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Facts
The assessee, engaged in trading building materials and C&F agency, filed a return of income. The case was selected for scrutiny due to low income compared to commission receipts and business expenses. The Assessing Officer (AO) disallowed 10% of expenditures as no reply was received from the assessee to the show cause notice. The NFAC dismissed the assessee's appeal ex-parte.
Held
The Tribunal found that the NFAC erred in dismissing the appeal ex-parte without providing the assessee an opportunity to be heard on merits. The Tribunal condoned the delay in filing the appeal and restored the matter to the NFAC for a fresh hearing on merits, cautioning the assessee to comply with future notices.
Key Issues
Whether the NFAC was justified in dismissing the appeal ex-parte without providing a reasonable opportunity to the appellant, and whether the addition made by the AO was justified without appreciating the merits of the case.
Sections Cited
143(3), 144B, 250
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, LUCKNOW BENCH “B”, LUCKNOW
Before: SHRI. SUDHANSHU SRIVASTAVA & SHRI NIKHIL CHOUDHARY
PER SUDHANSHU SRIVASTAVA, J.M.: This appeal has been preferred by the Assessee against the order dated 20.03.2025, passed by the National Faceless Appeal Centre, Delhi (NFAC) for Assessment Year 2020-21.
2.0 The brief facts of the case are that the assessee was engaged in the trading of building materials and also worked as C&F agent of a cement Company, M/s Jaiprakash Associates Limited. The assessee filed his return of income for the year under consideration on 27.01.2021, declaring a total income of Rs.14,61,950/-. The case of the assessee was selected for scrutiny under CASS on the issue of "Low income compared to large commission receipts, Business Expenses". During the course of assessment proceedings, the Assessing Officer (AO) noticed from the profit and loss account of the assessee that the assessee had made purchases to the tune of Rs.5,95,44,480/- and incurred expenditures for an amount of Rs.79,41,206/- during the year under consideration. The AO issued show cause notice to the assessee, requiring the assessee to explain as to why10% of expenditures of Rs.6,74,85,686/- (purchases of Rs.5,95,44,480/- plus expenditures of Rs.79,41,206/-) debited in the profit and loss account, which came to Rs.67,48,568/-, should not be disallowed and added to the total income of the assessee. Since there was no reply from the side of the assessee to the show cause notice issued by the AO, the AO disallowed the amount of Rs.67,48,568/- and added the same to the total income of the assessee. The AO completed the assessment under section 143(3) read with section 144B of the Act, assessing the total income of the assessee at Rs.82,10,518/-.
2.1 Aggrieved, the Assessee preferred an appeal before the NFAC, which dismissed the appeal of the assessee ex-parte qua the assessee and confirmed the order of the AO.
2.2 Now, the assessee has approached this Tribunal challenging the order of the NFAC, by raising the following grounds of appeal:
The Learned Commissioner of Income Tax (Appeals), NFAC (hereinafter referred to as the Ld. CIT(A)] has erred on facts and in law in dismissing the appeal of the appellant by passing an ex-parte order without providing reasonable opportunity to the appellant to have his say on the merit of the additions made by the Learned Assessing Officer.
On the facts stated in the statement of facts, the Ld. CIT(A) is not justified at all in passing the impugned order ex-parte.
3. The Ld. CIT(A) has erred by not appreciating the fact and the law that the present assessment order passed by the Ld. A.O. is bad in law and illegal on the ground that the selection of the case of the appellant was made under CASS for scrutiny assessment in gross violation of the guidelines laid down by the CBDT for selection of the cases under scrutiny assessment.
4. The Ld. CIT(A) has erred on facts and in law by confirming the additions of Rs.67,48,568/-made by the Ld. A.O. by way of making adhoc disallowances at the rate of 10 percent of aggregate expenses of Rs.6,74,85,686/-debited to the Profit and Loss Account under the head purchase and other expenses without pointing out any specific defect in the books and also by not appreciating the merits of the case. 3 The appellant reserves it right to advance such other grounds before or at the hearing, which it may consider fit and appropriate, for which it craves leaves to amend, alter or otherwise modify the Grounds appearing hereinbefore with the kind permission of the CIT(A). 2.3 The Ld. Authorized Representative for the assessee (Ld. A.R.) submitted that there is a delay of 27 days in filing the appeal before the Tribunal. He further submitted that the assessee had filed an application dated Nil for condonation of delay, duly supported by an Affidavit of the assessee, stating therein that the impugned order of the NFAC was neither served on the email id of the assessee nor by post on the registered address of the assessee given in Form 35 and that it was only when the assessee logged in to the online portal of the Income Tax Department, that he came to know about the passing of the impugned order and that further the notice of hearing issued under section 250 of the Act was sent on an email id “akhileshjainbahraich@gmail.com”, which did not pertain to the assessee. It was further submitted that immediately thereafter, the appeal was filed before the Tribunal with a delay of 27 days. He prayed that the delay be kindly condoned and the appeal be heard on merits.
2.4 The Ld. Sr. D.R. objected to the delay being condoned.
2.5 In view of the prayer made by the Ld. A.R., we condone the delay in filing of the appeal and admit the appeal for hearing.
The Ld. A.R. submitted before us that the NFAC was not justified in dismissing the appeal of the assessee without adjudicating the grounds of appeal and in passing the order ex- parte qua the assessee. The ld. AR prayed that the assessee’s appeal may be restored to the file of the NFAC for the purpose of adjudication on merits.
Since the order passed by NFAC was an ex-parte order, the ld. D.R. had no objection to the restoration of appeal to the NFAC.
We have heard both the parties and have also perused the material on record. Looking into the peculiar facts of this case, we are of the considered view that the assessee deserves one more opportunity to present his case and, therefore, we restore this file to the Office of the NFAC with the direction to hear the appeal on merits. We also caution the Assessee to fully comply with the notices and directions of the NFAC in the set- aside proceedings when called upon to do so, failing which, the NFAC would be at complete liberty to pass the order in accordance with law, based on material available on record even if it is ex-parte qua the assessee.
In the result, the appeal of the Assessee stands allowed for statistical purposes.
Order pronounced in the open Court on …/…../2025.
[NIKHIL CHOUDHARY] [SUDHANSHU SRIVASTAVA] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED:31/12/2025 JJ: