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Income Tax Appellate Tribunal, MUMBAI BENCH “C”, MUMBAI
Before: SHRI. PRASHANT MAHARSHI & SHRI. RAJ KUMAR CHAUHAN
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “C”, MUMBAI BEFORE SHRI. PRASHANT MAHARSHI, ACCOUNTANT MEMBER AND SHRI. RAJ KUMAR CHAUHAN, JUDICIAL MEMBER ITA NO. 4369/MUM/2023 (A.Y: 2017-18) Pervez Khodayar Raisi Vs. Assistant Commissioner of Bloc A, Rustom Baug, Sant Savta Income Tax Circle 19(2), Marg, Byculla, Mumbai – 400 027. Mumbai PAN: ADOOR2000R 207, Matru Mandir, Tardeo. Grant Road (West), Mumbai – 400 007. (Appellant) (Respondent) Assessee Represented by : Shri. Rahul Sarda Department Represented by : Shri. H. M. Bhatt (Sr. D.R.) Date of conclusion of Hearing : 23.04.2024 Date of Pronouncement : 13.05.2024 O R D E R PER RAJ KUMAR CHAUHAN (J.M.): 1. The assessee has instituted the present appeal for the A. Y. 2017-18 wherein the Appellant has challenged the order dated 06.10.2023 of Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC) [hereinafter referred to as the “CIT(A)”], passed under section 250 of the Income Tax Act, 1961 [hereinafter referred to as “the Act”]. 2. Assessee has raised following grounds in its appeal: -
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Inability of the Appellant to file submissions and represent its case a. The order dated 06.10.2023 passed by the National Faceless Appeal Centre(NFAC) is passed without hearing the Appellant and without appreciating that the non-compliance of the notices issued by the NFAC and the non-filing of submissions in response thereto was inadvertent, bona fide and not intentional and mala fide. Hence, the Appellant deserves to be given another opportunity of being heard. b. The Appellant has all the material in support of his case to establish that the additions made by the Assessing Officer in the assessment order dated 31.12.2018 are liable to be set aside. Hence, one more opportunity ought to be given to the Appellant to present his case so that there is adjudication on the merits of the appeal. Treating amount of Rs. 1,10,00,000/- as business income and invoking sec. 115BBE of the Act. c. The NFAC failed to appreciate that the AO had erred in treating the amount of Rs.1,10,00,000/- as unexplained income and further erred in levying tax thereon under section 115BBE of the Act Non-adjustment of cash found with advance tax liability d. The NFAC failed to appreciate that the Appellant ought to have been allowed the adjustment of cash found and seized during the course of search and seizure action against advance tax liability for the year under consideration.” 3. The brief facts giving rise to the present appeal are as under:- 4. The appellant is an Individual and regularly assessed to income tax. The appellant was found by local police in possession of cash of Rs, 1,10,00,000/- on 14.09.2016 at his residential premises, which was
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seized by DDIT (Inv.) Unit 7(1), Mumbai. Accordingly, notices u/s. 143(2) and 142(1) was issued and served on the appellant. In response to the statutory notice issued, the Authorized Representative of the appellant attended from time to time and filed the details called for. The Learned Assessment Officer (Ld. AO) after perusal of the details filed during the assessment proceeding treated the business income disclosed by the appellant amounting to Re 1,10,00,000/- as unexplained other income by invoking the provisions of section 69 A of the Act. The Relevant finding in para no. 4.1 of the Assessment Order is as under:
“4.1. The submission of the assessee has been carefully perused. The assessee during the course of the assessment proceedings was required to explain the source of the cash with supporting documentary eviderices which he has failed to do so. However it is seen from the return of income filed by the assessee for the year under consideration, that the assessee has offered the cash found in his premises during the course of search amounting to Rs. 1.10,00,000/- in his profit & Loss account as business income. Since the assessee has failed to explain the source of the cash of Rs. 1,10,00,000/- found in his premises during the course of search the same is treated as other income of the assessee U/s.69A of the Income tax act row.s. 11588E. Penalty proceedings u/s. 271AAC of the I.T. Act are Initiated separately for concealing particulars of his income.” 5. Being aggrieved by the aforesaid action of the Ld. AO, the appellant preferred an appeal before the Learned Commissioner of Income Tax (Appeals) (Ld. C.I.T. (A)) through National Faceless Appeal Centre (NFAC) vide Appeal No. CIT (A), Mumbai 30/10785/2018-19 u/s. 246 A Page | 3
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of the Income Tax Act, 1961 on the grounds that the Ld. AO erred in treating the business income as unexplained income and did not allow adjustment of cash found against advance tax liability. However, the Ld. CIT(A) vide impugned order dated 06.10.2023 through NFAC dismissed the appeal of the appellant/assessee without hearing the appellant. The ground no. 1 and 2 of assessee in appeal were dismissed by Ld. CIT(A) by observing as under:-
“I found no infirmity in the order of the Assessing Officer who has after proper investigation and enquiry came to the conclusion that the assessee has failed to explain the source of the cash of Rs. 1,10,00,000/- found in his premises during the course of search and the same is treated as other income of the assessee U/s.69A of the Income tax act r.w.s. 11588E. The appellant during the course of the assessment proceedings was required to explain the source of the cash with supporting documentary evidences which he has failed to do so. Therefore, the addition made by the Ld. Assessing Officer is affirmed and the appeal of the appellant is hereby dismissed. Ground No. 2 In ground number 2, the appellant has claimed that the Learned Assessing Officer has erred in not allowing the adjustment of Cash found and seized during the course of search and seizure action against Advance Tax liability for the A.Y. 2017-18 even after making request for the same during the course of search and seizure action. The issue of application of seized assets towards advance tax liability of the assessee has reached a level of finality after the insertion of Explanation 2 to Section 132B by Finance Act, 2013, w.e.f. 1-6-2013 which clearly states that seized assets cannot be adjusted against the advance tax liability as existing liability does not include advance tax payable in accordance with the provisions
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of Part C of Chapter XVII. This Ground of the appellant is therefore dismissed.” 6. It is stated that the non compliance of the notices issued by the NFAC and non filing of the submissions by the appellant/assessee was inadvertent, bonafide and neither intentional nor malafide hence the present appeal has been instituted.
The appellant has filed an affidavit dated 18.04.2024 in support of this appeal wherein the facts and circumstances are explained which prevented the appellant/assessee from prosecuting the case before the Ld. CIT(A).
It is stated in para no. 2 of the affidavit that the notice under section 143(2) read with 142(1) was issued and served upon and in response to the statutory notice, his authorized representative M/s. Agarwal and Mangal Chartered Accountants attended the proceedings/inquiry from time to time and filed the details required/called for.
On 31.12.2018, the Ld. AO treated business income amounting to Rs. 1,10,00,000/- as an unexplained other income by invoking the provisions of the section 69(A) of the Act. The said order of the Ld. AO was challenged in appeal before the Ld. CIT(A), who vide order dated 06.10.2023 dismissed the appeal as the appellant/assessee failed to Page | 5
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comply the requirement of the notice issued to the appellant/assessee and appellant/assessee has not filed any submissions. In his affidavit, it is further clarified that at the time when notice were issued from the Ld. CIT(A) through NFAC, the appellant/assessee had stopped availing services of M/s. Agarwal and Mangal Chartered Accountants and asked to return all the documents for engaging another Chartered Accountant.
It took time to take all documents back and handover the same to newly engaged Chartered Accountants. It is further stated that since the appellant/assessee is a senior citizen and due to aging and ill health was unable to understand documents clearly and therefore could not instruct the newly appointed Chartered Accountant. It is further stated that one Mr. Abdeali Bangliwala who is an accountant at LJ Law, Advocates and Solicitors was looking after most of his litigations and was therefore requested to provide his mobile number and email address for purpose of receiving notices etc. in any appeal.
In para no. 12 of the affidavit, it is stated that the said Mr. Abdeali Bangliwala has out of inadvertence overlooked the notices/or communications if any, sent on the provided mobile number and email address. It is further stated that for the above reasons, the appellant/assessee was not able to comply with the notices issued by the Page | 6
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Ld. CIT(A), Mumbai and could not file the submissions thereto. Non filing of submissions before the Ld. CIT(A) was an inadvertent and unintentional, it is therefore submitted that a fair and proper adjudication of the controversy is involved and he should be given a fair opportunity to represent his case before the Ld. CIT(A) through NFAC.
We have heard the Ld. AR of the appellant/assessee who has argued the same facts as alleged in the affidavit of the appellant/assessee. It is further argued that the end of justice requires that one fair opportunity be given to the appellant to present his case before the Ld. CIT(A) through NFAC because his non representation before the Ld. CIT(A) was inadvertent and beyond his control.
The Ld. DR on behalf of the department revenue has argued that the appellant/assessee has deliberately chosen not to present his case before the Ld. CIT(A) and therefore there is no illegality and perversity in the order of the Ld. CIT(A) and no grounds are made out by the appellant for setting aside the said order and the appeal is liable to be dismissed.
We have considered the rival submissions. It is to be noticed from the impugned order of Ld. CIT(A) that though there was no representation of the appellant/assessee and no documents had been filed in support of
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his case and there has been no response to the statutory notice issued, but the Ld. CIT(A) proceeded to decide the appeal on merit.
The appeal has been dismissed by the Ld. CIT(A) on the ground that the grounds of appeal and statement of facts remain unsubstantiated in the absence of any evidence or facts to counter the Assessing Officer by appellant/assessee during the course of appeal proceedings.
It is further observed in impugned order that inspite of several opportunities provided to the appellant/assessee, no response has been made by the appellant/assessee in support of his grounds of appeal and statement of facts and even no request for adjournment was made on behalf of the appellant/assessee. It is noticed that the appellant/assessee has failed to respond and both the grounds of appeal were decided against the appellant. It was also observed that the appellant/assessee has simply preferred an appeal but has failed to effectively pursue it and appeal was accordingly dismissed.
The explanation given by the appellant/assessee in his affidavit as reproduced earlier is that at the relevant time when the statutory notices were issued by the Ld. CIT(A) through NFAC, appellant/assessee has stopped the services of M/s. Agarwal and Mangal Chartered Accountant
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and has engaged one another person Mr. Abdeali Bangliwala and has given his mobile no. 9930192422 and email address bearing lalitsjain@gmail.com on form no. 35. It was further explained in the affidavit that the said person Mr. Abdeali Bangliwala inadvertently could not notice the statutory notices if any issued by the Ld. CIT(A) and as such non representation and non compliance of the said statutory notice by the appellant/assessee was inadvertent and without malafide. Para No. 4 to 7 of Affidavit of Mr. Abdeali Bangliwala are reproduced as under:
“I know Mr. Pervez Khodayar Raisi personally and I know that Mr. Pervez Khodayar Raisi had preferred an Appeal before the Learned Commissioner of Income Tax (Appeals) through National Faceless Appeal Centre (NFAC) vide Appeal No. C.I.T. (A), Mumbai- 30/10785/2018-19 under section 246 A of the Income Tax Act, 1961 (hereinafter referred to as the said "Form No. 35"). 5. Mr. Pervez Khodayar Raisi while preferring the said Form No. 35 had requested me to provide my mobile number and an e-mail address as he is not very much acquainted with using mobile phones and accessing e-mails on it. Since, I knew that Mr. Pervez Khodayar Raisi was represented by LJ Law in most of his litigations, I had provided my mobile number bearing no. lalitsjain@gmail.com. 9930192422 and e-mail id. 6. From bare perusal of Form No. 35 filed by Mr. Pervez Khodayar Raisi, it can be seen that Mr. Pervez Khodayar Raisi had provided the aforestated mobile number and e-mail address given by me. However, he had specifically opted for not sending any notices/ communications to the said e-mail address.
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Since the said Form No. 35 was filed way back in 2019 and there are a series of communications everyday to be done through the provided e-mail address and Mr. Pervez Khodayar Raisi has opted for sending any not notice/communication to the e-mail id provided by me, I might have overlooked the notice/s or communication/s, if any, sent by Learned Commissioner of Income Tax (Appeals) through National Faceless Appeal Centre (NFAC).” 18. It is evident from the impugned order challenged in this appeal that the notice under section 250 of the appeal was allegedly issued 3/4 times on different dates which as per outcome there was no compliance and no request for adjournment on behalf of the appellant/assessee. It is also observed that no evidence documentary or otherwise in support of the grounds was produced before the Ld. CIT(A), and the Ld. CIT(A) decided the appeal as ex parte.
Admittedly, no counter affidavit has been filed by the revenue or the respondent to the affidavit filed by the appellant/assessee in support of this appeal and the reasons for non compliance of the notice issued by the Ld. CIT(A) as explained in the affidavit remained uncontroverted on behalf of the revenue. We have no reason to disbelieve his affidavit and its contents wherein the reason for non compliance of the notice has been duly explained which shows that the non compliance was neither intentional nor malafide on behalf of the appellant/assessee.
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Let us examine provisions of Section 250(2) of the Income Tax Act, 1961 to find out if lower authority i.e., CIT(A) has complied the said provision or not. :
“(2) The following shall have the right to be heard at the hearing of the appeal:- a. The appellant, either in person or by an authorised representative;” 21. It is thus evident from the provisions that right to be heard at the hearing of the appeal in sine qua non for the adjudication and decision of the appeal. As per section 250(2)(A), the appellant/assessee either in person or by authorized representative shall have the right to be heard at the hearing of the appeal.
Admittedly, the appeal has been decided in the absence of the appellant/assessee or his representative who could not join the proceedings for the valid reasons as mentioned in the affidavit of the appellant/assessee.
The principle of natural justice requires that no one should be condemned unheard. The appellant has shown justified reasons for non compliance of the notice issued by the Ld. CIT(A) and has sufficiently explained as to why neither appellant/assessee nor his representative
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could appear at the time of hearing. Moreover, it is not clarified by revenue as to by what mode of service the notice was sent and served upon the assessee. Since principle of natural justice has not been followed while deciding the appeal ex parte, the impugned order is therefore liable to be set aside and is not legally sustainable in the eyes of law. Accordingly, the order dated 06.10.2023 is set aside with the direction that the appeal shall be restored on the file of the Ld. CIT(A) who shall decide the same afresh after giving effective opportunity to the appellant/assessee who shall present his case before the Ld. CIT(A) within 90 days.
In the result, appeal filed by the assessee is allowed for statistical purpose in above terms. Order pronounced in the open court on 13th May, 2024.
Sd/-/- Sd/-/- (PRASHANT MAHARISHI) (RAJ KUMAR CHAUHAN) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) Mumbai / Dated 13.05.2024 Karishma J. Pawar, (Stenographer)
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Copy of the Order forwarded to: 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file.
//True Copy// BY ORDER
(Asstt. Registrar) ITAT, Mumbai