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Facts
The assessee, a gold trader, had 2160 gms of gold seized by police and GST authorities. After GST penalties were paid and the DDIT (Investigation) issued a 'no further action' letter under the Income Tax Act, the gold was released. However, the AO made an addition of Rs. 47,98,000/- under Section 69C as unexplained investment, which the CIT(A) confirmed ex-parte.
Held
The Tribunal found that the CIT(A) did not decide the appeal on merits or consider all available evidence, and the proceedings at both assessment and appellate stages were ex-parte. Therefore, in the interest of justice, the Tribunal remanded both the quantum addition and the related penalty appeal back to the AO for fresh assessment and reconsideration, granting the assessee a full opportunity to present documentary evidence and cooperate.
Key Issues
Whether the addition under Section 69C for unexplained investment in gold was justified given the DDIT (Inv.) findings; and whether the ex-parte assessment and appellate orders were valid when full evidence was not considered.
Sections Cited
Section 250, Section 144, Section 69C, Section 271AAC
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Income Tax Appellate Tribunal, AMRITSAR BENCH, AMRITSAR
Before: SH. UDAYAN DASGUPTA & SH. KRINWANT SAHAY
This appeal is filed by the assessee against the order of ld. CIT (A) National Faceless Appeal Centre (NFAC), Delhi dated 30/07/2024 passed u/s 250 of the Income Tax Act, 1961 which has emanated from the order of the NFAC Delhi dated 23.04.2021 passed u/s 144 of the I. T. Act, 1961.
The grounds of appeal taken by the assessee in form 36 are as follows:
“1. That the order of the Assessing Officer as well as the order of Learned CIT(A) are both against the facts of the case and are untenable under the law.
2. That the worthy CIT(A) has not appreciated the facts of the case and merely relied on order of the AO and without applying his mind and without any rhyme & reason, the Ld. CIT(A) has confirmed the addition of Rs.47,98,000/- made by the AO by invoking the provisions of section 69C of the IT Act, 1961. As such the order of Ld. CIT (A) is liable to be cancelled and the addition made may be deleted.
That the Ld. CIT(A) has decided the case ex-parte which was not justified as no notice was served on the assessee. From the order of the CIT(A), it is clear that there is no mention of date of hearing of the appeal. As such the ex-parte order passed by the CIT(A) is not at all called for and the same may be cancelled.
That the CIT(A) did not appreciate that the assessment order was passed u/s 144 which was bad in the eyes of law as the AO passed the same without issuing any notice to the assessee. Thus, the CIT(A) should have cancelled the assessment order passed by the AO u/s 144 of the IT Act. 1961.
That the worthy CIT(A) did not appreciate that there was no stock of Gold which was outside the books of accounts. It was explained before GST authorities that this stock found was part of the stock of the assessee and these goods which were intercepted at Bathinda Railway Station on 27/09/2017. The DDIT (Investigation) directed the AETC Bathinda on 28/09/2017 to release the Gold. A copy of the letter dated 28/09/2017 is made part & parcel of grounds of appeal. On 29/09/2017 a letter was sent by AETC Bathinda to DDIT (Investigation) wherein the AETC Bathinda & 509/Asr/2024 Prince Kumar v. ITO intimated that the goods are kept under the safe custody. On 05/10/2017 the DDIT (Investigation) directed that no further action is required and vide letter dated 06/12/2017 the State Excise Department released the goods. Thus, there is no reason, justification and occasion for making the addition of Rs.47,98,000/- and as such the addition made may be deleted.
6. That it was explained before the authorities below that the Gold Stock worth Rs.47,98,000/- was part & parcel of stock of the assessee. As such there was no reason and occasion for making the addition and the addition of Rs.47,98,000/- may be deleted. Alternatively, the addition made is very high & excessive.
7. That any other ground of appeal which may be argued at the time of hearing of the appeal.”
3. The brief facts of the case emerging from record are that the assessee is engaged in the trading business of gold ornaments under the name and style of M/s Prince Ornaments House. On 27.09.2017, the assessee was apprehended by the Railway Police Authorities at Bathinda railway station and gold (pure gold) and gold ornaments weighing 2160 gms., were seized. In absence of assessee’s failure to establish the source of such gold and ornaments, the said goods were detained by the railway police authorities and were subsequently taken in custody by the GST authority. Thereafter, on payment of interest and penalty under the GST Act, the State Government Authorities released the seized goods.
4. Subsequently, in scrutiny proceedings before the Assessing Officer, there was no compliance on the part of the assessee and in absence of any response to various notices fixing the hearing on various dates, the assessment was completed with an addition of Rs.47,98,000/- u/s 69C of the Act treating the investment in gold and gold ornaments as unexplained.
5. The matter was carried in appeal before the ld. first appellate authority and the ld. CIT(A) has dismissed the said appeals by observing as follows:
“The appellant has raised several grounds of appeal and after perusing the grounds, it is clear that the appellant is mainly aggrieved on the addition of Rs. 47,98,000/- as unexplained cash expenditure under section 69C of the Income Tax Act, 1961.
The other grounds of appeal are related to this principal ground and need no separate adjudication.
The appellant claims that the necessary explanation with respect to the Gold intercepted was duly given to the DDIT(investigation), Bhatinda and the intercepted stock of Gold was released. The copy of letter dated 05.10.2017 addressed by DDIT(inv), Bhatinda was given to Assistant Excise and Taxation Commissioner. The relevant copy of letter was not submitted in the appellate proceedings. There is no evidence that the appellant had got clean chit from the department and the stock found was verified. The appellant had not submitted any evidence regarding the confirmation of the stock as a part of regular business. The genuineness of the source of the Gold Stock worth Rs. 47,98,000/- is still in question. The onus to prove the veracity of the source of Gold stock i.e details from whom the humongous amount of Gold is procured, PAN of the seller, Bills, invoices etc. The appellant has been silent on this matter from the beginning of assessment proceedings.
Thus, the impugned Gold stock amounting to Rs. 47,98,000/- has been rightly added as unexplained expenditure under section 69C of the Income Tax Act, 1961 and taxed accordingly alongwith the interest due. Subject to the above discussion, the appeal of the appellant is dismissed.”
Now, the assessee is in appeal before the Tribunal on the grounds contained in the memorandum of appeal. It is submitted by the ld. AR of the assessee that the notices of hearing from the office of the ld. first appellate authority has been issued on 3 (three) separate occasions on the e-mail id mehravipan40@gmail.com and princeluthraprinceluthra@gmail.com, which the ld. AR submits belongs to the accountant of the assessee and the accountant has not informed the assessee regarding the issue of notice in the e-mail which has resulted in non-compliance on the part of the assessee. He further states that in the instant appeal, the ld. appellate authority has not adjudicated on merits of the case and he has not considered all the materials available on record before the DDIT (Investigation) which should have been considered and examined before passing of the appellate order.
The ld. AR further referred to (page 6 of the paper book) to point out that in the instant case investigation under the Act has been initiated by the DDIT (Inv.), Bathinda, where the Assistant Excise and Taxation Commissioner, Bathinda was specifically directed not to release the seized gold until completion of investigation at & 509/Asr/2024 Prince Kumar v. ITO his end. Thereafter, he referred to (page no. 25 of the paper book) which is a letter dated 05.10.2017, issued by the DDIT (Inv.), Bathinda, addressed to the Assistant Excise and Taxation Commissioner, Bathinda stating that no further action is required under the Income Tax Act, 1961. The copies of both the letters are made a part of this order:
Referring to these two letters, the ld. AR submits that all papers and documents has been submitted before the DDIT (Inv.), post seizure and after being fully satisfied regarding the existence of the source of these seized gold, the DDIT (Inv.) has issued the said letter to the State Government Authorities and the gold has also been released accordingly. on the record before disposing of this appeal which is not done in this case.
The ld. DR relies on the order of the ld. CIT(A).
We have considered the rival submissions of counsel and the materials on record including short paper book filed by the assessee containing details of gold seized, statements recorded, various letters exchanged in between DDIT (Inv.) and the State Government Authorities, copy of stock ledgers, purchase ledger and copy of audited accounts and balance sheets along with the audit report for the year, and we are of the opinion that in the instant case, the ld. first appellate authority has not decided the issue considering all the existing materials on record and not on merits of the case. We also find that in notices of hearing issued by the ld. CIT(A), notices has been issued in the e-mail id mehravipan40@gmail.com of the accountant as well as on the e-mail id princeluthraprinceluthra@gmail.com, and the assessee cannot deny that the assessee has not received the mail. However, considering all aspects of the matter, we find that in the interest of justice, the matter should be remanded back to the files of the ld. A.O. for fresh assessment, after considering all the materials available on record considering that it is ex-parte at both stages. The assessee is also directed to file all documentary evidences, submissions, explanations and produce operate in fresh proceedings.
Needless to say, the assessee will be allowed a reasonable and proper opportunity of being heard.
We have not expressed any opinion on merits.
The appeal filed by the assessee is allowed for statistical purposes. of the ld. CIT(A) NFAC, Delhi dated 30.07.2024 passed u/s 250 of the Act sustaining the penalty imposed by the AO u/s 271AAC (1) amounting to Rs.2,87,800/-. Our in respect of the quantum addition applies mutatis mutandis to this penalty appeal also. Since, we have remanded the quantum appeal back to the A.O. for fresh assessment, we also remand back this penalty order to the A.O. for fresh consideration. purposes.
Order pronounced in accordance with Rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1963 as on 21.04.2025.