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Facts
The assessee's case was reopened under Section 147 due to information about cash deposits. The assessment was framed ex-parte as the assessee did not comply with notices. The CIT(A) also dismissed the assessee's appeal ex-parte for non-prosecution.
Held
The Tribunal held that dismissing an appeal ex-parte without examining merits can lead to a failure of justice, especially when the assessee is ready to substantiate their case. The matter was restored to the Assessing Officer for fresh adjudication.
Key Issues
Whether the CIT(A) was justified in dismissing the appeal ex-parte without considering the merits, and whether the reassessment proceedings were initiated correctly.
Sections Cited
139, 147, 148, 142(1), 144, 144B, 69A, 250
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “SMC” BENCH, AHMEDABAD
This appeal by the assessee is directed against the order dated 16.12.2024 passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [hereinafter referred to as “CIT(A)”], under section 250 of the Income Tax Act, 1961 [hereinafter referred to as “the Act”] for the assessment year 2016–17 arising from the order dated 31.03.2022 passed by the Assessing Officer under section 147 r.w.s. 144 read with section 144B of the Act. Facts of the Case 2. The assessee is an individual engaged in the business of labour contracting, as per the statement of facts filed before CIT(A). For the A.Y.
MA No.373/Ahd/2025
2 2016–17, the assessee had filed return of income under section 139 on 20.05.2017 declaring total income of Rs.5,17,644/-. The case was reopened under section 147 of the Act based on information that cash deposits aggregating to Rs.20,50,000/- were made in the assessee’s savings bank account with Syndicate Bank during the financial year 2012–13. A notice under section 148 of the Act was issued on 31.03.2021, and subsequent notices under section 142(1) were issued on 15.11.2021 and 22.01.2022. As there was no compliance from the assessee, the assessment was framed ex-parte under section 147 r.w.s. 144 and 144B of the Act, assessing total income at Rs. 25,67,644/- after making an addition of Rs.20,50,000/- under section 69A of the Act.
3. The assessee preferred an appeal before the CIT(A), challenging the legality of reassessment as well as the addition on merits. However, despite multiple notices issued on 08.10.2024, 08.11.2024, and 14.11.2024, the assessee did not respond. The CIT(A), therefore, passed an ex-parte order on 16.12.2024 dismissing the appeal for non- prosecution, while also observing that the assessee failed to discharge the burden to prove the explanation for the source of the deposits.
Aggrieved by the order of CIT(A) the assessee is in appeal before us raising following grounds:
1. The learned CIT(Appeals) / NATIONAL FACELESS APPEAL CENTRE [ NFAC] has grievously erred both in law and on facts in passing an order ex-parte due to non-response by the appellant as the appellant was not properly assisted by the then authorised representative though the grounds regarding illegality of reassessment and merits of addition were taken. Considering records of the case and even observations of the Id AO, the appeal ought to have been allowed. It be so held now.
The Id CIT(Appeals) / NFAC further erred in law and on facts in not appreciating that as per record of the assessment order the reassessment proceedings were initiated without properly
MA No.373/Ahd/2025 applying mind as regards year of cash deposited and also without following the mandatory requirements of section 147 to 151 of the Act and as there was no "reason to believe" as per settled legal position hence the same ought to be quashed. It be quashed now.
Without prejudice to the above grounds, the Id CIT(Appeals)/ NFAC erred in law and on facts in confirming the order passed by Id AO making huge addition u/s 69A when the appellant was not required to maintain books of account as per original return and section 69A of the Act was wrongly invoked. It be so held now and addition be deleted.
4. Without prejudice to the above grounds, the Id AO had failed to notice that there were also withdrawals from very same bank account deposits in bank account and as such cash so withdrawn was available and was re-deposited which ought to be considered while making gross addition. The appellant could not furnish the evidences due to non-cooperation of the ex-tax representative. The same be considered in the best interest of justice and got verified from the authorities below. The appellant craves leave to add, alter, modify or delete any of the grounds at the time of hearing.
During the course of hearing before us, the learned Authorised Representative submitted that the non-compliance before the lower authorities was not deliberate but occurred due to lack of proper assistance from the former consultant. It was stated that the assessee is now in possession of all relevant documents, including details of cash flow and withdrawals, and is in a position to substantiate his case both on the merits of the addition. The learned AR accordingly pleaded that, in the interest of justice, the matter be restored to the file of the Assessing Officer for de novo adjudication after granting proper opportunity to the assessee.
The Departmental Representative did not raise any serious objection to such restoration, though he supported the action of the MA No.373/Ahd/2025
4 lower authorities on the basis of non-cooperation by the assessee in earlier proceedings.
We have heard the rival submissions and perused the material on record. It is an admitted fact that the reassessment was completed ex- parte due to non-compliance with statutory notices. Further, the CIT(A) also dismissed the appeal ex-parte, solely on the ground of lack of response from the assessee.
It is now well-settled by a catena of decisions that dismissal of appeal ex-parte without examining the merits can result in failure of justice, particularly where the assessee expresses readiness to substantiate his case. In the present case, the assessee has explained the reasons for non-compliance and has now expressed readiness to furnish full details with supporting documents to substantiate both the jurisdictional and substantive grounds. In such circumstances, we are of the considered view that the interest of justice would be met if the matter is restored to the file of the Assessing Officer for fresh adjudication, after affording due opportunity to the assessee.
At the same time, to ensure that the appellate process is not misused, and that some responsibility is fixed for the earlier non- compliance, we impose a cost of Rs.5,000/- (Rupees Five Thousand only) on the assessee, which shall be paid to the credit of the Income Tax Department before the next date of hearing before the Assessing Officer.
In view of the above discussion, the impugned order of the CIT(A) is hereby set aside and the matter is restored to the file of the Assessing Officer for de novo adjudication in accordance with law, after affording adequate opportunity of being heard to the assessee. The assessee shall
MA No.373/Ahd/2025
5 ensure strict compliance and shall deposit the cost of Rs.5,000/- as directed above.
In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced in the Court on 6th May, 2025 at Ahmedabad.