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Facts
The assessee's assessment order for AY 2017-18, passed u/s 143(3), determined a significantly higher total income by making additions related to cash deposits, trading, unverifiable advances, and commission expenses. The assessee's appeal to the National Faceless Appeal Centre (NFAC) was dismissed in limine due to non-compliance with opportunities provided, leading to the current appeal before the ITAT.
Held
The ITAT set aside the NFAC's order, observing that the appeal was dismissed without a decision on merits and without providing the assessee a fair hearing. To ensure natural justice, the tribunal restored the case to the CIT(A) for fresh adjudication on merits, with a directive to grant the assessee a reasonable opportunity to present its case.
Key Issues
Whether the NFAC erred in upholding various additions and dismissing the assessee's appeal in limine without providing adequate opportunity of being heard, thereby violating principles of natural justice.
Sections Cited
143(3), 68, 145(3)
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Income Tax Appellate Tribunal, DELHI BENCH, ‘H’: NEW DELHI
Before: SHRI CHALLA NAGENDRA PRASAD & SHRI BRAJESH KUMAR SINGH
ORDER PER BRAJESH KUMAR SINGH, AM,
This appeal by the assessee is directed against the order of the National Faceless Appeal Centre (NFAC), Delhi, dated 14.08.2023 pertaining to Assessment Year 2017-18.
The grounds of appeal raised by the assessee reads as under:-
1. That learned National Faceless Appeal Centre (NFAC), Delhi has grossly erred both in law and on facts in upholding the order of assessment dated 21.12.2019 passed under section 143(3) of Income Tax Act, 1961 determining the total income of the appellant at Rs.1,65,25,070/- as against the returned income of Rs.23,22,760/-.
2. That the learned NFAC has erred both in law and on facts in sustaining the addition in the hands of assessee, without giving any fair and proper opportunity of being heard which is in violation of the principles of natural justice, and hence the impugned order is vitiated in law.
3. That learned NFAC has grossly erred in upholding the addition made of Rs.27,45,325/- u/s 68 of the Act, failing to appreciate that impugned sum is cash deposit made in the bank account of the appellant, and represents sale proceeds which has duly been credit in the profit and loss account of the appellant and hence such sum cannot be taxed as unexplained cash credit u/s 68 of the Act. 3.1 That learned NFAC while upholding the addition made of Rs.27,45,325/- u/s 68 of the Act had completely failed to appreciate that since such sum had already been offered for taxation, as such, addition of the said sum again would tantamount to taxing the same income twice which is impermissible in law. 3.2 That learned NFAC has grossly erred both in law and on facts in failing to appreciate that rejection of books of accounts of the appellant in terms of provisions of section 145(3) of the Act is unsustainable in law on the facts and 4. That learned NFAC has grossly erred in upholding the addition made of Rs.54,53,536/- by estimating the Gross profit @ 12% on adhoc basis as against the gross profit declared @8.31% during the year, failing to appreciate that the gross profit declared by the appellant was better than the gross profit declared in the preceding two years. 4.1 That learned NFAC has grossly erred in failing to appreciate that estimation of Gross Profit Ratio at 12% is without any basis and purely on assumptions and presumptions and hence is wholly arbitrary as such, addition made is unsustainable in law.
5. That learned NFAC has grossly erred in upholding the addition made of Rs.43,97,185/- on the ground that such advances are unverifiable failing to appreciate that a sum of Rs.6,75,000/- is received from its tenant M/s Rak Ceramics Pvt. Ltd. as security deposit and a sum of Rs.35,55,000/- is not an advance but is an amount payable to M/s Alpha Radios against two invoices towards supply of goods and remaining sum was received as advance from its regular customer during the course of business, and hence addition made is unsustainable in law.
6. That learned NFAC has grossly erred in upholding the addition made of Rs.16,06,265/- on account of commission expenses out of total expenses of commission Rs.20,00,000/- failing to appreciate that such addition is bad in law and against the facts and circumstances of the case.
6.1. That learned NFAC has grossly erred in failing to appreciate that appellant is engaged in the business of trading of electronics goods through e-commerce portal i.e. snapdeal.com and sum of Rs.20,00,000/-was deducted by snapdeal.com in respect of sales effected through the e-commerce portal, on which the appellant has also deducted TDS as such disallowance of a sum of Rs.16,06,265/- out of the said sum is wholly arbitrary and unsustainable in law.”
Brief facts of the case: In this case, the assessment order was passed u/s 143(3) on 21.12.2019 at a total income of Rs.1,65,25,070/- as against the returned income of Rs.23,22,760/-.
In the assessment, the following additions were made
(i) Cash deposit during demonetization period of Rs.27,45,325/- (ii) Trading addition of Rs.54,53,536/- (iii) Unverifiable advance from customer of Rs.43,97,185/- (iv) Commission expenses of Rs.16,06,265/- 4. Against the said order, the assessee appealed before National Faceless Appeal Centre (NFAC). The NFAC vide an order dated 14.08.2023 dismissed the appeal of the assessee in limine in view of various opportunities given to the assessee (as noted in para no.4.1 of the NFAC order), which were not complied by the assessee.
During the appellate proceedings, the AR submitted that NFAC sustained the additions without giving any fair and proper opportunity of being heard, which is in violation of principle of natural justice and submitted that the matter may be remanded back to NFAC for fresh adjudication after giving proper opportunity of being heard to the assessee. The CIT-DR relied upon the orders of the authorities below.
We have heard rival submissions and perused the material available on record. Considering the fact that there was no effective representation on behalf of the assessee before the authorities below and the learned CIT(A) dismissed the assessee's appeal in limine without giving any finding on merit, in order to subserve the interests of natural justice and to provide an opportunity to the assessee to effectively represent his case, the order of learned CIT(A) is set aside and the matter is restored to the file of learned CIT(A) for decision afresh on merit, after providing reasonable opportunity of being heard to the assessee. Grounds are allowed for statistical purposes.
In the result, the appeal filed by the assessee is allowed for statistical purposes.
Order pronounced in the open court on 28th May, 2024.