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Facts
The assessee failed to file an income tax return for AY 2011-12, leading to an ex-parte assessment under Section 144 r.w.s. 147 of the Income Tax Act. The assessee's appeal before the CIT(A) was also decided ex parte, with most additions confirmed but certain grounds, including the validity of reopening and a specific share transaction, left unadjudicated.
Held
The Tribunal held that both the assessment and the first appellate order were passed ex parte, violating the principles of natural justice. The CIT(A) failed to adjudicate on all grounds. Therefore, the matter was set aside and restored to the CIT(A) for fresh adjudication.
Key Issues
Whether the lower authorities erred by passing orders ex parte without affording the assessee an adequate opportunity to be heard, and whether the CIT(A) failed to adjudicate all grounds of appeal.
Sections Cited
144, 147, 148, 142(1), 68, 69C, 271(1)(c), 234A, 234B, 234C, 234D
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “SMC” BENCH, AHMEDABAD
Before: MS.SUCHITRA R. KAMBLE & SHRI MAKARAND V.MAHADEOKAR
This appeal by the assessee is directed against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [hereinafter referred to as “the CIT(A)”] dated 03.05.2024 for the Assessment Year 2011–12, arising from the assessment order passed under section 144 r.w.s. 147 of the Income Tax Act, 1961 [hereinafter referred to as “the Act”] by the Income Tax Officer, Ward 2(1)(3), Ahmedabad [hereinafter referred to as “Assessing Officer or AO”) dated 20.11.2018.
Condonation of Delay 2.1 At the outset, it is noted that there is a delay of 292 days in filing the present appeal before us. In support of the petition for condonation of delay, the assessee has filed a detailed notarised affidavit dated 03.07.2025, wherein the reasons for delay have been set out in a chronological and bona fide manner. It is stated that the assessee, aged 67 years, was suffering from sciatic nerve syndrome (sciatica) around the time of receipt of the appellate order and was medically advised complete bed rest for a couple of months, thereby rendering him unable to take necessary legal steps within the prescribed period.
2.2 Subsequently, the assessee was advised to opt for declaration under the Vivad se Vishwas Scheme, 2024, and he accordingly filed declaration for the assessment year under consideration along with two other years on 29.01.2025. The status on the income tax portal for the year under consideration continued to reflect as "Awaiting Form 2 from CIT", and the assessee was under a bona fide belief that the matter was under consideration before the competent authority in connection with the VsVs declaration.
2.3 It was only in April 2025, after receiving further professional advice and examining all records, that the assessee became aware that the appellate order dated 03.05.2024 was no longer under cover of the VsVs scheme and that the prescribed time limit for filing the appeal had expired on 02.07.2024. Thereafter, the appeal was promptly filed.
2.4 The reasons cited by the assessee are duly supported by contemporaneous documentation, including the medical certificate and documents relating to the VsVs declaration, which are annexed as Annexure A and Annexure B to the affidavit.
2.5 During the course of hearing, the learned Departmental Representative (DR) did not raise any serious objection to the assessee’s prayer for condonation of delay.
2.6 It is settled law that technical considerations should not override substantial justice and that liberal approach must be adopted while considering petitions for condonation of delay, especially when the delay is not deliberate, nor due to negligence or mala fides. In the present case, we are satisfied that the delay in filing the appeal was due to reasonable and bona fide cause, and not attributable to any deliberate lapse or negligence on the part of the assessee. Accordingly, the delay of 292 days in filing the appeal is condoned, and the appeal is admitted for adjudication on merits.
Facts of the Case 3.1 The AO, on the basis of AIR/CIB/ITS data, noted that the assessee had substantial transactions in F.Y. 2010–11 but had not filed return of income for A.Y. 2011–12. Reasons were recorded; approval obtained and notice under section 148 issued on 26.03.2018. Notices u/s 142(1) were issued on multiple occasions, but postal notices returned with the remark “Left” and no compliance was made electronically. Since no return or reply was filed, the AO completed assessment ex parte under section 144 r.w.s. 147 making the following additions:
Sr. Issue & Section Addition AO’s Finding No. (Rs.) 1 Cash deposit in Kotak 3,06,000/- Unexplained cash Mahindra Bank – Sec. deposits between 68 01.04.2010–31.03.2011, no source evidenced 2 Credit card payments – 14,80,636/- Payments to Citi Bank & Sec. 69C Kotak Mahindra Bank, source unexplained 3 Interest income – 1,65,447/- Interest from Kotak “Income from Other Mahindra Bank not Sources” disclosed 4 Penny stock 32,16,405/- Sale of shares treated as transaction in scrip of unexplained credit; M/s. Vax Housing assessee director in said Finance Corporation company, no evidence Ltd. – Sec. 68 produced
The total income was assessed at Rs.50,03,040/-. Penalty proceedings u/s 271(1)(c) were initiated.
3.2 The assessee preferred an appeal before CIT(A); however, no compliance was made. The appeal was decided ex parte based on material available on record. The CIT(A) confirmed the additions made by the AO. However, no adjudication was made on the assessee’s specific ground challenging the addition of Rs. 32,16,405/- u/s 68 in respect of share transactions.
Aggrieved by the order of CIT(A), the assessee is in appeal before us raising following grounds before us:
1. The Ld. CIT(A) has erred, both in law and on facts, in passing ex-parte order whereby, additions made by AO while passing order u/s 147 r.w.s. 144 of the Act have been confirmed.
2. The Ld. CIT(A) has erred, both in law and on facts, in not adjudicating the ground challenging reopening of assessment u/s 147 of the Act.
3. The Ld. CIT(A) has erred, both in law and on facts, in confirming addition of Rs.3,06,000/- u/s 68 of the Act in respect of cash deposits in bank account. 4. The Ld. CIT(A) has erred, both in law and on facts, in confirming addition of Rs. 14,80,636/- u/s 69C of the Act in respect of credit card expenses. 5. The Ld. CIT(A) has erred, both in law and on facts, in not adjudicating the ground w.r.t. addition of Rs.32,16,405/- made u/s 68 of the Act in respect of trading of shares. 6. The Ld. CIT(A) has erred, both in law and on facts, in confirming addition of Rs.1,65,447/- in respect of interest income from Kotak Mahindra Bank. 7. Both the lower authorities have passed the orders without properly appreciating facts of the case and have further erred in grossly ignoring various submissions, explanations and information furnished by the assessee from time to time, which ought to have been considered before passing the orders. Thus, action of lower authorities is in clear breach of law and Principles of Natural Justice and therefore, impugned orders deserve to be quashed. 8. The Ld. CIT(A) has erred in law and on facts of the case in confirming levy of interest u/s. 234A/B/C/D of the Act. 9. The Ld. CIT(A) has erred in law and on facts of the case in confirming initiation of penalty proceedings u/s. 271(1)(c) of the Act. 10. The appellant craves leave to add, amend, alter, edit, delete, modify or change all or any of the grounds of appeal at the time of or before the hearing of the appeal.
The learned Authorised Representative submitted that since the orders of both the Assessing Officer and the learned CIT(A) have been passed ex parte, the assessee has not had the benefit of proper representation of his case on merits. He pointed out that the learned CIT(A) has not adjudicated certain specific grounds raised in the appeal, particularly those challenging the validity of the reopening of the assessment and the addition of Rs. 32,16,405/- in respect of the alleged penny stock transaction. It was contended that, in the interest of justice, the assessee deserves one more effective opportunity to place on record the relevant explanations and evidences so that the issues in dispute can be decided on merits.
5.1 He therefore urged that the matter be restored to the file of the learned CIT(A) with a direction to pass a reasoned and speaking order on all grounds raised, after affording due and effective opportunity of hearing to the assessee, who undertakes to fully cooperate in the appellate proceedings without seeking unnecessary adjournments.
Learned Departmental Representative (DR) relied on the orders of the lower authorities. However, did not object to the matter being restored for fresh adjudication, particularly where grounds were not adjudicated by the CIT(A).
We have considered the rival submissions and carefully perused the orders passed by the Assessing Officer and the learned CIT(A). It is evident from the record that the assessment was completed ex parte under section 144 r.w.s. 147 of the Act without the participation of the assessee. The learned CIT(A) also proceeded to decide the appeal ex parte, confirming certain additions while leaving some specific grounds, including those relating to the validity of reopening and the addition of Rs. 32,16,405/- in respect of the alleged penny stock transaction, wholly unadjudicated. The principles of natural justice mandate that an assessee must be afforded reasonable opportunity to present his case, and that all grounds raised in appeal are required to be disposed of by way of a reasoned and speaking order.
7.1 In the facts of the present case, we find that the impugned order suffers from violation of these principles, as the assessee was not provided with an effective opportunity to be heard and certain grounds remained undecided. The grounds relating to the validity of the reopening and the addition on account of the alleged penny stock transaction have not been dealt with at all by the learned CIT(A). In our considered opinion, the interests of justice would be best served if the entire matter is restored to the file of the learned CIT(A) for a fresh decision on all the grounds of appeal, after affording due and effective opportunity of hearing to the assessee.
7.2 At the same time, we cannot ignore the fact that there has been persistent default on the part of the assessee in complying with statutory notices both during the assessment proceedings and before the first appellate authority. Such conduct has resulted in unnecessary litigation and wastage of public resources. Therefore, while granting the relief of restoration, it is necessary to impose a token cost to serve as a deterrent against such defaults in future.
7.3 We, accordingly, set aside the impugned order of the learned CIT(A) and restore the matter to his file for fresh adjudication on all grounds of appeal, in accordance with law, after affording adequate opportunity of being heard to the assessee. This restoration is, however, subject to the assessee depositing a sum of Rs.5,000/- as cost with the Income Tax Department within thirty days from the date of receipt of this order and furnishing proof thereof to the learned CIT(A). In the event of failure to deposit the cost within the stipulated period, the learned CIT(A) shall be at liberty to dismiss the appeal in limine.
In the result, the appeal is allowed for statistical purposes.
Order pronounced in the Court on 12th August, 2025 at Ahmedabad.