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Facts
The appellant, a cement dealer, challenged an assessment order for AY 2013-14 that included a disallowance of cash expenditure under Section 40A(3) and an addition for sundry creditors. The CIT(A) dismissed the appellant's appeal ex-parte, leading to this appeal before the ITAT, which was filed with a 51-day delay due to the appellant's son (who handled tax matters) being in judicial custody.
Held
The ITAT condoned the delay in filing the appeal. It set aside the ex-parte order of the CIT(A) (NFAC) and remanded the matter for fresh adjudication, citing the CIT(A)'s failure to address the grounds of appeal and inadequate opportunity of hearing, particularly given that notices were issued during the Covid-19 pandemic.
Key Issues
1. Condonation of delay in filing the appeal before the ITAT. 2. Validity of the ex-parte order passed by CIT(A) without proper hearing and consideration of appeal grounds.
Sections Cited
143(3), 40A(3)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, COCHIN BENCH
Before: SHRI INTURI RAMA RAO, AM & SHRI PRAKASH CHAND YADAV, JM
O R D E R Per: Inturi Rama Rao, AM This appeal filed by the assessee is directed against the order of the National Faceless Appeal Centre, Delhi [CIT(A)], dated 01.03.2024 for Assessment Year (AY) 2013-14.
The brief facts of the case are that the appellant is an individual carrying on the business of dealer in cement under the name and style of “Aiswarya Traders”. The return of income for AY 2013-14 was filed on 27.12.2013 disclosing income of Rs. 6,41,080/-. Against the said Return of Income, the assessment was P.V. Mercy completed by the Income Tax Officer, Ward-1, Guruvayur (hereinafter called "the AO") vide order dated 27.01.2016 passed u/s. 143(3) of the Income Tax Act, 1961 (the Act) at a total income of Rs.1,73,06,020/-. While doing so, the AO made disallowance of expenditure incurred in cash u/s. 40A(3) of the Act of Rs. 1,55,12,373/- and also made addition of sundry creditors of Rs. 11,52,558/- for alleged failure of the appellant to submit confirmation letters and to reconcile the difference in balance standing to the credit of the sundry creditors.
Being aggrieved, an appeal was filed before the CIT(A), raising the following grounds of appeal: -
“i] The order of assessment u/s 143(3) dated 27.01.2016 passed by the Income Tax officer, W-1, Guruvayur for the AY 2013-14 is not correct on law and facts and also against the statutory provisions and the spirit of law. ii] The learned Assessing officer legally and materially erred in not considering and appreciating the submissions regarding the unsettled purchases, but simply made addition u/s 40A(3) amounting to Rs 1,55,12,372/-, though in fact no such cash purchases were effected during the said period. iii] The findings of the Assessing Authority that the appellant has paid the full amount against the purchases it made from M/s Vellara Communications is incorrect, against the actual facts and without any materials on record. iv] The Assessing Officer legally and materially erred in disallowing an amount of Rs. 1,55,12,372/- under Section 40A(3) particularly when he admitted and accepted various cash payments and receipts out of business expediency made between the appellant and the sister concern, M/s Vellara Communications.
P.V. Mercy v] The learned assessing officer erred in adding back Rs 491877 (166026+325851) to business income as unconfirmed creditors without having any material on hand as evidence against the appellant. vi] Appellant craves leave for additional grounds at the time of hearing. For these and other grounds to be submitted at the time of hearing, it is prayed that the above appeal be allowed and may be pleased (1) to delete the additions made u/s 40A(3) amounting to Rs 1,55, 12,372/-, since there is no cash purchase during the period 2012-13 and (2) to delete the additions amounting to Rs 491877 made against the appellant for non confirmation of creditors.”
The CIT(A) dismissed the appeal exparte.
Being aggrieved, the appellant is in appeal before us in the present appeal.
At the outset, we find that there is delay of 51 days in filing the present appeal. The appellant filed an affidavit seeking condonation of delay stating that the appellant had no knowledge of the impugned order till the recovery proceedings were initiated by the AO on 19.10.2023. It is further submitted that the appellant’s elder son, Mr. Antony Sunny, who was handling the tax matters was in judicial custody. Thus, it is submitted that the delay occurred on account of factors and reasons, which are beyond the control of the assessee and, therefore, prayed for condonation of the delay.
On the other hand, the ld. Sr. DR has no serious objection for condonation of delay.
P.V. Mercy 8. In the absence of any evidence to the contrary, to disbelieve the averments made in the affidavit, we are of the considered opinion that it is a fit case to condone the delay of 51days. Accordingly we condone the delay in filing the appeal and admit the appeal for adjudication.
We have heard rival contentions and perused the material available on record. We carefully perused the impugned order passed by the CIT(A). The CIT(A), while passing the exparte order, although entered into the merits of the addition made in the order, but failed to advert to the grounds of appeal raised by the appellant before him as extracted above. Further, we find that except the last notice of hearing, all the notices of hearing were issued by the NFAC during the Covid-19 pandemic period. In the circumstances we set aside the order of the NFAC and remand to the NFAC with the direction for fresh adjudication in accordance with law after affording opportunity of hearing to the appellant.
In the result, appeal filed by the assessee is partly allowed.
Order pronounced in the open court on 4th February, 2025.
Sd/- Sd/- (PRAKASH CHAND YADAV) (INTURI RAMA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER Cochin, Dated: 4th February, 2025 n.p.