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Facts
The assessee's reassessment proceedings were initiated due to the purchase of an immovable property. The Assessing Officer made additions for unexplained investment, unexplained money from bank deposits, and interest income. The assessee's explanation for the source of funds was not accepted, and despite notices, the assessee did not comply.
Held
The Tribunal held that the CIT(A) erred by dismissing the appeal in limine due to non-compliance with notices without adjudicating on the merits, violating principles of natural justice. The assessee, being a non-filer and agriculturist, deserved a proper hearing.
Key Issues
Whether the CIT(A) erred in dismissing the appeal without a proper hearing, violating natural justice, and whether the assessee's explanation for the source of funds was adequately considered.
Sections Cited
147, 144, 144B, 250, 69, 115BBE, 69A, 142(1), 271(1)(c), 271F, 271(1)(b), 80TTA, 250(6), 282
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Income Tax Appellate Tribunal, “D” BENCH, AHMEDABAD
This appeal by the assessee is directed against the order passed under section 250 of the Income Tax Act, 1961 on 16.12.2024 by the Commissioner of Income-tax (Appeals), National Faceless Appeal Centre, Delhi, [hereinafter referred to as “CIT(A)” for the assessment year 2016-17. The said appellate order arises from the assessment framed by the Assessment Unit of the Income Tax Department [hereinafter referred to as “Assessing Officer”] under section 147 read with sections 144 and 144B by order dated 31.01.2024.
Facts of the Case 2.1 In case of the assessee, an individual, the reassessment proceedings for A.Y. 2016-17 were initiated under section 147 on the 2 basis of information from the Risk Management System and the Sub- Registrar, Sanand, regarding purchase of immovable property valued at Rs. 1,14,06,000/-. After conducting proceedings under section 148A and passing an order under section 148A(d) on 18.03.2023, notice under section 148 was issued on the same date. The Assessing Officer noted that no return of income was filed by the assessee in response to the notice. In the course of section 148A proceedings, the assessee had explained the investment as sourced from past savings and income arising out of acquisition of rural agricultural land by the State Government, but the Assessing Officer found that no corroborative evidences such as bank statements, documents of acquisition or compensation trail were furnished.
2.2 Subsequently, a series of notices and communications were issued, including intimation under section 144B dated 09.08.2023, reminder e-mail dated 15.09.2023, notice under section 142(1) dated 04.10.2023 requiring business and financial details, another reminder e-mail dated 03.11.2023, show-cause notice under section 144 dated 07.12.2023 and a final show-cause notice dated 11.01.2024 proposing additions. The Assessing Officer recorded that the assessee failed to comply with any of these.
2.3 In the assessment order, three variations were made. First, unexplained investment of Rs. 1,14,06,000/- under section 69 read with section 115BBE for the immovable property, in respect of which explanation was not accepted. Secondly, unexplained money of Rs.67,84,069/- under section 69A read with section 115BBE, being deposits of Rs. 15,02,466 in Dena Bank and Rs. 52,81,603/- in SBI account, sources of which were not substantiated. Thirdly, interest income of Rs. 42,882/- credited in another SBI account was brought to tax under the head “Income from other sources”.
2.4 Relying on section 144, the Assessing Officer held that the assessee had failed to file a return or respond to statutory notices and completed the assessment under section 147 read with sections 144 and 144B on best-judgment basis, determining total income at Rs.1,82,32,951/-. In addition, penalty proceedings were separately initiated under section 271(1)(c) for concealment, under section 271F for failure to file return and under section 271(1)(b) for non- compliance with notice under section 142(1).
2.5 The assessee preferred appeal before the CIT(A). In Form 35, nine grounds were taken, assailing the validity of the assessment under section 147 read with sections 144 and 144B, disputing invocation of section 144, alleging violation of natural justice, and contesting on merits the three additions. On merits, the assessee stated that the immovable property was purchased jointly with his brother and that the consideration stood sourced from the opening balance in the State Bank of India account of Rs. 67,48,594/-, premature encashment of fixed deposit in the same bank of Rs.14,99,603/-, transfer of Rs.24,50,000/- from the mother Smt. Kankuben Sagarbhai, and transfer of Rs. 13,32,000/- from the brother Shri Pashabhai Sagarbhai; it was contended that the credits in the bank accounts represented these explained sources and closure of an FD with Dena Bank of Rs. 15,00,000/- along with interest of Rs.2,466/-, and that there was a double addition because the same monies were again treated under section 69A. It was also urged that deduction under section 80TTA of Rs. 10,000/- be allowed against savings bank interest of Rs. 42,882/-.
2.6 The learned CIT(A), in the impugned order, recorded that during the course of appellate proceedings the assessee did not file any written submission or adduce any evidence, nor was any request for adjournment made. It is noted by the CIT(A) that three separate notices of hearing were issued in the faceless appeal environment, namely, notice dated 12.09.2024 fixing hearing on 27.09.2024, notice dated 05.11.2024 fixing hearing on 14.11.2024, and notice dated 21.11.2024 fixing hearing on 27.11.2024. On each of these occasions, according to the appellate authority, there was no compliance. The CIT(A) has observed that in the faceless regime, all communications are routed through the NFAC module, and the assessee is expected to respond through the same electronic platform, and therefore adequate opportunity stood afforded. The CIT(A) concluded that despite opportunities being made available, the assessee failed to avail the same, with the result that there was nothing on record to rebut the findings of the Assessing Officer. Consequently, the CIT(A) dismissed all the nine grounds of appeal and confirmed the additions made by the Assessing Officer.
Aggrieved by the order of CIT(A), the assessee is in appeal before us raising following grounds of appeal:
1.1 The learned CIT(A) grossly erred in law and on facts of the case in dismissing the appeal filed by the appellant against the order of the Assessing Officer of National Faceless Assessment Centre, Delhi made on 31/01/2024 u/s. 147r.w.s. 144 r.w.s. 144B for A.Y. 2016-17 determining total income at Rs. 1,82,32,951/- and thereby confirming the action of the learned AO in passing the assessment order and making the additions therein. The order so passed is contrary to the facts of the case, evidence on record and also the provisions of the Income Tax Act and the same is therefore not only bad in law but is perverse also. It is therefore prayed that impugned order may please be set aside. It is therefore prayed that the impugned order may please be set aside and remanded back to the CIT(A) with a direction for fresh adjudication in accordance with the provisions of the Act. 1.2 The learned CIT(A) grossly erred in law and on facts of the case in passing the impugned order u/s. 250 of the Income Tax Act without affording the appellant assessee a fair and reasonable opportunity of being heard, which is in clear violation of the principle of natural justice and also the express provisions of Section 250(1) of the I.T. Act. Though in the appellate order the CIT(A) has alleged that appellant was given many opportunities, as seen from the appellate order, only three notices of hearing are stated to have been issued which were never served upon the appellant assessee either in physical form or electronically in accordance with the provisions of Section 282 of the Income Tax Act. It is therefore prayed that impugned order of the CIT(A) may kindly be set aside. It is therefore prayed that the impugned order may please be set aside and remanded back to the CIT(A) with a direction for fresh adjudication in accordance with the provisions of the Act.
1.3 The learned CIT(A) grossly erred in law and on facts of the case in dismissing the appellant's appeal by capriciously holding that the appellant has chosen not to submit anything in support of the grounds of appeal and that the appellant does not want to press any of the grounds of appeal in utter disregard to the fact that none of the three notices of hearing stated to have been issued on 12/09/2024, 5/11/204 and 21/11/2024 was never served upon the appellant assessee and therefore the appellant was prevented from furnishing written submission. The appellant with utmost respect submits that he was very much interested in pursuing the appeal filed by him against the unlawful assessment order and the additions made therein. It is therefore prayed that the impugned order of the CIT (A) may please be set aside. It is therefore prayed that the impugned order may please be set aside and remanded back to the CIT(A) with a direction for fresh adjudication in accordance with the provisions of the Act.
1.4 The learned CIT(A) grossly erred in law and on facts of the case in en block dismissal of nine grounds of appeal taken by the appellant as per the ground of appeal in Form No. 35 without properly addressing anyone of the grounds in utter disregard to the fact that from the statements of facts as mentioned in the Form No. 35 contained factual matrix of the case which clearly demonstrated that all the additions made by the AO in the assessment order is unwanted by facts and unjustified in law and is therefore liable to be deleted. The order passed by the learned CIT (A) is in clear violation of provisions of Sub-Section (6) of Section 250 of the I.T. Act. It is therefore prayed that the impugned order may please be set aside and remanded back to the CIT (A) with a direction for fresh adjudication in accordance with the provisions of the Act.
2. The appellant craves leave to add and / or alter the ground at the time of hearing of the appeal.
During the course of hearing before us, none appeared on behalf of the assessee despite service of due notice. There was, therefore, no representation or assistance forthcoming from the side of the assessee. The learned Departmental Representative, while supporting the orders of the lower authorities, fairly submitted that he has no objection if the matter is restored to the file of the CIT(A) with a direction to decide the appeal afresh on merits after affording adequate opportunity of hearing to the assessee.
We have carefully considered the assessment order, the appellate order of the learned CIT(A), the statement of facts and grounds of appeal filed by the assessee, and the rival submissions. The undisputed position is that the assessment was completed ex parte under section 147 read with sections 144 and 144B of the Act.
5.1 In first appeal, the assessee raised as many as nine grounds, assailing both the jurisdictional validity of the reassessment as well as the additions made on merits. In the statement of facts, the assessee had explained that he is an agriculturist residing in a rural village, not assessed to tax earlier, and unfamiliar with the technicalities of electronic notices under the faceless scheme. It was further explained that the property purchase was funded through opening bank balances, encashment of fixed deposits, and identifiable transfers from mother and brother, and that double additions had been made by treating the same amounts both under section 69 and section 69A. A claim for deduction under section 80TTA was also raised against interest income.
5.2 The CIT(A), however, did not adjudicate on the merits of these grounds. The appeal was dismissed in limine on account of non- compliance with hearing notices, holding that despite opportunities the assessee failed to respond. The order merely affirms the assessment without recording findings on the specific grounds taken. This approach, in our view, falls short of the mandate of section 250(6) of the Act which requires the appellate authority to state points for determination, decision thereon, and reasons for the decision. The assessee’s factual assertions, particularly that he is a non-filer and agriculturist, deserved consideration in the appellate proceedings.
7 5.3 Having regard to these circumstances and also considering that the Departmental Representative has fairly raised no serious objection to remand, we are of the view that the assessee ought to be given one more and final opportunity before the first appellate authority. We accordingly set aside the impugned order of the CIT(A) and restore the matter to his file with a direction to adjudicate afresh all grounds of appeal on merits in accordance with law. The assessee is also directed to extend full cooperation by filing necessary documents and evidences. In case of failure, the CIT(A) shall be at liberty to decide the matter on the basis of record available.
In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the Court on 17th September, 2025 at Ahmedabad.