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Income Tax Appellate Tribunal, “D” BENCH, AHMEDABAD
Before: S/SHRI T.R. SENTHIL KUMAR & MAKARAND V.MAHADEOKAR
This appeal by the assessee is directed against the order dated 25.10.2024 passed by the Ld. Commissioner of Income-tax (Appeals), National Faceless Appeal Centre, Delhi [hereinafter referred to as "CIT(A)"], for the assessment year 2018–19, whereby the Ld. CIT(A) dismissed the appeal ex parte and upheld the addition of Rs.14,19,70,335/- made by the Assessing Officer under section 40A(3) of the Income-tax Act, 1961 [hereinafter referred to as “the Act"] as per the order dated 14.03.2023 passed under section 147 read with section 144B of the Act.
The assessee an individual engaged in the trading of agricultural produce under the proprietorship concern “Amrut Trading Company”, filed his return of income for A.Y. 2018–19 on 03.06.2022 declaring total income of Rs. 4,87,991/-. The case was reopened under section 147 based on information received through the Insight Portal, particularly on the basis of a Suspicious Transaction Report (STR) which highlighted substantial cash withdrawals aggregating to Rs. 35 lakhs during the period from 10.01.2018 to 06.02.2018 from the assessee’s bank account with Bank of Baroda (A/c No. 095802000000800). These withdrawals were preceded by RTGS credits received from M/s. Murlidhar Industries Pvt. Ltd., which were withdrawn in cash on the same day.
During the course of reassessment proceedings, the Assessing Officer noted that the assessee had shown purchases amounting to Rs.14,24,58,326/- made in cash allegedly for procuring agricultural commodities such as Raydo and other produce. The assessee failed to submit complete books of account, purchase bills, or supporting ledgers. Only bills aggregating to Rs.26,04,914/- were furnished, with the balance purchases remaining unsupported. The Assessing Officer concluded that the cash purchases exceeded the threshold prescribed under section 40A(3), and that the assessee had not established that such payments fell within any of the exceptions provided under Rule 6DD of the Income-tax Rules, 1962.
3 Accordingly, the entire sum of Rs. 14,24,58,326/- was disallowed and added to the total income. The assessment was framed ex parte under section 147 read with section 144B of the Act and penalty proceedings under section 270A were separately initiated for alleged misreporting of income. Interest under sections 234A, 234B, and 234C was also directed to be levied.
4. Aggrieved, the assessee filed an appeal before the Ld. CIT(A). During appellate proceedings, the assessee sought adjournment on 09.10.2024 requesting 15 days to file submissions and evidence. However, no adjourned date was communicated, and the appeal was dismissed ex parte on 25.10.2024. The Ld. CIT(A) upheld the entire disallowance under section 40A(3), observing that the assessee failed to prove that cash payments were made to farmers or that such transactions qualified for exemption under Rule 6DD. The order was passed without examining any materials or submissions on merits.
5. Aggrieved by the said order, the assessee is now in appeal before us raising following grounds:
1. The Ld. CIT(A), NFAC, Delhi was grievously erred in dismissing the appeal on merits by upholding the addition made by the Ld. A.O. which is not correct and bad in law. The appellant submits that the appellant had asked for the adjournment for 15 days on 09.10.2024 for furnishing his submission along with relevant documents on or before 24.10.2024. But the Ld. CIT(A) has not informed the adjournment date for the submission thereof to the appellant and in the meantime immediately on 25.10.2024 he has finalized the appeal on merits which is bad in law.
2. The Ld. CIT(A) has also erred in making addition of Rs.14,19,70,335/- by invoking the provision u/s. 40A (3) of the Income Tax Act, 1961.
4 It is submitted that on the facts and circumstances of the appellant such impugned addition is unwarranted and unjustified. The same should be deleted now.
3. Without prejudice to above, the transactions entered by the appellant has been covered under rule 6DD of Income Tax Rules, 1962. However the Ld. CIT(A) was failed to appreciate the said fact. Therefore it is prayed that the unlawful addition so made u/s. 40A(3) should be deleted.
The appellant therefore requests your Honour to kindly delete the addition confirmed by the Ld. CIT(A) by upholding the same, should be deleted looking to the merits of the case.
Also the appellant requests your Honour to kindly delete the interest imposed by the Ld. A.O, various sections on merits.
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.
6. Before us, the learned Authorized Representative submitted that the Ld. CIT(A) had erred in dismissing the appeal ex parte without providing effective opportunity to the assessee. It was submitted that the assessee had, vide communication dated 09.10.2024, sought an adjournment of fifteen days to submit detailed written submissions along with supporting evidence. However, no further notice of hearing or intimation regarding adjourned date was provided by the Ld. CIT(A), and the order was passed on 25.10.2024, thereby denying the assessee a fair and reasonable opportunity of being heard. It was further submitted that the addition made under section 40A(3) was unwarranted on merits as well, as the assessee was engaged in trading of agricultural produce and the cash payments made for purchases were covered under Rule 6DD(e) of the Income-tax Rules, 1962. However, in the interest of justice, the learned AR submitted that the assessee may be granted an opportunity to furnish the
The learned Departmental Representative fairly submitted that he had no objection if the matter is restored to the file of the CIT(A) for fresh consideration after providing adequate opportunity to the assessee.
We have heard the rival contentions and perused the material available on record. On a perusal of the order of the Ld. CIT(A), we find that the appeal was dismissed for non- prosecution, even though the assessee had sought a short adjournment on 09.10.2024 to furnish submissions and supporting evidence. There is nothing on record to show that the assessee’s request for adjournment was either disposed of or denied by the Ld. CIT(A). In our considered view, the denial of an effective opportunity of hearing to the assessee vitiates the appellate proceedings and violates the principles of natural justice.
In view of the above, and considering that the Department has no objection, we deem it fit and proper to set aside the impugned order passed by the Ld. CIT(A) and restore the matter back to his file for fresh adjudication of the appeal in accordance with law, after affording due and reasonable opportunity to the assessee to furnish his submissions and evidence in support of his claim.
6 We clarify that the assessee shall cooperate with the appellate proceedings and shall not seek undue adjournments. The Ld. CIT(A) shall dispose of the appeal by a speaking order after considering the submissions and documents to be filed by the assessee.
In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced in the Court on 5th May, 2025 at Ahmedabad.