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Facts
The assessee failed to file a regular return for AY 2011-12, leading the Assessing Officer (AO) to issue a notice under section 148. The assessee also failed to comply with subsequent notices under section 142(1). The AO made an addition of Rs. 2,44,24,140. The CIT(A) upheld the AO's order. The assessee appealed to the ITAT, primarily arguing that the CIT(A)'s order was ex-parte due to compelling circumstances.
Held
The Tribunal held that the assessee was prevented by sufficient cause from complying with the notices issued by the CIT(A) due to various personal issues including judicial custody, litigation, threats from creditors, and the death of their Chartered Accountant. Therefore, the order of the CIT(A) was set aside, and the matter was restored to the CIT(A) for a fresh decision.
Key Issues
Whether the CIT(A) erred in passing an ex-parte order without considering the assessee's reasonable cause and compelling circumstances for non-compliance with notices, and if the matter should be remanded for a fresh adjudication.
Sections Cited
148 of the Income-tax Act, 1961, 142(1) of the Act, 50C(2)
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Income Tax Appellate Tribunal, MUMBAI BENCH “D” MUMBAI
Before: SHRI OM PRAKASH KANT & SHRI SUNIL KUMAR SINGH
This appeal by the assessee is directed against order dated 15.04.2024 passed by the Ld. Commissioner of Income-tax (Appeals) – National Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for assessment year 2011-12, raising following grounds:
1.0 On facts and circumstances of the case and in Law, Ld. CIT(A) 1.0 On facts and circumstances of the case and in Law, Ld. CIT(A) 1.0 On facts and circumstances of the case and in Law, Ld. CIT(A) erred in passing the erred in passing the appeal order ex-parte and ought to have parte and ought to have considered the reasonable cause and compelling circumstances considered the reasonable cause and compelling circumstances considered the reasonable cause and compelling circumstances that had precluded the appellant to participate in the appeal that had precluded the appellant to participate in the appeal that had precluded the appellant to participate in the appeal proceeding; 2.0 On facts and circumstances of the case and in Law, Ld. CIT(A) On facts and circumstances of the case and in Law, Ld. CIT(A) On facts and circumstances of the case and in Law, Ld. CIT(A) erred in confir erred in confirming the addition of Short term capital gain of ming the addition of Short term capital gain of Rs.2,44,11,067/ Rs.2,44,11,067/- on alleged transfer of lands, though the on alleged transfer of lands, though the transaction did not materialise and was terminated during the transaction did not materialise and was terminated during the transaction did not materialise and was terminated during the impugned year itself; impugned year itself; 3.0 The Ld. CIT(A), before confirming the addition of Short term The Ld. CIT(A), before confirming the addition of Short term The Ld. CIT(A), before confirming the addition of Short term capital gain of Rs.2,44,11,067/ apital gain of Rs.2,44,11,067/- ought to have considered the ought to have considered the understated vital facts, being; understated vital facts, being; a) The property was mortgaged with SICOM and was under The property was mortgaged with SICOM and was under The property was mortgaged with SICOM and was under serious litigation and possession of lands vested with mortgager serious litigation and possession of lands vested with mortgager serious litigation and possession of lands vested with mortgager obtained under SARFAESI Act; obtained under SARFAESI Act; b) The appell The appellant was not authorised to sell/ transfer the ant was not authorised to sell/ transfer the properties without obtaining prior permission of the Court and properties without obtaining prior permission of the Court and properties without obtaining prior permission of the Court and release of mortgage; mortgage; c) The deed of cancellation/ termination of original conveyance The deed of cancellation/ termination of original conveyance The deed of cancellation/ termination of original conveyance was executed during impugned year itself; was executed during impugned year itself; 4.0 On facts and circ 4.0 On facts and circumstances of the case and in Law, Ld. CIT(A) umstances of the case and in Law, Ld. CIT(A) ought to have allowed the deduction of cost of acquisition of the ought to have allowed the deduction of cost of acquisition of the ought to have allowed the deduction of cost of acquisition of the property of Rs.2,72,59,500/ property of Rs.2,72,59,500/-, as against considered by the AO of , as against considered by the AO of Rs.35,51,433/- -; 5.0 On facts and circumstances of the case and in law, Ld. On facts and circumstances of the case and in law, Ld. CIT(A) On facts and circumstances of the case and in law, Ld. ought to have directed the AO to refer the valuation matter to DVO ought to have directed the AO to refer the valuation matter to DVO ought to have directed the AO to refer the valuation matter to DVO u/s 50C(2) to determine the fair market value of the property. u/s 50C(2) to determine the fair market value of the property. u/s 50C(2) to determine the fair market value of the property.
Briefly stated, facts of the case are that the assessee did not Briefly stated, facts of the case are that the assessee did not Briefly stated, facts of the case are that the assessee did not file regular return of income for the year under consideration. file regular return of income for the year under con file regular return of income for the year under con Therefore, in view of the information of sale of immovable property Therefore, in view of the information of sale of immovable property Therefore, in view of the information of sale of immovable property transactions and credit card payments and credit card payments, available in the databas available in the database of the Income-tax Department, t tax Department, the Assessing Officer recorded reasons he Assessing Officer recorded reasons to believe that income escaped assessment to believe that income escaped assessment and accordingly notice and accordingly notice u/s 148 of the Income u/s 148 of the Income-tax Act, 1961 (in short ‘the Act’) was issued tax Act, 1961 (in short ‘the Act’) was issued on 27.03.2018. The said notice was duly served on the assessee on 27.03.2018. The said notice was duly served on the assessee on 27.03.2018. The said notice was duly served on the assessee however, no compliance was made on the part of the assessee and however, no compliance was made on the part of the assessee and however, no compliance was made on the part of the assessee and therefore, the Assessing Officer subse therefore, the Assessing Officer subsequently, issued notice u/s quently, issued notice u/s 142(1) of the Act on various dates. However, same also remained 142(1) of the Act on various dates. However, same also remain 142(1) of the Act on various dates. However, same also remain non-complied. In view of the limitation, the Assessing Officer passed complied. In view of the limitation, the Assessing Officer passed complied. In view of the limitation, the Assessing Officer passed the the the assessment assessment assessment order order order on on on 29.12.2018 29.12.2018 29.12.2018 making making making addition addition addition of of of Rs.2,44,24,140/-.
On further appeal, t On further appeal, the Ld. CIT(A) also issued various notices he Ld. CIT(A) also issued various notices on 15.03.2022 to 24.02.2024. However, the assessee sought on 15.03.2022 to 24.02.2024. However, the assessee sought on 15.03.2022 to 24.02.2024. However, the assessee sought adjournment only on 05.02.2024 and no other notices were adjournment only on 05.02.2024 and no other notices were adjournment only on 05.02.2024 and no other notices were complied. Therefore, the Ld. CIT(A) upheld the order of the complied. Therefore, the Ld. CIT(A) upheld the order of the complied. Therefore, the Ld. CIT(A) upheld the order of the Assessing Officer.
Before us, the L Before us, the Ld. counsel for the assessee filed a Paper book d. counsel for the assessee filed a Paper book containing pages 1 to 70 comprising of affidavit of the assessee and containing pages 1 to 70 comprising of affidavit of the assessee and containing pages 1 to 70 comprising of affidavit of the assessee and the supporting document justifying reasonable cause for non- the supporting document justifying reasonable cause for non the supporting document justifying reasonable cause for non compliance of the notices issued by the Ld. CIT(A). compliance of the notices issued by the Ld. CIT(A).
The Ld. counsel for the The Ld. counsel for the assessee referred to ground No. 1 of assessee referred to ground No. 1 of the appeal and submitted that order passed by the Ld. CIT(A) is ex- the appeal and submitted that order passed by the Ld. CIT(A) is ex the appeal and submitted that order passed by the Ld. CIT(A) is ex parte and the assessee due to reasonable cause and compelling parte and the assessee due to reasonable cause and compelling parte and the assessee due to reasonable cause and compelling circumstances, could not comply to the notices. He accordingly could not comply to the notices. He accordingly could not comply to the notices. He accordingly submitted that one more opp submitted that one more opportunity might be provided to the be provided to the assessee for representing its case before the Ld. CIT(A). assessee for representing its case before the Ld. CIT(A). assessee for representing its case before the Ld. CIT(A).
The Ld. Departmental Representative (DR) on the other hand The Ld. Departmental Representative (DR) on the other hand The Ld. Departmental Representative (DR) on the other hand objected for restoring the matter to the Ld. CIT(A). objected for restoring the matter to the Ld. CIT(A).
We have heard rival submission of the partie We have heard rival submission of the parties on ground No. 1 s on ground No. 1 of the appeal of the assessee. The Ld. CIT(A) issued notices for of the appeal of the assessee. The Ld. CIT(A) issued notices for of the appeal of the assessee. The Ld. CIT(A) issued notices for hearing on 15.03.2022, 08.09.2023, 26.09.2023, 30.01.2024 and hearing on 15.03.2022, 08.09.2023, 26.09.2023, 30.01.2024 and hearing on 15.03.2022, 08.09.2023, 26.09.2023, 30.01.2024 and 20.02.2024 for furnishing submissions and evidence in support of 20.02.2024 for furnishing submissions and evidence in support of 20.02.2024 for furnishing submissions and evidence in support of grounds of appeal. T Those notices were issued through Income through Income-tax Business Application (ITBA) system Business Application (ITBA) system and via e-mail ID provided in mail ID provided in the ITBA portal. The assessee only filed an adjournment on the ITBA portal. The assessee only filed an adjournment on the ITBA portal. The assessee only filed an adjournment on 05.02.2024 but no other documents or submissions were filed on 05.02.2024 but no other documents or submissions were filed on 05.02.2024 but no other documents or submissions were filed on behalf of the assessee. In the affidavit filed bef behalf of the assessee. In the affidavit filed before us ore us, which is available on Paper Book page 1 to available on Paper Book page 1 to 3, we find that assessee has e find that assessee has mainly submitted that he was detained in judicial custody and later mainly submitted that he was detained in judicial custody and later mainly submitted that he was detained in judicial custody and later on released on bail and thereafter he was required to visit the police on released on bail and thereafter he was required to visit the police on released on bail and thereafter he was required to visit the police station, courts and advocates to hand station, courts and advocates to handle the court matters for le the court matters for economic offences. Further economic offences. Further, he has submitted he has submitted that his office premises had been seized been seized therefore, he was not having access therefore, he was not having access to the documents for contesting in appeal proceedings. He has also documents for contesting in appeal proceedings. He has also documents for contesting in appeal proceedings. He has also mentioned that due to threat from the cred mentioned that due to threat from the creditors and banks itors and banks, he was residing at home town situated at Mirzapur, U.P. Further he town situated at Mirzapur, U.P. Further he town situated at Mirzapur, U.P. Further he submitted that the Chartered Accountant dealing with Income-tax submitted that the Chartered Accountant dealing with Income submitted that the Chartered Accountant dealing with Income Appeals also died on 13.04.2022. The relevant part of the affidavit Appeals also died on 13.04.2022. The relevant part of the affidavit Appeals also died on 13.04.2022. The relevant part of the affidavit of the assessee is reproduced as under: of the assessee is reproduced as under:
“THAT, I could not attend the 1st Appeal proceeding related to THAT, I could not attend the 1st Appeal proceeding related to THAT, I could not attend the 1st Appeal proceeding related to Assessment years 2010 Assessment years 2010-11 and 2011-12 and could not furnish the 12 and could not furnish the submissions and relevant documents before Ld. CIT(A) under the submissions and relevant documents before Ld. CIT(A) under the submissions and relevant documents before Ld. CIT(A) under the bonafide reasons and compelling circumstances beyond my control, bonafide reasons and compelling circumstances beyond my control, bonafide reasons and compelling circumstances beyond my control, stated as under : ated as under :- a) I was terribly disturbed and was in mental state of a) I was terribly disturbed and was in mental state of a) I was terribly disturbed and was in mental state of depression and was extremely busy in handling the Civil and depression and was extremely busy in handling the Civil and depression and was extremely busy in handling the Civil and Criminal litigation matters before various Court of law. I was Criminal litigation matters before various Court of law. I was Criminal litigation matters before various Court of law. I was detained in judicial custody at Arthur Road Prison for detained in judicial custody at Arthur Road Prison for detained in judicial custody at Arthur Road Prison for substantial period of time from 03/09/2011 to 20/03/2013 antial period of time from 03/09/2011 to 20/03/2013 antial period of time from 03/09/2011 to 20/03/2013 (copy attached) and later was released on bail. Presently, I am (copy attached) and later was released on bail. Presently, I am (copy attached) and later was released on bail. Presently, I am on bail. I am frequently required to visit the Police stations, on bail. I am frequently required to visit the Police stations, on bail. I am frequently required to visit the Police stations, Courts and Advocates to handle the Court matters for Courts and Advocates to handle the Court matters for Courts and Advocates to handle the Court matters for Economic Offence (EOW) Economic Offence (EOW) (Rozanama copies attached) and attached) and therefore, I was not able to concentrate in the Income Tax therefore, I was not able to concentrate in the Income Tax therefore, I was not able to concentrate in the Income Tax matters and such had resulted in non matters and such had resulted in non-compliance before the compliance before the 1st Appellate 1st Appellate authority; b) My office premise had been sealed by the Economic Offence b) My office premise had been sealed by the Economic Offence b) My office premise had been sealed by the Economic Offence Wing (EOW) and presen Wing (EOW) and presently is in custody of Maharashtra tly is in custody of Maharashtra Protection of Investors deposits Protection of Investors deposits (MPID) Court and therefore, I (MPID) Court and therefore, I did not have accessibility to the documents and thus could not did not have accessibility to the documents and thus could not did not have accessibility to the documents and thus could not file the entire documents during course of assessment file the entire documents during course of assessment file the entire documents during course of assessment and appeal proceeding; appeal proceeding; c) Further, I was fa c) Further, I was facing threat from the creditors and banks cing threat from the creditors and banks and therefore, I was residing at my home town situated at and therefore, I was residing at my home town situated at and therefore, I was residing at my home town situated at Mirzapur, U.P and my non Mirzapur, U.P and my non-presence in Mumbai had resulted in presence in Mumbai had resulted in non-compliance before 1st Appellate authority; compliance before 1st Appellate authority; d) I had handed over various documents to my regul d) I had handed over various documents to my regul d) I had handed over various documents to my regular Chartered Accountant Late Mr. Ajit B Singhvi to attend the Chartered Accountant Late Mr. Ajit B Singhvi to attend the Chartered Accountant Late Mr. Ajit B Singhvi to attend the Income Tax assessment and appeal matters. However, the Income Tax assessment and appeal matters. However, the Income Tax assessment and appeal matters. However, the said Chartered Accountant was seriously ill and he ultimately said Chartered Accountant was seriously ill and he ultimately said Chartered Accountant was seriously ill and he ultimately died on 13/04/2022 (copy attached). Due to non died on 13/04/2022 (copy attached). Due to non died on 13/04/2022 (copy attached). Due to non-receipt of documents from his documents from his office and non-appointment of new appointment of new Chartered Accountant, I was not able to file the submissions Chartered Accountant, I was not able to file the submissions Chartered Accountant, I was not able to file the submissions and documents before the 1s Appellate authority. My business and documents before the 1s Appellate authority. My business and documents before the 1s Appellate authority. My business activities had been completely closed down and did not have activities had been completely closed down and did not have activities had been completely closed down and did not have any source of earnings and thus was not any source of earnings and thus was not able to appoint a able to appoint a Chartered Accountant to represent before the tax authorities; Chartered Accountant to represent before the tax authorities; Chartered Accountant to represent before the tax authorities; THAT, I declare that there is no wilful or deliberate attempt nor any THAT, I declare that there is no wilful or deliberate attempt nor any THAT, I declare that there is no wilful or deliberate attempt nor any gross negligence for my non gross negligence for my non-compliance during the 1st appeal compliance during the 1st appeal proceedings, however such had occurred under proceedings, however such had occurred under the bonafide reasons the bonafide reasons as stated herein above. as stated herein above. I respectfully make a prayer before the Hon'ble Income Tax Appellate I respectfully make a prayer before the Hon'ble Income Tax Appellate I respectfully make a prayer before the Hon'ble Income Tax Appellate Tribunal to adopt a liberal approach and grant a final opportunity to Tribunal to adopt a liberal approach and grant a final opportunity to Tribunal to adopt a liberal approach and grant a final opportunity to represent the case of merits. represent the case of merits. Solemnly declared and affirmed at Mumbai Solemnly declared and affirmed at Mumbai on this 30the day of July, on this 30the day of July, 2024.”
7.1 We have perused the affidavit of the assessee and are of the We have perused the affidavit of the assessee and are of the We have perused the affidavit of the assessee and are of the opinion that assessee was prevented by sufficient cause in opinion that assessee was prevented by sufficient cause in opinion that assessee was prevented by sufficient cause in complying the various notices issued by the Ld. CIT(A). Therefore, in complying the various notices issued by the Ld. CIT(A). Therefore, in complying the various notices issued by the Ld. CIT(A). Therefore, in the interest of justice and the interest of justice and let the appeal be decided on merit, we set let the appeal be decided on merit, we set aside the order of the Ld. CIT(A) and restore the matter back to him aside the order of the Ld. CIT(A) and restore the matter back to him aside the order of the Ld. CIT(A) and restore the matter back to him for deciding afresh. The assessee is directed to comply all the for deciding afresh. The assessee is directed to comply all the for deciding afresh. The assessee is directed to comply all the notices and file submissions along with documentary evidence notices and file submissions along with documentary evidence notices and file submissions along with documentary evidence required for disposal of the appeal before the Ld. CIT(A). The ground al of the appeal before the Ld. CIT(A). The ground al of the appeal before the Ld. CIT(A). The ground No. 1 of the appeal of the assessee is accordingly allowed. Since, we No. 1 of the appeal of the assessee is accordingly allowed. Since, we No. 1 of the appeal of the assessee is accordingly allowed. Since, we have already restored the appeal to the file of the Ld. CIT(A) have already restored the appeal to the file of the Ld. CIT(A) have already restored the appeal to the file of the Ld. CIT(A) therefore, we are not required to adjudicate upon we are not required to adjudicate upon the remaining we are not required to adjudicate upon grounds at this stage and therefore, same are dismissed as at this stage and therefore, same are dismissed as at this stage and therefore, same are dismissed as infructuous.
In the result, the appeal of the assessee is allowed for In the result, the appeal of the assessee is allowed for In the result, the appeal of the assessee is allowed for statistical purposes.