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Facts
The assessee, engaged in a typing and photocopying business, facilitated customer payments for government dues through his bank account. The AO made an addition of Rs. 9,09,830/- based on an 8% estimation of turnover from cash deposits in his bank account. The CIT(A) dismissed the appeal for non-prosecution.
Held
The Tribunal held that the CIT(A) failed to pass a speaking order on merits, violating Section 250(6) of the Act, despite the ex-parte assessment. The Tribunal set aside the CIT(A)'s order and restored the matter for fresh adjudication.
Key Issues
Whether the CIT(A) erred in dismissing the appeal for non-prosecution without adjudicating on merits and passing a non-speaking order. Whether the ex-parte assessment order and the addition made by the AO were justified.
Sections Cited
143(2), 142(1), 133(6), 144, 250, 250(6)
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Income Tax Appellate Tribunal, “SMC” BENCH, PUNE
Before: SHRI R.K. PANDA & MS. ASTHA CHANDRA
1. The appeal filed by the assessee is directed against the order dated 30.10.2024 of the Ld. Additional/Joint Commissioner of Income Tax (Appeals)-4, Kolkata [“Addl./JCIT(A)”] pertaining to Assessment Year (“AY”) 2017-18.
Briefly stated, the facts of the case are that the assessee is an individual engaged in the business of running a typing and photocopying in District Satara. The assessee routinely assists his customers in making payments of stamp duty, registration fees and other government dues which are required to be paid electronically and makes online payment on behalf of his customers which requires his customers to deposit the necessary amounts for payment of statutory dues in the assessee’s current account with Bank of India. For AY 2017-18, the assessee filed his e- return of income on 23.03.2018 declaring total income at Rs.3,41,210/-. The case was selected for scrutiny under CASS for the reason - to verify large cash deposits in bank account(s) during the year. Accordingly, statutory notice(s) u/s 143(2) and 142(1) of the Income Tax Act, 1961 (the “Act”) along with detailed questionnaire were issued and served upon the assessee. Due to non-compliance of such notice(s) and also the show cause notice issued to the assessee and after calling for the information from the assessee’s bank u/s 133(6) of the Act in respect of the cash deposits made by the assessee during the relevant AY, the Ld. Assessing Officer (“AO”) completed the assessment ex-parte u/s 144 of the Act vide his order dated 22.12.2019 holding that in the absence of any clarification regarding cash deposit, the deposits to the tune of Rs.1,56,38,000/- in the said bank are treated as turnover of the assessee and income from Business and Profession is estimated at 8% which works out to Rs.12,51,040/-. Accordingly, net addition of Rs.9,09.830/- is made to the total income of the assessee.
Aggrieved, the assessee filed an appeal before the Ld. Addl./JCIT(A) who dismissed the appeal of the assessee for non-prosecution without adjudicating the issue(s) involved on merits placing reliance on the decision(s) in the case of CIT vs. B.N. Bhattachargee & Another [118 ITR 461 (SC)]; Estate of Late TukojiRaoHolker vs. CWT [223 IR 480 (MP)]; and CIT vs. Multiplan India Pvt. Ltd. [38 ITD 320 (Del.)]. The relevant observations and findings of the Ld. Addl./JCIT(A) are reproduced below : “G 3] A notice u/s. 250 along with the Remand Report as received from the Ld. AO was sent to the Appellant on 17/10/2024 vide DIN:ITBA/APL/F/APL_1/2024-25/1069743879(1) containing Annexure. The content of the same is as under:-
1. 1. Please be informed that the Appeal is pending in e-Appeal Scheme dated 29/05/2023 duly notified in the Gazette of India vide CBDT‟s Notification No. 33/2023/F. No. 370142/10/2023 TPL.
2. The Appellant may please find the copy of the Remand Report sent by the Ld. AO, attached herewith and furnish his submissions with supporting evidence and explanation.
3. Any other documents in support of the Grounds of Appeal, which will be considered before passing any order by this office. The compliance date of the above said Notice was 24/10/2024. The said Notice was delivered to all the available email Ids of the Appellant as under on 17/10/2024 at 04:39:15 p.m. 1. officechougule953@gmail.com [ Primary email Id as per e-filing profile] 2. s.r.chougule98@gmail.com[ Secondary email Id as per e-filing profile] 3. ramnikam.28578@gmail.com[Primary email Id as per Latest Return Filed]
4. officemrprs@gmail.com[ Secondary email Id as per Latest Return Filed] 5. RAMNIKAM.28578@GMAIL.COM[ Email Id as per PAN database] However, no reply to the above said Notice has been received from the Appellant till date though earlier when reminder notice dated 27/08/2024 was served through these mails, the Appellant replied on 02/09/2024. H] Findings& Decision:- The Appeal was transferred to this office in e-Appeal Scheme dated 29/05/2023 duly notified in the Gazette of India vide CBDT‟s Notification No. 33/2023/F. No. 370142/10/2023-TPL. The Appellant has not replied. No information has been uploaded regarding the reason for non-submission of any reply. In the notice u/s 250, on Page 1, it was written as:- “7. If no submissions/information/documents is/are received within the stipulated time period, it will be presumed that you have nothing to say in this matter. The Department may proceed ahead based on material available on record.” The notice was served through five e-mails. It can‟t be that all the five e- mails are not noticed by the Appellant though earlier reply was made as above when notice was served through these mails just two months back. Also a text message is also sent to the registered Mobile Number of the Appellant as soon as any communication is sent. The Appellant could have uploaded his reply at any time till today as long as the order is not passed and the e-proceedings are kept open. Now it is not that the Reply has to be uploaded on the Scheduled date and at the time of the hearing fixed. It can be uploaded at any time till the order is passed. So, sufficient time has been allowed. From non-compliance on the part of the Appellant to statutory notice issued, it is evident that Appellant is intransigent in not complying. The Appellant has failed to display any action that can lead to believe that Appellant would co-operate in the proceedings. No adjournment petition has been filed. No explanation or document has been filed regarding the findings as mentioned in the notice u/s 250 as above in para G 3 above. No further explanation has been filed against the finding of the AO in Remand Report. This office has perused the same. In these circumstances, it has to believe that the Appellant is not interested in pursuing his/her own case. Appellant has failed to discharge the primary onus cast upon him/her to furnish the details required to complete the proceedings in the case. There is a well- known dictum of law Vigilantibus Non Dormientibus Jura Subveniunt, which means that the law assists only those who are vigilant and not those who are careless of their right. In order to claim one‟s right, she/he must be watchful of his/her right. Only those persons, who are watchful and careful of using his/her rights, are entitled to benefits of law. Law confers rights on persons who are vigilant of their rights. The assessee has failed to discharge its duty and has scant regard for due process of law. Therefore, there is no other option but to finalize the proceedings on ex-parte basis based on material available on record. In the case of Dev Dutt vs. Union of India and others reported in (2008) 8 SCC 725, the Hon'ble Supreme Court held as under: “Natural justice are not codified nor are they unvarying in all situations, rather they are flexible. It has to be adhered from both ends i.e. from the assessee as well as from the authority. They may, however, be summarized in one word : „fairness‟. In other words, what they require is fairness by the authority concerned. Of course, what is fair would depend on the situation and the context. Lord Eher M.R. in Voinet vs. Barrett (1885) 55 L.J. QB 39, observed: "Natural justice is the natural sense of what is right and wrong." In this context, we may refer to observations of the Hon'ble justice Krishna Iyer J.….. opportunity should be real and not ritualistic, effective and not illusory and must be followed by a fair consideration of the explanation offered and the materials available, culminating in an order which discloses reasons for the decision sufficient to show that the mind of the authority has been applied relevantly and rationally and without reliance on facts not furnished to the affected party. Natural justice, must warn, cannot be perverted into anything unnatural or unjust and cannot therefore be treated as a set of dogmatic prescriptions applicable without reference to the circumstances of the case. The question merely is, in all conscience have you been fair in dealing with that man? If you have been not arbitrary, not absent-minded, not unreasonable or not unspeaking, you cannot deny that there has been no „natural justice‟ breached, rather fullest natural justice has been followed but it is the person who has not availed any chances for the reasons best known to him.” From the fact of appellant's non-response to various notices, it is clear that apparently, appellant has no specific submission to file to pursue the pending appeal. As appellant failed to avail the opportunity offered. It is understood that appellant is not keen to pursue the appeal as per law and accordingly, appeal filed by the appellant is liable to be dismissed for non- prosecution by the appellant. The following citations/decisions of Hon'ble Adjudicating Authorities clearly envisage for dismissal of appellant's appeal for appellant's failure to prosecute/pursue the pending appeal in spite of availing sufficient time and opportunities and accordingly, is not maintainable. The relevant citations are briefed as under for placing reliance to adduce appellant's non-prosecution of appeal as not maintainable.
In the case of CIT Vs. B.N. Bhattachargee & Another 118 ITR 461 (relevant pages 477 and 478) wherein their Lordships have held that "the appeal does not mean merely filing of appeal but effectively pursuing it".
2. In the case of Estate of Late TukojiRao Holker Vs. CWT 223 IR 480 (MP) while dismissing the reference made at the instance of assessee in default made following observations in their order. "If the party at whose instance the reference is made fails to appear at the hearing, or fails in taking steps for preparation of the paper books so as to enable hearing of the reference, this court is not bound to answer the reference".
3. In the case of CIT Vs. Multiplan India Pvt. Ltd. 38 ITD 320 (Del). The appeal filed by the revenue before the Tribunal which was fixed for hearing but on the date of hearing nobody represented neither the revenue applicant nor any communication for adjournment was received. There was no communication or information as to why revenue choose to remain absent on that date. The Hon'ble Tribunal laid down the principle that on the basis of inherent power the appeal filed by the appellant can be treated as un- admitted. Keeping in view the above facts of appellant's non-furnishing of reply against the Remand Report, it is treated that the Appellant has nothing to furnish. Hence, it is apparent that the Appellant has nothing to furnish on the specific query made u/s 250(4) and I proceed to dispose off the Appeal. Ground No. 1 to 4: I find that sufficient opportunities were provided to the Appellant. The Appellant claimed that the cash deposited in his bank accounts were of other persons, but no identity or anything regarding those persons, if any, could be furnished. The Appellant was not authorized to receive the demonetized notes after 08/11/2016. There were huge
transactions through the current account of the Appellant. No Books were maintained. The Ld. AO was justified in treating the transactions and completing the Assessment at a fixed percentage of turnover / transactions through the bank account. I agree with the Ld. AO as mentioned in the Remand Report. Hence, the Grounds no 1 to 4 are DISMISSED. Ground No 5: Here the appellant has prayed its right to add, modify and / or delete any ground of appeal. I find that no ground of appeal has been added or amended or anything as above. Hence, this ground is not required for adjudication and as such NOT ADJUDICATED. In the result, the appeal is DISMISSED.”
Dissatisfied, the assessee is in appeal before the Tribunal raising the following grounds of appeal :
“On facts and in law, without prejudice to each other, 1. The Ld. AO erred in (CIT-A erred in confirming) addition of Rs.9,09,830/- being 8% of total turnover.
2. The Ld. AO and CIT (A) ought to have appreciated the fact that the deposits in my bank account were towards payment of stamp duty to government of Maharashtra. I was purely an agent who facilitated the said payment from my bank account to government. Thus, they ought not to have considered turnover at Rs.1,56,38,000/-.
3. The appellant craves for to leave, add, alter, modify, delete above grounds of appeal before or at the time hearing, in the interest of natural justice.”
The Ld. AR submitted that the non-compliance before the Ld. AO was not intentional and has happened due to bonafide gaps in communication at the assessee’s end. He submitted that the assessee belongs to small town and is not conversant with electronic proceedings in English due to which the submissions could not be made before the Ld. AO. As regards the appellate proceedings before the Ld. CIT(A), he submitted that the assessee filed its reply to some of the notices issued by the Ld. CIT(A). He brought to our attention the assessee’s para-wise reply to various grounds of appeal
raised before the Ld. CIT(A) reproduced on pages 10 to 17 of his appellate order. The Ld. CIT(A) forwarded submissions of the assessee to the Ld. AO seeking his comments thereon. The Ld. AO’s comments are recorded by the Ld. CIT(A) in para
6. (pages 30 to 44 of the appellate order). Thereafter, the Ld. CIT(A) issued another notice to the assessee on five different email ids available on Department’s records, along with a copy of the remand report of the Ld. AO asking the assessee to furnish his submissions with supporting evidence/documents and explanation. The Ld. AR admitted that there was a failure on the part of the assessee to file response to the said last notice issued by the Ld. CIT(A) but there was no malafide intention behind such non-compliance. He, therefore, prayed that the assessee may be granted one more opportunity to explain and substantiate his case before the Ld. AO/CIT(A).
5.1 On merits, the Ld. AR submitted that the cash deposited in the assessee’s current account with Bank of India reflects the cash deposits made by the customers of the assessee purely to facilitate payment of government dues on their behalf. The said cash deposits therefore did not represent real turnover and real income of the assessee. The addition made by the Ld. AO considering 8% of the alleged turnover is an adhoc addition which is excessive in comparison to the real turnover of the assessee’s business. Therefore, the assessee has a strong case on merits.
The Ld. DR supported the order of the Ld. CIT(A) and submitted that he has rightly dismissed the appeal of the assessee for non-prosecution as the assessee was given sufficient number of opportunities by the Ld. AO as well as Ld. CIT(A). However, he failed to make his submissions before them without there being any reasonable cause for such non-compliance.
We have heard the Ld. Representatives of the parties and perused the material available on records. The facts of the case are not in dispute. It is a case of an ex-parte assessment made by the Ld. AO u/s 144 of the Act due to non-compliance of notice(s) issued by him. From perusal of the Ld. CIT(A)’s order, we find that although the assessee filed certain details/submissions before the Ld. CIT(A) in response to the notices issued earlier by him, he failed to comply with the last notice issued asking the assessee’s to file reply/submissions with supporting evidences/documents and explanation in respect of the remand report of the Ld. AO. Apparently, the said notice was issued by the Ld. CIT(A) on five different e-mail ids of the assessee available on record of the Department but admittedly, the assessee failed to respond which led the Ld. CIT(A) dismiss the appeal of the assessee for non-prosecution without dwelling into the merits of the case. Before us, the Ld. Counsel for the assessee has submitted that the assessee belongs to a small town having a limited knowledge and experience about the electronic proceedings in English. The non- compliance before the lower authorities has resulted due to bonafide gaps of communication at the assessee’s end and not on account of any malafide intention of the assessee. The Ld. Counsel for the assessee has submitted before us that the assessee has a strong case on merits. We find that the Ld. CIT(A)/NFAC has confirmed the addition made by the Ld. AO because of non-furnishing of the requisite supporting evidences/ explanation by the assessee before him specifically called for in relation to the remand report submitted by the Ld. AO. Perusal of the Ld. CIT(A)’s order reveals that that he has dismissed the appeal of the assessee for non-prosecution by applying the decision of the Hon’ble Supreme Court in B.N. Bhattachargee’s case (supra) and some other cases mentioned above and passed a non-speaking order as regards the merits of the case. No doubt, the Ld. CIT(A)/NFAC may decide the appeal ex-parte where the assessee does not prosecute his appeal in spite of several opportunities granted. Nonetheless, he has to adhere to the legislative mandate enshrined in sub-section (6) of section 250 of the Act which requires him to state the points for determination, the decision thereof and the reasons for the decision. Thus, in our view, his impugned order is in violation of the provisions of section 250(6) of the Act.
On the above facts and in the circumstances of the case, we deem it fit, in the interest of justice and fair play, to set aside the order of Ld. CIT(A)/NFAC and restore the matter back to his file for adjudication afresh with a direction to pass speaking order on merits of the case as per facts and law, after allowing one final opportunity of being heard to the assessee. Needless to say, the assessee shall provide the requisite support in terms of submitting the relevant documents/evidence as may be required/called upon, on the appointed date without seeking any adjournment under any pretext unless required for a sufficient cause, failing which the Ld. CIT(A)/NFAC shall be at liberty to pass appropriate order as per law. The assessee is also directed to remain vigilant and provide the Department with his latest contact details/email id for receiving notice of hearing through Departments’ portal and making compliance thereof. We direct and order accordingly. The grounds of appeal raised by the assessee are therefore allowed for statistical purposes.
In the result, the appeal of assessee is treated as allowed for statistical purposes.
Order pronounced in the open court on 23rd June, 2025.