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Facts
The assessee, engaged in the business of buying and selling vegetables, did not file an income tax return for AY 2017-18. The Assessing Officer (AO) initiated reassessment proceedings under Section 147 and made an addition of Rs. 10,47,230/- towards commission income, estimated at 3% of the total turnover. The assessee contended that their commission rate is between 0.1% to 1%.
Held
The Tribunal noted that the CIT(A) had not adjudicated certain grounds of appeal related to the validity of reopening and principles of natural justice. Consequently, the Tribunal remitted the legal issues raised in ground No. 4 back to the CIT(A) for fresh adjudication. The merits of the case were also restored to the CIT(A) for necessary adjudication.
Key Issues
Whether the addition made by the AO towards commission income was justified, and whether the reassessment proceedings and assessment order were passed in accordance with the law and principles of natural justice.
Sections Cited
147, 250, 251, 139, 148, 133(6), 151A, 270A, 272A(1)(d), 271F, 271B, 142(1)
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Income Tax Appellate Tribunal, SMC BENCH,
Before: Dr. MANISH BORAD & SHRI VINAY BHAMORE
आदेश/ORDER
PER DR. MANISH BORAD, ACCOUNTANT MEMBER :
This appeal at the instance of the assessee is directed against the order of Ld. CIT Appeal (NFAC), Delhi u/s 250 r.w.s. 251 of the Income-tax Act, 1961 dated 06.08.2025 which is arising out of Order passed u/s.147 of the Act dated 07.03.2025.
Assessee has raised following grounds of appeal:-
1. On the facts and in the circumstances of the case and in law, the Id. CIT(A), has erred in upholding the action of the AO in making an addition of Rs.10,47,230/-, being 3% commission on total turnover of Rs.5,23,61,507/-, on estimated basis, as against 1% shown by the appellant assessee on the basis of regular books of account. The appellant assessee is a "Kaccha Adtiya", acts as an agent of his constituents and never acted as a principal and not buying the tomato of his constituents.
2. On the facts and in the circumstances of the case and in law, the Id. CIT(A), has grossly erred in faulting the appellant assessee in not furnishing certain information. Such information was never asked by the AO or even by the Id. CIT(A). The AO was provided with copy of cash book, cash flow statement, P & L account, Balance Sheet, details of all expenses debited as called for by the AO. Except this, nothing was called for by the AO. The findings of the Id.CIT(A) in sustaining the addition on account of commission is inconsistent with the material on records.
3. The AO and the Id. CIT(A) have failed to consider and appreciate the binding judicial precedents relied upon vide submission before AO dtd.20.02.2025 and before ld. CIT(A), dtd. 29.03.2025.
4. The Id. CIT(A), NFAC, has not at all adjudicated on the following 3 grounds of appeal
having SR. No. 3, 4 &
5. While not adjudicating these 3 grounds, the Id. CIT(A), vide para 5.5 of the appellate order has termed these 3 grounds taken by the appellant as "general and vague". The appellant begs to challenge the legality, validity and propriety of such remark of the Id. CIT(A), NFAC. The appellant prays before this Hon'ble Court to take judicious and holistic view of all the facts of the appellant's case. The appellant craves liberty to raise additional grounds, evidences and to modify/amend/delete the grounds of appeal at the time of hearing.
3. When the case called for none appeared in person before this Tribunal. However written submissions dated 10.10.2025 and 02.12.2025 are placed on record and assessee has requested to adjudicate the grounds raised in the instant appeal on the basis of return synopsis and written arguments.
Brief facts of the case are that the assessee is an individual and did not file the return of income u/s 139. Based on the information about large cash deposits and withdrawals, Ld. Assessing Officer (AO) issued valid notice u/s 148 of the Act. In response assessee furnished the return of income on 04.10.2024 declaring income of Rs. 2,44,180/- During the course of reassessment proceedings assessee did not responded to the communication dated 04.10.2024. Ld. AO called information from the Axis Bank u/s 133(6) of the Act. Ld. AO further observed that the assessee has shown turnover of Rs. 5,23,61,507/- and has declared the income at Rs. 2,44,175/-. Ld. AO observed that the assessee is earning commission from transactions of purchase and sale of vegetables and concluded the proceedings by assuming the income/commission @ 3% of the total turnover and made addition of Rs. 10,47,230/- and assessed income at Rs. 12,91,410/-
Aggrieved assessee preferred appeal before Ld. CIT(A) but failed to get any relief. Aggrieved assessee is now in appeal before this Tribunal. In the written synopsis the assessee has claimed that he is dealing in the vegetables goods and commission in such business is ranging from 0.1% to 1% and assessee has already shown 1% commission of Rs. 5,23,615/- on gross turnover. He has also mentioned various aspects of the nature of the business carried out on by him and stated that the assumption by the AO is on a very higher side and has not considered the market competition, perishable items of goods, increase in wages, travelling, freight and inflation in prices and other inevitable expenses. All the other arguments in the written submissions are for the legal issues challenging the validity of reopening, validity of the approval and other judicial issues.
On the other hand Departmental Representative (DR) vehemently argued supporting the order of the Ld. CIT(A).
We have heard rival contentions and perused the records placed before us. The assessee is aggrieved with the higher estimation of commission of the AO and finding of the Ld. CIT(A) afirming the action of Ld. AO. The assessee has also made written submissions challenging the validity of reassessment proceedings as per the provisions of section 151A and scheme framed u/s 151A of the Act.
We however on going through the grounds of appeal
observe that in ground No. 4, assessee has mentioned that Ld. CIT(A) has not adjudicated the following 3 grounds raised before Ld. CIT(A) and duly mentioned in Form No. 35 which reads as under:-
1. On the facts and in the circumstances of the case, the Id. AO, Faceless has erred in assessing the total income of the appellant at Rs. 12,91,410/- vide order u/s. 147 r.w.s. 1448 of the Act, dated 07.03.2025 by making an addition of Rs. 10,47,230/- on unreasonable estimation of commission at 3% on the perishable item of tomato dealt with by the appellant.
2. That the Id. AO, Faceless has erred on facts and in law, in estimating commission at 3%, which is not at all earned by the appellant. Thus, the estimated baseless addition of Rs. 10,47,230/- is on a very high side. AO's sweeping observation and remark that the rate of commission earned is ranging from 3% to 10% is not borne out by any comparable case of such trade in commission of tomato business.
3. On the facts and in the circumstances of the case and in law, the impugned assessment order passed by the Id. AO, Faceless is made in breach of principles of natural justice. The appellant detailed, logical, credible and authenticate explanation/objection with supporting case of law of the Honourable Supreme Court, in response to the show cause notice dated 20.02.2025 (acknowledgement No. 878814381200225), has been completely dislodged. The AO, Faceless, is bound by Rule of Procedure, hence he could not have ignored the binding decision relied upon in the said submission. Thus, Rule of Natural Justice are completely broken in the case of the appellant.
4. The impugned assessment order has been passed in complete violation of the Faceless Scheme and on incorrect assumption of jurisdiction u/s. 147/148 of the Act. Further, the notices u/s. 148 and 142(1) were issued by the AO. Wd. 1(4), Jalgaon, and thereafter the assessment proceedings were transferred to the AO. Faceless. As per the provisions of section 151A of the Act, both issuance of notice u/s. 148 and completion of assessment/reassessment u/s. 148 shall be made in faceless manner. Thus, the assessment is framed in total violation of the Faceless Scheme. The assessment order is illegal, void ab initio.
5. On the facts and in the circumstances of the case and in law, the Id. AO, Faceless has grossly erred in passing the impugned assessment order without dealing and without rebutting the appellant submission dated 01.03.2025 (acknowledgement No. 888404871010325). It is a gross violation of principle of natural justice, which smacks of utter violation of Rule of Audi Altrm Partem. Thus, the AO has finalised the assessment without marshalling the facts properly.
6. That on the facts and in the circumstances of the case and in law, the Id. AO, Faceless has erred in initiating the penalty proceedings u/s. 270A, 272A(1)(d), 271F & 271B, as none of these penalties are attracted, as the appellant assessee has not committed any such default for which these penalty proceedings are initiated.
7. The appellant prays that the estimated commission at Rs. 10,47,230/- may kindly be deleted.
8.The appellant craves liberty to raise additional ground/evidences and to modify/amend the grounds of appeal at the time of hearing.
9. We on going through the impugned order find that Ld. CIT(A) has not adjudicated the above referred 3 grounds and termed them as general and vague. Here we would like to take note of Hon’ble Delhi High Court in the case of Divine Infracon Private Limited Vs. PCIT (2025) 171 Taxman.com 92 (Del), wherein Hon’ble High Court vide Para 13 have categorically held that the Tribunal has no jurisdiction to proceed to dispute the grounds which do not arise from the impugned order passed by first appellate authority, irrespective of such grounds were raised in first appeal or not.
10. Considering the written submissions made and ground No. 4 raised before us, we deem it appropriate to remit back the legal issues referred in ground No. 4 which are referred above challenging the validity of the re-opening proceedings back to the file of Ld. CIT(A) for necessary adjudication to be carried out on due consideration of judicial precedence as mentioned in the written synopsis and written arguments filed by the assessee before this Tribunal. Needless to mention that Ld. CIT(A) shall provide one more opportunity of hearing to the assessee.
11. Accordingly ground No. 4 raised by the assessee is allowed for statistical purposes.
12. So far as merits of the case are concerned the assessee has only contended that he is a “Kaccha Adtiya” and the commission income in such business is between 0.5 to 1%. However since the legal issues have not been adjudicated by Ld. CIT(A) it would be too early to deal with the merits of the case. Further as we have already restored the issues to the file of Ld. CIT(A) we deem it appropriate to restore the issues raised on merits also to the file of Ld. CIT(A) for necessary adjudication after considering the submissions of the assessee and its consistent commission income being declared in the Income Tax Return (If any).
Thus ground No. 1 and 2 are also remitted back to the file of Ld. CIT(A). Other grounds being general in nature needs no adjudication. Effective grounds of appeal raised by the assessee are allowed for statistical purposes.
In the result, appeal of the assessee is allowed for statistical purposes.
Order pronounced on this 23rd day of December, 2025.