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Facts
The assessee deposited Rs. 84 lakhs cash in a bank account during FY 2015-16. The assessment was completed ex-parte by the AO, determining total income at Rs. 11.77 lakhs, and the CIT(A) upheld this. The assessee, claiming to be a Scheduled Tribe from Kargil, Ladakh, asserted income exemption under Section 10(26) of the Income Tax Act, which was not considered by lower authorities, and also challenged the validity of notice issued under Section 148 and denial of proper hearing.
Held
The Tribunal noted that the Assessing Officer and CIT(A) failed to discuss the certificates submitted by the assessee regarding his Scheduled Tribe status and business in Ladakh. As the authenticity of these documents and the claim for exemption under Section 10(26) needed verification, the case was remanded back to the Assessing Officer for fresh assessment. The assessee is to be given a reasonable opportunity of being heard and the exemption claim allowed subject to verification.
Key Issues
Whether the assessee, a member of a Scheduled Tribe residing in Ladakh, is eligible for income exemption under Section 10(26) of the Act, and whether the reassessment proceedings initiated under Section 148 were valid given the lack of proper hearing and jurisdictional challenges.
Sections Cited
250, 147, 144B, 148, 10(26)
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Income Tax Appellate Tribunal, AMRITSAR BENCH, AMRITSAR
Before: SH. MANOJ KUMAR AGGARWAL & SH. UDAYAN DASGUPTA
This appeal is filed by the assessee against the order of the ld. CIT(A) NFAC, Delhi dated 18.10.2024 passed u/s 250 of the Income Tax Act, 1961 which has emanated from the order of the AO, NFAC passed u/s 147 r.w.s. 144B of the Act, dated 29.01.2024. the issue that no proper opportunity of hearing has been allowed by the ld. first appellate authority and as apparent from the appellate order notices of hearing has been issued through ITBA portal and the ld. first appellate authority has sustained the addition without appreciating the preliminary facts of the case that the assessee is a resident of Kargil, Ladakh and his covered by the Scheduled Tribes certificate. Apart from the above, the assessee has also challenged the initiations of proceedings on legal grounds on the validity of issue of notice under section 148 of the Act, being issued by the A.O. without jurisdiction.
The brief facts of the case are that the assessee has deposited an amount of Rs.84 (eight four) lakhs in cash in his Bank A/c with Jammu & Kashmir Bank (A/c No. xxxxx00338) during the financial year 2015-16 (relating to the year under appeal). In absence of any response to various notices issued by the Assessing Officer, the assessment was completed ex-parte by determining the total income at Rs.11.77 lakhs (being 10% of total bank credits of Rs.1.17 lakhs).
The matter was carried in appeal and the ld. first appellate authority dismissed the appeal in absence of any response from the assessee and upholding the estimation of the AO as reasonable. short paper book containing 54 pages consisting of copy of Shop Registration Certificate issued by administration of Union Territory of Ladakh under Shop and Establishment Act, 1996, as proof that the assessee is carrying on business of electronic items under the trade name of Asian Traders. He further stated that the asssessee belongs to the Balti Tribe as defined u/s Jammu & Kashmir Scheduled Tribes, issuance of Certificate Rules, 1990 (copy of the said certificate is enclosed in paper book page no. 35). The assessee has also submitted copes of VAT Registration Certificate, purchase bills of suppliers and copy of his Aadhar card to prove the existence of his business.
The ld. AR further submitted that the assessee being a Member of a Scheduled Tribes as defined in Clause 25 of Article 266 of the Constitution of India and residing in the Ladakh region of the State of Jammu & Kashmir, his income is exempted u/s 10(26) of the Act, 1961 and he is not liable to pay any income tax. He further submitted that this information was brought to the knowledge of the Assessing Officer but the Assessing Officer has not taken the same into cognizance and subsequently the ld. first appellate authority has also not discussed the said provisions in his appellate order. sustained by the ld. CIT(A) may please be deleted because the assessee’s income is exempted u/s 10(26).
The ld. DR relied on the order of the ld. CIT(A) but has no objection if the documentary evidences which are now submitted before the Tribunal for the first time be examined by the Assessing Officer and the matter is remanded back to the AO for fresh assessment.
We have heard the rival submissions and considered the materials on record and we find that the Assessing Officer has not discussed regarding the existence of the certificates issued by the office of the Tehsildar Kargil, Government of Jammu & Kashmir certifying the assessee as a member of the Scheduled Tribes. From the documentary evidences submitted before us, we are of the opinion that as per provisions of section 10(26) of the Act, any income which accrues or arises to the assessee from any source in the areas in the Ladakh region of the State of Jammu & Kashmir shall not be included in computing the total income of the previous year. On the basis of the certificate and the documentary evidences produced the assessee is carrying on the business located at Kargil and is claimed to be covered by section 10 (26) of the Act. However, these documentary evidences produced before us now has authenticity of these documents needs to be verified and enquired upon.
As such, in the interest of justice, we set aside the case back to the files of the Assessing Office for fresh assessment after causing necessary enquiry and verification of the documentary evidences submitted by the assessee. The assessee is also directed to submit all these documentary evidences before the Assessing Officer and to furnish necessary explanations in support of his contention and claim u/s 10 (26) of the Act, and to fully cooperate in the fresh assessment proceedings.
The assessee will be allowed the claim of exemption u/s 10 (26) of the Act, subject to verification and authentication of documentary evidence.
The assessee to be allowed reasonable opportunity of being heard.
In the result, the appeal filed by the assessee is allowed for statistical purpose.
Order pronounced in accordance with Rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1963 as on 28.08.2025.