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Facts
The assessee firm filed its ITR for AY 2016-17. The AO made an addition of Rs. 7,12,650/- (25% of Rs. 28,50,240/-) for alleged bogus purchases and rejected books of accounts under Section 145(3) of the Act, based on survey operations revealing brokers providing bogus bills. The CIT(A) subsequently dismissed the assessee's appeal for non-prosecution, asserting that the assessee failed to participate despite multiple opportunities.
Held
The ITAT found that the assessee had explicitly opted out of receiving notices via email in their 'Form-35' memorandum of appeal. As all notices for hearing fixation were issued electronically through ITBA, the assessee was genuinely unaware of the appellate proceedings, thereby being deprived of a proper opportunity to be heard. Consequently, the ITAT set aside the ex-parte order of the CIT(A) and remanded the matter back for fresh adjudication, directing the CIT(A) to provide a reasonable opportunity to the assessee to present its case.
Key Issues
Whether the CIT(A) was justified in dismissing the appeal for non-prosecution when the assessee had opted out of email communication, leading to a lack of proper notice and an opportunity to be heard before the appellate authority.
Sections Cited
Sec. 143(3), Sec. 250, Sec. 143(2), Sec. 133A, Sec. 131, Sec. 145(3)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, RAIPUR BENCH “SMC”, RAIPUR
Before: SHRI RAVISH SOOD
आदेश / ORDER
PER RAVISH SOOD, JM:
The present appeal filed by the assessee firm is directed against the order passed by the ADDL/JCIT(A), Udaipur, dated 29.10.2024, which in turn arises from the order passed by the A.O under Sec.143(3) of the Income-tax Act, 1961 (in short ‘the Act’) dated 04.12.2018 for the assessment year 2016-17. The assessee firm has assailed the impugned order on the following grounds of appeal:
“1. That on the facts and in the circumstances of the case and in law, the assessment order passed by the Id. Assessing officer u/s 143(3) of the Act dated 04/12/2018 is illegal and void ab initio.
2. That on the facts and in the circumstances of the case and in law, the order passed by the Id. CIT(A), National Faceless Appeal Centre u/s 250 of the Act dated 29/10/2024 is illegal and incorrect.
3. That on the facts and in the circumstances of the case and in law, the Id. CIT(A), National Faceless Appeal Centre has defied the principles of natural justice by not allowing proper opportunity of being heard.
4. That on the facts and in the circumstances of the case and in law, the Id. CIT(A), National Faceless Appeal Centre has erred in making an addition of Rs.7,12,560/-on account of alleged bogus purchases.
The appellant craves to add, alter or delete any of the grounds of appeal during the course of appellate proceedings.”
Succinctly stated, the assessee firm which is engaged in the business of manufacturing of flour and rice, had filed its return of income for A.Y.2016-17 on 14.10.2016 declaring an income of Rs.4,58,260/-. Subsequently, the case of the assessee firm was selected for scrutiny assessment u/s. 143(2) of the Act.
During the course of assessment proceedings, the A.O observed that the assessee firm had purchased paddy/broken rice aggregating to Rs.28,50,240/- from the following parties:
S. No. Name of the party Total purchase 1. M/s. Agrawal Agro, Dunda, Raipur 15,64,500/- 2. M/s. Shri Annapurna Foods, Raipur 9,64,640/- 3. M/s. Shri Shyamji Rice Agrotech, Raipur 3,21,100/- Total Rs.28,50,240/- A survey operation u/s.133A of the Act was conducted at the business premises of Shri Sanjay Sharma, Hanuman market, Raipur and Shri Kamlesh Kesharwani, commission Agent, Ramsagarpara, Raipur on 15.03.2016, which revealed that certain rice millers would procure bogus bills from brokers/entry operators without any actual purchase of goods. It was observed by the A.O that substantial incriminating material evidencing the aforesaid facts were found in the course of the aforesaid proceedings. The A.O also noticed that survey action was carried out in the case of Nagarik Sahakari Bank, Raipur where some of the brokers/entry operators maintained their bank accounts. It was further observed by the A.O that brokers/entry operators had in their respective statements that were recorded on oath u/s.131 of the Act had admitted of having provided bogus bills to rice traders and millers without any actual supply of goods. Also, it was noticed by the A.O that certain rice millers had in their statements that were recorded on oath admitted of being involved in the nefarious activities of providing bogus bills without any corresponding sales of goods. After deliberating at length on the modus-operandi that was adopted by the brokers/entry operators and certain rice millers who had admitted of their involvement in providing/facilitating bogus bills in lieu of commission, and referring to their statements which were recorded u/s.131 of the Act a/w. those recorded in the course of their cross examination by rice millers who were alleged by them as beneficiary, it was observed by the A.O that brokers namely, Shri Sanjay Sharma, Shri Aditya Sharma, Shri Kamelsh Kesharwani, Shri Ghanshuam Rijwani and Shri Narad Sahu had stated on oath that they had provided bogus entries or bogus bills to various rice millers. It was also observed by the A.O that the assessee had failed to substantiate the genuineness of the purchases claimed to have been made from the aforementioned parties on the basis of supporting documentary evidences, viz. delivery challans.
The A.O considering the fact that the 3 parties from whom the assessee firm had claimed to have made purchases of Rs.28,50,240/- were in the course of investigation found to be bogus firms, called upon the assessee firm to substantiate the authenticity of the impugned purchase transactions on the basis of supporting documentary evidence. As the assessee firm had failed to substantiate the authenticity of the purchases claimed to have been made from the aforementioned three parties, therefore, the A.O held the same as bogus purchases. The A.O in the totality of the facts involved in the case held the entire purchases of Rs.28,50,240/- as bogus.
5. The A.O after treating the impugned purchases in question as bogus rejected the books of accounts of the assessee firm u/s.145(3) of the Act. Further, the A.O by relying on the judgment of the Hon’ble High Court of Gujrat in the case of Sanjay Oil Cake Industries Vs. CIT (2009) 316 ITR 274 ( Guj.), and impliedly being of the view that the assessee firm had purchased the goods in question not from the aforementioned tainted parties from whom only bills were procured for routing the transactions through its books of account, but had procured such goods at a discounted value from the open/grey market, thus, disallowed 25% of the value of bogus purchases and made a consequential addition of Rs.7,12,650/- to the assessee's returned income. On the basis of his aforesaid deliberations, the A.O vide his order passed u/s.143(3), dated 04.12.2018 determined the income of the assessee company at Rs.11,70,820/-.
Aggrieved the assessee firm carried the matter in appeal before the ADDL/JCIT(A), Udaipur. As the assessee firm despite having been afforded four opportunities i.e. on 15.01.2021, 13.02.2024, 22.02.2024 and 07.10.2024 had failed to participate in the proceedings before the first appellate authority, therefore, the latter after referring to the facts involved in the present case dismissed the appeal for want of prosecution. For the sake of clarity, the observations of the ADDL/JCIT(A), Udaipur are culled out as under:
“6.1 I have carefully considered the facts of the case and the assessment order u/s.143(3) of the Act, 1961. The issue involved in this appeal is addition of account of bogus purchases. Rs.7,12,560/- of 25% of purchase recorded in the books of Rs.28,50,240/- on account of bogus purchases. Despite being given many opportunities, appellant did not respond during appellate proceedings nor furnished any written submission or any evidence in support of the grounds of appeal raised. The assessment order of the AO has been carefully perused and I find that during the assessment proceedings no satisfactory explanation was submitted regarding genuineness of purchases made from parties as mentioned at para No.3 of the assessment order. During the survey proceedings, the brokers have also confirmed that they have provided bogus bills and not actual purchases were done. The assessment order is well reasoned and speaking order which has dealt in detail the issue before making the additions and disallowances. Therefore, in the absence of any explanation or any evidence explaining genuineness of purchases of rice from the above parties, the AO made addition 25% of total purchase of Rs.28,50,240/- as bogus purchases. 6.2. In the appellate proceedings, burden of proof lies on the appellant to prove that the facts and the findings of the Assessing Officer are incorrect. However, in the instant case, appellant has not furnished any evidence/written submission in support of grounds of appeal raised by the appellant. 6.3 As mentioned in Para 4.1 of this appeal order, this office has issued several letters / notices to assessee to file written submission / genuineness of purchases made. However, the appellant did not file written submissions/ document evidence in support of ground raised in appeal. The notices were issued on email available in the ITBA Module of the Income Tax Department, 6.4. From the above conduct of the appellant, it is evident that the appellant is not interested in pursuing its appeal. The Hon'ble Supreme Court in the case of CIT Vs B. N. Bhattacharjee & Others [1979]
10. CTR 354 (SC) observed that preferring an appeal, means effectively pursuing it. The Hon'ble M.P. High Court in the case of Estate of Late TukojiraoHolkar Vs CWT [1979] 223 ITR 480 (MP) dismissed the reference filed at the instance of the assessee for default and for not taking necessary steps. Considering the conduct of the appellant in the present proceeding, I am of the view that the appellant is not interested in pursuing the appeal. 6.5 The Hon'ble Supreme Court in the decision pronounced on October 25, 2019 in the case of PCIT vs. NRA Iron & Steel Pvt. Ltd in Civil Appeal No of 2019 (Arising out of SLP (Civil) No. 29855 of 2018)11as held that if a notice is duly served upon the litigant through its authorized representative, and it was provided sufficient opportunity to appear before the Court and contest the matter but the litigant chooses to let the matter proceed ex-parte, the order cannot be recalled. In the case of the present appellant, the notices to the appellant u/s 250 of the I.T. Act, 1961, have been issued online through the ITBA software, as is required under the Faceless Assessment & Appeals now in practice. 6.6 The decision of the Hon'ble High Court of Mumbai in the case of M/s. Chemipol v/s. Union of India [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. 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 case of Nandramdas Dwarkadas, AIR 1958 MP
7. The assessee firm being aggrieved with the order of the ADDL/JCIT(A) has carried the matter in appeal before the Tribunal.
I have heard the Ld. Authorized Representatives of both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by the Ld. AR to drive home his contentions.
Shri Praveen Goyal, Ld. Authorized Representative (for short ‘AR’) for the assessee firm, at the threshold, submitted that the CIT(Appeals) had disposed of the appeal without validly putting the assessee firm to notice. Elaborating on his contention, the Ld. AR submitted that though the assessee firm had in the memorandum of appeal i.e. “Form-35” specifically opted out of receipt of all notices/communications through email, but no physical/hard copy of the notices intimating the fixation of the hearing of the appeal was ever served upon it. The Ld. AR in support of his aforesaid contention had taken me through the “Form 35” which reads as under: (relevant extract)
Carrying his contention further, the Ld. AR submitted that as the assessee firm had remained divested of an opportunity to put forth its case assailing the impugned addition made by the A.O before the CIT(Appeals), therefore, the latter’s order is liable to be set-aside with a direction to re-adjudicate the same after affording a reasonable opportunity of being heard to the assessee firm. The Ld. AR in support of his aforesaid contention relied on the order of the ITAT, Raipur in the case of Parul Singh Dahiya Vs. ITO, Ward-1(3), Bhilai, dated 19.11.2024.
Per contra, Smt. Anubhaa Tah Goel, the Ld. Sr. Departmental Representative (for short ‘DR’) relied on the order of the ADDL/JCIT(A). It was submitted by her that as the assessee firm despite having been afforded four opportunities i.e. on 15.01.2021, 13.02.2024, 22.02.2024 and 07.10.2024 had failed to participate in the proceedings before the first appellate authority, therefore, the latter finding no infirmity in the view taken by the A.O had rightly upheld the same.
Admittedly, it is a matter of fact borne from record that the assessee firm despite having been afforded four opportunities vide impugned service of notices electronically through ITBA had failed to participate in the proceedings before the first appellate authority. At the same time, I find substance in the contention advanced by the Ld. AR that as the assessee firm in the memorandum of appeal filed before the CIT(Appeals) in “Form 35” had specifically opted out of service of notice/communications from the latter’s office through email, therefore, it had remained unaware about the on-going appellate proceedings for which notices were issued electronically through ITBA and, thus, for the said reason had failed to participate in the same. As stated by the Ld. AR and, rightly so, though the assessee/appellant in memorandum of appeal filed with the CIT(Appeals), i.e. in “Form-35” had specifically opted out of service of notices/communications from his office through email, but on all the four occasions the notices intimating fixation of appeal i.e. on 15.01.2021, 13.02.2024, 22.02.2024 and 07.10.2024 were issued electronically through ITBA. Accordingly, I concur with the Ld. AR’s claim that there were justifiable reasons for the assessee firm of having remained unaware about the on-going appellate proceedings before the CIT(Appeals) due to which it had failed to participate in the same.
Considering the totality of the facts involved in the present case which had resulted to passing of an ex-parte order by the CIT(Appeals), I am of the view that as the assessee-appellant for no fault on its part had remained divested of a sufficient opportunity to participate in the proceedings before the first appellate authority, therefore, the matter in all fairness requires to be restored to his file for fresh adjudication. Needless to say, the CIT(Appeals) shall in the course of the set-aside proceedings afford a reasonable opportunity of being heard to the assessee firm which shall remain at a liberty to substantiate its aforesaid claim on the basis of fresh documentary evidence, if any.
Before parting, I may herein clarify that though the assessee firm in the memorandum of appeal, i.e “Form-35” had specifically opted out of service of all notices/communication through email but at the time of hearing, the Ld. AR had stated that if notices/communications intimating the fixation of hearing of the appeal in the course of set-aside proceedings are dropped in the said email account i.e. udai.raj.singhania@gmail.com, then the same would duly be complied with.
In the result, appeal of the assessee firm is allowed for statistical purposes in terms of the aforesaid observations.