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Facts
The assessee failed to file a return for AY 2017-18 but made significant cash deposits of Rs. 42.52 lakhs during demonetization. The AO, after obtaining bank statements due to non-compliance with notices, treated the total bank credit of Rs. 3.12 crores as income, making additions under Section 69A (demonetization deposits) and Section 44AD (presumptive business income on the remaining amount), completing an ex-parte assessment under Section 143(3). The NFAC dismissed the assessee's appeal without admitting additional evidence.
Held
The Tribunal observed that the assessment was ex-parte and the NFAC's order was passed without considering additional evidence due to the assessee's ill health. Therefore, the Tribunal set aside the NFAC's order and remanded the case back to the Assessing Officer, directing a fresh opportunity for the assessee to present all evidence, while cautioning the assessee to ensure full compliance.
Key Issues
Whether the lower authorities erred in determining total income through additions under Section 44AD and 69A without proper consideration of additional evidence or audited accounts, and if the dismissal of the appeal by NFAC without admitting evidence violated principles of natural justice.
Sections Cited
144, 133(6), 143(3), 115BBE, 270A, 271AAC, 69A, 44AD, 46A, 250
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Income Tax Appellate Tribunal, LUCKNOW BENCH “A”, 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 09.07.2025, passed by the National Faceless Appeal Centre, Delhi (NFAC) for Assessment Year 2017-18.
2.0 The brief facts of the case are that the assessee had not filed the return of income for the year under consideration. The Income Tax Department was in possession of information that the assessee had made deposits of Rs.42,52,000/- in his bank account maintained with Bank of Baorda, Sarojini Nagar, Lucknow during the demonetization period (from 08.11.2016 to 31.12.2016). The Assessing Officer (AO) issued statutory notices to the assessee. However, the assessee did not respond to the notices issued by the AO. Since there was no compliance from the side of the assessee to various notices issued by the AO, he Page 2 of 6 issued show cause notice to the assessee, requiring the assessee to show cause as to why the provisions of section 144 of the Income Tax Act, 1961 (hereinafter called “the Act’) may not be invoked and the entire sum deposited in the bank account of the assessee may not be treated as the unexplained income of the assessee. However, there was still no response from the assessee. The AO, thereafter issued notice under section 133(6) of the Act to the Bank of Baroda, Sarojini Nagar, Lucknow and obtained bank account statements relating to the assessee. As per the bank account statement provided by the Bank, there was a total credit of Rs.3,12,22,265/- in the assessee’s bank account No.36490200000108 maintained with Bank of Baorda, Sarojini Nagar, Lucknow. The AO, after reducing the amount of Rs.42,52,000/- (deposits made by the assessee during the demonetization period) from the total credit of Rs.3,12,22,265/- in the year under consideration, the difference amount of Rs.2,69,70,265/- (Rs.3,12,22,265 – Rs.42,52,000) was treated as the business income of the assessee. The AO also estimated the business profit of the assessee under section 44AD of the Act @8% of Rs.2,69,70,265/-, which came to Rs.21,57,621/- and added the same to the income of the assessee. The AO completed the assessment under section 143(3) of the Act, computing the income of the assessee as under:
Returned income : Rs.12,87,310/- Addition u/s. 69A of the Act : Rs.42,52,000/- Addition u/s. 44AD of the Act : Rs.21,57,621/-
Total income : Rs.76,96,931/- 2.1 The AO also invoked the provisions of section 115BBE of the Act and initiated penalty proceedings under sections 270A and 271AAC of the Act, separately.
2.2 Aggrieved, the Assessee preferred an appeal before the NFAC and filed additional evidence. However, the NFAC, without admitting the additional evidence filed by the assessee, dismissed the appeal of the assessee and confirmed the order of the AO.
2.3 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. That the Ld. Assessing Officer as well as the Ld. Commissioner of Income Tax (Appeals), [here-in-after referred to as the Ld. CIT(A)] have erred on facts in determining the total income of the appellant at Rs.76,96,931/- as against the returned income of Rs.12,87,310/- by applying 44AD and 69A of Income Tax Act, 1961 and making addition of Rs.64,09,621/- which are seriously challenged.
2. Because the Ld. Lower authorities have erred on facts and in law in applying 44AD of the Income Tax Act, 1961 on bank deposits of Rs.2,69,70,265/- ignoring the audited accounts filed under section 44AB of the Income Tax Act, 1961. The Ld. Assessing Officer having also ignored the presumptive business income already included income from business / return filed of Rs.12,87,310/-, which is illegal, against the facts and inequitable.
3. Because the Ld. Lower authorities have erred on facts and in law in applying provision of section 69A of the Income Tax Act, 1961 on deposit of Rs.42,52,000/- as SBN during demonetization period.
4. That the assessment order of the Ld. Assessing Officer dtd. 30.11.2019, having been passed when the assessee appellant was seriously ill and was advised on complete bed rest was without affording proper and justified opportunity and appreciation of facts and legal background needs to be quashed.
5. That the Ld. CIT(A) has erred both on facts and in law in dismissing the appeal without considering the additional evidence filed by the assessee under Rule 46A of the Income Tax Rules, 1962, by neither admitting nor rejecting the additional evidence filed, thereby violating the principles of natural justice.
6. That the Ld. CIT(A) has further erred in not calling for a remand report from the Ld. AO on the additional evidence furnished by the assessee, despite a specific request made in this regard, which is mandatory under Rule 46A(3).
7. That the order u/s 250 of the ITA, 1961 has been passed by the Ld. CIT(A) dtd 09.07.2025 without providing a mandatory requirement of personal hearing opportunity to the assessee appellant to rebut or explain the observations of the Ld.AO in the light of the fresh evidence before disposing of the appeal which is clear violation of principles of natural justice.
The appellant craves leave to modify any of the grounds of appeal mentioned above and / or to add any fresh grounds as and when it is required to do so. 3.0 The Ld. Authorized Representative for the assessee (Ld. A.R.) submitted before us that due to ill health of the assessee, no compliance could be made before the AO. However, the assessee had furnished additional evidence under section 46A of the Income Tax Rules before the NFAC, but the NFAC, without admitting the additional evidence, had dismissed the appeal of the assessee by confirming the order passed by 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 those evidences before the AO.
4.0 Since the order passed by the AO was under section 144 of the Act and the NFAC had dismissed assessee’s appeal without admitting the additional evidence filed by the assessee, the Ld. Sr. D.R. had no objection to the restoration of appeal to the file of the Assessing Officer.
5.0 We have heard both the parties and have also perused the material on record. It is evident that the order passed by the AO is ex-parte qua the assessee and the Ld. First Appellate Authority has dismissed the appeal of the assessee without admitting the additional evidence filed by the assessee. Looking into the facts of this case, we are of the considered view that the Page 6 of 6 assessee deserves one more opportunity to present his case and, therefore, we set aside the order of the NFAC and restore this file to the Office of the Assessing Officer with the direction to provide one more opportunity to the assessee to present his case. The AO is also directed to admit whatever evidences assessee wants to submit before him. We 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 material available on record even if it is ex-parte qua the assessee.
6.0 In the result, the appeal of the assessee stands allowed for statistical purposes.
Order pronounced in the open Court on 31/12/2025.