DILIPKUMAR PASHABHAI PRAJAPATI,AHMEDABAD vs. THE INCOME TAX OFFICER, WARD-3(3)(5), AHMEDABAD

The assessee is an individual engaged in the business activities and has filed the original return of income for AY 2016-17, declaring an income of Rs. 7,88,880/-. The assessee filed the original return of income for AY 2017- 18 on 31.10.2017, declaring total income at Rs. 7,88,880/-. The assessment for the A.Y. 2017-18, under section 143(3) of the Act, was completed on 31.05.2019. Later, the AO on the basis of enquiry reports and findings of Director of Income Tax (Investigation) and Director of Intelligence and Criminal Investigation, noted that the assessee had entered into significant financial transactions with M/s Orange Tradex Pvt. Ltd., amounting to Rs. 1,16,49,66,875/- for F.Y. 2015-16 and Rs. 90,37,67,440/-for F.Y. 2016-17. These transactions were flagged as accommodation entries and not genuine business dealings. The AO found that the entities involved were paper concerns without substantial business activities, and their VAT registrations had been cancelled. The AO reopened the assessment for AY 2016-17 and A.Y. 2017-18 under section 147 of the Act, relying on the same set of information regarding the involvement of M/s.Orange Tradex Pvt. Ltd. in providing accommodation entries. The AO recorded reasons to believe that income chargeable to tax had escaped assessment due to undisclosed credit transactions.

The AO, on an independent enquiry, observed that M/s.Orange Tradex Pvt. Ltd. was merely a paper concern involved in routing money

Following are the details of various notices issued and the response by the assessee in case of both the assessment years:

The assessee preferred appeals before CIT(A) against the orders of AO. During the course of appellate following notices were issued and there was not response by the assessee:

The repeated failure to appear or provide any submission led the CIT(A) to infer that the assessee was not interested in prosecuting the appeal. The principle that "the law aids those who are vigilant, not those who sleep upon their rights" (Vigilantibus et non dormientibus jura subveniunt) was invoked, highlighting that the assessee had not shown due diligence in pursuing the appeal. The CIT(A) emphasized that the conduct of the assessee failed on this principle of equity, as they did not take necessary actions despite the opportunities provided. The CIT(A) referred to various judicial pronouncements to substantiate the dismissal of the appeal due to non- prosecution. The CIT(A) relied on established legal principles that an assessee must effectively pursue an appeal rather than merely file it. The CIT(A) noted that due to the assessee’s non-compliance, it was extremely difficult to adjudicate on the issues raised, as there was a lack of submissions, clarifications, and counter-clarifications. The consistent non-cooperation by the assessee demonstrated a lack of interest in pursuing the appeal. The ITA Nos.1095 & 1096/Ahd/2024 Asst. Years : 2016-17 & 2017-18

Aggrieved by the orders of CIT(A), the assessee is in appeal before us with following grounds of appeal:

It was observed that there was delay of 155 days in filing the appeals before us. The assessee submitted an affidavit stating that – “Said delay occurred due to fact that the assessed income is very high pitched in the sense that it is approximately 371 times the returned income. This resulted in a delay in filing the appeal. There was no intention to disregard the notice/ order, and the delay was purely an oversight due to the genuine hardship being caused to the appellant. The assessment raised unexpected and substantial demands, requiring extensive documentation and a thorough review process. The involvement of the CBI further complicated and prolonged the situation, necessitating additional time. Given the complexity and the gravity of the matters involved, our preparations for the appeal were delayed. There was no wrong, intention to not file the appeal. Your honour may kindly appreciate that there was no ill motive behind not filling appeal in time It is pertinent to note that appellant has already filed the return and paid the tax for the A. Y 2016-17 (A.Y. 2017-18).”

The Affidavits filed by the assessee for both the assessment years under consideration were argumentative and not clearly explaining the delay, therefore, the assessee was asked to re-submit the affidavits with proper application of condonation of delay. The assessee resubmitted the affidavits giving the reasons as mentioned below:

The Affidavit for A.Y. 2017-18 with similar contents was also filed by the assessee.

During the course of hearing before us, the Departmental Representative (DR) strongly objected to the condonation of the delay, emphasising that the assessee was non-cooperative during the assessment and appellate proceedings. It was highlighted that the assessee consistently disregarded the statutory notices issued under sections 148, 142(1) of the Act,

We considered the contents of the Affidavits filed by the assessee. While the magnitude of the assessed income and resultant demands is acknowledged, this reasoning does not directly justify non-cooperation during the assessment and appellate proceedings. It does not adequately explain why the assessee failed to respond timely to statutory notices or provide the necessary documentation when initially required. The fact that the assessment was high-pitched should have prompted proactive engagement rather than inaction. While the CBI's involvement may indeed complicate the case, this reasoning does not address the assessee's repeated non-compliance during the assessment and appellate proceedings. The assessee had several opportunities to present relevant facts and evidence to the AO and CIT(A), but these were not utilized. Moreover, the affidavit does not provide a clear link between the CBI’s involvement and the assessee’s failure to engage with the lower authorities. This aspect of the affidavit seems more relevant to the content of the case rather than an excuse for non- cooperation.

The assessee stated that the absence of immediate legal assistance delayed the filing of the appeal. According to the affidavit, the significant additions in the assessment made it difficult to promptly secure appropriate legal advice, which is why the CIT(A) orders were passed ex-parte. This claim does not sufficiently justify the lack of cooperation during the assessment and appellate proceedings. The assessment and appellate stages are distinct from ITA Nos.1095 & 1096/Ahd/2024 Asst. Years : 2016-17 & 2017-18

The Affidavit asserts that the delay was unintentional and not motivated by any deliberate attempt to avoid compliance. The assessee attributes the delay to genuine hardship and unforeseen challenges, emphasizing that there was no intention to disregard the authorities. While this statement attempts to mitigate the perception of deliberate non- compliance, it does not provide a factual basis that justifies the assessee’s behavior during the lower proceedings. Despite repeated opportunities to participate and present evidence, the assessee failed to do so, which directly contradicts the assertion of unintentional delay. The affidavit’s narrative lacks specific explanations for the repeated non-cooperation before the AO and CIT(A).

The Affidavit concludes with an assurance of future cooperation if the delay is condoned, and the appeals are admitted by us. This assurance is forward-looking and does not address past non-cooperation. While a commitment to cooperate in future proceedings is welcome, it cannot retroactively justify past conduct.

The law on condonation of delay is well-settled and has been liberally interpreted in favour of the assessee to advance substantial justice rather than to penalise for procedural lapses. The Hon’ble Supreme Court and various

The Authorized Representative (AR) of the assessee, raised several legal grounds through written submissions in ITA No. 1095/Ahd/2024 (AY 2016-17) and ITA No. 1096/Ahd/2024 (AY 2017-18) challenging the orders of the AO. These legal grounds primarily pertain to procedural lapses alleged to have been committed by the AO during the reassessment proceedings.

The AR contended that the AO failed to issue a notice under section 143(2) after the filing of the return in response to the notice issued under section 148. The AR argued that this failure renders the entire reassessment proceedings invalid as per the settled law laid down by the Hon’ble Supreme Court in the case of GKN Driveshafts (India) Ltd. v. Income-tax Officer [2002] 125 Taxman 963 (SC). The assessee relied on the proposition that once

The AR argued that the AO failed to provide the reasons recorded for reopening the assessment, despite the assessee’s request after filing the return in response to section 148. This, according to the AR, is against the law laid down by the Hon’ble Supreme Court in GKN Driveshafts (India) Ltd., which mandates that upon filing a return and requesting reasons for reopening, the AO must furnish the reasons to the assessee and allow them an opportunity to object.

The AR contended that the AO’s reopening of the assessment based on information from the Central Bureau of Investigation (CBI) inquiry is not a valid basis for reassessment under the Income Tax Act, as CBI inquiries are not judicial proceedings. The AR further argued that this reliance renders the reassessment invalid as the information obtained is unrelatable to the assessment proceedings under the Income Tax Act.

The AR also argued that the orders passed by the CIT(A) were ex-parte and that there was no adequate opportunity to present the case on merits. The AR claimed that this lack of hearing is against the principles of natural justice.

The AR placed reliance on several judicial precedents to argue that the failure to issue a notice under section 143(2) after the filing of a return in ITA Nos.1095 & 1096/Ahd/2024 Asst. Years : 2016-17 & 2017-18

The DR stated that the assessee was given a period of 30 days to file the return of income in response to notice u/s 148 dated 31-3-2021 in which it was mentioned that the same issued after obtaining the necessary satisfaction of the range head and the assessee failed to reply to the same in case of both the assessment years. The DR repeatedly pointed out non-cooperation from the assessee. The DR pointed out that the assessee was issued a notice u/s 142(1) of the Act on 19-11-2021 in which the assessee was reminded that he has not filed a return in response to notice u/s 148 and was asked to provide details as per the annexure but assessee neither filed return of income in response to notice u/s 148 of the Act nor submitted the details as called for. The DR also stated that the assessee vide its reply dated 29-12-2021 (for both assessment years) informed that he has filed return of income in response to notice u/s 148 and also infirmed that he would not like to declare any additional income. In the same reply, the assessee also asked for the reason for reopening the assessment u/s 147 of the Act.

The DR further stated that the assessee was issued one more notice u/s. 142(1) dated 21-02-2022, requiring him to produce books of accounts and other documents specified in the annexure. In the same annexure, the AO sought clarification from the assessee that the assessee only uploaded acknowledgement of ITR and as per e-filing details the return is not against notice u/s 148. The AO also expressly wrote that he is not clear whether assessee want to submit original ITR as ITR against notice u/s.148 of the Act. The DR specifically mentioned that that the AO could not see the return filed

We have heard the rival contentions and noted the reliance placed by both the parties on various judicial precedents. The AR argued that the AO failed to issue a notice under section 143(2) after the filing of the return in response to the notice issued under section 148. The DR highlighted the repeated non-cooperation of the assessee during the assessment proceedings. Despite multiple notices under sections 148 and 142(1), the assessee failed to comply, either by not filing the return within the stipulated time or by failing to provide the required details and documents. The DR also pointed out that although the assessee claimed to have filed a return in response to the notice under section 148, it was not visible on the e-filing portal, and the AO could not confirm its filing. Consequently, the AO treated it as invalid, as substantiated by the notice issued on 21-02-2022, seeking clarification from the assessee regarding the return.

It is a well-settled legal position, as laid down by the Hon’ble Supreme Court in GKN Driveshafts and Hotel Blue Moon, that the issuance of a notice under section 143(2) of the Act is mandatory after the filing of a return in response to a notice under section 148 of the Act. However, this requirement presumes the existence of a validly filed return in response to the notice under section 148. In the present case, the DR has convincingly demonstrated that the return claimed to be filed by the assessee was not visible on the e-filing portal and was treated as invalid by the AO. The repeated requests for clarification from the assessee regarding the return went unanswered, which justifies the AO’s action in treating the return as invalid and proceeding ahead with the assessment. The reliance on the cited judicial precedents by the assessee fails in this context because the factual matrix indicates that the procedural requirements could not be fulfilled due to the assessee’s own non-compliance. Therefore, the legal grounds raised by the assessee regarding the non-issuance of section 143(2) notice are not dismissed.

It is pertinent to note that the assessee did not raise the specific issue of non-issuance of notice under section 143(2) of the Act before the CIT(A). This omission indicates that the assessee did not prioritize this procedural ground during the earlier stage of appeal and is now raising it before this Bench, which undermines the credibility of this argument. Established legal principles dictate that issues not raised before the first appellate authority generally cannot be raised for the first time before us unless substantial reasons are provided, which is not the case here.

While the AR relied on GKN Driveshafts to argue that the reasons for reopening were not furnished, the record reflects that the assessee’s request for reasons was made belatedly and not in a timely manner after the initial filing of the return. The assessee’s lack of engagement with the reassessment process and non-cooperation further undermines this argument. The AO’s actions were consistent with the repeated non-cooperative stance of the assessee, and the procedural lapses cited by the AR are found to be attributable to the assessee’s conduct rather than any arbitrary action on the part of the AO.

The AR’s argument that CBI inquiries are not judicial proceedings and cannot form the basis for reassessment is legally unsustainable. The AO is permitted to rely on credible information from any source, including investigative agencies like the CBI, if such information reasonably leads to a belief that income has escaped assessment. The information’s origin from a non-judicial source does not automatically invalidate the reassessment if it meets the criteria for a reasonable belief under section 147. 9. 5. The AR’s claim of denial of natural justice due to ex-parte orders is not tenable when the CIT(A) provided multiple opportunities to the assessee to appear and present the case, which were not availed. The record indicates consistent non-attendance and failure to comply with notices issued by the CIT(A), justifying the ex-parte decision. The principles of natural justice do not protect a party that willfully avoids participation in the proceedings.

The reliance placed by DR on the decision of Sunshine Infraestate (P.) Ltd. is related to assessment u/s 153A hence are not considered whereas

We find that the legal grounds raised by the assessee are primarily an afterthought, driven by procedural technicalities that are not substantiated by consistent compliance during the assessment proceedings. The non- cooperative attitude of the assessee, the delayed responses, and the failure to provide clear submissions on time have collectively contributed to the procedural challenges faced by the AO. The contention that the AO failed to issue a notice under section 143(2) cannot be viewed in isolation from the broader context of the assessee’s conduct throughout the proceedings.

Furthermore, the ground of non-issuance of section 143(2) of the Act notice was not raised before the CIT(A) and is being raised for the first time before us, which weakens the validity of the legal argument.

Accordingly, the legal grounds raised by the assessee in ITA No. 1095/Ahd/2024 and ITA No. 1096/Ahd/2024 are dismissed.

Upon examining the merits of the appeals in ITA No. 1095/Ahd/2024 (AY 2016-17) and ITA No. 1096/Ahd/2024 (AY 2017-18), it is observed that the assessee has produced several key-documents before us that were not previously submitted during the assessment or appellate proceedings before the lower authorities. The documents produced by the assessee include:

Sale register, purchase register for the financial year 2016-17. 6. Copy of ledger accounts of M/s Orange Tradex Pvt. Ltd.along with sample credit and debit notes.

These documents, along with other supporting materials like bank statements, audit reports of earlier years, and copies of assessment orders of previous years, are being presented for the first time before us. The lower authorities, including the AO and the CIT(A), did not have the opportunity to verify these documents due to the non-cooperative attitude of the assessee during the initial proceedings.

The documents submitted by the assessee are crucial for substantiating the transactions in question, particularly those involving Krish Enterprise and Orange Tradex Pvt. Ltd. The confirmations, audit reports, VAT returns, sales and purchase registers, and ledger accounts are vital pieces of evidence that directly impact the assessment of the assessee's income, and the validity of the additions made by the AO.

We acknowledge that the lower authorities did not have the opportunity to examine these documents due to the non-cooperative behaviour of the assessee during the assessment and appellate stages. However, in the interest of natural justice, every party must be given a fair

In light of the above considerations, we find that the interests of justice would be best served by setting aside the order of the CIT(A) and restoring the matter back to the file of the AO for fresh adjudication on merits. The AO is directed to examine the newly submitted documents, provide adequate opportunity to the assessee, decide the matter on merit and complete the proceedings expeditiously and within the time frame prescribed under the law.

The orders of the CIT(A) are set aside, and the matters are restored to back to the file of the AO to decide the same on merits, in accordance with the principles of natural justice and after verifying the documents submitted by the assessee. Accordingly, the appeal(s) for AY 2016-17 and AY 2017-18 are partly allowed for statistical purposes.

In the result, both the appeals of the assessee in ITA Nos.1095 & 1096/Ahd/2024 are treated as allowed for statistical purposes.

( ) / The CIT(A)-(NFAC), Delhi िवभागीय #ितिनिध आयकर अपीलीय अिधकरण राजोकट/DR,ITAT, Ahmedabad, 5. , , गाड" फाईल /

Guard file.