MUKUL HASTEER,KARNAL vs. ITO WARD-1, KARNAL

That the Ld. Appellate Authority wrongly & illegally upheld the addition of Rs35,00,000/- against the facts and circumstances of the case.

7. That the Ld. Appellate Authority wrongly & illegally upheld the addition of Rs1,32,50,000/- against the facts and circumstances of the case.

8. That the Ld. Appellate Authority wrongly & illegally upheld the addition of Rs.88, I 321 against the facts and circumstances of the case.

at the time of hearing.”

3. The relevant facts giving rise to this appeal are that the assessee is engaged in the business of pharmaceutical supplies. Based on the specific information, the case of the assessee was reopened under section 147 of the Income Tax Act, 1961 (‘Act’). Various opportunities of being heard to ensure compliance to the show-cause notices were provided by the Ld. AO. However, only part-compliance was made by the assessee. Therefore, the Ld. AO observing as under completed the assessment:

As per Investigation report available on record, the assesses is beneficiary of bogus long-term capital without actually purchasing the equity shares of Eicher Motors Ltd in earlier years. According to the information available, the brokers i.e. Karnam Securities Private Limited and Asian Bulls Capital Private Mukul Hasteer Limited were engaged in providing bogus long term capital gain to the assessee, where the modus operandi is that shares through off market transaction are provided to beneficiary in the same financial year and transferred to assessee's demat account in same financial and later on these are sold in stock exchange. Equity shares are shown to have purchased in earlier financial year whereas they are purchased through off market transaction just few days before the sale of equity shares. Through this modus operandi, as per Investigation Wing, assessee is one of such oh beneficiary through dealing in equity shares of Eicher Motors. The assessee in his submission has submitted that the assessee has earned net long term capital gain of Rs.43,08,917/- from sale of share during the financial year 2017-18. As submitted by the assessee, the assessee has purchased the 152 shares of Eicher Motors Ltd. amounting to Rs.57,273/- during the FY 2009-10 and sold of 152 shares of Eicher Motors Ltd. amounting to Rs.43,66,189/- during the FY 2017-18. Το justify the year of purchase of equity shares of Eicher Motors, the assessee through various notices, during the assessment proceedings, was repeated asked to provide the documentary evidence, showing purchase of equity shares in F.Y. 2009-10. However, despite providing ample opportunities, the assessee has not submitted any documentary evidence showing proof of purchases of equity shares of Eicher Motors in F.Y. 2009-10 i.e. copies of contracts notes issued for purchase of shares, details of source and mode of purchase of shares along with documentary evidence i.e. bank statement etc., showing detail of payment made for purchase of shares etc. The onus was entirely on the assessee to justify the purchase of equity shares of Eicher Motors in F.Y. 2009-10, as claimed by the assessee in his submission. However, the documentary evidence showing purchase of 152 equity shares of Eicher Motors, source and mode of payment for purchase of equity shares of Eicher Motors Ltd. during the FY 2009-10 has not been submitted to justify the claim of the assesee that, these shares were actually purchased in F.Y. 2009-10. Even no Demat account statement for F.Y 2017-18 has been filed by the assessee. Hence, it is evident that assessee has converted its unaccounted cash through entry operators controlled entity in his account as exempt long term capital gain from sale of Eicher Motor Limited, using the above modus operandi, where shares were purchased just before the transfer to assessee beneficiary, within the few days of purchase by way of off market transfer, 3 Mukul Hasteer using account controlled and managed by the entry providers, from where, shares purchased through off market, was sold within few days. In this manner, the assessee's own unaccounted money camouflaged as exempt long term capital gain and no tax has been paid on it. The unaccounted money is actually the sale consideration shown to have received from the share transaction of Eicher Motor Limited, as mentioned in the information available. As per the information available, the assessee is the beneficiary of Rs.44,06,448/- through arranged share transaction of Eicher Motors Limited. In view of the above, Rs.44,06,448/- is hereby added to the total income of the assessee u/s 69A of the Income Tax Act, 1961 as unexplained money. The provision of tax u/s 115BBE of the Income Tax Act, 1961 are applicable in this case. Penalty u/s 271AAC of the Act is initiated separately. (Addition: Rs. 44,06,448/-) Further, on perusal of information, it is found that the assessee has made fictitious purchases of shares amounting to Rs.5,50,375/- during the year under consideration. In response, the assessee has denied purchasing any share amounting to Rs.5,50,375/-. However, the assessee has not provided demat account for the year under consideration. In the absence of substantiating documentary evidence provided by the assessee, it is not established that the fictitious purchase of shares amounting to Rs.5,50,375/- is not made by the assessee. Therefore, Rs.5,50,375/- is added to the income of the assessee u/s 69 of the Income Tax Act, 1961 as unexplained investment. The provision of tax u/s 115BBE of the Income Tax Act, 1961 are applicable in this case. Penalty u/s 271AAC of (Addition: Rs. 5,50,375/-) the Act is initiated separately. Further, on perusal of information, it is found that the assessee has made time deposit amounting to Rs.35 lakhs during the year under consideration. In response, the assessee has submitted that the time deposit has been made through the saving bank account of the assessee and submitted the copy of Axis Bank account. On perusal of Axis Bank account, no such transaction has been reflected in the bank account statement as provided by the assessee. Therefore, in the absence of source of time deposit of Rs. 35 lakhs made by the assessee remain unverified. Hence, Rs.35 lakh is added to the total income of the assessee u/s 69 of the Income Tax Act, 1961 as unexplained investment. The provision of tax u/s 115BBE of the Income Tax Act, 1961 are applicable in this case. Penalty u/s 271AAC of the Act is initiated separately. (Addition: Rs. 35,00,000/-) 4 Mukul Hasteer Further, on perusal of information, it is found that the assessee has purchased an immovable property amounting to Rs.132.5 lakhs during the year under consideration. In response, the assessee submitted copy of challan and Form 26QB and stated that the payment has been made through bank account. On perusal of bank statement submitted by the assessee, no such transaction has been reflected in the bank statement which corroborates that the assessee has made the payment. Further, the assessee has also failed to provide purchase deed of the property. In absence of documentary evidence, the source of purchase of property of Rs. 132.5 lakhs remain unverified. Hence, Rs.1,32,50,000/- is added to the total income of the assessee u/s 69 of the Income Tax Act, 1961 as unexplained investment. The provision of tax u/s 115BBE of the Income Tax Act, 1961 are applicable in this case, Penalty u/s 271AAC of the Act is initiated separately. (Addition: Rs. 1,32,50,000/-) On perusal of information, it is found that the assessee has made foreign remittance amounting to Rs. 1.614 lakhs during the year under consideration. In response, the assessee has stated that the foreign remittance amounting to Rs. 1.614 lakhs was made through Axis Bank account and provided the copy of Axis bank account. On perusal of Axis Bank account statement submitted by the assessee, no such transaction has been reflected in the bank account. In the absence of documentary evidence, the source of foreign remittance amounting to Rs. 1.614 lakhs remain unverified. Hence, Rs. 1,61,400/- is added to the total income of the assessee u/s 69C as unexplained expenditure. The provision of tax u/s 115BBE of the Income Tax Act, 1961are applicable in this case. Penalty u/s 271AAC of the Act is initiated separately. (Addition: Rs. 1,61,400/-) Further, since the assessee has made payment as commission to entry operator to make arranged transaction to bring unaccounted income in his books without paying any tax on it, therefore Rs. 88,132/- [2% of Rs. 44,06,648] is hereby added to the total income of the assessee u/s 69A of the Income Tax Act, 1961 as unexplained money. The provision of tax u/s 115BBE of the Income Tax Act, 1961 are applicable in this case. Penalty u/s 271AAC of the Act is initiated separately. (Addition: Rs. 88,132/-) As per the computation of income filed for AY 2018-19, it is seen that the assessee has claimed deduction of interest on borrowed capital of Rs.63,790/- from the rental income of property at Shop No 9P, Ground Floor, Karnal. The assessee was asked to furnish the documentary evidence. The 5 Mukul Hasteer assessee has filed copy of certificate of interest for the period 01.04.2017 to 31.03.2018 in the name of Mrs. Hasteer Neetu and Mr. Hasteer Mukul on the property Flat No-K, 1101, 11th Floor, Uppal, Plumeria Garden Estate-Block K, Block K, PIO Sector Omicron, Greater Nodia-201305. Since, the assessee has claimed interest on borrowed capital of Rs.63,790/- on the property at Shop No 9P, Ground Floor, Karnal and no documentary evidence has been provided by the assessee in respect of interest on borrowed capital on the property at Shop No 9P, Ground Floor, Karnal therefore it remains unverified. Therefore, Rs.63,790/- is hereby disallowed and added to the total income of the assessee. Penalty proceeding u/s 270A of the Act is initiated separately for under reporting of income in consequence of misreporting income. Addition: Rs. 63,790/-)

[Emphasis supplied] 4. Aggrieved, the assessee filed appeal before the Ld. CIT(A), who dismissed the appeal, ex-parte, holding as under:

“3. During the course of the appellate proceedings, notices u/s 250 were issued to the appellant through e-proceedings facility calling for the written submissions and documentary evidences in support of grounds of appeal raised by the appellant during the course of appellate proceedings. However, there is no compliance to the notices. 3.1 It appears from the above that, after filing of appeal against the assessment order, the appellant is not serious in pursuing the appeal or did not care for the notices being issued and served on him. It appears the non- adherence to notices is deliberate. Section 114(g) of Indian Evidence Act, 1872 lays a presumption that evidence which could be and is not produced when, if produced, be unfavorable so the person who withholds it. In the appellate proceedings, burden of proof lies on the appellant to prove that facts and findings of the AD are incorrect. If the appellant fails to disprove or rebut with cogent evidence such facts and findings, no interference is required against the assessment order. In this case, the appellant chose not to avail several opportunities in appellate proceedings, which entails conclusion that he had no evidence or say or explanation against the order of the AO. In case of tax evasion, sometimes compliance is more detrimental than non-compliance because compliance can lead to more investigation or more points to be explained whereas non-compliance led to mere penalty u/s.271(1)(b) and/or

6. Mukul Hasteer ex-parte decision on the basis of available material only. It also brightens chance against levy of concealment penalty. Ex-parte assessment/other order have its own inherent limitations as to its scope and extent. Hence, the appellant should not be allowed to be enriched or benefited unjustly for an act of his own wrongs, i.e. non-compliance. 3.2. The Hon'ble High Court of Delhi in the case of CIT vs Gold Leaf Capital Corporation Ltd on 2.9.2011 (ITA No.798 of 2009) held that a negligent assessee should not be given many opportunities just because that quantum of amount Involved is high. Necessary course of action is to draw adverse inference; otherwise, it would amount to give premium to the appellant for his/her negligence. When the appellant is non-cooperative, it can naturally be safely concluded that the appellant did not want to adduce evidence as it would expose falsity and non-genuineness. In this regard, reliance is placed on the decision of the Hon'ble High Court of Mumbai in the case of M/s Chemipol vs Union of India, Central Excise Appeal No.62 of 2009 wherein, it is held that every Court, judicial body or authority, which has a duty to decide between two parties, inherently possesses the power to dismiss the case In default. Further, the appellant has to not only file the Memorandum of Appeal but has to effectively pursue it as held by the Hon'ble Supreme Court in the case of B. N. Bhattacharji and Anr. reported in 118 ITR 461 at pages 477 and 478. In view of the above judicial decisions, the appeal is liable to be dismissed for non-compliance and non-pursuing of appeal.

5. The Ld. Authorized Representative (‘AR) submitted that the Ld. CIT(A) erred in dismissing the appeal, ex-parte, without adjudicating the appeal on merit. Before us, the Ld. AR of assessee prayed for remanding the matter back to the Ld. AO as the assessee failed to ensure proper and complete compliance before the Ld. AO. On the other hand, the Ld. Sr. DR, drawing our attention to various paras of the assessment order and impugned order, submitted that reasonable opportunities of being heard were provided to the appellant assessee by the Authorities below. However, the appellant assessee tactfully Mukul Hasteer ensured noncompliance to avoid proper investigations. Hence, he prayed for upholding of orders of the Authorities below. On specific query by us, he admitted that the issue in dispute had not been decided on merit by the Ld. CIT(A). However, there was nothing to further investigate in the case as the Ld. AO level; hence, at most, the case might be remanded to the Ld. CIT(A) for deciding it on merit.

6. We take note of the fact that the Ld. CIT(A) has not decided each ground of appeal after discussing the issues in detail and his reasons for agreeing with the assessment order though he/she, as per provisions of section 250(6) of the Act, is obliged to dispose of the appeal in writing with well-reasoned order on each point of determination arisen for his consideration. It is evident from the perusal of section 251(1)(a), 251(1)(b) and Explanation of section 251(2) of the Act that the CIT(A) is required to apply his/her mind to all the issues which arise from the impugned order before him/her, whether or not these issues have been raised by the assessee before him/her. On cumulative consideration of the provisions of section 250(6) of the Act read with sections 250(4), 250(5), 251(1)(a), 251(1)(b) of the Act and Explanation of section 251(2) of the Act, the Ld. CIT(A) is not empowered to dismiss the appeal for non-prosecution of appeal and is obliged to dispose of the appeal on merits.

Mukul Hasteer However, in view of the facts in entirety and in the interest of justice, we find it fit that this case requires to be decided afresh by the Ld. AO as certain verification is required to be done to arrive the final conclusion. Therefore, without offering any comment on merit of the case, we deem it fit to set aside the impugned order and remit the matter back to the file of the Ld. AO for deciding the issues in dispute afresh after providing adequate opportunity of being heard to the appellant assessee. The appellant assessee, no doubt, shall ensure compliance and cooperate in remanded assessment proceedings. Ordered accordingly.

Order pronounced in open Court on 15th October, 2025