MAHANT PANDEY,ROHTAS vs. NFAC, DELHI

That having regard to the facts and circumstances of the case, the Ld. COMMISSIONER NFAC/Assessing Officer has erred both on facts and in law in deciding the appeal ex parte in violation of the principles of natural justice and without granting to the assessee a fair, proper and meaningful opportunity that there was no reasonable cause for alleged non-compliance I.T.A. Nos.: 181 & 182/PAT/2025 Assessment Year: 2017-18 Mahant Pandey. on the dates fixed for hearing the order is being unjust and against the provisions of law.

That having regard to the facts and circumstances of the case, the Ld. COMMISSIONER NFAC/Assessing Officer has erred both on facts and in law in issuing order without.

At the outset, it is submitted that the various observations, which have been made by the A.O. for making addition are based purely on surmises, conjectures and personal presumptions as well as without proper verification/consideration of material and details available on record. That apart, the facts and basis on which the said observations have been made are itself based on mere hypothesis and probabilities devoid of merits and hard facts and realistic situation. Thus, it is contended that mere hypothetical situation based on A.O.'s own belief cannot be construed as unexplained credits as alleged so as to reject them while invoking the provisions of section 68/69 of the Act since the addition has been made on the basis of hypothetical situation without providing sufficient opportunity to appellant is not permissible to arrive at such a conclusion.

Without prejudice to our ground that no addition should be made, your appellant submits that the learned AO ought to have considered and accepted the fact that disclosures has been made and taxes has been deposited by issuing letter to Ld. AO prior to the passing of order.

Without prejudice to our ground that no addition should be made as, your appellant submits that the learned AO ought to have considered and accepted the fact in the case.

The issue which needs adjudication is that where no notice under section 143(2) of the Act has been issued to assessee, can the assessment be completed under section 143(3) of the Act? Further, whether in the circumstances where no return of income has been filed and no notice under section 143(2) of the Act could be issued, then what was course of action which was available for completing the assessment. There is no requirement of the law that if the return is filed any time before Assessing Officer u/s 148 read with 143 (3) of the Act, the Assessing Officer should have been issued notice u/s 143(2). The question will arise then that if the assessee was issued a notice u/s 148 of the Act and he does not file any return of income till the date of framing of the assessment order or also filed a return before passing of the assessment order u/s 143(2) of the Act, then what is the stand Revenue should take? In such case, it is not at all possible that the assessee can contest that notice u/s 143(2) should have been issued, in all such cases where reassessment is required to be made. The onus of filing of return of income on the assessee is a responsibility which is cast upon him to be fulfilled by him, if he fails to take benefit of any of the provisions I.T.A. Nos.: 181 & 182/PAT/2025 Assessment Year: 2017-18 Mahant Pandey. of law the assessee cannot plea that he will not comply with the law and not follow time limit before the Assessing Officer and the Assessing Officer he is duty bound to follow the law even in belated compliance by the assessee. Thus, from the above it can be inferred that no notice u/s 143(2) was issued by the Ld. AO. And by following the judgment of Hon'ble Delhi 519/2015 and in the case of Alpine Asia Pvt. Ltd vs DGIT (WPC 7932/2010) the assessment made without issue of notice u/s 143(2) is illegal and bad in law. And the judgment of CIT vs. Madhya Bharat Energy Corporation Ltd. relied by the Ld. CIT (A) has also been considered in the above judgment of PCIT vs. Shri Jay Shiv Shankar Traders Pvt. Ltd. and distinguished as in this case appeal was not admitted on the question concerning the mandatory compliance with regard to issue of notice u/s 143(2).

As per the recent judgement in the case of Mantra Industries Limited Vs National Faceless Assessment Centre (NFAC or NEAC) & Ors. (Bombay High Court) the Assessment orders passed without application of mind liable to be set aside and invite substantial costs to be imposed on such AO HC has held that an assessment order passed by the Assessing Officer (AO) should necessarily be made with sound consideration and application of mind, and any absence thereof shall make the order liable to be set aside and would warrant imposition of substantial costs on such AO. In the present petition, Mantra Industries Ltd. (“the Petitioner”) had impugned the assessment order dated 08.06.2021 read with the notice of demand dated 08.06.2021 issued under Section 156 of the Income Tax Act, 1961 (“the Act”) read with show cause notice dated 08.06.2021 issued for initiating penalty proceedings under section 274 read with Section 270A of the Act. The Petitioner had received a notice dated 22.04.2021 for Assessment Year 2018-2019 calling upon to show cause as to why assessment should not be completed as per the draft assessment order. The Petitioner was to submit its response by 23:59 hours of 24.04.2021. On 23.04.2021, the Petitioner filed its response mentioning the objections and sought 20 days to fulfill the requirements as per the notice. Additionally, the Petitioner stated that it wished to object to the modification through a personal hearing. On 27.04.2021, the Petitioner filed its response giving the quantitative details which was sought for in the show cause notice issued. On 08.06.2021, the AO issued the impugned assessment order, show cause notice and notice of demand. The Petitioner challenged the assessment order and the consequential show cause notice issued with the notice of demand on the contentions that the assessment order is an exact reproduction of the draft assessment order except one sentence which shows that the Petitioner’s request for an adjournment had not been considered, request for personal hearing had not been considered and most importantly the objection filed in response to the show cause notice with the draft assessment order had not been considered. The said I.T.A. Nos.: 181 & 182/PAT/2025 Assessment Year: 2017-18 Mahant Pandey. contentions were accepted by the Hon’ble Bombay High Court. The Court observed that any assessment made under Section 144B (9) of the Act shall be non-est if such assessment is not made in accordance with the procedure laid down under this section. It was held that the impugned order was non- est as it is an exact replica of the draft assessment order with the exception of one sentence which shows that no application of mind took place while making the order. Hence, the Hon'ble Bombay High Court set aside the impugned assessment order and consequential show cause notice and notice of demand while observing that if such orders are continued to be passed, the Hon’ble Bombay High Court will be constrained to impose substantial costs on the concerned Assessing Officer.

Without prejudice to the above, the learned Assessing Officer is not justified in completing the assessment without communicating the reasons recorded for issue of notice under section 148, in spite of the specific request made by the assessee for furnishing the reasons. As per the judgment of Hon’ble Supreme Court in the case of M/s. GKN Drive Shafts (India) Ltd. v. ITO, it is obligatory on the part of assessing officer to communicate the reasons on furnishing the return of income. The assessee in response to the notice issued under section 148 submitted a letter to the assessing officer to treat the returns filed earlier as returns in response to the notice issued under section 148. Thus the assessee has complied with the mandate of Hon’ble Supreme Court judgment cited supra but the assessing officer failed to communicate the reasons. The assessee relied on the decision of Hon’ble High Court of Calcutta in the case of Berger Paints India Ltd. v. AC IT (supra), wherein Hon’ble High Court held that the assumption of juri iction of assessing officer under section 147 depends upon existence of reasons followed by communication thereof to the assessee. If the notice served under section 148 is challenged, the assessing officer cannot proceed with the assessment under section 147 unless reasons are communicated. In the instant case, the contention of the assessee is that the assessee has complied with the notice under section 148 and the assessing officer has not furnished the reasons recorded for issuance of notice under section 148 despite the request made by the assessee. The Revenue could not place any evidence to controvert the argument of the learned A.R. that the reasons were not communicated. Thus the assessee’s case is squarely covered by the decisions in the case of Berger Paints India Ltd. v. ACIT (supra) and CIT v. Trend Electronics (supra). The Hon’ble Bombay High Court in the case of CIT v. Trend Electronics (supra) following the decision of CIT v. Videsh Sanchar Nigam Ltd. and applying the decision of Apex Court in the case of GKN Drive Shafts (India) Ltd. v. ITO held as under “We find that the impugned order merely applies the decision of the Apex Court in GKN Driveshafts (India) Ltd. (supra). Further it also follows the decision of this Court in Videsh Sanchar Nigam Ltd. (supra) in holding that an order passed I.T.A. Nos.: 181 & 182/PAT/2025 Assessment Year: 2017-18 Mahant Pandey. in reassessment proceedings are bad in law in the absence of reasons recorded for issuing a reopening notice under section 148 of the Act being furnished to the assessee when sought for. It is axiomatic that power to reopen a completed assessment under the Act is an exceptional power and whenever revenue seeks to exercise such power, they must strictly comply with the prerequisite conditions viz. reopening of reasons to believe that income chargeable to tax has escaped assessment which would warrant the reopening of an assessment

That Penalty proceeding u/s 272A(2)(l)(d) of the Income Tax Act,’61 is initiated for noncompliance to the Notice u/s 142(1) dated 24/03/2022. It is not possible for a asseesee to comply in short span of time to make reply which is unjustified and against the principal of natural justice.

That Penalty proceeding u/s 271AAC is also initiated as the income determined includes income referred u/s 69 of the Income Tax Act,’61. As the entire source is explain hence no penalty proceeding has no legal legs to stand in court of law.

That the Ld. NFAC has allowed the similar case for A.Y. 2020-21 on the similar footing and allowed the case, the copy of the order is attached as per annexure C

The Appellant craves leave to add, alter, substitute and delete any or all of the statement of facts urged above. For the above and other statement of facts to be urged during the hearing of the appeal the Appellant prays that the appeal be allowed in the interest of equity and justice.”

The grounds of appeal are argumentative and descriptive and repeatedly stress the fact that proper opportunity was not provided to furnish the response at various stages. Similar argumentative and descriptive grounds of appeal have been raised in ITA No. 182/PAT/2025; AY 2017-18 as well, which is against the penalty under section 271AAC of the Act.

Brief facts of the case are that the assessee is an individual and did not file the return of income for AY 2017-18 and as per the information available with the Department, it was seen that the assessee had carried out financial transactions relating to cash withdrawals in current account, cash payments for goods and services, I.T.A. Nos.: 181 & 182/PAT/2025 Assessment Year: 2017-18 Mahant Pandey. TDS showing payments to contractors, cash deposits in current account and TDS showing salary to employees. Since these incomes remained unexplained in the absence of a return of income, therefore, a notice u/s 148 of the Act was issued to the assessee but the assessee failed to file the return and despite giving sufficient opportunities failed to respond to the notices issued. The Assessing Officer (hereinafter referred to as Ld. 'AO') examined the provision of section 69A of the Act and the judicial pronouncement in the case of Chuharmal vs. CIT (1988) 172 ITR 250 (SC) and made an addition of ₹1,25,24,480/- u/s 69A of the Act for the cash deposits in the bank account maintained with the Bank of Baroda which remained unexplained. An addition of ₹4,35,720/- appearing as gross salary received from the employer as per Form No. 26AS was also made. Another sum of ₹7,09,800/- from Executive Officer Nagar Parishad Sasaram received during FY 2016-17 on which TDS was also deducted was also treated as unexplained receipts and an amount of ₹56,784/- being 8% of the total contract receipts was treated as profit of the assessee and added to the income of the assessee. A sum of ₹8,08,000/- being cash payments for goods and services purchased from Chetmani Ornaments (P) Ltd. was also added as unexplained expenditure as the assessee failed to file a reply and the total income was assessed at ₹1,38,24,984/-. The penalty proceeding u/s 271AAC(1) of the Act was also initiated and the assessment was made u/s 147 r.w.s. 144 r.w.s. 144B of the Act. Penalty under other sections for various defaults were also initiated.

Aggrieved with the assessment order, the assessee filed an appeal before the Ld. CIT(A) who vide the impugned order dated 17.02.2025 dismissed the appeal of the assessee against the assessment order by holding on page 2 of the order as under: I.T.A. Nos.: 181 & 182/PAT/2025 Assessment Year: 2017-18 Mahant Pandey. “The income of the appellant was assessed at Rs.1,38,24,984/- u/s 147 r.w.s 144 read with section 144B of the Income Tax Act, 1961. The appellant preferred appeal.

1 In this case, the appellant has misrepresented the facts. Vide point no 2C of the form 35 submitted by the appellant, he has claimed date of service of order/notice of demand as 16.02.2024. Appellant filed the appeal on 16.02.2024. Vide Point no 14 of the Form no 35 filed by the appellant, it has been found that the appellant has not requested for condonation of delay in filing of appeal.

2 For the relevant year, assessment order was passed and demand notice was issued on 24.03.2022. As confirmed from ITBA portal of the department, the same was delivered to the appellant on 24.03.2022 at 09:44 PM. Thus, appellant has mislead & misrepresented the facts while filing appeal against the assessment order. There is a delay of 665 days in filing of appeal but the appellant has not requested for condonation of delay in filing of appeal. Since the appellant has not requested for condonation of delay in filing of appeal, the appeal of the appellant is dismissed.”

The Ld. CIT(A) vide his order dated 25.02.2025 had also dismissed the appeal of the assessee against the penalty order by holding as under: “After considering the facts of the case, penalty of Rs. 10,30,006/- u/s 271AAC(1) of the Income-tax Act, 1961 was imposed by CA. The appellant preferred appeal.

1 In this case, the appellant has misrepresented the facts. Vide point no 2C of the form 35 submitted by the appellant, he has claimed date of service of order/notice of demand as 16.02.2024. Appellant filed the appeal on 16.02.2024. Vide Point no 14 of the Form no 35 filed by the appellant, it has been found that the appellant has not requested for condonation of delay in filing of appeal.

2 For the relevant year, assessment order was passed and demand notice was issued on 08.09.2022. The same was delivered to the appellant on 08.09.2022. Thus, appellant has mislead & misrepresented the facts while filing appeal against the assessment order. There is a delay of 496 days in filing of appeal but the appellant has not requested for condonation of delay in filing of appeal. Since the appellant has not requested for condonation of delay in filing of appeal, the appeal of the appellant is dismissed.” I.T.A. Nos.: 181 & 182/PAT/2025 Assessment Year: 2017-18 Mahant Pandey.

Aggrieved with the orders of the Ld. CIT(A), the assessee has filed the appeals before the Tribunal. Before us, it was submitted that the assessee is a Government engineer who carried out the Departmental work and had received cash for the same which has been added to the income of the assessee but was utilized for carrying out the Departmental work assigned. As regards non-compliance before the Ld. CIT(A), it was submitted that in the absence of proper communication, the compliance before the Ld. CIT(A) could not be made.

As regards the receipts being from the Department for the work carried out, the assessee submitted that the relevant details are available from pages 50 to 102 of the paper book and if another opportunity is granted, he will comply to the notice issued as the entire amount of cash received from Nagar Parishad was for the work carried out by the assessee which is also reflected in the documents available and filed before us.

We have considered the submissions made and have also gone through the facts of the case. The Bench was of the view that in the absence of proper submission, the Ld. AO made the assessment and the assessee claims to have necessary evidence in support of the relief claimed, therefore, one more opportunity needs to be provided in the interest of justice and fair play. Accordingly, both the orders of the Ld. AO as well as the Ld. CIT(A) are hereby set aside and the matter is remitted back to the Ld. AO for making the reassessment de novo. Needless to say, the assessee shall be given a reasonable opportunity of being heard to make any further submission it wants to make in support of its grounds of appeal and shall not seek unnecessary adjournments. Since the assessment order has been set aside, the penalty order is also hereby set aside to be done afresh after the I.T.A. Nos.: 181 & 182/PAT/2025 Assessment Year: 2017-18 Mahant Pandey. reassessment is done again. Accordingly, the grounds taken by the assessee in both the appeals are partly allowed for statistical purposes.

In the result, both the appeals filed by the assessee are partly allowed for statistical purposes. Order pronounced in the open Court on 21st August, 2025. [Sonjoy Sarma] [Rakesh Mishra] Judicial Member Accountant Member Dated: 21.08.2025 Bidhan (Sr. P.S.) I.T.A. Nos.: 181 & 182/PAT/2025 Assessment Year: 2017-18 Mahant Pandey. Copy of the order forwarded to:

CIT(A)-NFAC, Delhi.

CIT-

CIT(DR), Patna Bench, Patna.

Guard File. //// By order