts/financial statements. In the present case, the assessee neither furnished return of income nor financial statements to prove its explanation. At the same time, the Ld.CIT(A) also dismissed the appeals in light of provisions of section 249(4)(b) of the Act, even though there are no evidences with the Ld.CIT(A) to show that the income of the assessee for the year under consideration is above the maximum amount liable for tax. Since the assessment order is ex-parte and the Ld.CIT(A) has dismissed the appeal in terms of section 249(4)(b) of the Act, in our considered view, to give one more opportunity of hearing to the assessee, the issue needs to be set aside to the file of the Ld.CIT(A). Thus, we set aside the order of the Ld.CIT(A) and restore the issue to the file of the Ld.CIT(A) with a direction to reconsider the issue after providing one more opportunity to the assessee. Needless to say, the assessee shall appear before the Ld.CIT(A) and satisfy the provisions of section 249(4)(b) of the Act in light of proviso by filing an application to the Ld.CIT(A) for any good and sufficient reasons to be recorded in writing, seeking exemption from the operation of the provisions of section 249(4)(b) of the Act.

In the result, appeal filed by the assessee is allowed for statistical purpose.