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Facts
The assessee filed a revised return declaring income, including net agricultural income derived from gross agricultural receipts after deducting expenses. The Assessing Officer (AO) treated the entire gross agricultural receipts as unexplained money under Section 69A of the Income Tax Act, completing the assessment ex-parte due to the assessee's failure to respond to notices. The CIT(A) dismissed the appeal for non-compliance.
Held
The Tribunal held that while the assessee was persistent in failing to respond to notices, the submission regarding incorrect email service for appellate notices carried weight. The addition of gross agricultural receipts as unexplained money without factual verification was a significant grievance. Principles of natural justice require giving the assessee a final opportunity to substantiate claims.
Key Issues
Whether the CIT(A) erred in dismissing the appeal ex-parte without hearing the assessee and whether the gross agricultural income was wrongly treated as unexplained money without considering expenses.
Sections Cited
144, 144B, 69A, 143(2), 142(1), 29
AI-generated summary — verify with the full judgment below
Order PER LALIET KUMAR, J.M: This appeal by the Assessee is directed against the order of the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, dated 31/01/2025, pertaining to Assessment Year 2020-21. 2. In the present appeal Assessee has raised the following grounds:
1. 1. Challenge to the Action of Ld. CIT(A) on Facts and Law:- Because the 1. action of the Learned CIT(A) is being challenged on facts and law for confirming the action of the Learned Assessing Officer (AO) in completing the assessment under Section 144 read with Section 144B at an an amount of Rs. 1,22,39,230/-. The quantum of additions made by the AO and upheld by the Ld. CIT(A) is disputed. 1.1 Treatment of Gross Agricultural Income as Undisclosed Income:- That the L'd CIT(A) erred in upholding the action of the Learned AO in treating the gross agricultural income of Rs. 1,20,23,560/- as undisclosed income, which is contrary to the facts and the law. The assessee had duly disclosed the agricultural income in the return of income, supported by relevant documentation and evidence. The credits in the bank account were declared as receipts from agricultural activities, primarily from the sale of sugarcane to government-regulated sugar mills (Piccadilly Sugar Mill, Bhadson, and Karnal Cooperative Sugar Mill, Karnal) as 2 per the bond filed under the government scheme. The income declared by the assessee is genuine and supported by the Minimum Support Price (MSP) mechanism regulated by the government. The fact of agricultural income has not been concealed, and the action of the authorities is arbitrary and unjustified. 1.2 Failure to Appreciate that Income Declared was Accounted For: That the Ld. CIT(A) has failed to appreciate that there was no difference in the income declaredby the assessee and the income credited to the bank account. It is not a caseof 'unexplained money' U/s 69A as alleged by the Ld. AO and upheld by the Ld. CIT(A). The income declared by the assessee as agricultural income has been duly accounted for credited by the respective sugar mills. 1.3 Failure to Consider Expenses Claimed by the Assessee:- That the L'dCIT(A) erred in upholding the action of the Learned AO in treating the gross agricultural income as undisclosed income under Section 69A of the Income Tax Act, 1961, without considering the expenses of Rs. 91,23,890/- claimed by the assessee. Even in a best judgment assessment under Section 144, in the absence of any reply from the assessee, the AO, after taking into account the gross receipts, ought to have considered the expenses claimed by the assessee while determining the undisclosed income. Section 144 specifically lays down that the Learned AO has to consider all relevant material available on record. The failure to allow the expenses is arbitrary, unjustified, and contrary to the principles of natural justice and the provisions of the Income Tax Act, 1961.
2. Denial of Opportunity to Present the Case:- That the L'd CIT(A) erred in dismissing the appeal for non-compliance with the notice dated 26.12.2024, without considering that the notices were sent to an incorrect email address (KAMBOJSUKHVINDER1988@GMAIL.COM), which does not belong to the assessee or his present counsel. The correct email address (taxkkr@gmail.com) was mentioned in Form 35, but the same was ignored, resulting in the assessee being deprived of a fair hearing. 2.1 Violation of Principles of Natural Justice:- That the L'd CIT(A) erred in not providing the assessee an opportunity to present his case and contest the assessment order. The dismissal of the appeal without a proper hearing is a violation of the principles of natural justice and the provisions of the Income Taх Act, 1961. In the interest of justice, the matter should be set aside to the file of the L'd CIT(A) or the Learned AO to provide the assessee with an opportunity to present his case and submit the necessary evidence and documentation. 2.2 That the Learned CIT(A) grossly erred in dismissing the appeal ex parte without addressing all the grounds of appeal on the merits of the case. The dismissal was made without a comprehensive examination of the issues raised, which contradicts established judicial precedents. In this regard, reliance is being placed on the judgment of the Hon'ble ITAT, Amritsar Bench, in SMT. INDU SHARMA vs. INCOME TAX OFFICER following COMMISSIONER OF INCОМЕ ТАX vs. PREMKUMAR ARJUNDAS LUTHRA (HUF) reported in (2017) 297 CTR (Bom) 614. Additionally, various other judgments highlight the importance of addressing the merits of the case before any dismissals, which have not been duly considered in this matter.
3. Notwithstanding the grounds of appeal mentioned above, The Hon'ble ITAT may kindly be pleased to admit the additional evidence under Rule 29 of the Income Tax Appellate Tribunal (ITAT) Rules, 1963, as the same is necessary for the 3 proper adjudication of the appeal on merits, and all the conditions for the admission of additional evidence are duly fulfilled.
4. Prayer for Consequential Relief:- Because for allowing the addition, modification in the Grounds of Appeal, and for any consequential relief and/or any legal claim arising therein in the interest of substantial justice for a decision in accordance with law.
Briefly, the facts of the case are that the assessee is an individual who filed a revised return of income for A.Y. 2020-21 on 19/03/2021. The return declared a total income of Rs. 2,15,670/- and a Net Agricultural Income of Rs. 28,99,670/-. This net figure was arrived at by deducting agricultural expenditures of Rs. 91,23,890/- from gross agricultural receipts of Rs. 1,20,23,560/-. The case was selected for Limited Scrutiny via CASS to verify the genuineness of these agrarian transactions.
During the assessment proceedings, the Assessing Officer (AO) issued several notices under Section 143(2) and Section 142(1) between June 2021 and February 2022. The assessee failed to respond or provide documentary evidence such as land ownership records, Khatauni (crop records), or proof of sale of produce. Consequently, the AO completed the assessment ex-parte under Section 144, treating the entire gross agricultural receipt of Rs. 1,20,23,560/- as "unexplained money" under Section 69A of the Act.
On appeal, the Ld. CIT(A) dismissed the matter on 31/01/2025, noting that the assessee remained non-responsive to four notices issued during the appellate proceedings between November and December 2024.
Now the assesse is in appeal before us on the grounds mentioned hereinbove. 7. The learned AR for the assessee submitted that the non-compliance was not intentional but due to a bonafide misunderstanding and the negligence of the previous counsel. The AR emphasized that the assessee is a farmer who has consistently declared agricultural income.The AO erred by treating the entire gross receipts as unexplained money without allowing for the corresponding 4 agricultural expenditures. Lastly it was submitted that the notices were sent on the email id of earlier counsel and not to the email id mentioned in Form 35 before the Ld. CIT(A). Since the service has not been effected on the assessee therefore the present case deserves to be remanded back for denovo assessment.
Per contra, the learned DR strongly supported the orders of the lower authorities. The DR argued: that sufficient and reasonable opportunities were afforded at both the assessment and appellate stages.The notices were successfully delivered and read on the portal, yet the assessee chose not to comply.In the absence of evidence, the AO had no option but to finalize the assessment as per the best of his judgment.
We have heard the rival submissions and perused the material available on record. It is evident that the assessment was framed ex-parte due to the assessee's persistent failure to respond to statutory notices. However, the submission that notices were sent to the incorrect email IDcontrary to the details provided in Form 35carries weight regarding the adequacy of the opportunity provided at the appellate stage.Furthermore, the addition of the entire gross agricultural receipt as unexplained moneywithout a factual verification of the land holdings or the primary nature of the receipts—represents a significant tax grievance that touches upon the merits of the case. While we do not condone the assessee's laxity, the principles of natural justice and the requirement for a fair adjudication suggest that the assessee should be given one final opportunity to substantiate his claims. A "Best Judgment Assessment" should still aim for a reasonable estimate rather than a purely punitive addition.
In view of the above, and to meet the ends of justice, we set aside the order of the Ld. CIT(A) and remand the matter back to the file of the Assessing Officer for de novo adjudication. This remand is subject to the following strict conditions: