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Facts
The assessee, an individual, filed her return for AY 2016-17. A reassessment notice under section 148 (later deemed under section 148A) was issued based on information from a survey of Babylon Group, indicating the assessee received Rs. 4,38,00,000 in undisclosed cash payments for immovable properties. The Assessing Officer recalculated Long Term Capital Gain (LTCG) using a total sale consideration of Rs. 8,70,00,000, proposing an addition of Rs. 5,58,00,000 to income, and initiating penalty proceedings. The CIT(A)/NFAC dismissed the assessee's appeal ex-parte due to non-compliance.
Held
The Tribunal set aside the ex-parte order of the CIT(A)/NFAC and remanded the matter for de novo adjudication. It emphasized that the case involved serious allegations of unaccounted investments and money rotation, necessitating a detailed examination by the CIT(A)/NFAC to determine if fraudulent transactions were used for tax evasion. The Tribunal reiterated the principle that fraud vitiates all acts and that parties approaching the court must come with clean hands.
Key Issues
The key legal issues involve the validity of reassessment proceedings for alleged escaped income from undisclosed cash payments in property sales, the correct computation of Long Term Capital Gains (LTCG) under section 50C, the admissibility of deductions claimed under sections 54 and 54EC without proper substantiation, and the implications of an ex-parte dismissal by the CIT(A)/NFAC due to the assessee's non-compliance in a case involving alleged tax evasion and fraud.
Sections Cited
Section 139 of the Income-tax Act, 1961, Section 143(3) of the Income-tax Act, 1961, Section 148 of the Income-tax Act, 1961, Section 148A of the Income-tax Act, 1961, Section 148A(b), Section 148A(d), Section 147 of the Income-tax Act, 1961, Section 133A of the Income-tax Act, 1961, Section 50C of the Income-tax Act, 1961, Section 54 of the Income-tax Act, 1961, Section 54EC of the Income-tax Act, 1961, Section 54(2) of the Income-tax Act, 1961, Section 271(1)(c) of the Income-tax Act, 1961, Section 144B of the Income-tax Act, 1961, Section 156 of the Income-tax Act, 1961
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Income Tax Appellate Tribunal, RAIPUR BENCH, RAIPUR
Before: SHRI PARTHA SARATHI CHAUDHURY & SHRI ARUN KHODPIA
आदेश / ORDER
PER PARTHA SARATHI CHAUDHURY, JM:
The captioned appeal preferred by the assessee emanates from the order of the Ld.CIT(Appeals)/NFAC, Delhi dated 31.03.2025 for the assessment year 2016-17 as per the grounds of appeal on record.
The brief facts in this case as per the assessment order are as follows:
That being aggrieved, the assessee carried the matter in appeal before the Ld. CIT(Appeals)/NFAC. It is noted that as per Paras 4 to 7 of the impugned order, the Ld.CIT(Appeals)/NFAC vide an ex-parte order had dismissed the appeal of the assessee due to non-compliance by the assessee. For the sake of clarity, Paras 4 to 7 of the Ld.CIT(Appeals)/NFAC order is culled out as follows: “4. During the course of appeal proceedings, the following notices/letters for hearing were issued to the appellant, but till date the appellant has neither filed any response nor filed any submissions in support of grounds of appeal. The details of the notices issued are as under:
4.1 Thus in this case, the appellant has not effectively pursued the appellate proceedings and failed to respond to various notices issued by this office. It is important to delve into the judicial pronouncements on this issue which are elaborated below: 4.1.1 In the case of CIT vs. B.N. Bhattacharya reported at 118 ITR 461, it was held by the Hon'ble Supreme Court that “…… appeal does not mean merely filing of appeal but effectively pursuing it." 4.1.2 The decision of the Hon'ble High Court of Mumbai in the case of M/s. Chemipol v/s. Union of India, Law Ministry, Aayakar Bhawan, Mumbai and The Commissioner of Central Excise, Mumbai (Central Excise Appeal No.62 of 2009) clearly states, that every court judicial body or authority, which has a duty to decide a matter between two parties, inherently possesses the power to dismiss the case in default. 4.1.3 For the sake of reference, the relevant extract of the judicial pronouncement rendered by the Hon'ble High Court of Mumbai quoting decision of Hon'ble Supreme Court in the case of Nandramdas Dwarkadas AIR 1958 MP 260, is reproduced below: "Now the Act does not give any power of dismissal. But it is axiomatic that no court or tribunal is supposed to continue a proceeding before it when the party who has moved it has not appeared nor cared to remain present. The dismissal, therefore, is an inherent power which every tribunal possesses." 4.1.4 The principle that every court that is to decide on a matter of dispute, inherently possesses the power to dismiss the case for default, has been upheld by the Hon'ble Supreme Court in case of Dr. P. Nalla Thampy Vs. Shankar (1984 (Supp) SCC 63 and the case of New India Assurance vs. Srinivasan (2000) 3 SCC 242. In the latter case, the Apex Court has held as under:- "That every court or judicial body or authority, which has a duty to decide a list between two parties, inherently possesses the power to dismiss a case in default. Where a case is called up for hearing and the party is not present, the court or the judicial or quasi-judicial body is under no obligation to keep the matter pending before it or to pursue the matter on behalf of the complainant, therefore, the court will be well within its jurisdiction to dismiss the complaint for non-prosecution. So also, it would have the inherent power and jurisdiction to restore the complaint on good cause being shown for the non-appearance of the complainant." 4.1.5 The Hon'ble Bombay High Court has also laid down the proposition that where the appellant in spite of notice is persistently absent and the Tribunal on facts of the case is of the view that the appellant is not interested in prosecuting the appeal, it can in exercise its inherent power to dismiss the appeal for non-prosecution. 4.1.6 The Hon'ble ITAT Delhi (ITR No.2006/Del/2011 dtd 19.12.2001) in the case of Whirlpool of India Ltd v. DCIT had dismissed appeal for non-attendance at hearings, inferring that assessee was not interested in prosecuting of appeal. Thereafter in another decision in the case of Chadha Finlease Ltd. V. ACIT (ITA No.3013/De1/2011 date of order 20.12.2011) the Hon'ble ITAT had dismissed the appeal for non-attendance at hearings. 4.1.7 In a decision in the case of CIT v. Gold Leaf Capital Corporation Ltd. On 02.09.2011 (ITA no.798 of 2009), the Hon'ble High Court of Delhi had held that a negligent assessee should not be given many opportunities just because that quantum of amount involved is high. Necessary course of action is to draw adverse inference; otherwise it would amount to give premium to the assessee for his negligence.
5. The facts of the case as noted above are that the appellant has not pursued the appeal despite being granted several opportunities as elaborated supra. No details, documents or submissions have been provided to come to any conclusion other than those arrived at by the assessing officer in the order. The notices have been duly served upon the assessee via e-mail. Regrettably no response whatsoever was forthcoming on the appointed date. Thus, nothing has been placed on record to substantiate as to why the addition made by the AO should not be sustained.
6. In view of the above, the undersigned is left with no option but to decide the case on the basis of material on record. Bare perusal of the facts shows that the appellant has not pursued the appeal despite being granted several opportunities as elaborated supra. The assessee has further jeopardized its case by not responding despite several opportunities that were provided. I am constrained to agree with the approach adopted by the AO in making the addition. The AO has passed a reasoned and speaking order considering all the facts and the circumstances of the case and no interference with the order of the AO is called for. The grounds of appeal
are therefore dismissed.
7. Thus, in view of the facts and circumstances of the case, the order passed u/s.147 r.w.s. 144B of the Act dated 23.05.2023 by the AO is upheld.”
That considering the factual spectrum that an ex-parte order has been passed by the Ld. CIT(Appeals)/NFAC due to non-compliance by the assessee, in such scenario, this bench has provided one final opportunity to the assessee considering that the benefit of doubt may be existing in favour of the tax payer assessee and for that due to reasons beyond control of the assessee, the said assessee may not have been able to represent and comply with the hearing notices before the Ld. CIT(Appeals)/NFAC. Therefore, in this regard, as per the order of the ITAT, “Division Bench”, Raipur in the cases 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 wherein the Tribunal had dealt with similar issue on the same parameters of ex-parte order passed by the Ld. CIT(Appeals)/NFAC and remanded the matter back to the file of the Ld. CIT(Appeals)/NFAC, accordingly, we set-aside the order of the Ld. CIT(Appeals)/NFAC and remand the matter back to its file for denovo adjudication on similar terms as recorded by us in the aforesaid decision. However, the facts in this case further suggests that the assessee was involved in huge unaccounted investment and rotation of unaccounted money involving M/s.Hotel Babylon International Pvt. Ltd. and its group of companies/concerns. Therefore, it is mandatory on the part of the Ld. CIT(Appeals)/NFAC to determine and examine the facts in detailed manner whether any sham transactions have been facilitated to defraud the revenue by the assessee and thereby getting illegitimate gains. That if fraud is detected that shall be within purview of tax evasion and in such scenario, fraud vitiates everything including natural justice. The person approaching the court has to come with clean hands and if hands of the assessee itself are tainted the principles of natural justice will not come to his/her rescue.
The application of principle of fraud was even considered by the Hon'ble Supreme Court in the case of Badami (deceased) by her LRs v. Bhali in Civil Appeal No.1723/2008, dated 22/05/2012 wherein the Hon'ble Supreme Court has held as follows:-
20. In S. P. Chengalvaraya Naidu (dead) by L.Rs. v. Jagannath (dead) by L.Rs. and others AIR 1994 SC 853 this court commenced the verdict with the following words:-
Fraud-avoids all judicial acts, ecclesiastical or temporal"
It had been held that the courts of law are meant for imparting justice between the parties and one who comes to the court, must come with clean hands. A person whose case is based on falsehood has no right to approach the Court.
In another decision of the Hon’ble Supreme Court in the case of Smt. Shrist Dhawan v. M/s. Shaw Brothers AIR 1992 SC 1555, it has been held that fraud and collusion vitiates even the most solemn proceedings in any civilized system of jurisprudence including natural justice. Further, the Hon’ble Supreme Court in the case of Mc Dowell & Company Ltd. Vs. CTO [1985] 154 ITR 148 (SC) has held that "Tax planning may be legitimate provided it is within the framework of law, Colourable devices cannot be part of tax planning....".
Therefore, in our considered view, in the present matter it is the responsibility of the revenue authorities to investigate the matter in detailed manner as per law whether there is tax planning or tax evasion as per the transactions entered into by the assessee. If tax evasion is determined by the revenue in such circumstances additions are to be sustained in the hands of the assessee.
As per the aforesaid terms, the grounds of appeal raised by the assessee stands allowed for statistical purposes.
In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the open court on 20th day of June, 2025.