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Facts
During the demonetization period, the assessee deposited significant cash sums (over Rs. 4.6 Cr) into bank accounts, claiming they were from business receipts. The Assessing Officer (AO) found discrepancies in the assessee's stock and sales data, alleging suppression of stock, inflation of sales, and undisclosed cash, leading to income additions. The CIT(A) dismissed the assessee's subsequent appeal for non-prosecution without addressing the merits.
Held
The Income Tax Appellate Tribunal (ITAT) observed that the CIT(A) had dismissed the appeal for non-prosecution after sending notices to a wrong email address, which was a violation of natural justice. The ITAT held that the CIT(A) should have decided the appeal on merits. Consequently, the ITAT remitted the issues back to the CIT(A) to consider them afresh and pass an order as per law, after providing the assessee an adequate opportunity of being heard.
Key Issues
Whether the CIT(A) was justified in dismissing the assessee's appeal for non-prosecution without considering its merits, especially when notices were allegedly sent to a wrong email address, and if such dismissal violated principles of natural justice and Section 250(6) of the Income Tax Act.
Sections Cited
250(6)
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Income Tax Appellate Tribunal, DELHI BENCH “G”, NEW DELHI
Before: SHRI SHAMIM YAHYA, & SHRI SUDHIR PAREEK
The Assessee has filed the instant Appeal against the Order of the Ld. CIT(Appeal)/NFAC, Delhi dated 15.12.2023, relating to assessment year 2017-18. Although the assessee has raised various grounds. But at the outset, he argued the Ground No. 1 to 3 only which are related to principle of natural justice and dismissal of appeal for non-prosecution. The said Ground Nos. 1 to 3 read as under:- 1. That the facts and circumstances of the case, exparte order passed by the CIT(A) is unjustified, highly excessive, uncalled for and against the principles of natural justice, law and facts of the case and liable to be set aside.
2. That the impugned exparte order passed by the Ld. CIT(A)s in violation of section 250(6) of the Income Tax Act as the Ld. CIT(A) did not mention the reasons for decision in the order since the matter was simply dismissed by the Ld. CIT(A) on account of default of appearance and submission, therefore the order is liable to be set aside.
3. That the Ld. CIT(A) ought to decide the appeal on merit on the basis of facts and materials placed on record even in the case of non-appearance of the appellant.
Briefly stated facts are that during the assessment proceedings, it was observed by the AO that amount of Rs.2,27,07,524/- and Rs. 2,34,24,382/- in cash was deposited in assessee's two separate HDFC bank accounts during the demonetization period. Assessee claimed that those were deposited out of receipt from his business and also furnished a copy of one Notification whereby Mobile Prepaid retailers were allowed to accept demonetized Currency in form of SBNs of Rs. 500/-from customers once per customer during the demonetized currency for mobile recharge on production of valid ID proof. However, when further enquiries were made by the AO and after going through opening stocks, closing stocks, monthly sale and purchases of the assessee, the following observations were made by the AO in assessment order:- a. During the period 01.11.2016 to 08.11.2016 suddenly, against the purchase of Rs. 77.59 Lakh sale was Rs. 1.39 Crore which, as per AO, signified that the Assessee had claimed to have sold something it did not have.
b. Assessee had claimed to have purchased inventory of Rs. 4.73Crore during the period 09.11.2016 to 31.12.2016 but the sale during the same period was claimed to be Rs. 4.17 Cr only and Assessee has shown the closing stock to be merely Rs. 27,00,000/-. The Assessee had shown increased purchases during the period 09.11.2016 to 31.12.2016 and 01.01.2017 to 31.03.2017 but the corresponding sale figures are low in comparison to such purchases. / Considering that there was no Opening Stock for the period 09.11.2016 to 31.12.2016, Assessee should have closed his Accounts with very high Closing Stock but Assessee has shown Closing Stock of merely Rs. 27,00,000/-. c. Closing Stock of every month is found-to be negative up to October 2016. In fact Closing Stock which was in heavily negative territory has started improving from the period 09.11.2016 to 31.12.2016 and 01.01.2017 to 31.03.2017 to come into the positive territory. In this way the Assessee has adjusted all lack of Inventory during the period 01.04.2016 to 08.11.2016 by fresh purchases during the period 09.11.2016 to 31.03.2017 and has understated his Closing Stock so as to suppress Profit. Thus, the assessee had not only shown his own undisclosed Income as Sales but he had also suppressed his Closing Stock to reduce profit. 2.1 In light of the above-mentioned analysis, the AO held that the Assessee had suppressed his Stock, continuously inflated his Sales before the demonetization and had undisclosed Cash in Hand as on 31.03.2017. Thus, the Cash component of Sales which was not out of Sale proceeds was computed by AO to the tune of Rs. 61,24,643/- and the same was added into the income of the assessee. 2.2 Further, AO found that the closing stock was always in negative. However, it took huge short fall from being (9,82,200) in the Month of May to be (1,38,33,059) as on 08.11.2016. Which according to AO was an effort by the assessee to pass the sale of inventory which it never had and Assessee had tried to. pass his Own undisclosed cash as sales during the period from April to November (upto 01.11.2016). Therefore, difference of Rs. 77,08,416/- (Rs.1,38,33,059 - Rs. 61,24,643) was added to the Income of the Assessee being undisclosed Cash. 2.3 It was observed by the AO that the closing Stock of the Assessee should have been Rs. 1,55,31,494/- as on 31.03.2017. However, Assessee had shown the Closing stock to be Rs. 27,00,000/- only. AO considered it to be an understatement of the stock by Rs. 1,28,31,494/- and added it to the Income of the Assessee as undisclosed Closing stock. 2.4 Also, considering the monthly gross profit ration of the assessee and in view of the fact that the opening stock was declared as Nil, AO stated that assessee had excess cash in hand to the tune of Rs. 67,91,400/- and the same was added back in the income of the assessee.
Against the aforesaid action of the AO, assessee preferred an appeal before the Ld. CIT(A), who vide his impugned order dated 15.12.2023 confirmed the action of the Assessing Officer and dismissed the appeal of the assesee for non-prosecution by noting that assessee has no desire to pursue his appeal and also assessee has no submission to make in support of the grounds of appeal
4. Aggrieved with the above Ld. CIT(A)’s order, assessee is in appeal before us. 4
5. At the time of hearing, Ld. Counsel for the assessee submitted that Ld. CIT(A) notices have not reached to the assessee. It is further submitted that the email address provided was different than the email on which the notices were sent. In this regard, a Certificate from the Chartered Accountant has also been attached.
6. Per contra, Ld. DR relied upon the orders of the authorities below.
Upon careful consideration, we find that it is the plea of the assessee that non-compliance of the notices of the Ld. CIT(A) was due to wrong email address in which the notices were sent. Furthermore, Ld. CIT(A) has dismissed the appeal for non-prosecution, which is not appropriate, in accordance with law. In our considered view, the Ld. CIT(A) should have dealt with the issues on merits, which he has not done. Accordingly, in the interest of justice, we remit the issues in dispute to the file of the Ld. CIT(A) and direct him to consider the issues in dispute afresh and pass an order, as per law, after giving adequate opportunity of being heard to the assessee.
In the result, the Assessee’s appeal is allowed for statistical purposes.