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Facts
The assessee, a partnership firm, filed its return of income declaring Rs. 54,030/-. The AO selected the case for scrutiny and issued notices, to which there was no response. The AO later issued a show cause notice, and the assessee replied, explaining a clerical error in GSTR-3B and issues with timely online submission. The AO added amounts for difference in closing stock valuation and unexplained unsecured loans.
Held
The Tribunal condoned the delay in filing the appeal. While acknowledging non-compliance by the assessee before NFAC and partial compliance before AO, the Tribunal decided to give the assessee one more opportunity to present its case. The file was restored to the AO with directions to provide an opportunity for the assessee to present evidence.
Key Issues
Whether the assessee's appeal should be heard on merits despite delay and non-compliance, and whether the matter should be restored to the AO for fresh adjudication.
Sections Cited
144, 144B, 143(3), 68, 270A, 271AAC, 250, 282, 221(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, SMC BENCH, LUCKNOW
Before: SHRI. SUDHANSHU SRIVASTAVA
O R D E R This appeal has been preferred by the Assessee against the order dated 07.08.2024, 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 a partnership firm engaged in the business of timber products. The assessee filed its return of income for the year under consideration on 10.12.2020 declaring a total income of Rs.54,030/-. The case of the assessee was selected for scrutiny assessment and, accordingly, the Assessing Officer (AO) issued statutory notices to the assessee. However, there was no response from the side of the assessee. The AO finally issued show cause notice under section 144 of the Income Tax Act, 1961 (hereinafter called “the Act’) dated 21.3.2022, vide which the AO proposed to estimate the net profit of the assessee @ 0.5% on the turnover reflected in the GSTR-3B, as, according to the AO, the assessee had not submitted any response to the discrepancy found in GSTR-B return. In response to this show cause notice, the assessee filed reply dated 09.04.2022, stating as under:
"It is mentioned in notice that that turnover as per 3B is 1323741416 but actual sales as per audit report and gstr9 is 17755072 which can be verified from records of income tax and gst. during filling of gstr3b it was wrongly mentioned 1308705117 instead of 1308705 on which tax at the rate 9percent cgst and same sgst amt 117783 each has been deposited. First three digits of tax amount was by mistake written in column of sales which after submission could not be deleted but cash memo and bill wise details mentioned in gstr 1 from which sales can be verified amt Rs.1308705 for month of April 2019. No one should be punished for such a clerical mistake, tcs has been deducted by seller which is genuine on wood purchase. It is a partnership firm salary and intt applicable has been paid to partners and after that tax has been calculated and subsequently refund claimed, assessee is ready to face legal proceeding manually and on line also, we are not so friendly on line working and dependent on others that’s why response could not be submitted within due time we are sorry for that we will do all compliance in future as per your order.” 2.1 After considering the reply furnished by the assessee, the AO observed that the closing stock of the assessee was not valued as per ICDS and that the audit report was also faulty. Accordingly, the AO made proportionate adjustment as per ICDS, which came to Rs.2,92,51,873/- (including freight & cartage) and the difference of Rs.13,18,023/- in the closing stock valuation was added back to the income of the assessee.
2.2 Further, the assessee was also asked to furnish the details of unsecured loans. In response, the assessee stated as under:
“.....All unsecured loans has been taken from friends and relatives having genuine identity and will be produced on demand and money received has been used in business motive accordingly and therefore no reason to add as unexplained investment. it is requested to complete assessment on basis of documents produced and available on record....."
2.3 The assessee had also furnished before the AO the copies of letters received from the lenders. The AO found that there were increase in unsecured loan totaling to Rs.33,61,040/-. As per AO, since the assessee had failed to furnish the details, these unsecured loans were to be treated as unexplained loans and accordingly were added to the total income of the assessee.
2.4 The AO completed the assessment under section 144B of the Act read with section 143(3) of the Act, computing the income of the assessee as under:
Income particulars Amount Returned Income Rs.54,030/- Addition of difference in closing Rs.13,17,919/- stock valuation
Addition on account of unexplained Rs.33,61,040/- loan u/s. 68 of the Act
Total assessed income Rs.47,32,989/- 2.5 The AO also initiated penalty proceedings under sections 270A and 271AAC of the Act, separately.
2.6 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.
2.7 Now, the assessee has approached this Tribunal challenging the orders of the AO as well as the NFAC, by raising the following grounds of appeal:
1. Because the CIT(A) has erred on facts and in law in dismissing the appeal ex-parte for the reasons of non- compliance by the assessee to the notices issued, the assessee being prevented by the sufficient and reasonable cause in as much as none of the notice issued could reach the assessee, the order passed by the CIT (A) be set aside.
2. Because the notices alleged to have been delivered on emails did not reach the hands of the assessee in as much as the assessee being unaware of the said emails, being prevented by sufficient and reasonable cause, the order passed by the CIT(A) be set aside.
3. Because the notices u/s 250 have not been issued and served physically, more so uploading the notice on the portal would not amount to service as per provisions of section 282 of the Act, the order passed by CIT(A) be set aside.
4. Because the CIT(A) has erred on facts and in law by not adjudicating the appeal on the merits of addition made, which ought to have been done, in absence of the same, the order passed by CIT(A) be set aside.
5. Because the CIT(A) has erred on facts and law in upholding the addition of Rs.13,17,919/- on account of difference in valuation stock, has failed to appreciate, that the assessee has never added the cartage for valuing the opening or closing stock, the addition of Rs.13,17,919/- being contrary to facts and in law, be deleted.
6. Because there is no change in method of accounting, regularly followed by the assessee, the authorities below have failed to appreciate that any variation on valuation in the stocks would affect both the opening as well as closing stock, such order passed by CIT(A) of upholding addition of Rs.13,18,023/- would be against the principles of accounting, is contrary to facts the additions made be deleted.
7. Because the CIT(A) has erred on facts and in law in upholding Rs.33,61.040/- u/s 68 of the Act which addition is contrary to facts, bad in law be deleted.
8. Because CIT(A) has erred on facts upholding the addition of Rs.33,61,040/- u/s 68 of the Act without appreciating that in certain cases old balances have been brought forward wherein new amounts have been received, such accounts being accepted as genuine and self-explanatory, the addition made is bad in law, be deleted.
3.0 The Ld. Authorized Representative for the assessee (Ld. A.R.) submitted that there is a delay of 273 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 partner, Shri Mohammad Mustafa and also copy of order sheet dated 29.07.2025 of the Family Court, Lucknow, stating therein that the appeal against the impugned order dated 07.08.2024 of the NFAC ought to have been filed before the Tribunal on 30.10.2024. However, the appeal has been filed on 31.07.2025 with a delay of 273 days. It was further stated that the copy of the impugned order of the NFAC was handed over to the Counsel of the assessee for taking appropriate action, but the Counsel had forgotten to file the appeal and that further due to ongoing litigation in the Family Court in the case filed by the deponent’s wife for divorce, the matter relating to filing of the appeal escaped the attention of the deponent also and that it was only when the assessee received a notice under section 221(1) of the Income Tax Act, 1961 (hereinafter called “the Act’), that the deponent had contacted the Counsel to enquire about the filing of appeal before the Tribunal and that in view of these facts, the assessee could not file the appeal before the Tribunal within the prescribed time limit. He prayed that the delay be kindly condoned and the appeal be heard on merits.
4.0 The Ld. Sr. D.R. objected to the delay being condoned.
5.0 In view of the prayer made by the Ld. A.R., I condone the delay in filing of the appeal and admit the appeal for hearing.
6.0 During the course of hearing before me, the Ld. A.R. submitted that the NFAC had erred on facts and in law in dismissing the appeal of the assessee by passing an ex-parte order, without adjudicating the issues involved in the appeal of the assessee on merit. The Ld. A.R. further submitted that the assessee could not be represented before the NFAC and that there was only partial compliance before the AO. The Ld. A.R. also submitted that certain details and documents relating to the transactions entered into by the assessee during the year under consideration could not be filed before the AO. The Ld. A.R. prayed that the matter may be restored to the file of the AO and if an opportunity is given, the assessee will produce all the relevant documents in support of its claim before the AO.
7.0 The Ld. Sr. D.R. objected to the restoration of appeal to the file of the Assessing Officer as requested by the Ld. A.R.
8.0 I have heard both the parties and have also perused the material on record. I find that there was non-compliance on behalf of the assessee before the NFAC and partial compliance before the AO. However, looking into the facts of this case and the prayer of the Ld. A.R., I am of the considered view that the assessee deserves one more opportunity to present its case and, therefore, I restore this file to the Office of the Assessing Officer with the direction to provide an opportunity to the assessee to present its case and to produce the necessary evidences in support of the impugned transactions entered into by the assessee during the year under consideration. I also caution the assessee to fully comply with the directions of the Assessing Officer in the set-aside proceedings when called upon to do so, failing which, the Assessing Officer would be at complete liberty to pass the order in accordance with law, based on the material available on record even if it is ex-parte qua the assessee.
9.0 In the result, the appeal of the assessee stands allowed for statistical purposes.
Order pronounced in the open Court on 31/12/2025.