PRATIK SHAH, BHILAI,DURG vs. INCOME TAX OFFICER, WARD-2(1), BHILAI, DURG

4. The impugned order is bad in law and on facts.

5. The appellant reserves the right to add, alter, omit all or any of the grounds of appeal with the permission of the Hon'ble appellate authority.

3. Briefly stated, the assessee is an individual, who had not filed his return of income for the AY 2017-18. As per statement of financial transaction retrieve from the system, it is noticed by the department that the assessee had deposited cash amounting to Rs. 48,18,500/- in his A/c No. 15560210002414 maintained with the United Commercial Bank of India, Bhilai, during the demonetization period. Accordingly, the case of the assessee was selected for scrutiny assessment, notice u/s 142(1) was 3 Shri Pratik Shah Vs ITO, Ward-2(1), Bhilai issued and served upon the assessee. However, the assessee failed to furnish ROI in response to notice u/s 142(1) of the Act. Further, notices were issued to the assessee on regular intervals as emanating from the assessment order i.e., on 02.07.2019, 05.07.2019 and 16.09.2019. Later on, through an email dated 20.09.2019 the assessee has made a request for some time due to medical emergency, and the time was granted. But the assessee remains unresponsive, therefore, a show cause notice was issued to the assessee on 20.11.2019, proposing the addition u/s 69A for SBN deposited by the assessee. However, no compliance was made by the assessee again. Ld. AO, further in order to gather the information have initiated action u/s 133(6), have collected the information from the concerned bank and have completed the assessment under best judgment assessment following the manner provided u/s 144(1) of the Act. Another addition was made qua the credit entries in the bank accounts of the assessee to the tune of Rs. 1,78,16,711/- on which a GP rate 2.82% was applied taking the average of other 3 assessee’s in the same trade in which the assessee in present case was engaged and an addition of Rs. 5,02,431/- was made. The assessment u/s 144 was culminated with addition of Rs. 50,02,931/-.

4. An appeal was preferred by the assessee before the Ld. CIT(A) against the aforesaid order of Ld. AO, wherein again the assessee was 4 Shri Pratik Shah Vs ITO, Ward-2(1), Bhilai found to be of a non-complaint, as discernible from the order of Ld. CIT(A) that the assessee was not responsive on 8 occasions, as under:

S. No. Date of hearing notice Date of hearing Response of the Remarks fixed appellant 1 07/01/2021 11/01/2021 No Response Hearing notice was delivered on the available email address 2 06/01/2022 14/01/2022 No Response -do- 3 03/08/2023 11/08/2023 20/08/2023 -do- (adjournment) 4 22/08/2023 01/09/2023 No Response -do- 5 08/09/2023 18/09/2023 No Response -do- 6 02/11/2023 13/11/2023 No Response -do- 7 30/11/2023 12/12/2023 No Response -do- 8 20/12/2023 29/12/2023 No Response -do-

5 Shri Pratik Shah Vs ITO, Ward-2(1), Bhilai I find from the assessment order that the appellant had deposited cash of Rs. 48,00,500/- in bank account during demonetization period but the return of income for AY 2017-18 was not filed. Therefore, AO had issued notice u/s 142(1) requesting the appellant to file the return of income by 31/03/2018, however again there was no response from the appellant. The subsequent notices issue u/s 142(1) were also not responded by the appellant. Therefore, the AO had collected the information from banks u/s 133(6) of the act which revealed that there were total credits of Rs. 2,23,17,211/- during FY 2016-17 including cash deposits of Rs. 48,38,500/- during demonetization period. Considering the non-cooperative attitude of the appellant the AO had issued show cause notice proposing to complete the assessment u/s 144, however again their appellant failed to submit any reply/explanation. Therefore, the AO treated the cash deposited during demonetization period in SBN of Rs. 45,00,500/- as unexplained money and made addition of Rs. 45,00,500/-. Regarding other credits of Rs. 1,75,89,904/-, the estimated the GP at the rate of 2.82% on the basis of average GP of last 3 years shown by 3 third parties engaged in the similar line of business that of the appellant and made the addition of Rs. 5,02,431/-. Thus total income was determined at Rs. 50,02,930/- u/s 144 rws 115BBE of the Act.

During the course of appellant proceedings, the appellant failed to submit the ground wise written submission with supporting evidences in spite giving 8 opportunities of being heard. The appellant vide office letter dated 20/12/2023 was clearly informed that this is FINAL OPPORTUNITY given for submission of the ground wise written submission and if the appellant fails to comply, the appeal would be decided on merits of the case and submissions filed so far. However the appellant did not file any response till the date. Since the appellant failed to controvert the action of the AO with supporting evidences, the additions made by the AO are confirmed and the grounds of appeal raised by the appellant are dismissed.

6. In ground No. 3, the appellant has contended that if anything is left then assessee has right to modify, addition or deletion in this appeal,. However, this option is not exercised by the appellant during the appellate proceedings. Therefore, the ground of appeal raised by the appellant is dismissed.

6 Shri Pratik Shah Vs ITO, Ward-2(1), Bhilai 6. Aggrieved with the aforesaid order of Ld. CIT(A), the matter is being carried before us for our consideration.

8. Under the fresh proceedings after recalling the matter, apparently, it is emanating from the order of Ld. CIT(A) that the assessee’s appeal has been disposed of on Ex-parte basis. In such a situation, as we have held that, in a matter for which there was no compliance / representation by the assessee before the first appellate authority, for which no deliberate negligence on the part of assessee is proved by the revenue, the assessee should be provided with one last opportunity to represent his case and the matter should be restored back to the file of Ld. CIT(A) for fresh adjudication after hearing the assessee. Both the parties agreed to the 7 Shri Pratik Shah Vs ITO, Ward-2(1), Bhilai aforesaid view and accordingly the matter is directed to set aside to the file of Ld. CIT(A) for denovo adjudication.

and the assessment order. However, due to non-compliance 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 8. Shri Pratik Shah Vs ITO, Ward-2(1), Bhilai of appeal raised before the first appellate authority has not been substantiated on merits through corroborative evidence /submissions.

9. 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 ex-parte 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 9 Shri Pratik Shah Vs ITO, Ward-2(1), Bhilai 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 ex-parte 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.

10. 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.

10 Shri Pratik Shah Vs ITO, Ward-2(1), Bhilai 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 ex-parte, 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 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 11 Shri Pratik Shah Vs ITO, Ward-2(1), Bhilai 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.

11. Needless to say, the assessee shall be afforded with reasonable opportunity of being heard in the set aside appellate proceedings. The assessee as conceded through its authorized representative before us, also directed to cooperate and assist proactively in the set aside proceedings, failing which the Ld. CIT (A) would be at liberty to decide the case in accordance with the mandate of law.