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Facts
The assessee, a rural milk co-operative society, did not file its return of income, leading to a reassessment where cash withdrawals of ₹86,25,000/- were added as unexplained expenditure under Section 69C. The CIT(A) confirmed the addition ex-parte due to non-compliance by the assessee, which the assessee attributed to difficulties in accessing digital notices. The assessee claims these cash withdrawals were legitimate business payments to rural milk vendors.
Held
The Tribunal condoned the 393-day delay in filing the appeal, acknowledging the genuine difficulties faced by the assessee. It observed that the CIT(A) erred by dismissing the appeal ex-parte without adjudicating the merits. Consequently, the Tribunal remanded the matter back to the Assessing Officer for fresh de-novo consideration, directing that the assessee be given an opportunity to explain the cash withdrawals in light of its business activities.
Key Issues
Whether the CIT(A) erred in confirming additions ex-parte without adjudicating merits; whether cash withdrawals by a milk society for vendor payments constitute unexplained expenditure under Section 69C; and condonation of delay in filing appeal.
Sections Cited
69C, 115BBE, 250(6), 271AAC, 234A, 234B, 234F
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Income Tax Appellate Tribunal, “A” BENCH, AHMEDABAD
Before: SHRI SIDDHARTHA NAUTIYAL & SHRI NARENDRA PRASAD SINHA
O R D E R
PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER:
This appeal has been filed by the Assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals), (in short “Ld. CIT(A)”), National Faceless Appeal Centre (in short “NFAC”), Delhi vide order dated 06.08.2024 passed for A.Y. 2019-20.
The assessee has taken the following grounds of appeal:
“1.0 The learned Commissioner of Income Tax (Appeals), NFAC has erred in law and on facts in passing the appellate order ex-parte, without ensuring that a real and meaningful opportunity of hearing was afforded to the appellant, especially considering the peculiar circumstances and genuine limitations faced by the appellant in effectively participating in the proceedings. 2.0 The learned Commissioner of Income Tax (Appeals), NFAC has erred in law and on facts in confirming the addition of Rs.86,25,000/- on account of cash withdrawals from the bank account treating the same as undisclosed income made by invoking the provisions of section 69C rws 115BBE of the I T Act, 1961, without Kaidvana Muvada P Dudh Utpadak Sahkari Mandali Ltd. vs. ITO Asst. Year –2019-20 - 2– adjudicating the appeal on merits and without considering the appellant's inability to respond to the hearing notices due to genuine constraints. 3.0 The learned Commissioner of Income Tax (Appeals), NFAC has erred in law and on facts in confirming the additions made by the Assessing Officer ex-parte in violation of the mandate under section 250(6) of the Act, which requires the Commissioner (Appeals) to dispose of the appeal through a reasoned order on each ground of appeal
, irrespective of the appellant's absence or non-compliance. 4.0 The learned Commissioner of Income Tax (Appeals), NFAC failed to appreciate that non-appearance of the appellant does not empower the Commissioner (Appeals) to dismiss or decide appeal on merits without real hearing. 5.0 The learned Commissioner of Income Tax (Appeals), NFAC has erred in law and on facts in confirming the initiation of penalty proceedings under section 271AAC of the Income Tax Act, 1961 for the alleged under reporting and/or mis-reporting of income. 6.0 The learned Commissioner of Income Tax (Appeals), NFAC erred in law and on facts has confirmed the charging interest under section 234A, 234B and 234F of the Income Tax Act, 1961. 7.0 The appellant craves leave to add to, alter, delete or modify any of the above grounds of appeal either before or at the time of hearing of this appeal.”
3. At the outset, we observe that the assessee has filed application for condonation of delay along-with an Affidavit for delay of 393 days in filing of the present appeal. We have considered the application for condonation of delay along with the affidavit filed by the assessee explaining the reasons for the delay in filing the present appeal before the Tribunal. In the affidavit, the Secretary of the assessee society has stated that the impugned order passed by the Commissioner of Income Tax (Appeals), NFAC dated 06.08.2024 was served through email on the registered email address of the Mandli, however, the said email account was not regularly accessed as the assessee is a rural milk co-operative society managed by members who are not technically equipped to handle digital correspondence on a regular basis. It has further been explained that due to the lack of technical infrastructure and regular Kaidvana Muvada P Dudh Utpadak Sahkari Mandali Ltd. vs. ITO Asst. Year –2019-20 - 3– monitoring of email communications, the appellate order remained unnoticed and came to the knowledge of the assessee only when the Mandli approached its tax consultant during a subsequent round of income tax correspondence. The assessee submitted that the delay in filing the appeal was neither willful nor intentional but occurred due to genuine and unavoidable circumstances beyond the control of the assessee and that the assessee has meritorious grounds to contest the order of the learned Commissioner (Appeals). After considering the contents of the affidavit and the circumstances explained therein, we are satisfied that the assessee was prevented by sufficient cause from filing the appeal within the prescribed period of limitation. Accordingly, in the interest of justice, the delay of 393 days in filing the present appeal is condoned and the appeal is admitted for adjudication on merits.
4. On merits, the brief facts of the case are that the assessee did not file the return of income for the relevant assessment year and the case was taken up for reassessment proceedings. During the course of assessment proceedings, the Assessing Officer examined the bank account of the assessee and noticed substantial cash withdrawals and transactions. Since the assessee had not filed the return of income and no explanation was furnished before the Assessing Officer with respect to the deposits and withdrawals in the bank account, the Assessing Officer treated the cash withdrawals as unexplained expenditure and made an addition of ₹86,25,000/- under section 69C of the Act and taxed the same under the provisions of section 115BBE of the Act.
Aggrieved by the assessment order, the assessee preferred an appeal before the Commissioner of Income-tax (Appeals). The learned Commissioner (Appeals) issued several notices to the assessee during the Kaidvana Muvada P Dudh Utpadak Sahkari Mandali Ltd. vs. ITO Asst. Year –2019-20 - 4– appellate proceedings requiring the assessee to appear and substantiate the grounds of appeal. However, the learned Commissioner (Appeals), observed that the assessee did not comply with the notices issued during the course of appellate proceedings and no submissions or documentary evidence were filed in support of the grounds raised in the appeal. In view of the non- compliance on the part of the assessee and in the absence of any material to rebut the findings of the Assessing Officer, the learned Commissioner (Appeals) held that the assessee was not interested in prosecuting the appeal. Accordingly, the learned Commissioner (Appeals) confirmed the assessment order passed by the Assessing Officer and dismissed all the grounds of appeal raised by the assessee.
The assessee is in appeal before us against the order passed by the Commissioner (Appeals) dismissing the appeal of the assessee.
During the course of hearing before us, the learned counsel for the assessee submitted that the learned Commissioner (Appeals) had passed the appellate order ex-parte without affording an opportunity of hearing to the assessee. It was further submitted that the learned Commissioner (Appeals) confirmed the addition without adjudicating the grounds of appeal on merits and without considering the genuine constraints faced by the assessee in responding to the notices issued during the appellate proceedings. The learned counsel further submitted that the order passed by the learned Commissioner (Appeals) is contrary to the mandate of section 250(6) of the Act which requires the appellate authority to dispose of the appeal by passing a reasoned order dealing with each ground of appeal raised by the assessee.
Kaidvana Muvada P Dudh Utpadak Sahkari Mandali Ltd. vs. ITO Asst. Year –2019-20 - 5– 8. On merits, the learned counsel for the assessee submitted that the addition of ₹86,25,000/- made by the Assessing Officer on account of cash withdrawals from the bank account has been made without properly appreciating the nature of the assessee’s activities. It was submitted that the assessee is engaged in the activity of procuring milk from rural milk vendors who are members associated with the assessee. The assessee purchases milk from such rural vendors and thereafter supplies the milk to Milk Federation. It was submitted that the cash withdrawals from the bank account were made in the normal course of business for making payments to the rural milk vendors from whom the milk was procured. Therefore, the withdrawals could not be treated as unexplained expenditure under section 69C of the Act.
After considering the rival submissions and perusing the material available on record, we find that the learned Commissioner (Appeals) has dismissed the appeal of the assessee primarily on account of non-compliance and has not adjudicated the issues raised by the assessee on merits. We further note that the assessee has placed on record certain submissions explaining the nature of its business activities and the circumstances under which the cash withdrawals were made. According to the submissions made by the learned counsel for the assessee, the assessee is engaged in procurement of milk from rural milk vendors and the amounts withdrawn from the bank account were for purpose of making payments to such vendors in connection with the procurement of milk which is subsequently supplied to Milk Federation. These submissions go to the root of the matter and require proper examination and verification at the level of the Assessing Officer.
Kaidvana Muvada P Dudh Utpadak Sahkari Mandali Ltd. vs. ITO Asst. Year –2019-20 - 6– 10. Considering the totality of facts and circumstances of the case and in the interest of justice, we are of the considered view that the matter requires fresh examination at the level of the Assessing Officer. Accordingly, we restore the matter to the file of the Assessing Officer for de-novo consideration in the light of the submissions of the learned counsel for the assessee and the explanation furnished regarding the business activity of procurement of milk from rural milk vendors who are members associated with the assessee and the sale of milk to Milk Federation. The Assessing Officer shall examine the issue afresh after providing adequate opportunity of being heard to the assessee and shall decide the matter in accordance with law.
In the result, the appeal of the assessee is allowed for statistical purposes. This Order is pronounced in the Open Court on 10/03/2026
Sd/- Sd/- (NARENDRA P. SINHA) (SIDDHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 10/03/2026 TANMAY, Sr. PS TRUE COPY आदेश की �ितिलिप अ�ेिषत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant ��थ� / The Respondent. 2. 3. संबंिधत आयकर आयु� / Concerned CIT 4. आयकर आयु�(अपील) / The CIT(A)- 5. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER,
उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपीलीय अिधकरण, अहमदाबाद / ITAT, Ahmedabad