DEEPAK KUMAR PROP. M/S URVI ENTERPRISES MANDIGOBINDGARH,MANDI GOBINDGARH vs. THE ASSESSMENT UNIT NFAC DELHI JAO THE INCOME TAX OFFICER WARD-2 MANDI GOBINDGARH, MANDI GOBINDGARH

In this factual backdrop, the Assessing Officer recorded the following findings, which are reproduced herein for the sake of completeness: “From the facts discussed hereinabove, it is evident that the assessee has made purchases aggregating to Rs.41,76,55,696/- from the aforesaid 18 parties. However, the assessee has failed to make any compliance to the notices issued under section 142(1) of the Income-tax Act, 1961 and has not furnished any documentary evidence or explanation to substantiate the genuineness of the said purchases. During the course of assessment proceedings, notices under section 133(6) of the Act were issued to the said parties to verify the transactions entered into by the assessee. It is observed that no compliance was made by most of the parties. In certain cases, notices could not be served due to incomplete or incorrect addresses, while in other cases, despite service of notices, no reply was received. In one instance, the party categorically denied having any business dealings with the assessee. Further, verification through the Verification Unit also failed to establish the genuineness of the transactions.

Apart from the above, the Assessing Officer also noticed that the assessee had shown current liabilities amounting to Rs.1,89,386/- in the balance sheet but failed to furnish any evidence to substantiate the same. Accordingly, the said amount was treated as unexplained cash credit under section 68 of the Act. The assessment was thus completed determining the total income at Rs.5,28,54,478/-.

Aggrieved, the assessee preferred an appeal before the Ld. CIT(A). However, it is noted that the assessee did not file any submissions during the appellate proceedings as well. The CIT(A) recorded a categorical finding that notices were duly issued on the email address furnished by the assessee himself in Form No. 35. The contention of the assessee that notices were not received due to a different email address was rejected, and the appeal was dismissed for non-prosecution.

We have heard the rival submissions and perused the material available on record. Before us, the assessee filed an application for admission of additional evidence under Rule 29 of the Income-tax (Appellate Tribunal) Rules, 1963, contending that both the assessment proceedings as well as the first appellate proceedings were completed ex parte and that he was prevented by sufficient and reasonable cause from producing the relevant evidences before the lower authorities. The assessee submitted that he is an individual engaged in trading activities and was largely dependent upon his accountant for handling income-tax compliances. It was explained that the email ID urvienterprises66@gmail.com , which was available on the income- tax records, was created and operated by the said accountant, who subsequently left the services of the assessee after the closure of business activities during the relevant year. According to the assessee, after the departure of the accountant, he neither had access to the said email ID nor knowledge of its password, resulting in non-response to the statutory notices issued during the course of assessment proceedings.

The assessee further stated that although another email ID, namely dipak0879@gmail.com , belonged to him, the same had not been actively used for several years, and access thereto was also not readily available. It was submitted that the assessee became aware of the ex parte assessment only upon receiving telephonic communication from the Department in the first week of August 2024 in connection with recovery proceedings. Thereafter, the assessee immediately contacted his counsel, updated his profile on the income-tax portal and changed the primary and secondary email IDs to amitbansal750@gmail.com and gstreturns750@gmail.com , respectively.

It was further contended that while filing Form No. 35 before the Ld. CIT(A), the updated email IDs were duly mentioned therein; however, the notices issued by the Ld. CIT(A) were sent to the old email IDs rather than to the email addresses provided in the appeal form, resulting in non- participation in the appellate proceedings and the consequent dismissal of the appeal for non-prosecution. In support of the application for admission of additional evidence, the assessee submitted that the evidence now sought to be filed is vital and goes to the root of the matter.

The additional evidence includes copies of the return of income, audit report in Form Nos. 3CB and 3CD along with financial statements, GST returns in Forms GSTR-1, GSTR-3B, GSTR-9 and GSTR-9C, purchase registers, details of eighteen parties doubted by the Assessing Officer, ledger confirmations from certain suppliers and copies of purchase bills. It was pleaded that there was no deliberate or intentional default, and reliance was placed on various judicial precedents to contend that additional evidence should be admitted in the interest of substantial justice.

The Ld. AR further submitted that the assessee is ready and willing to cooperate with the Department and prayed that the matter may be restored either to the file of the Assessing Officer or the Ld. CIT(A) for fresh adjudication after granting due opportunity of being heard.

During the course of hearing, the Bench specifically required the Ld. AR to demonstrate the genuineness of the purchases aggregating to approximately Rs.44 crores. At this stage, the Ld. AR fairly submitted that the documents presently placed on record are not complete in all respects and that, on the basis of the material currently available, the assessee would not be in a position to conclusively establish the genuineness of the impugned purchases, however given further time the assessee would be able to prove his case.

The Ld. AR also drew our attention to Form No. 35 filed before the Ld. CIT(A), wherein the primary and secondary email IDs were mentioned as amitbansal750@gmail.com and gstreturns750@gmail.com . It was pointed out that the notices issued by the Ld. CIT(A) were sent to the old email ID urvienterprises66@gmail.com . The assessee placed on record the profile details from the income-tax portal showing that the email IDs were last updated on 21.12.2024. However, we note that the order of the Ld. CIT(A) was passed on 22.11.2024 and that the notices were also issued on the email IDs urvienterprises66@gmail.com and dipak0879@gmail.com . There is no categorical denial by the assessee that the email ID dipak0879@gmail.com does not belong to him. Thus, the plea regarding non-service of notices does not inspire full confidence.

We have carefully considered the orders of the lower authorities and the submissions made before us. It is an admitted position that the assessee did not extend due cooperation during the course of the assessment proceedings and that the suppliers failed to respond to the notices issued under section 133(6) of the Act. Before the Tribunal, the assessee has sought indulgence for filing certain documents and, for this purpose, has moved an application for admission of additional evidence. In the said application, the assessee has disclosed reasonable cause explaining the non-filing of such documents before the lower authorities.

At the same time, we note that the Assessing Officer, in the facts and circumstances of the case, has not disallowed the entire purchases but has estimated the profit element at 12.5% on the alleged unverifiable purchases, which is a reasonable and judicially recognised approach consistently adopted in similar cases. We further observe that the appeal before the Ld. CIT(A) was dismissed for non-prosecution, without adjudication on merits. Considering that the assessee is now seeking an opportunity to place additional material on record and in the interest of substantial justice, we are of the considered view that one final opportunity should be granted to the assessee.

Accordingly, in the interest of justice, we set aside the order of the Ld. CIT(A) and restore the matter to his file for fresh adjudication on merits, after affording due and reasonable opportunity of being heard to the assessee. However, keeping in view the repeated non-compliance and lack of cooperation on the part of the assessee at various stages, the restoration is made subject to payment of costs of Rs.50,000/-, which shall be deposited by the assessee in the Poor Patient Relief Fund, PGI, Chandigarh, within 30 days from the date of receipt of this order. Proof of such deposit shall be furnished before the Ld. CIT(A). In case of failure to comply with this direction, the Ld. CIT(A) shall be at liberty to decide the appeal on the basis of material available on record.

In the result, the appeal filed by the assessee is allowed for statistical purposes.