Loading judgment…
Facts
The assessee filed their Income Tax Return for AY 2017-18, but failed to provide quantitative details and appeared before the authorities. The assessment was completed ex-parte, estimating income at 5% of turnover. The CIT(A) confirmed the Assessing Officer's action.
Held
The Tribunal found that the lower authorities confirmed actions based on the assessee's non-participation, despite multiple notices. Considering principles of justice, the matter was remanded to CIT(A) for a fresh adjudication.
Key Issues
Whether the lower authorities erred in deciding the appeal ex-parte without providing proper opportunity, and whether the matter should be remanded for fresh adjudication.
Sections Cited
143(2), 142(1), 144, 40A(3), 270A, 272A(1)(d), 143(3)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, HYDERABAD BENCHES “A” , HYDERABAD
Before: SHRI LALIET KUMAR, HON’BLE & SHRI G. MANJUNATHA, HON’BLE
O R D E R PER LALIET KUMAR, J.M.
This appeal is filed by the assessee, feeling aggrieved by the order passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC) Delhi, dated 19.09.2024 for the AY 2017-18 on the following grounds :
“1. The order of the learned CIT (A) is erroneous both on facts and in law; 2. The learned CIT (A) erred in deciding the appeal ex-parte without providing proper opportunity; 3. The learned CIT (A) ought to have decided the appeal on merits; 4. The learned CIT (A) erred in confirming the action of the Assessing Officer in rejecting the books of account and in resorting to estimation of income at 5% of the total sales; 5. The learned CIT (A) ought to have seen that proper books of account have been maintained and no addition should have been made by the Assessing Officer; 6. The learned CIT (A) erred in confirming the addition on account of estimation of income at Rs.2,55,91,230/- made by the Assessing Officer; 7. The learned CIT (A) erred in confirming the action of the Assessing Officer in making disallowance u/s 40A(3) of the I.T. Act of Rs.1,22,57,000/- without considering the facts on record and also the fact that the books of account have been rejected and estimation is resorted to; 8. The learned CIT (A) erred in not considering the ground of disallowance of Chapter VIA deduction claimed by the appellant.”
Facts of the case, in brief, are that assessee is an individual, filed his Return of Income for the Assessment Year 2017-18 on 27/10/2017, declaring income of Rs. 19,61,870/-. The case was selected for complete scrutiny under CASS due to the non- submission of quantitative details of principal items of goods traded or raw materials and finished goods. A notice under section 143(2) was issued on 17/08/2018 and served by email. Thereafter, notices under section 142(1) were issued on 16/01/2019 and 12/10/2019, requesting further details, but the assessee did not comply the same. The assessee reported gross sales of Rs. 51,58,24,590/- and a net profit of Rs. 21,42,165/-, which is less than 0.42%. Despite issuing a show-cause notice on 15/11/2019, the assessee furnished part information, including the P&L Account, Balance Sheet, and bank statement, but failed to provide an explanation for the low profit and missing quantitative details. In the absence of proper explanation and documentation, the assessment was completed ex-parte under section 144 of the Income Tax Act, with income estimated at 5% of turnover (Rs. 51,58,24,590/-), amounting to Rs. 2,55,91,230/-.Further, bank statements revealed cash withdrawals of Rs. 1,28,33,000/- during FY 2016-17.
2.1. Thereafter, a show-cause notice was issued on 03/12/2019 regarding the disallowance of these withdrawals under section 40A(3), but the assessee did not provide any explanation. The withdrawals were treated as payments for goods purchase exceeding Rs. 20,000 per transaction, leading to a disallowance of Rs. 1,22,57,000/- under section 40A(3). The assessee also claimed a deduction under Chapter VI-A of Rs. 1,53,082/-, including Rs. 1,28,900/- under section 80C and Rs. 24,182/- under section 80D. However, only partial evidence for the 80C claim was submitted, and no proof was provided for the 80D deduction, resulting in the disallowance of the entire deduction. Penalty proceedings under section 270A for under-reporting of income and section 272A(1)(d) for failure to comply with notices under section 142(1) were initiated separately. Finally, Assessing Officer completed the assessment u/s 143(3) of the Act on 30.12.2019, determining the total income of the assessee at Rs.3,78,48,230/-.
Feeling aggrieved by the order passed by the assessing officer, assessee filed appeal before the Ld. CIT(A), who dismissed the appeal of assessee.
Feeling aggrieved with the order of ld.CIT(A), assessee is now in appeal before us.
Before us, ld.AR submitted that the assessee has failed to provide necessary information and appear before the lower authorities. Hence, the ld. AR requested the Bench to remand the matter back to the file of Assessing Officer. Ld.AR further submitted that as the assessee has sufficient cause from putting in appearance before the lower authorities, matter may kindly be remitted back to the authorities below for afresh adjudication.
On the other hand, the ld. DR contended that despite multiple notices issued by the LD.CIT(A), including a final show- cause notice, the assessee failed to respond or seek an adjournment. The ld. DR submitted that the assessee's continued non-compliance demonstrated a neglectful attitude, and therefore, the order of the lower authorities should be sustained.
7 We have heard the rival contentions of both the parties and perused the material available on record. On perusal of the impugned order passed by the ld. CIT(A), it is observed that the ld. CIT(A) confirmed the action of the Assessing Officer based on the available records, as the assessee did not participate in the proceedings. The order of LD.CIT(A), more particularly, from paragraphs 5 to 7 reflects that multiple notices were issued, but the assessee failed to provide any documentary evidence or submissions in support of his claims. The LD.CIT(A) also cited legal precedents emphasizing that repeated non-compliance does not constitute a violation of natural justice. However, considering the principle of justice and to provide the assessee one more opportunity to substantiate his case, we deem it appropriate to remand the matter back to the file of the ld. CIT(A) with a direction to adjudicate the appeal afresh, after considering the documents available on record and affording a reasonable opportunity of hearing.
The assessee shall be at liberty to file documents, if any, as required for proving his case and the LD.CIT(A) shall consider the evidence, if any, filed by the assessee. Needless to say the LD.CIT(A) shall examine those documents / evidence filed by the assessee and also the other documents available on record. After considering the documents filed by the assessee and the submissions made by the assessee, the LD.CIT(A) shall pass a detailed speaking order dealing with the contentions of the assessee. We have not adjudicated the other grounds on merits as we are setting aside the orders passed by the lower authorities to the file of LD.CIT(A) for fresh adjudication. Thus, the grounds of the assessee are allowed for statistical purposes.
In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced in the Open Court on 11th February, 2025.