NEPAL SINGH KUSHWAH,INDORE vs. CIT(A), NFAC
Facts
The assessee filed a second appeal against the order of the Ld. CIT(A) which dismissed the assessee's first appeal. The assessee was aggrieved by an assessment order that made additions to income based on a statement from one Mr. Agrawal, which was later retracted. The assessee claimed that no opportunity for cross-examination was provided and the addition was based on unsubstantiated documents.
Held
The Tribunal held that the impugned order was passed in violation of the principles of natural justice as the assessee was not provided with an opportunity of being heard due to notices not being sent to the correct email address. Therefore, the Tribunal set aside the impugned order and remanded the case back to the Ld. CIT(A) for a fresh decision.
Key Issues
Whether the impugned order is sustainable when the assessee was not provided an opportunity of hearing due to non-receipt of notices, violating principles of natural justice?
Sections Cited
253, 147, 143(3), 250, 246A, 153A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Per Paresh M Joshi, J.M.:
This is an appeal filed by the assessee Under Section 253 of
the Income Tax Act, 1961 (hereinafter referred to as the “Act” for
sake of brevity) before this Tribunal as and by way of Second
appeal under the Act. The assessee is aggrieved by the order
bearing Number ITBA/NFAC/S/250/2023-24/1061037770(1)
dated 16.02.2024 passed by Ld. CIT(A) u/s 250 of the Act which
is hereinafter referred to as the “Impugned order”. The relevant
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Assessment Year is 2014-15 and the corresponding previous year
period is from 01.04.2013 to 31.03.2014.
FACTUAL MATRIX
2.1 That as and by way of an assessment order made U/s
147/143(3) of the Act, the assessee’s total assessed income was
computed at Rs.47,94,070/-. Additions were made to the return
of income. That the assessment order is dated 10.12.2018
which is hereinafter referred to as the “impugned Assessment
order”.
2.2 That the assessee being aggrieved by the aforesaid
“impugned assessment order” prefers first appeal U/s 246A of
the Act before Ld. CIT(A) who by the “impugned order” has dismissed the 1st appeal of the assessee on grounds specified
therein.
2.3 That the assessee being aggrieved by the “impugned order”
has preferred the present second appeal under the Act before this
Tribunal and has raised following grounds of appeal in Form
No.36 against the “impugned order” which are as under:-
“1.The addition of Rs. 40,00,000/- to the appellant's income was made without providing an opportunity to cross-examine Mr. Saurabh (Sonu) Agrawal, whose initial statement formed the basis of the addition. The right to cross-examine a person
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whose testimony is relied upon is a fundamental principle of natural justice. Courts have repeatedly held that a failure to provide such an opportunity violates the principles of fairness, and any addition made under such circumstances should be struck down.
The entire addition is based on the statement given by Mr. Agrawal during the search proceedings, which he later retracted in a sworn affidavit. The appellant submits that this statement, made under duress, cannot form the sole basis for an addition, especially when the person retracts it and clarifies the actual position under oath. Judicial precedents affirm that retracted statements hold little probative value unless supported by independent corroborating evidence, which is absent in this case.
The addition of Rs. 40,00,000/- is based solely on a loose paper found at the premises of Mr. Agrawal and his retracted statement. The AO failed to corroborate this information with any substantive, independent evidence such as bank statements, financial records, or other documentation that could validate the existence of such a loan transaction. Courts have consistently ruled that additions based on mere suspicion or unsubstantiated third-party statements are not sustainable.
The affidavit filed by Mr. Agrawal, dated 12/10/2018, categorically states that his earlier statement implicating the appellant was made under fear and duress. The AO completely ignored this affidavit without providing any reasons or conducting further investigation. The Hon'ble Supreme Court has held that when a sworn affidavit contradicts earlier statements, it must be examined, and if found credible, it should override previous contradictory evidence.
The appellant's financial records for the relevant financial year (FY 2013-14) do not reflect any transaction of Rs. 40,00,000/- or any financial dealing with Mr. Agrawal. The AO has not identified any such entry in the appellant's books of account or any evidence to show that the appellant had this amount of cash available to lend during the relevant period.
In the assessment of Mr. Agrawal, conducted under section 153A of the Income Tax Act for the same assessment year, the alleged loan of Rs. 40,00,000/-was not added to his income. This indicates that the department itself did not consider the
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loan to be real or valid in the hands of the recipient, yet the same amount was arbitrarily added to the appellant's income. This inconsistency highlights a contradiction in the department's approach.
The addition of Rs. 40,00,000/- was based on a loose paper found at Mr. Agrawal's premises. It is settled law that loose sheets or unsubstantiated documents, without corroborative evidence, cannot be used as conclusive evidence to make an addition to the income of any person. The Hon'ble Supreme Court has held in multiple cases that loose papers are not admissible unless backed by substantive and credible evidence.
The department did not provide any valid explanation for its failure to consider the affidavit submitted by Mr. Agrawal, retracting his earlier statement. The Hon'ble CIT(A) has observed in several cases that an affidavit cannot be dismissed without inquiry or evidence to the contrary. Ignoring this affidavit without proper examination amounts to a violation of due process and weakens the department's case.
The AO has not established a direct link between the appellant and the alleged cash loan. The assertion that the appellant provided cash to Mr. Agrawal lacks any concrete proof, making the allegation speculative. The absence of a clear connection further weakens the case against the appellant.
Judicial pronouncements, such as in M/s. M. A. Jaleel vs. ITO, emphasize the right to cross-examine witnesses whose statements adversely affect a taxpayer. The failure to allow this right in the present case further infringes upon the appellant's rights and calls into question the integrity of the assessment.
Given the above grounds, the appellant requests a reasonable opportunity to put its case before the lower authority, which aligns with principle of natural justice. The appellant seeks relief from the unwarranted addition of Rs. 40,00,000/- to his income and requests the appeal to be allowed in favor of the taxpayer.”
Record of Hearing
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3.1 The hearing in the matter took place before this Tribunal on
24.04.2025 when Ld. AR for and on behalf of the assessee at the
outset and at the threshold contended that there is a delay of 176
days in preferring the present appeal. In the application for
condonation of delay explanation is first given about exparte
nature of the “Impugned Order”. It was brought to our notice
that in Form No. 35 it was stated expressly that notice(s) should
be send on Cariteshjain10@gmail.com and not on
Indorencs@gmail.com. No notices and “impugned order”
however came on Cariteshjain10@gmail.com. It was further
contended that when jurisdictional Assessing Officer initiated
recovery proceedings vide letter dated 13.08.2024 which came by
post on 24.08.2024 the assessee contacted his erstwhile counsel learnt that the 1st appeal is dismissed by “impugned order” due
to non appearance. Thereafter the present second appeal was
filed on 09.10.2024 albeit with a delay. Reliance was placed on
an affidavit of ertwhile counsel Shri Niranjan Purandare which
too supports the contentions of the assessee on the delay. We
have perused the condonation of delay application on page 25 to
26 of paper book filed wherein total delay calculated is of 8
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months (235 days). Per contra Ld. DR has not seriously
contested the delay part. After hearing both the Ld. AR & Ld. DR
and so also after carefully perusing condonation of delay
application, affidavits placed on record and examining the rival
contentions we are of the considered view that assessee has
shown reasonable and sufficient cause hence we condone the
delay and admit the appeal.
3.2 Thereafter Ld. AR for and on behalf of the assessee
contended that the “impugned order” under challenge is bad in
law, illegal and not proper. It is in violation of the principles of
natural justice. The “impugned order” deserves to be set aside.
It was contended by the Ld. AR that no notice(s) with regard to
“opportunities” were ever received. In Form No.35 the assessee
had provided e-mail id as cariteshjain10@gmail.com whereas
department served notice(s) at email id indorencs@gmail.com
the necessary proof in this regard was tendered across bar. A
perusal of same shows that email address on which notice(s)
were sent was indorencs@gmail.com and not cariteshjain10
@gmail.com where infact notice(s) from office of Ld. CIT(A) ought
to have come. But unfortunately that did not happens.
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Consequently opportunity notice(s) dated 29.01.2021,
03.10.2023, 16.10.2023, 17.10.2023 and 24.01.2024 remained
uncomplied with by the assessee. Therefore no opportunity in
effective manner was provided to the assessee and hence
“impugned order” deserves to be set aside as being in the
violation of the principles of natural justice. Per contra Ld. DR
for and on behalf of Revenue has agreed with the contention of Ld.
AR on issues raised by him. In rejoinder Ld. AR has repeated
and reiterated that no communication with regard to
hearings/opportunities were ever received by the assessee on e-
mail provided in Form No.35 (supra) consequently no effective
hearing on merits could take place and hence “impugned
order” should be set aside, in order to meet ends of justice.
Observations,findings & conclusions.
4.1 We now have to decide the legality, validity and the
proprietary of the “Impugned Order” basis records of the case
and rival contentions canvassed before us.
4.2 We have carefully perused the records of the case.
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4.3 We basis records of the case and after hearing and so also
upon examining the contentions are of the considered opinion
that “Impugned order” has just not examined the merits of the
case which assessee could have presented had the notice(s) of
opportunities would have come to him on correct e-mail address
as provided in Form No.35. In any event the “impugned order”
is in violation of the principles of natural justice as none of the
notice(s) (supra) was received by the assessee. Under these
circumstances we set aside the “impugned order” and remand
the case back to the file of Ld. CIT(A) to pass a fresh order on
denovo basis after giving a reasonable opportunity to the
assessee to present case. The assessee to cooperate with the
Income Tax Department and not to seek any unnecessary
adjournment. The Ld. CIT(A) is expected to pass a detailed
reasoned and speaking order according to law by following due
process of law.
Order
5.1 The impugned order is set aside as and by way of remand
back to the file of Ld. CIT(A) on denovo basis.
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5.2 Appeal of the assessee is allowed for statistical purpose.
Order pronounced in open court on 30.04.2025.
Sd/- Sd/-
(BHAGIRATH MAL BIYANI) (PARESH M JOSHI) ACCOUNTANT MEMBER JUDICIAL MEMBER
Indore िदनांक/ Dated : 30/04/2025 Dev/Sr. PS
Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order COPY Senior Private Secretary Income Tax Appellate Tribunal Indore Bench, Indore
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