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Facts
The assessee filed a return of income showing Rs. 58,43,286. The AO issued a notice under Section 142(1) and later completed assessment under Section 147 read with Section 143(3) by adding Rs. 20,15,534 as undisclosed income (bogus accommodation entry), Rs. 50,388 as commission, and Rs. 2,41,864 as interest on bogus unsecured loan. The assessee's appeal to NFAC was dismissed for non-compliance.
Held
The Tribunal, considering the peculiar facts and the assessee's request for an opportunity to present its case, restored the appeal to NFAC for hearing on merits. The assessee was cautioned to comply with NFAC's notices.
Key Issues
Whether the reassessment proceedings initiated under Section 147 were valid, and whether additions made were based on proper material and adherence to principles of natural justice, considering the dismissal of the appeal by NFAC due to non-compliance.
Sections Cited
142(1), 147, 143(3), 271(1)(c), 153C, 148, 151
AI-generated summary — verify with the full judgment below
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 order dated 05.03.2025, passed by the National Faceless Appeal Centre, Delhi (NFAC) for Assessment Year 2012-13.
The brief facts of the case are that during the year under consideration, the assessee filed his return of income, showing income from non-speculation business, amounting to Rs.58,43,286/-. The Assessing Officer (AO) issued notice under section 142(1) of the Income Tax Act, 1961 (hereinafter called “the Act’), informing the assessee that the assessee had made transactions with M/s Bansal Suppliers Pvt. Ltd., amounting to Rs.20,15,534/- for allegedly taking accommodation entries in the form of unsecured loan as revealed in the search and seizure operation conducted by the Investigation Wing of Income Tax Department on 28.04.2015 in Rich Udyog Group of Cases. The AO observed that during the above search operation and also during assessment proceedings, it was allegedly established that M/s Bansal Suppliers Pvt. Ltd. was acting as a tool to provide accommodation entries through entry operators, Shri Shashwat Agarwal and Shri Adesh Agarwal to various parties and that although M/s Rich Udyog Network and its Directors had filed Writ Petitions before the Hon'ble Allahabad High Court challenging the search action and for release of seized cash and other issues, but all the Writ Petitions were rejected by the Hon'ble High Court. The AO required the assessee to explain as to why such accommodation entries should not be added to the income of the assessee. In response, the assessee uploaded the reply in the Income Tax Portal on 11.12.2019. After considering the reply of the assessee and other material placed on record, the AO completed the assessment under section 147 read with section 143(3) of the Act, computing the income of the assessee as under:
Total income as shown in return : Rs.58,43,290/- Addition of undisclosed income : Rs.20,15,534/- Addition being commission @2.5% : Rs.50,388/- on bogus entry.
Addition of interest paid on bogus : Rs.2,41,864/- Unsecured loan
Total Income (rounded off) : Rs.81,51,080/- 2.1 The AO also initiated penalty proceedings under section 271(1)(c) of the Act, separately.
Aggrieved, the assessee preferred an appeal before the NFAC. However, the appeal before the NFAC came to be dismissed for the reason of non-compliance by the Assessee.
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 Ld. CTT(A) has erred in law and on facts in sustaining the impugned assessment order ignoring the fact that the order passed under section 147 r.w.s 143(3) issued by the Ld. A.O, without adjudicating the grounds in the appellant's case taken before CIT(A).
2. The Ld. CIT has erred in law and on facts in sustaining that the impugned re-assessment order ignoring the facts that order is dispatched by speed post by the Ld. A.O. on 03.01.2020 which is barred by limitation therefore, the impugned assessment order is liable to be quashed.
3. The Ld. CIT has erred in law and on facts in sustaining the impugned assessment order ignoring the facts that the Ld. A.O. has erred in law and facts that recording reasons in which there is no averment to the fact that the income has escaped assessment by reasons of the failure on the part of the appellant to disclose fully and truly all material facts necessary for his earlier assessment proceedings, order of which was passed under section 143(3) of the Income Tax Act, 1961. Therefore, in the light of judgment of Hon'ble Allahabad High Court in the case of Pr. CIT Vs. Light Carts Private Limited 4041TR 574, the impugned assessment order is without jurisdiction, barred by limitation and void-ab-initio and hence deserves to be quashed.
4. The Ld. CIT has erred in law and on facts in sustaining the impugned re-assessment order ignoring the facts that the re-assessment was completed in gross violation of section 153C of the Income Tax Act, 1961, therefore, the impugned re-assessment order passed under section 147of the Income Tax Act, 1961 is void-ab-initio and liable to be quashed.
That the Ld. CIT (A) has erred in law and on facts in sustaining the impugned assessment order ignoring the fact, that the addition/disallowances were made by the Ld. A.O. on the basis of certain material obtained at the back of the appellant which were not confronted to the appellant therefore, various additions/disallowances made by the Ld. A.O. are unsustainable in law and liable to be deleted.
6. That the Ld. CIT (A) has erred in law and on facts in sustaining the impugned assessment order ignoring the fact that the Ld. A.O. has not followed the guidelines issued by Delhi High Court in the case of M/s. Sabh Infrastructure Ltd. Vs. A.C.I.T. (2017) 398 ITR 198 (Delhi), therefore the impugned reassessment order is void-ab-initio and liable to be quashed.
7. That the Ld. CIT (A) has erred in law and on facts in sustaining the impugned assessment order ignoring the fact that that the addition/disallowances were made by the Ld. A.O. without providing opportunity to cross examine Shri Shashwat Agarwal and Shri Adesh Agarwal, therefore, various additions/disallowances made by the Ld. A.O. are unsustainable in law and liable to be deleted.
8. That the Ld. CTT (A) has erred in law and on facts in sustaining the impugned assessment order ignoring the fact that the copy of reasons recorded are undated and unsigned by the A.O., therefore, the proceedings initiated under section 147 of the Income Tax Act, 1961, and the impugned assessment order is insupportable in law, void-ab-initio and liable to be quashed.
That the Ld. CIT (A) has erred in law and on facts in sustaining the impugned assessment order ignoring the fact that the Ld. Assessing Officer. Kanpur, recorded vague reasons and these are based on incorrect facts, surmises. conjectures, assumptions therefore, there is no valid assumption of jurisdiction by the Ld. A.O. to initiate proceedings under section 147 of the Income Tax Act, 1961 and consequent impugned reassessment order is void-ab- initio and liable to be quashed. 10. That the Ld. CIT (A) has erred in law and on facts in sustaining the impugned assessment order ignoring the fact that the Pr.CIT-1, Kanpur has given mechanical approval/satisfaction for issue of notice under section 148 of the Income Tax Act, 1961 and such satisfaction cannot be said to be in accordance with section 151 of the Income Tax Act, 1961, therefore, the impugned assessment order is void- ab-initio and liable to be quashed.
That the Ld. CIT (A) has erred in law and on facts in sustaining the impugned assessment order ignoring the fact that that the Ld. Pr. C.I.T. (1), Kanpur has not granted approval/satisfaction as contemplated in section 151 of the Income Tax Act, 1961, therefore, the assumption of jurisdiction by the Ld. A.O. to initiate proceedings under section 147 of the Income Tax Act, 1961 is unsustainable in law consequently the impugned reassessment order is illegal, void-ab-initio and liable to be quashed.
That the Ld. CIT (A) has erred in law and on facts in sustaining the impugned assessment order ignoring the fact that the Ld. Assessing Officer, Kanpur has erred in law and on facts in not providing the Reasons Recorded under section 147 of the Income Tax Act, 1961 to the appellant and without there being initiate the proceedings under section 147 of the Income Tax Act, 1961 against the appellant, which is illegal and liable to be dropped.
That the Ld. CIT (A) has erred in law and on facts in sustaining the impugned assessment order ignoring the fact that the Ld. Assessing Officer, Kanpur, has erred in law and on facts in making the addition of Rs.20, 15,534/- which has been taken by the appellant firm as Unsecured Loan and Ld. A.O. arbitrarily treated the same as Bogus Accommodation Entry/Undisclosed sources without bringing out any cogent material on record and also which is without proper basis and therefore, said addition is insupportable in law and deserves to be deleted.
That the Ld. (CIT (A) has erred in law and on facts in sustaining the impugned assessment order ignoring the fact that the Ld. Assessing Officer,, has erred in law and on facts in making the ad-hoc estimated addition of Rs.50.388/- on account of alleged commission paid by the appellant at the rate of 2.5 per cent to the alleged entry provider, without bringing any cogent material on record therefore the said addition is unsustainable in law and on facts and deserves to be deleted.
That the Ld. CIT (A) has erred in law and on facts in sustaining the impugned assessment order ignoring the fact that the Ld. Assessing Officer has erred in law and on facts in making the addition of Rs.2,41,864/- on account of disallowance of Interest Expenses at the rate 12 per cent on the alleged bogus Unsecured Loan of Rs.20.15.534/- .therefore, the same is unsustainable in law and on facts and deserves to be deleted.
That the Ld. CIT (A) has erred in law and on facts in sustaining the impugned assessment order ignoring the fact that the Ld. Assessing Officer making the addition/ disallowance amounting to Rs.20,15,534/-, Rs.50,388/- and Rs.2,41,864/- in the income of the appellant firm which is contrary to the Principles of Natural Justice and Equity, therefore, the said addition is unsustainable in law and liable to be deleted. 17. That the Ld. CIT (A) has erred in law and on facts in sustaining the impugned assessment order ignoring the fact that the Ld. Assessing Officer making the addition amounting to Rs.20,15,534/-, Rs.50,388/- and Rs.2,41,864/- in the income of the appellant which is much too high and excessive and therefore deserves to be deleted. 18. That any other relief or reliefs as may be deemed fit on the facts on record, be granted. 19. Your humble appellant craves leave to add, amend or withdraw of any Grounds of Appeal
on/or before hearing of appeal
5. The ld. Authorized Representative for the assessee 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 an 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 its 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 30/06/2025.