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Facts
The assessee failed to file a return of income for AY 2020-21, leading to the case being flagged under the Risk Management Strategy. The Assessing Officer (AO) made an addition of Rs. 78,69,694/- as unexplained investment. The assessee objected to the draft assessment order, but the Dispute Resolution Panel (DRP) rejected the objections due to a delay in filing. The assessee then appealed to the Tribunal.
Held
The Tribunal held that the delay in filing objections before the DRP was minor (one day) and should not cause the assessee to suffer. The Tribunal noted that the assessee was not given sufficient opportunity of being heard at the assessment and DRP stages, violating the principles of natural justice. Therefore, the Tribunal condoned the delay and directed the DRP to consider the objection and adjudicate the issue.
Key Issues
Whether the DRP was justified in rejecting the assessee's objections solely on the ground of a minor delay, and whether the assessee was afforded sufficient opportunity of being heard during the assessment and DRP proceedings, thereby upholding the principles of natural justice.
Sections Cited
147, 144C(3), 69, 115BBE, 148, 274, 271AAC, 139(1), 148A, 151, 148, 142(1), 144C(2), 144C(1), 35A, 144C(13)
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Income Tax Appellate Tribunal, RAJKOT BENCH, RAJKOT
Before: DR. ARJUN LAL SAINI & SHRI DINESH MOHAN SINHA
आदेश / O R D E R Per, Dr. Arjun Lal Saini, AM: Captioned appeal filed by the assessee, pertaining to assessment year 2020-21, is directed against the final order passed by the assessing officer dated 26.05.2025 under section 147 r.w.s. 144C(3) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”).
Grounds of appeal raised by the assesse are as follows: (1) Learned A.O. erred in law as well facts in making addition of Rs. 78,69,694/- as unexplained investment u/s 69 r.w.s 115BBE and passing order u/s 147 r.w.s. 144C(3)
ITA 420/RJT/2025 MITESHKUMAR PABARI of the Act and raised huge demand of Rs. 1,25,24,430/-. Hon. DRP not considered the objection, not verified the submission, not given proper opportunity to being heard and rejected the objection application on the ground of minor delay and non- submission of form, even the not taxable income and even provided the explanations with necessary details, explanation and supporting documents. The passed order is erroneous, against the principle of nature of justice and against the provision of law, liable to quash and set aside. (2) Learned A.O. erred in law as well facts by initiating proceeding u/s 148. The notice is time barred, issued without Jurisdiction, rendering the proceedings invalid ab initio which is erroneous, unjust, unfair, illegal, against the provision of law. The order is liable to quash and set aside. (3) Ld. AO is erred in initiating penalty proceedings u/s 274 r.w.s. 271AAC of the Act. The proceedings is liable to quash. (4) Learned A.O. erred in law as well facts by not giving effective opportunity of being heard. The passed order is erroneous, against the principle of nature of justice and against the provision of law. The order is liable to be quashed and set aside. The appellant craves leave to add, alter or withdraw any of the grounds of appeal.”
Facts of the case, which can be stated quite shortly are as follows: For the assessment year (A.Y.) 2020-21, the assessee has not filed return of income u/s 139(1) of the I.T Act, 1961. Subsequently, the case was flagged under Risk Management Strategy consequent upon dissemination of certain High Risk Non-filer cases on the insight portal of the department. As per the information during the year under consideration, the assessee entered in to the following financial transactions: Description of Information Amount (Rs.) Purchase of immovable property 72,09,450/- In view of the above information, the assessee was served a show-caused notice, vide notice u/s 148A (b) of the I.T. Act, 1961, dated 24.01.2024, as to why notice u/s.148 of the Act should not be issued. In response to the show- cause notice the assessee has submitted that he was NRI for the year under consideration. The assessee also submitted copy of purchase deed and bank Page 2 of 12
ITA 420/RJT/2025 MITESHKUMAR PABARI statement. Being submission of the assessee was not found tenable on the issue under consideration, accordingly order u/s 148A(d) of the Act, was issued after getting approval u/s 151 of the Act of competent income-tax authority. Thereafter, notice u/s 148 of the I.T Act, 1961 dated 29.03.2024, was served requiring the assessee to furnish return of Income. In response to the notice u/s 148 of the Act, the assessee has filed return of income on 29.07.2024 thereby declaring total income at Rs.10,510/-.During the course of proceedings u/s 147 of the I.T. Act 1961 various notices u/s 142(1) of the Act were issued and duly served upon the assessee through e-proceedings.
During the assessment proceedings, the assessee submitted its reply before the assessing officer. The assessing officer noticed that the assessee has furnished the copy of passport (duly stamped with Arrival & Departure from India) and details of stay in India. On perusal of the same it was seen that the assessee was NRI (Resident of USA) for the year under consideration. Further, the assessee has furnished the copy of sale deed of immovable property (Address: Flat No.D-802, Casa Vyoma co-operative Housing Society, Vastrapura-Ahmedabad), Copy of bank account statements, Sanction letter of loan approval by HDFC Bank for Rs.40,00,000/-, reconciliation of purchase consideration paid. On perusal of the reply submission furnished by the assessee, it was noted by the assessing officer that details/description of property is not mentioned in the loan sanction letter, details of disbursal of loan submitted as well as evidence of payment and source thereof not explained. Therefore, assessee was served again a show cause notice u/s.142(1) of the Act, dated 25.02.2025 stating that as to why investment in purchase of immovable property including stamp duty and registration charges paid should not be considered unexplained investment.
ITA 420/RJT/2025 MITESHKUMAR PABARI 5. In response to the above show-cause notice, the assessee has furnished his reply vide letter dated 01.03.2025 and submitted the repeated submission as furnished earlier, before the assessing officer. Since, the assessee has not furnished the requisite details as called for vide show-cause notice dated 25.02.2025, therefore, the ongoing proceedings were carried out by the assessing officer on the basis of detail furnished by the assessee, as well as Information/details available with the assessing officer. The assessing officer, having gone through the reply of the assessee, observed the followings: (a) In the reply the assessee has furnished the following details w.r.t source of purchase consideration of the property: Source of fund Amount (Rs.) Personal Savings from services in USA 10,69,798 Paid by father Shree Dayaljibhai Pabari 28,43,767 Housing Loan from HDFC Bank. 32,95,885 Total 72,09,450 With respect to purchase consideration of Rs. 10,69,798/- paid through personal savings, the assessee has furnished the detail of his foreign activities and income earned there from, copy of tax return filed in resident country, entries of inward remittance in his HDFC bank account. On perusal of the same it is seen that certain debit entries through ACH reflected as well as certain credit entries are reflected through inward remittances. But in absence copy of Loan agreement mentioning the description of property, it could not be considered the as source of fund for repayment of housing loan taken against the said property. (b) With respect to the purchase consideration of Rs.28,43,767/- paid by the father of assessee, the assessee has not furnished the copy of respective bank account of his father along with the proof of source of fund thereof. It is Page 4 of 12
ITA 420/RJT/2025 MITESHKUMAR PABARI therefore, a bare statement that the particular consideration paid by relative is not considerable. (c) With respect to the purchase consideration of Rs.32.95,885/- through loan from HDFC bank, the assessee has furnished only copy of housing loan sanction letter wherein description of property was not mentioned, further the assessee fails to provide copy of loan agreement letter, detail of disbursal of loan or recovery certificate of loan wherein description of property mentioned. In absence of the same it could not be considered that the amount mentioned in the loan sanction letter pertains to the impugned property.
Apart from the above, the assessing officer also noticed that the schedule of purchase consideration paid, as mentioned in the Sale deed, does not match with the debit entries in the bank account of the assessee. It is therefore, such debit entries could not be considered towards purchase consideration of the impugned property. In view of the above, it was observed by the assessing officer that the assessee fails to submit the proof of payment of purchase consideration of the impugned property (from Sumedha Spacelinks LLP) along with the source of fund thereof. Accordingly, the purchase consideration along with the registration fees, Maintenance charge & stamp duty paid aggregating to Rs.78,69,694/- with respect to the impugned property, was considered unexplained investment by the assessing officer within the meaning of section 69 r.w.s 115BBE of the I.T Act, 1961.
In the draft assessment order, the assessing officer also stated that this is a draft order passed as per the provisions of Section 147 r.ws. 144C(1) of the I.T. Act, 1961. The assessee is hereby allowed thirty days' (30 days) time from the date of receipt of this order (draft order) to file its acceptance to the above variations made to its total income as per the return of income filed or to file its objections, if any, before the Dispute Resolution Panel, as per the provisions Page 5 of 12
ITA 420/RJT/2025 MITESHKUMAR PABARI of Section 144C(2) of the Act at the following address: The Secretary, Dispute Resolution Panel-2, World Trade Center, Cufffe Parade, Colaba, Mumbai- 400005, failing which the final assessment order u/s 147 r.w.s.144C(3)/144C(13) of the Income-tax Act shall be passed assessing the total income of the assessee as proposed here-in-above.
8.Aggrived by the above draft assessment order of the assessing officer, the assessee filed the objections before the Dispute Resolution Panel (DRP-2- Mumbai). The Dispute Resolution Panel-2, Mumbai did not admit the objections of the assessee, as the objections were filed after expiry of 30 days, and the assessee has also not filed any petition for condonation of delay before the Hon’ble DRP-2, therefore, Hon’ble DRP rejected the objections filed by the assessee, observing as follows (For the sake of convenience the entire order of Hon’ble DRP is reproduced below):
Page 6 of 12 ITA 420/RJT/2025 MITESHKUMAR PABARI Page 7 of 12 ITA 420/RJT/2025 MITESHKUMAR PABARI
Then after, the assessing officer framed the final assessment order u/s. 147 r.w.s. 144C(3) of the Act dated 26.05.2025, stating that the assessee fails to submit the proof of payment of purchase consideration of the impugned property (from Sumedha Spacelinks LLP) along with the source of fund Page 8 of 12
ITA 420/RJT/2025 MITESHKUMAR PABARI thereof. Accordingly, the purchase consideration along with the registration fees, Maintenance charge & stamp duty paid aggregating to Rs.78,69,694/- w.r.t the impugned property was considered by the assessing officer, as unexplained investment within the meaning of section 69 r.w.s 115BBE of the I.T Act, 1961.
Aggrieved by the final order of the assessing officer, u/s. 147 r.w.s. 144C(3) of the Act, vide order dated 26.05.2025, the assessee is in appeal before this Tribunal.
The Learned Counsel for the assessee argued before the Bench that payments were made earlier in other assessment years by the non-resident assessee, therefore, no addition should be made in the hands of the assessee.
On the contrary, the Learned DR for the revenue relied on the findings of the authorities below.
We have heard both the parties and perused the material available on record. We note that Hon’ble DRP-2, Mumbai has rejected the assessee`s objections, as the assessee did not file the objections within 30 days from the date of draft order, therefore, the Hon’ble DRP did not condone the delay and dismissed the appeal of the assessee, in limini, stating that the objections were filed by the assessee after the expiry of 30 days and in absence of Form-35A prescribed for raising objection, the Hon’ble DRP could not initiate the proceedings through ITBA portal.
We have gone through the findings of the Hon’ble DRP, and noted that there was minor delay (one day) in filing the objections before the Hon’ble DRP. The objections had been received by the Hon’ble DRP on 23.05.2025, whereas the date of draft order appears to be 22.03.2025, hence, there is minor Page 9 of 12
ITA 420/RJT/2025 MITESHKUMAR PABARI delay of 1 day. We note that because of such minor delay, the assessee should not suffer. We note that the primary function of an Authority/Court is to adjudicate the dispute between the parties and to advance substantial justice. It is axiomatic that condonation of delay is a matter of discretion of the Court. Section 5 of the Limitation Act does not say that such discretion can be exercised only if the delay is within a certain limit. Therefore, we condone the delay in filing the objections before the Hon’ble DRP.
Considering the above facts, we note that assessee could not plead his case before Hon`ble DRP successfully. Therefore, we note that assessee has also raised the grievance in grounds of appeal No.1 as follows: “…Hon. DRP not considered the objection, not verified the submission, not given proper opportunity to being heard and rejected the objection application on the ground of minor delay and non-submission of form, even the not taxable income and even provided the explanations with necessary details, explanation and supporting documents….”
The assessee has also raised the grievance in grounds of appeal No.4 as follows: (4) Learned A.O. erred in law as well facts by not giving effective opportunity of being heard. The passed order is erroneous, against the principle of nature of justice and against the provision of law. The order is liable to be quashed and set aside.
Therefore, we note that the assessee, under consideration, was not given sufficient opportunity of being heard during the assessment stage, as well as during the Hon`ble DRP stage. We note that the Hon’ble Supreme Court in M.S.Gill vs The Chief Election Commission 1978 AIR SC 851 held “The dichotomy between administrative and quasi-judicial function vis-à-vis the doctrine of natural justice is presumably obsolescent after Kraipak (A.K. Kraipak vs UOI AIR 1970 SC 150) which makes the water-shed in the application of natural justice to administrative proceedings. The rules of natural justice are rooted in all legal systems and are not any new theology. Page 10 of 12
ITA 420/RJT/2025 MITESHKUMAR PABARI They are manifested in the twin principles of nemo judex in parte sua (no person shall be a judge in his own case) and audi alterem partem (the right to be heard). It has been pointed out that the aim of natural justice is to secure justice.
Considering the above facts, we direct the Hon’ble DRP to consider the assessee`s objection and to adjudicate the issue in accordance with law. The assessee is also directed to file Form-35A in prescribed form and other details and documents, which are required and mandatory to file along-with objections before the Hon’ble DRP. Needless to say, that the assessee shall fully co-operate with the Hon`ble DRP in the timely completion of the set aside proceedings. The assessee may note that all the necessary compliances should be made at the earliest and within the time limit prescribed in the notices issued by the Hon`ble DRP. It should be the endeavor of the assessee to promptly submit necessary evidences in support of his claim, suo-moto or as required by the Hon`ble DRP without causing undue delays, leading to submissions towards the fag end of the limitation period. The assessment order under section 147 r.w.s. 144C(3) is thus, set aside, with a direction to the Hon`ble DRP, to make a fresh order in accordance with the law.
In the result, the appeal filed by the assessee is allowed, for statistical purposes, in above terms.
Order is pronounced in the open court on 30/10/2025.