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Facts
The assessee is appealing an order of the CIT(A) for assessment year 2010-11. This is a second appeal after a previous remand. The Assessing Officer made an addition based on commodity transactions, treating it as undisclosed income. The assessee claims primary income from agriculture, which is exempt, and incurred a loss on commodity trading, thus having no liability to file a return.
Held
The Tribunal found that the assessee repeatedly failed to provide required evidence and comply with directions, demonstrating a pattern of non-compliance. The CIT(A) correctly rejected the appeal as the assessee did not substantiate their claims with appropriate evidence. The repeated failure to comply and the filing of irrelevant material were not condoned.
Key Issues
Whether the addition made by the AO on account of commodity transactions is justified when the assessee claims agricultural income as primary source and a loss in commodity trading, and whether the assessee's non-compliance with procedural requirements warrants dismissal.
Sections Cited
10(1), 139(1), 271(1)(c), 271(1)(b), 142(1), 68
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Assessee by : Sh. Rachit Goyal, CA Revenue by : Sh. Vinod Kumar Chaudhary, JCIT, Sr. DR सुनवाई क� तार�ख/Date of Hearing : 12-11-2025 उदघोषणा क� तार�ख/Date of Pronouncement : 17-11-2025 आदेश/Order This appeal by the assessee is directed against the order of the Commissioner of Income Tax (Appeals), NFAC, dated 10/03/2025, for the assessment year 2010-11.
We find that the present appeal is a second round of appeal before the Tribunal. In the first round, this Tribunal has remanded the matter to the file of the Assessing Officer
2 with the direction as reproduced in paragraph 6 of the order of the Assessing Officer to the following effect: -
6. The Hon'ble ITAT after considering the submission of the assessee and the order of the Id. CIT(A) set aside the issue to the file of the AO with the directions given here below: We have considered the submissions of both the parties and perused the material on the record in the present case it is an admitted fact that the AO made impugned addition by passing the assessment order ex parte and the Id. CIT(A) also sustained the addition by observing that the assessee had not submitted his bank account or copy of account to show the investment made for trading in the commodity transaction. Accordingly, the estimated made by the AO was sustained. It is well settled that nobody issued be condemned unheard as per the maxim. 'audi alteram pertam'. In the present case, the AO made the addition by passing the ex parte order, we therefore by keeping in view the principle of natural justice deem it appropriate to set aside this case back to the file of AO to be adjudicated afresh in accordance with law after providing due and reasonable opportunity of being heard to the assessee.” 3. The Assessing Officer had issued a notice as mentioned in the assessment order; however, despite the issuance of the notice, the Assessee failed to appear and file the evidence before the Assessing Officer. On account of the failure of the 3 Assessee to appear before the AO despite the direction of the Tribunal, the AO was left with no other option except to pass the assessment order. His finding in the assessment order is at para 8 of the assessment order
“8. In this regard, it would be pertinent to state that the onus was on the assessee to furnish all details on the basis of which additions were made by the AO and confirmed by the Ld. CIT(A) to prove his case. Further, the onus was also on the assessee to prove the source of the investment with supporting documentary evidences. Since the assessee failed to furnish the said details, 2% of the total commodity transaction of Rs. 9,84,82,375/- amounting to Rs. 19,69,647/- is added to the total income of the assessee and the same is treated as undisclosed income of the assessee. Penalty proceedings u/s 271(1)(c) of the IT act are initiated in the case of the assessee for concealing particulars of income. Penalty proceedings u/s 271(1)(b) of the IT act are initiated for non-compliance to notices u/s 142(1).”
Feeling aggrieved by the order of the Assessing Officer, the Assessee preferred an appeal before the CIT(A). The Ld. CIT(A) had dismissed the assessee's appeal for the reasons recorded in para 5.2.2. of his order which is to the following effect.
4 “5.2.2. In addition to the above arguments, the appellant has submitted a bank statement, proof for agricultural income and statement of commodities transaction. The appellant claims that he is an agriculturist and income from agricultural operations is the only source of income. The appellant has submitted 4 bills in support of claim of agricultural income. The bills pertain to FY 2010-11 and cumulatively the agricultural receipts in these 4 bills amount to Rs.2,20,604/-. These evidences are not relevant for the AY under consideration and the appellant has not moved an application under Rule 46A of the I.T. Rules for admission of additional evidence. Without prejudice to the fact that the appellant has not invoked provisions of Rule 46A of the IT Rules, the evidences are not relevant for FY 2009-10 and hence these evidences are rejected. The appellant fails to submit documentary evidence to prove its claim that he had accumulated savings from the past. The appellant has claimed that he has incurred loss from commodity transaction. However, no documents have been submitted to prove that transaction in commodities have resulted in a net loss. The statement of commodities transaction alone, submitted by the appellant during the course of appellate proceedings does not lead to any meaningful conclusion regarding profit or loss derived by the appellant. Further, no documents/evidences have been provided to prove the source of investments in commodities. The appellant has not filed ROI for AY 2010-11 and fact remains that the source of investment in commodities has not been explained. In this context, the estimated addition of Rs. 19,69,647/- as undisclosed income consequent
5 to transaction in commodities is justified. The grounds of appeal are therefore dismissed.
5. Now the Assessee is in appeal before us and the Assessee has filed the submissions at page 4 to 11 which are to the following effect:
Ground No. 1 The Id. CIT(A) has erred in making addition of income from commodities without even taking into consideration that the agricultural income was the prime source of income of the applicant. In regards to above stated ground, we would like to humbly submit the following facts: The appellant, Sh. Pavitar Singh (PAN: BTEPS4094.I). respectfully submits that the learned CIT(A) has erred in making the addition of income from commodities without appreciating that the main source of income of the appellant is agricultural, which is exempt under the provisions of The Income Tax Act, 1961. It is further submitted that the appellant had actually incurred a loss on commodity transactions and was, therefore, not under any obligation to file an income tax return. The addition has been made without proper appreciation of the facts and evidences on record, and is thus unjustified and unsustainable. In regards to above stated grounds and facts, we would like to humbly submit the following submissions: Please refer Para 5.2.2, Page-4 of order issued u/s 250 of The Income Tax Act, DIN: ITBA/NFAC7S/250/2024- 1961 dated 10.03.2025 against 25/1074306431(l) (attached in Annexure A), we hereby submit the following rebuttal to the inferences drawn therein: "...The appellant has not filed ROI for AY 2010-11 and fact remains that the source of investment in commodities has not been explained. "
In regards to the aforementioned statement, the appellant humbly submits the following rebuttal: The appellant respectfully submits that there was no liability to file a return of income for AY 2010-11, as the primary source of income comprised agricultural receipts, which are exempt under section 10(1) of the Income-tax Act, 1961. During the relevant year, a loss was also incurred from commodity trading, resulting in the absence of any taxable income. In the absence of" income chargeable to tax, there was no statutory requirement to file a return of income for AY 2010-11. Accordingly, the non-filing of the return cannot be viewed adversely. As per the decision of the Hon’ble Allahabad High Court in the case of The Chamber of Tax Consultants vs. Director General of income Tax (Allahabad High Court, January 24, 2025), it was held that an assessee is under no obligation to file a return of income under section 139(1) of the Income-tax Act, 1961, if their total income does not exceed the maximum amount not chargeable to tax. In the said case, after deducting exempt or non-taxable income, the remaining income fell below the taxable threshold, thereby absolving the assessee of any requirement to file a voluntary return. This principle applies equally where the appellant's income is derived from exempt agricultural operations and further diminished by a genuine loss from commodity trading, resulting in zero taxable income and hence no return-filing liability. Ground No. 2 The impugned order in the case cited as subject is erroneous since the same has been framed without fully appreciating the merits of the case. The agricultural income and past savings of the assessee has been totally dejected as the source of the said investments which is against the laws of natural justice. In regards to above stated ground, we would like to humbly submit the following facts: The appellant respectfully submits that he is engaged primarily in agricultural activities, and the investments under consideration amounting to Rs. 3.60,000/- were duly made out of agricultural income and accumulated past savings. In support of the same, a copy of Form- J along with the Kisan Card is enclosed as Annexure-B. It is further submitted that the commodity transactions in question were carried out by the broker on behalf of the appellant, resulting in a loss of Rs. 55,544/-. In regards to above stated grounds and facts, we would like to humbly submit the following submissions: Please refer Para 5.2.2, Page-4 of order issued u/s 250 of The Income Tax Act. 1961 dated 10.03.2025 against DIN: ITBA/NFAC/S/250/2024-25/1074306431(l) (attached in Annexure A). we hereby submit the following rebuttal to the inferences drawn therein: "... The appellant fails lo submit documentary evidence to prove its claim that he had accumulated savings from the past. " In regards to the aforementioned statement, the appellant humbly submits the following rebuttal: It is respectfully submitted that the appellant is a farmer by occupation. Agricultural income, being exempt under section 10(1) of the Income- tax Act, 1961, is not chargeable to tax. The appellant has been engaged in farming for several years, and the documentary evidence/bills already submitted before your goodself clearly demonstrate that his agricultural operations generate sufficient income. From such income, it is reasonable and natural to infer that the appellant could accumulate personal savings over time. The fact that the appellant had a balance of ?3.60,000/- in his bank account is a direct outcome of such agricultural earnings and frugal living, and does not require separate taxation or disallowance. It is further submitted that the Income-tax Act does not provide for bringing to tax the mere 'savings' of an assessee, particularly when the source of such savings can be traced to exempt agricultural income. Accordingly, the appellant's explanation stands duly substantiated.
As per the decision of the Hon'ble ITAT Ahmedabad in the case of Kamlesltbhai Vinodbhui Patel vs. Income Tax Officer [ITA No. 2003/Ahd/2017, order dated 28.02.2020], it was held that where the assessee. being an agriculturist, had duly explained cash deposits in his bank account as having been sourced from exempt agricultural income and supported the claim with land records, sale bills, and other documentary evidences, no addition under Section 68 of the Income- tax Act, 1961. was warranted. The Hon'ble Tribunal further observed that once the assessee has discharged the initial burden of proving the source of such deposits, the onus shifts on the Revenue to bring contrary material on record, failing which no adverse inference can be drawn. Ground No. 3 The learned CIT (A) erred in /mv and on facts by dismissing the appeal without considering the replies and explanations submitted by the appellant in response to the show-cause notices, thereby violating the principles of natural justice. In regards to above stated ground, we would like to humbly submit the following facts: The appellant respectfully submits that the learned CIT(A) has erred both in law and on facts by dismissing the appeal without considering the detailed replies and explanations filed in response to the show- cause notice. The said replies’, along with supporting documents, were duly placed on record but have neither been referred to nor adjudicated upon in the impugned order. Such non-consideration of material submissions amounts to violation of the principles of natural justice, as the appellant was denied a fair opportunity of being heard.
In regards to above stated grounds and facts, we would like to humbly submit the following submissions: Please refer Para 5.2.2. Page-4 of order issued u/s 250 of The Income DIN: Tax Act, 1961 dated 10.03.2025 against ITBA/NFAC/S/250/2024-25/1074306431(1) (attached in Annexure
9 A), we hereby submit the following rebuttal to the inferences drawn therein: "... The appellant has submitted 4 hills in support of claim of agricultural income. The hills pertain (o FY2010-11 and cumulatively the agricultural receipts in these 4 bills amount to Rs. 2.20,604. " In regards to the aforementioned statement, the appellant humbly submits the following rebuttal: It is hereby submitted that the appellant. Sh. Pavitar Singh, is primarily engaged in agricultural activities and hails from a rural background. The appellant is not well-versed with the technicalities of accounting, documentation, or the procedural requirements of income-tax assessments. Owing to this limitation, there appears to have been an inadvertent mistake in furnishing certain bills pertaining to a different financial year, i.e.. FY 2010-11, in support of the claim of agricultural income. It is humbly clarified that the said error was unintentional and purely attributable to the appellant's lack of formal education and understanding of record-keeping requirements. The correct bills substantiating the agricultural income for the assessment year 2010- 11 are now being furnished herewith as Annexure A along with a copy of the appellant's Kisan Card.
It is further submitted that no show cause notice was ever served upon the appellant in reference to this mistake, and consequently, no final opportunity was provided to rectify the inadvertent mistake before passing the impugned order. ' Without prejudice to the above, it is respectfully emphasized that the insistence on furnishing Form J was unnecessary in the present case, as the commodity statement already submitted clearly reflects a loss. Ground No. 4 The learned CIT(A) erred in making an ad hoc addition of ?19.69,647/-, calculated as 2% of alleged commodity transactions amounting to fP,84,82,375/-, without establishing any real income or gain accrued to the appellant. In regards to above stated ground, we would like to humbly submit the following facts: The appellant respectfully submits that the income computed on account of commodity transactions has been arrived at without any logical basis of calculation. The appellant had incurred a loss from such commodity transactions, and hence, no taxable income arose therefrom. Since the appellant's principal source of income is agriculture, which is exempt from tax under the Income-tax Act, no return of income was required to be filed. The impugned addition is therefore unjustified. The statement showing the loss incurred by the appellant from commodity trading is attached as Annexure-C, which itself is conclusive proof of the loss suffered. Beyond this documentary evidence, there remains nothing further that the appellant can possibly furnish in support of the claim.
In regards to above stated grounds and facts, we would like to humbly submit the following submissions: Please refer Para 5.2.2. Pagc-4 of order issued u/s 250 of The Income DIN: Tax Act, 1961 dated 10.03.2025 against ITBA/NFAC/S/250/2024-25/1074306431(l) (attached in Annexure A), we hereby submit the following rebuttal to the inferences drawn therein:
...In this context, the estimated addition o f Rs. 19.69,647/- as undisclosed income consequent to transaction in commodities is justified. The grounds of appeal are therefore dismissed.
In regards to the aforementioned statement, the appellant humbly submits the following rebuttal:
11 It is respectfully submitted that the estimated addition of Rs. 19,69.647/- as undisclosed income does not have any sound or logical basis. The application of a flat rate of 2% appears to be based on a mere presumption, without any supporting material or factual foundation. It is respectfully submitted that such estimation, being purely on a notional basis, cannot be sustained in law.
It is well settled that additions must be grounded in evidence and have a logical connection with the facts of the case. In the present matter, the appellant has already placed on record the commodities statement (Annexure C) and the corresponding bank statement (Annexure D). which clearly establish that a net loss of Rs. 55,544/- was incurred. In these circumstances, the estimation of profit at 2% and the consequent addition of Rs. 19.69,647/- is not justified and deserves to be deleted. As per the decision of the Hon'ble ITAT Delhi in the case of ITO vs. Bhuvan Sharma (AY 2017-18). it was held that an addition cannot be sustained where it is made merely on assumptions or presumptions without any concrete supporting evidence. The Hon'ble Tribunal observed that estimations must be founded on facts and corroborative material, and purely notional figures cannot form the basis of taxation. Ground No. 5 The learned CIT(A) has erred in law and on facts in dismissing the appeal without due appreciation of the evidence on record and in a mechanical manner.
In regards to above stated ground, we would like to humbly submit the following facts & submissions: The appellant respectfully submits that the learned CIT(A) has erred in law and on facts in dismissing the appeal without due appreciation of 12 the evidence placed on record. The documentary evidences furnished by the appellant were not duly considered, and the appeal was disposed of in a mechanical manner without providing a proper opportunity of being heard.
In regards to above stated grounds and facts, we would like to humbly submit the following submissions: Please refer Para 5.2.2, Page-4 of order issued u/s 250 of The Income Tax Act, 1961 dated 10.03.2025 against DIN: ITBA/NFAC/S/250/2024-25/1074306431(l) (attached in Annexure A). we hereby submit the following rebuttal to the inferences drawn therein: "...However, no documents have been submitted to prove that transaction in commodities have resulted in a net loss. The statement of commodities transaction alone, submitted by the appellant during the course o f appellate proceedings does not lead to any meaningful conclusion regarding profit or loss derived by the appellant. " In regards to the aforementioned statement, the appellant humbly submits the following rebuttal: It is respectfully submitted that the appellant has duly placed on record the commodities statement, which clearly sets out the particulars of the transactions undertaken and demonstrates that a net loss of Rs. 55,544/- was incurred during the relevant period. The said statement, when read in its entirety, unambiguously reflects the fact that the appellant's transactions in commodities did not result in any gain but rather culminated in a loss. In order to further corroborate the genuineness of the above, the appellant has also furnished the corresponding bank statement, which reflects the movement of funds associated with the said commodity trades. The commodities statement has been enclosed as Annexure C and the relevant bank statement has been enclosed as Annexure D for your kind perusal. It is therefore respectfully submitted that the documentary evidence now placed on record sufficiently establishes the fact that the appellant
13 has indeed suffered a genuine loss of Rs. 55,544/-from commodity transactions, and no adverse inference is warranted on this count. As per the decision of the Hon'ble Calcutta High Court in the case of PCIT vs. BLB Cables and Conductors Pvt. Ltd. it was held that where the assessee had substantiated losses from commodity transactions through broker statements, bank records and mother supporting evidences, such losses could not be disregarded merely on suspicion or extraneous grounds. The Hon'ble Court further observed that once the assessee has placed primary documentary evidence on record, the burden shifts on the Revenue to disprove the same with cogent material; failing which, no adverse inference can be sustained.
Ground No. 6 The learned CIT(A), despite finding the material on record unsatisfactory, failed to grant the appellant any further proper opportunity of being heard to furnish any additional evidence, if was required, before disposing of the appeal. In regards to above stated ground, we would like to humbly submit the following facts & submissions: The appellant respectfully submits that if the learned CTT(A) was of the view that the material on record was unsatisfactory, it was incumbent upon him to grant a fair and proper opportunity to the appellant to produce further evidence in support of the claim. The CIT(A) failed to provide any such opportunity to the assessee and disposed off the appeal.
However, the Ld. The AR who joined virtually had also submitted that an inadvertent error occurred due to the failure to file the correct documents before the Ld. CIT(A) and one more chance be given to the Assessee.
The ld. DR has submitted that the Assessee is a chronic non-compliant party and there is a cautious failure on the part
14 of the Assessee to cooperate in the proceedings and to file the requisite documents essential for the adjudication of the appeal.
I have considered the rival submissions and perused the material available on record. Admittedly, in the present case, the matter was remanded back to the file of the Assessing Officer in the first round, with the direction to redo the assessment after providing a due and reasonable opportunity of hearing to the Assessee. Despite the above direction, the Assessee failed to comply with the Tribunal's order and has not submitted any reply to the notices dated 16.9.2021 and 12.8.2021. In light of this, the AO has made the addition of Rs. 19,69,647/-.
It is further noticed that, at the time of filing the appeal before the Ld. CIT(A), the assessee did not furnish the relevant and contentious evidence pertaining to the assessment for A.Y. 2010-11 (relevant to F.Y. 2009-10). On the contrary, the assessee chose to file documents relating to F.Y. 2010-11 (A.Y. 2011-12), which had no nexus whatsoever with the issues under adjudication. Such wholly irrelevant material could not, and rightly ought not to, have been entertained by the Ld. 15 CIT(A). The Ld. CIT(A) has, therefore, correctly rejected the appeal. In my considered view, it is the bounden statutory duty of the assessee to substantiate its claim with appropriate and admissible evidence. The repeated failure of the assessee, first during assessment, then before the Ld. CIT(A), and even after the specific directions of this Tribunal in the first round, reveals a persistent pattern of disregard, indifference, and non-compliance. Such conduct cannot be condoned or glossed over. I cannot countenance a situation where an assessee, by deliberate inaction and filing of irrelevant documents, attempts to take the appellate process for a joyride, thereby wasting valuable judicial time. In these circumstances, I find no justification whatsoever to extend any further indulgence or latitude to the assessee. The appeal is accordingly dismissed.
In the result, appeal of the Assessee is dismissed.