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Facts
The Assessing Officer disallowed the claim of interest expenditure on borrowed capital and made an addition for investment in immovable property due to a lack of documentary evidence and bank certificates. The CIT(A) dismissed the appeal ex-parte due to the assessee's non-responsiveness to notices, citing the assessee's limited literacy and unfamiliarity with the digital portal.
Held
The Tribunal acknowledged the importance of substantial justice over technical lapses and the right to be heard. It recognized that the assessee's failure to respond might be due to a digital divide rather than mala fide intent. Therefore, the Tribunal set aside the CIT(A)'s order.
Key Issues
Whether the assessee was denied a reasonable opportunity of being heard in the appellate proceedings due to unfamiliarity with the digital portal, and whether the additions made by the AO were justified without proper verification.
Sections Cited
69A, 143(3)
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Income Tax Appellate Tribunal, MUMBAI BENCH “B” MUMBAI
Before: SHRI OM PRAKASH KANT & MS. KAVITHA RAJAGOPAL
ORDER PER OM PRAKASH KANT, AM
This appeal by the assessee is directed against order dated 12.09.2025 passed by the Ld. Commissioner of Income-tax (Appeals) – National Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for assessment year 2020-21, raising following grounds:
Bharti Nehru Kariya ITA No. 7104/MUM/2025
The Hon'ble CIT (A) [NFAC] has erred in passing an Ex 1. The Hon'ble CIT (A) [NFAC] has erred in passing an Ex 1. The Hon'ble CIT (A) [NFAC] has erred in passing an Ex-parte Appellate Order, without having offered reasonable opportunity Appellate Order, without having offered reasonable opportunity Appellate Order, without having offered reasonable opportunity of being heard. of being heard.
The Hon'ble C 2. The Hon'ble CIT (A) [NFAC] has failed in appreciating the facts IT (A) [NFAC] has failed in appreciating the facts that the Ld. Assessing Officer has erred in disallowing an that the Ld. Assessing Officer has erred in disallowing an that the Ld. Assessing Officer has erred in disallowing an amount of Rs. 12,79,748/ amount of Rs. 12,79,748/-, without appreciating the facts of the , without appreciating the facts of the case, the documentary evidences furnished before him. case, the documentary evidences furnished before him. case, the documentary evidences furnished before him.
3. The Hon'ble CIT (A) 3. The Hon'ble CIT (A) [NFAC] has failed in appreciating the facts [NFAC] has failed in appreciating the facts that the Ld. Assessing Officer has erred in treating an amount of that the Ld. Assessing Officer has erred in treating an amount of that the Ld. Assessing Officer has erred in treating an amount of Rs. 1,75,00,000/ Rs. 1,75,00,000/- as unexplained investment u/s 69A of the I.T. as unexplained investment u/s 69A of the I.T. Act, 1961, not only without appreciating the facts of the case as Act, 1961, not only without appreciating the facts of the case as Act, 1961, not only without appreciating the facts of the case as well law, but wi well law, but without even having made any effort to cross verify thout even having made any effort to cross verify the facts.
4. The appellant craves leave to add, amend, alter and/or vary 4. The appellant craves leave to add, amend, alter and/or vary 4. The appellant craves leave to add, amend, alter and/or vary any of the grounds at the time or before the hearing of this any of the grounds at the time or before the hearing of this any of the grounds at the time or before the hearing of this appeal.
5. The appellant therefore prays that the addition/ disallowanc 5. The appellant therefore prays that the addition/ disallowanc 5. The appellant therefore prays that the addition/ disallowance made by the Ld. Assessing Officer and subsequently upheld by made by the Ld. Assessing Officer and subsequently upheld by made by the Ld. Assessing Officer and subsequently upheld by Hon'ble CIT (A) may please be deleted and/or alternatively the Hon'ble CIT (A) may please be deleted and/or alternatively the Hon'ble CIT (A) may please be deleted and/or alternatively the appellate order passed by the Hon'ble CIT (A) in an Ex appellate order passed by the Hon'ble CIT (A) in an Ex appellate order passed by the Hon'ble CIT (A) in an Ex-parte manner and Assessment order passed by the Ld. Assessing manner and Assessment order passed by the Ld. Assessing manner and Assessment order passed by the Ld. Assessing Officer may p Officer may please be restored back to Hon'ble CIT (A) or Ld. lease be restored back to Hon'ble CIT (A) or Ld. Assessing Officer for fresh adjudication after providing appellant Assessing Officer for fresh adjudication after providing appellant Assessing Officer for fresh adjudication after providing appellant with a fair and reasonable opportunity of being heard. with a fair and reasonable opportunity of being heard. with a fair and reasonable opportunity of being heard. 2. Facts qua the issue in dispute are that in the assessment Facts qua the issue in dispute are that in the assessment Facts qua the issue in dispute are that in the assessment completed, the Assessing the Assessing Officer disallowed the claim of interest Officer disallowed the claim of interest expenditure amounting to Rs.12,79,748/ expenditure amounting to Rs.12,79,748/- on borrowed capital in on borrowed capital in absence of bank certificate and loan sanction letter. Similarly, the absence of bank certificate and loan sanction letter. Similarly, the absence of bank certificate and loan sanction letter. Similarly, the AO made addition for amount of Rs.1.75 crores for investment in AO made addition for amount of Rs.1.75 crores for investment in AO made addition for amount of Rs.1.75 crores for investment in immovable property in absence of documentary evidence supporting in absence of documentary evidence supporting in absence of documentary evidence supporting the contention of the loan taken. Accordingly, the Assessing Officer the contention of the loan taken. Accordingly, the Assessing Officer the contention of the loan taken. Accordingly, the Assessing Officer completed the assessment u/s 143(3) of the Act on 20.09.2022 completed the assessment u/s 143(3) of the Act on 20.09.2022 completed the assessment u/s 143(3) of the Act on 20.09.2022 assessing the total income of Rs.1,89,84,368/ assessing the total income of Rs.1,89,84,368/-.
2.1 In the first appellate pro In the first appellate proceedings, the Ld. CIT(A) observed that ceedings, the Ld. CIT(A) observed that the assessee remained non the assessee remained non-responsive to three statutory notices responsive to three statutory notices issued between November 2024 and August 2025. Applying the issued between November 2024 and August 2025. Applying the issued between November 2024 and August 2025. Applying the legal maxim "Vigilantibus non dormientibus jura subveniunt" "Vigilantibus non dormientibus jura subveniunt" "Vigilantibus non dormientibus jura subveniunt" (the law assists the vigilant, not assists the vigilant, not those who sleep over their rights), the Ld. those who sleep over their rights), the Ld. CIT(A) concluded that the assessee was not interested in pursuing CIT(A) concluded that the assessee was not interested in pursuing CIT(A) concluded that the assessee was not interested in pursuing the appeal. Relying on the ratio in the appeal. Relying on the ratio in CIT vs. B. N. Bhattacharya CIT vs. B. N. Bhattacharya [118 ITR 461], the Ld. CIT(A) dismissed the appeal on merits based on ITR 461], the Ld. CIT(A) dismissed the appeal on merits based on ITR 461], the Ld. CIT(A) dismissed the appeal on merits based on the available record, confirming the additions for want of evidence. e record, confirming the additions for want of evidence. e record, confirming the additions for want of evidence.
2.2 Before us, the Ld. Counsel for the assessee has raised a plea Before us, the Ld. Counsel for the assessee has raised a plea Before us, the Ld. Counsel for the assessee has raised a plea of significant hardship. It is contended that the assessee, being an of significant hardship. It is contended that the assessee, being an of significant hardship. It is contended that the assessee, being an individual with limited literacy and unfamiliarity with the nuances individual with limited literacy and unfamiliarity with the nuan individual with limited literacy and unfamiliarity with the nuan Income Income Tax Tax Business Business of of digital digital communication communication and and the the Application (ITBA) portal, was unaware of the electronic notices. portal, was unaware of the electronic notices. portal, was unaware of the electronic notices. The assessee maintains that the failure to comply was not a The assessee maintains that the failure to comply was not a The assessee maintains that the failure to comply was not a deliberate act of defiance but a consequence of the digital divide. A deliberate act of defiance but a consequence of the digital divide. A deliberate act of defiance but a consequence of the digital divide. A prayer is made to restore the matter to allow a fair opportunity to prayer is made to restore the matter to allow a fair opportunity to prayer is made to restore the matter to allow a fair opportunity to produce the loan sanction letters and bank certificates that were e loan sanction letters and bank certificates that were e loan sanction letters and bank certificates that were missing during the assessment. missing during the assessment.
We have carefully considered the rival contentions and We have carefully considered the rival contentions and We have carefully considered the rival contentions and perused the record. While we acknowledge the Ld. CIT(A)’s reliance perused the record. While we acknowledge the Ld. CIT(A)’s reliance perused the record. While we acknowledge the Ld. CIT(A)’s reliance on judicial discipline and the need for time on judicial discipline and the need for timely disposal, we must also ly disposal, we must also consider the higher principle of the right to be heard. consider the higher principle of the right to be heard. consider the higher principle of the right to be heard.
3.1 The transition to a faceless and digital appellate regime is The transition to a faceless and digital appellate regime is The transition to a faceless and digital appellate regime is intended to enhance efficiency, but it must not become a barrier to intended to enhance efficiency, but it must not become a barrier to intended to enhance efficiency, but it must not become a barrier to justice for those who lack the technical justice for those who lack the technical proficiency to navigate such proficiency to navigate such systems. The Hon’ble Supreme Court has repeatedly emphasized systems. The Hon’ble Supreme Court has repeatedly emphasized systems. The Hon’ble Supreme Court has repeatedly emphasized that "substantial justice" must prevail over technical lapses. If the that "substantial justice" must prevail over technical lapses. If the that "substantial justice" must prevail over technical lapses. If the assessee has a plausible explanation for the source of investment assessee has a plausible explanation for the source of investment assessee has a plausible explanation for the source of investment (alleged housing loan of (alleged housing loan of ₹1.75 Cr.) and the interest expenditure, the Cr.) and the interest expenditure, the merits should not be stifled due to a failure to respond to electronic merits should not be stifled due to a failure to respond to electronic merits should not be stifled due to a failure to respond to electronic notices, provided such failure is not mala fide. notices, provided such failure is not mala fide.
3.2 In the interests of justice and to ensure that the assessment is In the interests of justice and to ensure that the assessment is In the interests of justice and to ensure that the assessment is based on the "real income" based on the "real income" principle, we find it appropriate to grant principle, we find it appropriate to grant the assessee a final opportunity to substantiate the claims. the assessee a final opportunity to substantiate the claims. the assessee a final opportunity to substantiate the claims.
3.3 Accordingly, the order of the Ld. CIT(A) is Accordingly, the order of the Ld. CIT(A) is set aside set aside, and the matter is restored to the file of the Assessing Officer (AO) for a fresh to the file of the Assessing Officer (AO) for a fresh to the file of the Assessing Officer (AO) for a fresh adjudication on merits. The AO shall: on merits. The AO shall:
(i) Verify the housing loan sanction letter and bank certificates Verify the housing loan sanction letter and bank certificates Verify the housing loan sanction letter and bank certificates regarding the ₹1.75 Crore 1.75 Crore investment. (ii) Examine the interest certificates for the let Examine the interest certificates for the let-out properties. out properties. (iii) Allow the assessee a reasonable opportunity to present Allow the assessee a reasonable opportunity to present Allow the assessee a reasonable opportunity to present documentary evidence. vidence.
3.4 The assessee is strictly cautioned to be diligent in the remand The assessee is strictly cautioned to be diligent in the remand The assessee is strictly cautioned to be diligent in the remand proceedings. Any further failure to cooperate may result in an proceedings. Any further failure to cooperate may result in an proceedings. Any further failure to cooperate may result in an adverse inference.
3.5 The ground No. 1 of the appeal of the assessee is accordingly The ground No. 1 of the appeal of the assessee is accordingly The ground No. 1 of the appeal of the assessee is accordingly allowed for statistical purpose allowed for statistical purposes.
The remaining grounds are rendered academic. The remaining grounds are rendered academic. The remaining grounds are rendered academic.
In the result, the appeal of the assessee is allowed for In the result, the appeal of the assessee is allowed for In the result, the appeal of the assessee is allowed for statistical purposes.