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Facts
The assessee, a partnership firm, filed its return of income. The case was selected for scrutiny, and the Assessing Officer (AO) issued several notices, to which the assessee did not respond, seeking adjournment. The AO completed the assessment ex-parte under Section 144.
Held
The Tribunal noted that the lower authorities passed ex-parte orders without sufficient opportunity for the assessee to be heard. The Tribunal restored the matter to the file of the AO for fresh adjudication, providing one more opportunity to the assessee.
Key Issues
Whether the ex-parte assessment orders passed by the AO and NFAC were justified, and if the assessee should be granted another opportunity to present its case.
Sections Cited
132A, 143(3), 144B, 144, 69C, 68, 270A, 271AAC(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, LUCKNOW BENCH “B”, LUCKNOW
Before: SHRI. SUDHANSHU SRIVASTAVA & SHRI NIKHIL CHOUDHARY
This appeal has been preferred by the assessee against the order dated 10.03.2025, passed by the ld. Commissioner of Income Tax (Appeal), National Faceless Appeal Centre (NFAC), Delhi for Assessment Year 2020-21.
2.0 The brief facts of the case are that during the captioned assessment year, the assessee was a partnership firm, engaged in the business activities of purchase and sale of Watches and their repairing work, etc., and was regularly assessed to tax. The assessee firm had e-filed its return of income for the year under consideration on 15.02.2021, declaring a total income of Rs.1,55,620/-. The case of the assessee firm was selected for scrutiny for verification of the genuineness of the transactions uploaded through Verification Report Upload (VRU) in respect of the inquiry report regarding action under section 132A of the Income Tax Act, 1961 (hereinafter called “the Act’) based on the interception of cash of Rs.23.00 lakhs from Mr. Mohd. Suhail, the partner of the firm by the Aurangabad Police in Bihar and also in respect of suppression of sales.
2.1 During the course of assessment proceedings, the Assessing Officer (AO) issued statutory notices dated 29.06.2021, 11.11.2021, 25.01.2022, 24.03.2022 and 01.08.2022 and thereafter a reminder letter dated 02.09.2022 to the assessee. However, the assessee did not respond to any of the notices except filing a letter dated 07.09.2022, seeking adjournment. The AO rejected the adjournment application dated 07.09.2022 moved by the assessee and issued a show cause notice dated 08.09.2022 proposing variations on several issues as stated in the notices issued to the assessee. In response to this show cause notice, the assessee filed a letter dated 10.09.2022, stating therein that the assessee was not aware of the notices issued to the firm till 02.09.2022 when it opened the online portal and updated the mobile number and email in the e-filing account and, therefore, assessee sought further time of 10-15 days for collecting necessary details and documents. However, the AO rejected the adjournment application dated 10.09.2022 also and observed that the assessee was casual and habitually non- compliant to the several statutory notices/ communications and no required details/documents and explanations, as called for had been submitted. He, therefore, decided to complete the assessment ex-parte under section 144 of the Act on the basis of material facts available on record and accordingly he proposed the following variations:
(1) Variation on account of cash credit found in the Bank account: Rs.6.90 lakhs.
(2) Variation on account of unexplained capital introduction: Rs.12.60 lakhs.
(3) Variation on account of unexplained unsecured loans: Rs.8.00 lakhs.
(4) Variation on account of non-furnishing of details in respect of Sundry Creditors and other payables: Rs.28,86,655/-.
(5) Variation on account of non-reconciliation of total credits found in the assessee’s Bank accounts vis-à- vis its sales turnover and other credits: Rs.17,75,605/-.
3.0 The AO completed the assessment under section 143(3) read with 144B of the Act, computing the income of the assessee as under:
1 Total income as per return of income filed by Rs.1,55,620/- the assessee.
2 Income as computed u/s. 143(1)(a) Rs.1,55,620/-
Variation in respect of addition made on Rs.6,90,000/- account of unexplained expenditure u/s.69C of the Act.
Variation in respect of additions made u/s. Rs.49,46,655/- 68 of the Act on account of explained capital (Rs.12,60,000), unsecured loans (Rs.8.00 lakhs) and unexplained Sundry Creditors (Rs.28,86,655).
Variation in respect of addition made on Rs.17,75,605/- account of Gross Profit.
Total assessed income. Rs.75,67,880/- 4.0 The AO also initiated penalty proceedings under sections 270A and 271AAC(1) of the Act, separately.
5.0 Aggrieved, the assessee preferred an appeal before the NFAC, which dismissed the appeal of the assessee for the reason of non-compliance by the Assessee.
6.0 Now, the assessee has approached this Tribunal challenging the dismissal of its appeal by the NFAC by raising the following grounds of appeal:
1. That the Learned Commissioner of Income tax (appeals) has erred in fact and law by confirming the Rs.6,90,000/-on account of expenses incurred by firm.
2. That the Learned Commissioner of Income tax (appeals) has erred in fact and law by confirming the addition u/s 68, of the IT Act, 1961 of Rs.12,60,000/- on account of addition made by partners in their capital account.
3. That the Learned Commissioner of Income tax (appeals) has erred in fact and law by confirming the addition of Rs.8,00,000/- as unsecured loan taken by the appellant towards the income of the appellant.
4. That the Learned Commissioner of Income tax (appeals) has erred in fact and law by confirming the addition of Rs.28,86,655/- u/s 68 of the IT Act. 1961 as increased of amount of sundry creditors in spite of the facts that the sundry creditors were duly recorded as per the books of account maintained by the appellant for the business conducted during the year.
5. That the Learned Commissioner of Income tax (appeals) has erred in fact and law by confirming the addition of 1,42,04,840/- as gross profit on difference of sales and total credits of bank account towards the income of the appellant.
The order passed by the Commissioner of Income tax (Appeals) is arbitrary capricious, misconceived, erroneous and against the principle of natural justice.
That the appellant craves leave to add /alter any of the grounds of appeal on or before the date of hearing.
7.0 During the course of hearing before us, the Ld. Authorized Representative for the assessee (Ld. A.R.) submitted that the notices issued by the AO till 02.09.2022 had not been received by the assessee and it was only when the online portal of the Income Tax Department was accessed on 02.09.2022 and the mobile number and email address of the assessee were updated in the e-filing account, that the assessee came to know about the issuance of notices by the AO and that the assessee sought a short adjournment of 10-15 days for collecting necessary details and documents. However, the AO rejected the adjournment application moved by the assessee and passed an order ex-parte qua the assessee under section 143(3) read with 144B of the Act. The Ld. A.R. further submitted that the NFAC too passed the order ex-parte qua the assessee without affording reasonable opportunity of hearing to the assessee. The Ld. A.R. prayed that, in the facts and circumstances of the case and in the interest of justice, ex-parte orders of the lower authorities may be set aside, and the matter may be restored to the file of the AO for fresh adjudication after affording reasonable and adequate opportunity of being heard to the assessee.
8.0 Since the orders passed by both the lower authorities were ex-parte, the Ld. Senior D.R. had no objection to the restoration of appeal to the file of the Assessing Officer.
9.0 We have heard both the parties and have also perused the material on record. Looking into the facts of this case, we are of the considered view that the Assessee deserves one more opportunity to present its case and, therefore, we restore this file to the Office of the Assessing Officer with the direction to provide one more opportunity to the Assessee to present its case and produce the necessary documents/details sought for by the AO. 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 the material available on record even if it is ex-parte qua the assessee.
10.0 In the result, the appeal of the assessee stands allowed for statistical purposes.
Order pronounced in the open Court on 11/08/2025.