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Facts
The assessee filed an income tax return for AY 2018-19, which was selected for scrutiny concerning large sales promotion expenses. The Assessing Officer (AO) treated Rs. 2,89,94,161/- as unexplained expenditure under Section 69C of the Income Tax Act, 1961, making an addition. The First Appellate Authority (CIT(A)) subsequently dismissed the assessee's appeal ex-parte.
Held
The Tribunal acknowledged the assessee's negligence in not complying with multiple opportunities provided by the CIT(A), attributing it to their counsel. Despite this, to ensure natural justice, the Tribunal decided to set aside the matter back to the CIT(A) for a fresh opportunity to the assessee, conditional on payment of Rs. 10,000/- to the Prime Minister's National Relief Fund. The CIT(A) is directed to allow another opportunity, failing which, they may decide on merits.
Key Issues
Whether the CIT(A) erred in dismissing the appeal ex-parte without providing adequate opportunity of being heard, and the justification of the addition made by the AO under Section 69C/115BBE.
Sections Cited
143(3), 69C, 115BBE
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, AHMEDABAD “C” BENCH, AHMEDABAD
Before: Ms. SUCHITRA KAMBLE & SHRI NARENDRA PRASAD SINHA
O R D E R
PER SHRI NARENDRA PRASAD SINHA, AM:
This appeal is filed by the assessee against the order of the National Faceless Appeal Centre (NFAC), Delhi (in short “the CIT(A)”) dated 30.09.2025 for the Assessment Year (A.Y.) 2018-19, in the proceeding under Section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’).
The brief facts of the case are that the assessee had filed its return of income for the A.Y. 2018-19 on 31.10.2018 declaring income of Rs.34,32,120/-. The case was selected for scrutiny under CASS to examine large sales promotion expense vis-à-vis gross receipts. In the course of assessment, the AO found the assessee had incurred sales (Assessment Year: 2018-19) Dharti Madrid County LLP vs. DCIT Page 2 of 6 promotion expense of Rs.3,01,63,665/- which included brokerage on sales, interest on cancellation, interest on customer’s loan etc. the genuineness of which was examined. The AO found that the assessee did not incur any expenditure towards rent and interest on home loan. The AO treated the interest on customer’s home loan and sales promotion expense amounting to Rs.2,89,94,161/-as unexplained expenditure under section 69C of the Act and accordingly made the addition.
Aggrieved with the order of the Assessing Officer, the assessee had filed an appeal before the First Appellate Authority which was decided by the Ld. CIT(A) vide the impugned order and the appeal of the assessee was dismissed.
The assessee is now in second appeal before us. The following grounds have been taken in this appeal: -
1. The learned Commissioner of Income Tax (Appeals), NFAC, Delhi has erred in passing an Ex Parte order without providing reasonable opportunity of being heard to the appellant. Hence the same being against the principles of natural justice and equity requires to be quashed.
2. The learned Commissioner of Income Tax (Appeals), NFAC, Delhi has erred in dismissing the appeal without rejecting the adjournment applications filed by the appellant from time to time in compliance to various notices issued by him.
3. The learned Commissioner of Income Tax (Appeals), NFAC, Delhi has erred in confirming action of the Assessing Officer in computing the total income at Rs.3,24,76,278/- as against that of Rs.34,32,120/- declared by the appellant in return of income filed on 31/10/2018.
4. The learned Commissioner of Income Tax (Appeals), NFAC, Delhi has erred in confirming addition of Rs.2,89,94,161/- made by the Assessing Officer treating the amount of expenditure claimed by the assessee in (Assessment Year: 2018-19) Dharti Madrid County LLP vs. DCIT Page 3 of 6 Profit and Loss account comprising the interest on customers home loan Rs. 1,26,48,132/-, interest on home loan SL Rs.61,25,509/- and Sales Promotion exp. Of Rs. 1,02,20,520/- as alleged unexplained expenditure u/s 69C of the 1. T. Act, 1961 and taxing the same u/s 115BBE of the 1.T.Act 1961
5. The Appellant craves leave to add, alter, amend or modify any of the grounds on or before the date of hearing of appeal.”
Shri Aseem Thakkar, Ld. AR of the assessee, submitted at the outset that no compliance could be made before the Ld. CIT(A), who had dismissed the appeal of the assessee without adjudicating the grounds taken by the assessee on merit. He explained that adjournment applications were filed by the assessee on different occasions, still the appeal was decided ex-parte without allowing further opportunity. The Ld. AR requested that the assessee may be allowed another opportunity to explain the transactions by setting aside the matter to the file of the Ld. CIT(A).
Per contra, Shri Ashok Kumar Suthar, Ld. CIT-DR supported the order of the Ld. CIT(A). He, however, had no objection if the matter was set aside to the file of Ld. CIT(A) for allowing another opportunity to the assessee.
We have considered the submissions of the assessee. It is found that the Ld. CIT(A) had allowed as many as five opportunities to the assessee to submit evidence and substantiate it’s claim. However, apart from seeking adjournment, no compliance was made by the assessee on any of the dates. The assessee has attributed the default before the Ld. CIT(A) on the counsel. The assessee cannot escape by placing the blame for non-compliance on the counsel. It is a settled law that there is (Assessment Year: 2018-19) Dharti Madrid County LLP vs. DCIT Page 4 of 6 no general proposition that mistake of counsel by itself is always a sufficient ground. When the assessee had filed first appeal before the Ld. CIT(A), it should have been careful enough to ensure that proper compliance was made before the appellate authority other than seeking adjournment. It was the duty of the assessee to watch its affairs before the CIT(A) and ensure that proper compliance is made before him. The assessee was certainly negligent and we are not convinced with the explanation of the assessee regarding non-compliance before the Ld. CIT(A). Therefore, we deem it proper to impose a cost of Rs.10,000/- on the assessee which should be deposited to the Prime Minister’s National Relief Fund within a period of 15 days from the date of receipt of this order. Subject to the payment of cost, we deem it proper to set aside the matter to the file of Ld. CIT(A) with a direction to allow another opportunity to the assessee to explain the nature of transactions and to substantiate its claim. The assessee is also directed to make compliance before the Ld. CIT(A) in the course of set aside appeal proceeding. In case the assessee does not make compliance, the Ld. CIT(A) will have liberty to decide the matter on merits on the basis of the materials available on record.
In the result, the appeal of the assessee is allowed for statistical purpose.
Order pronounced in the open Court on this …09th January, 2026.