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Facts
The assessee deposited Rs. 19,60,000/- in bank during the demonetization period, which the AO added as unexplained money under Section 69A read with Section 115BBE of the Income Tax Act. The CIT(A)-NFAC dismissed the assessee's appeal ex-parte due to non-compliance, without independently addressing the facts or the assessee's adjournment request.
Held
The Tribunal ruled that the CIT(A) erred by not providing a proper opportunity of hearing, violating principles of natural justice. Citing judicial precedents, the Tribunal set aside the CIT(A)'s order and remanded the case for de novo adjudication, granting the assessee a final opportunity to present its case on merits.
Key Issues
Whether the CIT(A) was justified in dismissing the appeal ex-parte for non-compliance without considering the assessee's adjournment request, and if such dismissal violated principles of natural justice, warranting a remand.
Sections Cited
69A, 115BBE, 250(4), 250(6), 33(4) of Income Tax Act, 1922, Article 14 of Constitution of India
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, RAIPUR “SMC” BENCH :: RAIPUR
Before: SHRI PARTHA SARATHI CHAUDHURY
ORDER PER PARTHA SARATHI CHAUDHURY, JM:
This appeal preferred by the assessee emanates from the order of Ld. Commissioner of Income Tax (Appeals)/NFAC, Delhi [“CIT(A)- NFAC”] dated 11/04/2025 for Assessment Year (“AY”) 2017-18 as per grounds of appeal on record.
2. This is a case of addition of Rs.19,60,000/- being unexplained money in the hands of the assessee made u/sec. 69A r.w.s. 115BBE
2 ITA.No.397/RPR/2025 of the Act. That, as per the facts on record and the information available with the Department, the assessee had made cash deposit of Rs. 19,60,000/- in the bank account during the demonetization period i.e. 09/11/2016 to 30/12/2016 in the year under consideration. The details of cash deposits are as follows:-
S.No. Name & Address Bank Account Cash deposited during of Bank No. demonetization period (9.11.2016 to 31.12.2016) 1 ICICI Bank Ltd 134805000494 15,60,000/- 2 ICICI Bank Ltd 134801502855 4,00,000/- Total 19,60,000/-
3. That, during the assessment proceedings, though, the assessee was asked to explain the source of such cash deposits, however, the assessee had not complied with the hearing notices, hence, the source and nature of such cash deposits remained unexplained. Accordingly, the Assessing Officer (for short, "AO") made the addition of Rs.19,60,000/- as unexplained money u/sec. 69A of the Act in the hands of the assessee read with sec. 115BBE of the Act.
That, when the matter travelled before the ld. CIT(A)-NFAC, it had simply extracted the findings of the AO in the assessment order, however, has not recorded any findings on facts for the reason that there was no compliance from the assessee. That, from the order of 3 ITA.No.397/RPR/2025 ld.CIT(A)-NFAC, it is evident that though there was no compliance from the assessee, however, the assessment order and Form No.35 consisting of statement of facts and grounds of appeal were before the ld. CIT(A)-NFAC, however, the said authority chose not to apply mind independently nor pass speaking order in terms with sec. 250(4) & (6) of the Act. That, explaining the reasons for non-compliance before the first appellate authority, learned counsel demonstrated that first communication while opening of the communication window by the Department was issued on 04/11/2022 which therefore was not a hearing notice at all, rather it was opening of communication window. The only notice of hearing that was issued to the assessee was on 17/03/2025 asking for compliance by 01/04/2025. The said notice is culled out and made part of this order:-
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That, against the same, assessee had requested for adjournment dated 31/03/2025 which is also extracted for the sake of completeness.
Date : 31.03.2025 From: Vivek Dhariwal Dhariwal Jewellers Near Gopal Mandir, Sadar Bazar, Raipur-492001 (C.G.) To Hon’ble Commisioner of I.T. (Appeals) National Faceless Appeal Centre, Delhi Respected Sir/Madam Re: PAN : BLEPD8258F AY: 2017-18 Appeal No. CIT(A), Raipur-2/10725/2019-20 Sub:- Request for adjournment 1. This has reference to notice u/sec. 250 of I.T. Act, 1961 dated 17/03/2025 in respect of the above mentioned appeal, requiring the appellant to submit its explanation by 01/04/2025.
In this regard, it is humbly submitted that for arguing its case before your honour, appellant has very recently appointed a new counsel. The new counsel has required for certain documents which could not be gathered because the transaction pertain to old years.
Further, it is submitted that the new counsel of the appellant was pre-occupied in the finalization of income tax assessment and search assessments, which were getting time barred on 31/03/2025. Because of the heavy workload of such assessment, necessary preparations for the case could not be done. Your honour would kindly appreciate that the appellant could not submit written submission without the assistance of its counsel. Because of compelling
5 ITA.No.397/RPR/2025 circumstances, the counsel was also note in a position to prepare written submission. 4. In view of the above mentioned reasons, it is most humbly requested that the appellant may kindly be provided a period of 1 month to make compliance in the matter. The appellant assures full cooperation in early disposal of appeal.”
It is evident from the perusal of the order of ld. CIT(A)-NFAC that it had not recorded any findings with regard to the date, on which opportunity of hearing was provided to the assessee, nor has mentioned about the adjournment letter that was filed by the assessee, instead summarily dismissed the appeal of the assessee even without independent application of mind and making any specific enquiry. Be that as it may, the assessee also failed to appear before the ld.CIT(A)- NFAC and therefore not provided any evidence substantiating the said cash deposits. Balancing scales of justice, it would be appropriate to provide a final opportunity to the assessee to represent his matter on merits before the first appellate authority. Following the same parity of reasoning as per the decision of Division Bench of this Tribunal in the case of Brajesh Singh Bhadoria Vs. Dy./ACIT, Central Circle-2, Naya Raipur [IT(SS)A Nos. 1 to 6, 8 & 9/RPR/2025, dated 20.03.2025], I set aside the order of ld. CIT(A)-NFAC and remand the matter back to its file for denovo adjudication as per law and at the same time, the assessee is directed that this being the final
6 ITA.No.397/RPR/2025 opportunity, he shall respond to the hearing notice and represent the case on merits. The relevant portion of the order in the case of Brajesh Singh Bhadoria (supra) is extracted as follows:- “7. We have considered the submissions of the parties herein and analyzed the facts and circumstances involved in all the captioned appeals. After careful perusal of the documents on record, we find that the assessee had assailed the legal ground as aforestated, however, the fact of the matter is that on perusal of the respective orders of the Ld. CIT(Appeals) for all the years before us, it is also evident from Para 3 that there has been no compliance by the assessee before the said authority and as such, an ex-parte order was passed for the concerned years in appeal. Admittedly, as per record, sufficient opportunities had been provided to the assesse, however, there was no compliance by the assessee. In effect, rights and liabilities of the parties herein are yet to be adjudicated substantially at the level of the first appellate authority. Though in the impugned orders, discussion has been done as per material available on record by the Ld.CIT(Appeals) but they are only Form 35, statement of facts, grounds of appeal and the assessment order. However, due to noncompliance by the assessee, there are no submissions, evidence and documents submitted for adjudication by the assessee before the Ld. CIT(Appeals). That as per Para 3 of the Ld. CIT(Appeals) order, there has been no compliance on the part of the assessee for submitting detailed explanations regarding the grounds of appeal for the years under consideration which clearly shows that the grounds of appeal raised before the first appellate authority has not been substantiated on merits through corroborative evidence /submissions.
8. That in such scenario we are of the considered view that the Income tax Act is within the ambit of welfare legislation which are completely different from that of the penal legislation, therefore, benefit of doubt whenever arises, it has to be interpreted in favour of the assessee tax payer within the parameters of law and facts. There may be circumstances beyond control of the assessee because of which, the assessee may not have been able to represent his case on the given dates of hearing before the Ld. CIT(Appeals). Though it is correct that there was no compliance from the side of the assessee, however, nothing is there on record which suggests any deliberate non-compliance or malafide conduct of the assessee. That further, if one final opportunity is provided to the assessee to represent his
7 ITA.No.397/RPR/2025 case before the first appellate authority, the position of the revenue will also not be jeopardized.
Recently, the Hon’ble High Court of Bombay in the case of Vijay Shrinivasrao Kulkarni Vs. Income-tax Appellate Tribunal (2025) 171 taxmann.com 696 (Bom.), dated 04.02.2025 observed that in the case the Assessing Officer had passed an ex-parte order and when the matter went on appeal before the Ld. CIT(Appeals)/NFAC, it had also dismissed the matter ex-parte due to non-compliance by the assessee’s authorized representative, when the matter came up before the ITAT, it had failed to address the infirmity regarding the fact that the assessee was not afforded proper opportunity of being heard and the matter was dismissed ex-parte by the Ld. CIT(Appeals)/NFAC which amounted to violation of principles of natural justice, and instead ITAT decided the case on merits, in such circumstances, the Hon’ble High Court of Bombay held that passing of an order on merits by the ITAT even when the impugned order was passed exparte amounts to violation of principles of natural justice and accordingly, the said matter was remanded to ITAT for passing a fresh order in accordance with law after hearing the parties. The legal principle as enshrined in the present judgment is crystal clear that the principles of natural justice i.e. the right to be heard is to be provided and accordingly, the matter had to be substantially adjudicated by the appellate authority. Therefore, if the impugned order of the Ld. CIT(Appeals)/NFAC is an exparte order, the only recourse in conformity with the aforesaid judicial pronouncement is to remand the matter back to the file of the Ld. CIT(Appeals)/NFAC for fresh adjudication in terms with the principles of natural justice providing one final opportunity to the assessee.
In the aforesaid case, the Hon’ble High Court of Bombay had referred to a judgment of the Hon’ble Supreme Court in the case of Delhi Transport Corporation vs. DTC Mazdoor Union AIR 1999 SC 564, wherein the Supreme Court inter-alia held that Article 14 guarantees a right of hearing to a person who is adversely affected by an administrative order. The principle of audi-alteram partem is a part of Article 14 of the Constitution of India. In light of such decision, the petitioner ought to have been granted an opportunity of being heard which, partakes the characteristic of the fundamental right under Article 14 of the Constitution of India.
The Hon’ble High Court of Bombay in the aforesaid case had referred to a decision of the Hon’ble Supreme Court in the case of Commissioner of Income Tax Madras v. Chenniyappa Mudiliar 1969
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1 SCC 591, wherein the Supreme Court in interpreting the section 33(4) of the Income Tax Act, 1922 has held that the appellate tribunal was bound to give a proper decision on question of fact as well as law, which can only be done if the appeal is disposed off on merits and not dismissed owing to the absence of the appellant. Reverting to the facts of the present case the grounds of appeal were simply filed before the Ld.CIT(Appeals) they were not substantiated or corroborated through submissions and filing of documentary evidences since the assessee had not complied before the Ld.CIT(Appeals) on the dates of hearing. Therefore, as per framework of the Act there must be adjudication on merits by the first appellate authority and one final opportunity be provided to the assessee to represent his matter on merits in the interest of natural justice.
12. There may even be a situation where the Ld. Counsel for the assessee may assail a legal ground before the Tribunal following the decision of the Hon’ble Supreme Court in the case of National Thermal Power Company Ltd. Ltd. Vs. CIT (1998) 229 ITR 383 (SC) with a contention that irrespective of the order of the Ld. CIT(Appeals) being exparte, the Tribunal may decide the legal issue that has been raised by the Ld. Counsel. In our view, the decision of the Hon’ble Supreme Court in the case of National Thermal Power Company Ltd. Ltd. Vs. CIT (supra) provides that any legal issue which goes to the root of the matter and is established through legal principles, the assessee can take up and raise such legal issue at any appellate forum irrespective of whether the assessee had raised such legal issue at the sub-ordinate level or not, however, it always depends on facts and circumstances of each case whether the Tribunal would decide the legal ground or in a case where the question is of natural justice and ex-parte order by the Ld. CIT(Appeals) the Tribunal would remand it back to Ld.CIT(Appeals) providing final opportunity to a bonafide assessee. The Tribunal as the highest fact finding authority must be certain enough that the impugned order before it has been passed on merits and is a speaking order where the assessee has also complied during the process of litigation. In case, where the order of the Ld. CIT(Appeals) itself is ex-parte and some legal ground is raised and if the Tribunal decides such legal ground where in fact principles of natural justice is left unanswered due to the fact that the impugned order before the Tribunal is ex-parte and there was no compliance by the assessee in such scenario the Tribunal would also be usurping the power of the Ld. CIT(Appeals) which is also a statutory authority as per the Act. This is due to the reason that as per framework of the Act, Ld.CIT(Appeals) is the first appellate authority where an appeal by 9 ITA.No.397/RPR/2025 assessee it would be substantially decided through a speaking order by the Ld.CIT(Appeals). When this part is over and either party is aggrieved second appeal lies before the ITAT. Now if for every ex- parte order passed by the Ld. CIT(Appeals), of course due to non- compliance by the assessee, if the Tribunal adjudicates a legal ground, for instance validity of assessment or reassessment order and answers it in favour of the assessee then it would create an easy route for assessee getting redressal from Tribunal even without bothering to comply with hearing notices before the Ld. CIT(Appeals). This would dismantle the structure of the Act which is definitely not the intention of the legislature. Here in this situation, where the benefit of doubt is given to the assessee since he had not complied with the hearing notices before the Ld. CIT(Appeals) which resulted in passing of an ex-parte order by the Ld. CIT(Appeals), in such scenario, as per the scheme of the Act and following the principles of natural justice, the only course of action is to remand the matter back to the file of the Ld. CIT(Appeals) for adjudication on merits providing one final opportunity to the assessee.
In view thereof, we set aside the respective orders of the Ld. CIT(Appeals) for all the years and remand the same to their file for denovo adjudication on merits. At the same time, we direct the assessee that this being the final opportunity, there must be compliance on merits before the first appellate authority. Needless to say, the Ld. CIT(Appeals) shall provide reasonable opportunity of being heard to the assessee and pass an order in terms of Section 250(4) and (6) of the Act within three months from receipt of this order.
As per the above terms, all the grounds of appeals stands allowed for statistical purposes.”
Respectfully following the afore-stated order and as per the directions already provided hereinabove, the grounds of appeal stands allowed for statistical purposes.
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In the result, appeal of the Assessee is allowed for statistical purposes.
Order pronounced in the open Court on 02.07.2025.